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

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     FOR THE TRANSITION PERIOD FROM ________________ TO ________________.

                        COMMISSION FILE NUMBER 333-84486

                               LAND O'LAKES, INC.
             (Exact name of Registrant as Specified in Its Charter)

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<S>                                                          <C>
               MINNESOTA                                         41-0365145
    (State or Other Jurisdiction of                           (I.R.S. Employer
     Incorporation or Organization)                          Identification No.)
</TABLE>

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<S>                                                              <C>
      4001 LEXINGTON AVENUE NORTH
         ARDEN HILLS, MINNESOTA                                     55112
(Address of Principal Executive Offices)                         (Zip Code)
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                                 (651) 481-2222
              (Registrant's Telephone Number, Including Area Code)
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

     Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act. Yes [ ] No [X]

     Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 of Section 15(d) of the Act. Yes [X] No [ ]

     Indicate by check mark whether the registrant (1) has filed all report
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. Yes [ ] No [X]

     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. Not applicable.

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):

Large accelerated filer [ ]   Accelerated filer [ ]   Non-accelerated filer [X]

     Indicate by check mark whether the registrant is a shell company (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

     Land O'Lakes, Inc. is a cooperative. Our voting and non-voting common
equity can only be held by our members. No public market for voting and
non-voting common equity of Land O'Lakes, Inc. is established and it is
unlikely, in the foreseeable future that a public market for our voting and
non-voting common equity will develop.

     The number of shares of the registrant's common stock outstanding as of
March 1, 2006: 1,000 shares of Class A common stock, 4,050 shares of Class B
common stock, 174 shares of Class C common stock, and 1,004 shares of Class D
common stock.

     Documents incorporated by reference: None.

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                                      INDEX

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<S>                                                                           <C>
                                     PART I.
         Forward Looking Statements .......................................    3
Item 1.  Business .........................................................    3
         Business Segments ................................................    3
         Description of the Cooperative ...................................   11
Item 1A  Risk Factors .....................................................   17
Item 2.  Properties .......................................................   27
Item 3.  Legal Proceedings ................................................   28
Item 4.  Submission of Matters to a Vote of Security Holders ..............   28

                                    PART II.
Item 5.  Market for Registrant's Common Equity, Related Stockholder
         Matters, and Issuer Purchases of Equity Securities ...............   28
Item 6.  Selected Financial Data ..........................................   29
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations ............................................   32
Item 7A. Quantitative and Qualitative Disclosures About Market Risk .......   55
Item 8.  Financial Statements and Supplementary Data ......................   56
Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure .............................................   56
Item 9A. Controls and Procedures ..........................................   56
Item 9B. Other Information ................................................   57

                                    PART III.
Item 10. Directors and Executive Officers of the Registrant ...............   57
Item 11. Executive Compensation ...........................................   61
Item 12. Security Ownership of Certain Beneficial Owners and Management ...   65
Item 13. Certain Relationships and Related Transactions ...................   66
Item 14. Principal Accountant Fees and Services ...........................   66

                                    PART IV.
Item 15. Exhibits, Financial Statement Schedules ..........................   66
         Signatures .......................................................   69
</TABLE>


                                       2
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                           FORWARD-LOOKING STATEMENTS

     The information presented in this Annual Report on Form 10-K under the
headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation" contains forward-looking
statements. The forward-looking statements are based on the beliefs of our
management as well as on assumptions made by and information currently available
to us at the time the statements were made. When used in the Form 10-K, the
words "anticipate", "believe", "estimate", "expect", "may", "will", "could",
"should", "seeks", "pro forma" and "intend" and similar expressions, as they
relate to us are intended to identify the forward-looking statements. All
forward-looking statements attributable to persons acting on our behalf or us
are expressly qualified in their entirety by the cautionary statements set forth
here and in "Item 1A.- Risk Factors" on pages 17 to 26. We undertake no
obligation to publicly update or revise any forward-looking statements whether
as a result of new information, future events or for any other reason. Although
we believe that these statements are reasonable, you should be aware that actual
results could differ materially from those projected by the forward-looking
statements. For a discussion of factors that could cause actual results to
differ materially from the anticipated results or other expectations expressed
in our forward-looking statements, see the discussion of risk factors set forth
in "Item 1A - Risk Factors" on pages 17 to 26. Because actual results may
differ, readers are cautioned not to place undue reliance on forward-looking
statements.

WEBSITE

     We maintain a website on the Internet through which additional information
about Land O'Lakes, Inc. is available. Our website address is
www.landolakesinc.com. Our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports of Form 8-K, press releases and earnings releases are
available, free of charge, on our website as soon as practicable after they are
released publicly or filed with the SEC.

                                     PART I

ITEM 1. BUSINESS.

     Unless context requires otherwise, when we refer to "Land O'Lakes," the
"Company," "we," "us", or "our," we mean Land O'Lakes, Inc. together with its
consolidated subsidiaries.

OVERVIEW

     In 1921, we were formed as a cooperative designed to meet the needs of
dairy farmers located in the Midwest. We have expanded our business through
acquisitions and joint ventures to diversify our product portfolio, to leverage
our portfolio of brand names, to achieve economies of scale and to extend our
geographic coverage. We operate our business through five segments: Dairy Foods,
Feed, Seed, Agronomy and Layers. Dairy Foods develops, produces, markets and
sells a variety of premium butter, spreads, cheese and other related dairy
products. Feed develops, produces, markets and distributes animal feed to both
the lifestyle and livestock animal markets. Seed develops, markets and sells
seed for a variety of crops, including alfalfa, corn, soybeans and forage and
turf grasses. Agronomy primarily consists of an investment in Agriliance LLC,
which manufactures, markets and distributes crop nutrient and crop protection
products. As of August 2005, the Company sold its entire ownership interest in
CF Industries, Inc., a domestic manufacturer of crop nutrients which was a part
of Agronomy. Layers produces and markets shell and liquid egg products through
MoArk, LLC. On February 25, 2005, we also sold substantially all the assets
related to our swine production business. The Swine assets are reflected as
discontinued operations in our consolidated financial statements. We have
additional operations and interests in a group of joint ventures and investments
that are not consolidated in our five operating segments.

BUSINESS SEGMENTS

     We operate our business in five reportable segments: Dairy Foods, Feed,
Seed, Agronomy, and Layers. For financial information by reportable segment, see
the "Notes to Consolidated Financial Statements" included in this annual report
on Form 10-K.

DAIRY FOODS

     Overview. We produce, market, and sell butter, spreads, cheese and other
related dairy products. We sell our products under our national brand names and
trademarks, including LAND O LAKES, the Indian Maiden logo and Alpine Lace, as
well as under our regional brands such as New Yorker. Our network of 12 dairy
manufacturing facilities is geographically diverse and allows us to support our
customers on a national scale. Our customer base includes national supermarket
and super-center chains, industrial customers, including major food processors,
and major foodservice customers, including restaurants, schools, hotels and
airlines.


                                        3

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     Products. We manufacture over 300 dairy-based food products. Our principal
     dairy products include:

          Butter. We produce and market branded butter under our proprietary
     LAND O LAKES brand name for retail and foodservice customers. In addition,
     we produce non-branded butter for our private label and industrial
     customers. Our butter products include salted butter, unsalted butter,
     spreadable butter with canola oil, light butter, whipped butter and
     flavored butter.

          Spreads. We produce and market a variety of spreads, including
     margarine, non-butter spreads and butter blends. These products are
     primarily marketed under the LAND O LAKES brand and are sold to our retail,
     foodservice and industrial customers.

          Cheese. We produce and sell cheese for retail sale in deli and dairy
     cases, to foodservice businesses and to industrial customers. Our deli case
     cheese products are marketed under the LAND O LAKES, Alpine Lace and New
     Yorker brand names. Our dairy case cheese products are sold under the LAND
     O LAKES brand name. We also sell cheese products to private label
     customers. We offer a broad selection of cheese products including cheddar,
     monterey jack, mozzarella, provolone, American and other processed cheeses.

          Other. We manufacture nonfat dry milk and whey for sale to our
     industrial customers. We produce nonfat dry milk by drying the nonfat milk
     byproduct of our butter manufacturing process. It is used in processed
     foods, such as instant chocolate milk. Whey is a valued protein-rich
     byproduct of the cheese-making process which is used in processed foods,
     sports drinks and other nutritional supplements.

          Raw Milk Wholesaling. We purchase raw milk from our members and sell
     it directly to other dairy manufacturers, particularly fluid milk
     processors. We generate substantial revenues but negligible margins on
     these sales. See "Item 7: Management's Discussion and Analysis of Financial
     Condition and Results of Operation -- Wholesaling and Brokerage
     Activities."

          New Products. In February 2005, we introduced LAND O LAKES Light
     Butter with Canola Oil. This new product has 60 percent less cholesterol
     and 50 percent less fat and calories per serving than regular butter.
     Introduced in August 2005 was the FlavorProtect Wrapper for our flagship
     branded butter. We also responded to our Foodservice customers' needs in
     2005 and introduced a full line of reduced-fat school lunch products and a
     reduced-fat blend of butter and margarine.

     Sales, Marketing and Advertising. In order to meet the needs of our retail,
foodservice and industrial customers, sales efforts are specifically designed to
service each of these customer bases. Our retail customers are serviced through
direct sales employees and independent national food brokers. Our retail sales
force consists of approximately 60 employees that service our larger retail
customers, such as supermarket and super-center chains, and manage our national
food broker relationships. We spent $26.4 million on advertising and promotion
for the year ended December 31, 2005.

     Our foodservice products are primarily sold through independent regional
food brokers and food distributors. In addition, we employ approximately 25
salespeople who are responsible for maintaining these regional food broker
relationships and marketing to our large foodservice customers directly.

     We market our products to our industrial customers through five dedicated
salespeople. Our industrial customers generally maintain a direct relationship
with our facility managers in order to coordinate delivery and ensure that our
products meet their specifications

     Distribution. We contract with third-party trucking companies to distribute
our dairy products throughout the United States in refrigerated trucks. Our
dairy products are shipped to our customers either directly from the
manufacturing facilities or from one of our five regional distribution centers
located in New Jersey, Georgia, Illinois, California and Ohio. As most of our
dairy products are perishable, our distribution facilities are designed to
provide necessary temperature controls in order to ensure the quality and
freshness of our products. The combination of our strategically located
manufacturing and distribution facilities and our logistics capabilities enables
us to provide our customers with a highly efficient distribution system.


                                        4

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     Production. We produce our dairy products at 11 manufacturing facilities,
including a facility the Company anticipates closing in the first quarter of
2006, strategically located throughout the United States. We also have
contractual arrangements whereby we engage other dairy processors to produce
some of our products. We believe the geographic distribution of our plants
allows us to service our customers in a timely and efficient manner. In 2005, we
processed approximately 7.9 billion pounds of milk, primarily into butter and
cheese. Butter is produced by separating the cream from milk, pasteurizing it
and churning the cream until it hardens into butter. Butter production levels
fluctuate due to the seasonal availability of milk and butterfat. The cheese
manufacturing process involves adding a culture and a coagulant to milk. Over a
period of hours, the milk mixture hardens to form cheese. At that point, whey is
removed and separately processed. Finally, the cheese is salted, shaped and
aged.

     Our largest facility is Cheese and Protein International LLC ("CPI"), a
wholly owned, consolidated subsidiary which produces mozzarella cheese and whey
in Tulare, California. Commercial production commenced in May 2002, and a phase
II expansion that doubled plant capacity was completed during 2004. Through
2004, Land O'Lakes and a subsidiary of Mitsui & Co. (USA) were parties to a
joint venture agreement which gave Mitsui participation interest of
approximately 2.6% of the venture. Mitsui did not have significant control of
the joint venture, but retained a put option allowing Mitsui to sell its
remaining interest to us at original cost, with no interest thereon. In December
2005 Mitsui exercised this put and we paid $3.2 million for the remaining
minority interest in CPI.

     Supply and Raw Materials. Our principal raw material for production of
dairy products is milk. During 2005, we sourced approximately 93% of our raw
milk from our members. We enter into milk supply agreements with all of our
dairy members to ensure our milk supply. These contracts typically provide that
we will pay the producer an advance for the milk during the month of delivery
and then will settle the final price in the following month for an amount
determined by us which typically includes a premium over Federal market order
prices. These contracts provide that we will purchase all of the milk produced
by our members for a fixed period of time, generally one year or less. As a
result, we often purchase more milk from our members than we require for our
production operations. There are three principal reasons for doing this: first,
we need to sell a certain percentage (which is not less than 10% of the amount
procured and depends on which Federal market order the milk is subject to) of
our raw milk to fluid dairy processors in order to participate in the Federal
market order system, which enables us to have a lower input cost for our milk;
second, it decreases our need to purchase additional supply during periods of
low milk production in the United States (typically August, September and
October); and third, it ensures that our members have a market for the milk they
produce during periods of high milk production. We enter into fixed-price
forward sales contracts with some of our large industrial cheese customers which
historically represented 10-15% of our processed milk volume. We simultaneously
enter into milk supply agreements with a fixed price in order to ensure our
margins on these contracts. We also purchase cream, bulk cheese and bulk butter
as raw materials for production of our dairy products. We typically enter into
annual agreements with fluid processors to purchase all of their cream
production. We typically purchase bulk cheese and butter pursuant to annual
contracts. These cheese and butter contracts provide for annual targets and
delivery schedules and are based on market prices. In isolated instances, we
purchase these commodities on the open market at current market prices. We refer
to this type of transaction as a spot market purchase.

     Customers. We sell our dairy products directly and indirectly to over 500
customers. Our products are sold in over 5,000 retail locations, including
supermarkets and super-centers, convenience stores, warehouse club stores and
military commissaries. In addition, we sell our products through food brokers
and distributors to foodservice providers such as major restaurant chains,
schools, hotels and airlines.

     Research and Development. We seek to offer our customers product
innovations designed to meet their needs. In addition, we work on product and
packaging innovations to increase overall demand for our products and improve
product convenience. In 2005, we spent $10.7 million on dairy research and
development, and we employ approximately 65 individuals in research capacities
at our dedicated dairy foods research facility.

     Competition. The bulk of the dairy industry consists of national and
regional competitors. Our branded cheese products compete with products from
national competitors such as Kraft, Borden and Sargento as well as several
regional competitors. For butter, our competition comes primarily from regional
brands, such as Challenge and Kellers, and from private label products. We face
increased competitive pressures because our retail customers are consolidating.
We rely on the strength of our brands to help differentiate our products from
our competition. We believe our branded products compete on the basis of brand
name recognition, product quality and reputation and customer support. Products
in the private label and industrial markets compete primarily based on price. We
believe our product quality and consistency of supply distinguishes our products
in these markets.


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FEED

     Overview. Through Land O'Lakes Purina Feed, we manufacture and market feed
for both the commercial and lifestyle sectors of the animal feed market in the
United States. Our commercial feed products are used by farmers and specialized
livestock producers who derive income from the sale of milk, eggs, poultry and
livestock. Our lifestyle feed products are used by customers who own animals
principally for non-commercial purposes. Margins on our lifestyle feed products
are significantly higher than those on our commercial feed products. We market
our lifestyle animal feed products, other than dog and cat food, under the
brands Purina, Chow and the "Checkerboard" Nine Square logo. We also market our
animal feed products under the LAND O LAKES Feed label. We operate a
geographically diverse network of 76 feed mills, which permits us to distribute
our animal feed nationally through our network of approximately 1,430 local
member cooperatives, approximately 3,300 independent dealers operating under the
Purina brand name and directly to customers.

     We believe we are a leader among feed companies in animal feed research and
development with a focus on enhancing animal performance, productive capacity
and early stage development. For example, we developed and introduced milk
replacer products for young animals, and our patented product formulations make
us the only supplier of certain milk replacer products. These products allow
dairy cows to return to production sooner after birthing and increase the annual
production capacity of cows. Other than certain insignificant investments and
sales, we operate our feed business entirely through our Land O'Lakes Purina
Feed entity.

     Products. We sell commercial and lifestyle animal feed which are based upon
proprietary formulas. We also produce commercial animal feed to meet our
customers' specifications. We sell feed for a wide variety of animals, such as
dairy cattle, beef cattle, swine, poultry, horses and other specialty animals
such as laboratory and zoo animals. Our principal feed products and activities
include:

          Complete Feed. These products provide a balanced mixture of grains,
     proteins, nutrients and vitamins which meet the entire nutritional
     requirement of an animal. They are sold as ground meal, in pellets or in
     extruded pieces. Sales of complete feeds typically represent the majority
     of net sales. We generally sell our lifestyle animal feed as complete feed.
     We market our lifestyle animal feed through the use of our trademarks,
     namely, Purina, Chow and the "Checkerboard" Nine Square logo.

          Supplements. These products provide a substantial part of a complete
     ration for an animal, and typically are distinguished from complete feed
     products by their lack of the bulk grain portion of the feed. Commercial
     livestock producers typically mix our supplements with their own grain to
     provide complete animal nutrition.

          Premixes. These products are concentrated additives for use in
     combination with bulk grain and a protein source, such as soybean meal.
     Premixes consist of a combination of vitamins and minerals that are sold to
     commercial animal producers and to other feed mill operators for mixing
     with bulk grains and proteins.

          Simple Blends. These products are a blend of processed commodities,
     generally steam-rolled corn or barley that are mixed at the producer's
     location with a feed supplement to meet the animal's nutritional
     requirements. These products are highly price competitive and generally
     have low margins. These products are primarily used by large dairies in the
     Western United States.

          Milk Replacers. Milk replacers are sold to commercial livestock
     producers to meet the nutritional requirements of their young animals while
     increasing their overall production capability by returning the parent
     animal to production faster. We market these products primarily under our
     Maxi Care, Cow's Match and Amplifier Max brand names. We have patents that
     cover certain aspects of our milk replacer and other products and processes
     which have expirations through 2018.

          Ingredient Merchandising. In addition to selling our own products, we
     buy and sell or broker for a fee soybean meal and other feed ingredients.
     We market these ingredients to our local member cooperatives and to other
     feed manufacturers, which use them to produce their own feed. Although this
     activity generates substantial revenues, it is a very low-margin business
     with a minimal capital investment. We are generally able to obtain feed
     inputs at a lower cost as a result of our ingredient merchandising business
     because of lower per unit costs associated with larger purchases and volume
     discounts.


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     Sales, Marketing and Advertising. We employ approximately 400 direct
salespeople in regional territories. In our commercial feed business, we provide
our customers with information and technical assistance through trained animal
nutritionists whom we either employ or have placed with our local member
cooperatives. Our advertising and promotional expenditures are focused on higher
margin products, specifically our lifestyle animal feed and milk replacers. We
advertise in recreational magazines to promote our lifestyle animal feed
products. To promote our horse feed products, we have dedicated promoters who
travel to rodeos and other horse related events. We promote our milk replacers
with print advertising in trade magazines. We spent $18.2 million on advertising
and promotion for the year ended December 31, 2005.

     Distribution. We distribute our animal feed nationally primarily through
our network of approximately 1,430 local member cooperatives and approximately
3,300 Purina-branded dealers or directly to customers. We deliver our products
primarily by truck using independent carriers, supplemented by our own fleet.
Deliveries are made directly from our feed mills to delivery locations within
each feed mill's geographic area.

     Production. The basic feed manufacturing process consists of grinding
various grains and protein sources into meal and then mixing these materials
with certain nutritional additives, such as vitamins and minerals. The resulting
products are sold in a variety of forms, including meal, pellets, blocks and
liquids. Our products are formulated based upon proprietary research pertaining
to nutrient content. As of December 31, 2005 we operated 76 feed mills across
the United States. Consistent with current industry capacity utilization, many
of our facilities operate below their capacity.

     Supply and Raw Materials. We purchase the bulk components of our products
from various suppliers. These bulk components include corn, soybean meal and
grain byproducts. In order to reduce transportation costs, we arrange for
delivery of these products to occur at our feed mill operations throughout the
United States. We purchase vitamins and minerals from multiple vendors,
including vitamin, pharmaceutical and chemical companies.

     Customers. Our customers primarily include large commercial corporations,
local cooperatives, private feed dealers and individual producers. In the case
of local cooperatives, the cooperative either uses these products in their own
feed manufacturing operations or resells them to their customers. Our customers
purchase animal feed products from us for a variety of reasons, including our
ability to provide products that fulfill some or all of their animals'
nutritional needs, our knowledge of animal nutrition, our ability to maintain
quality control and our available capacity.

     Research and Development. Our animal feed research and development focuses
on enhancing animal performance, productive capacity and early stage
development. Additionally, we dedicate significant resources to developing
proprietary formulas that allow us to offer our commercial customers alternative
feed formulations using lower cost ingredients. We employ 90 people in various
animal feed research and development functions at our research and development
facilities. In 2005, we spent $11.0 million on research and development.

     Competition. The animal feed industry is highly fragmented. Our competitors
consist of many small local manufacturers, several regional manufacturers and a
limited number of national manufacturers. The available market for commercial
feed may become smaller and competition may increase as meat processors and
livestock producers become larger and integrate their business by acquiring or
constructing their own feed production facilities. In addition, purchasers of
commercial feed tend to select products based on price and performance and some
of our feed products are purchased from other third parties. As a result of
these factors, the barriers to entry in the feed industry are low. Distribution
for lifestyle feed is also consolidating as major national chain retailers enter
this market. We believe we distinguish ourselves from our competitors through
our high-performance, value-added products, which we research, develop and
distribute on a national basis. Our brands, Purina, Chow and the "Checkerboard"
Nine Square logo, provide us with a competitive advantage, as they are
well-recognized, national brands for lifestyle animal feed. We also compete on
the basis of service by providing training programs, using animal nutritionists
with advanced technical qualifications to consult with local member
cooperatives, independent dealers and livestock producers, and by developing and
manufacturing customized products to meet customer needs.

SEED

     Overview. We sell seed for a variety of crops, including alfalfa, soybeans
and corn, under our CROPLAN GENETICS brand. We also distribute certain crop seed
products under third- party brands, including Northrop King, Asgrow and Dekalb,
and under private labels. We distribute our seed products through our network of
local member cooperatives, to other seed companies, to retail distribution
outlets and under private labels. We have strategic relationships with Syngenta
and Monsanto, two crop seed producers in the United States, to which we provide
distribution and research and development services.


                                        7

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     Products. We develop, produce and distribute seed products including seed
for alfalfa, soybeans, corn and forage and turf grasses. We also market and
distribute seed products produced by other crop seed companies, including seed
for corn, soybeans, sunflowers, canola, sorghum and sugar beets. Seed products
are often genetically engineered through selective breeding or gene splicing to
produce crops with specific traits. These traits include resistance to
herbicides and pesticides and enhanced tolerance to adverse environmental
conditions. As a result of our relationships with certain life science
companies, we believe we have access to one of the most diverse genetic
databases of any seed company in the industry. We also license some of our
proprietary alfalfa seed traits to other seed companies for use in their seed
products. In 2005, RoundUp Ready Alfalfa received US regulatory approval and was
introduced into the market shortly thereafter. This product was the result of
over 10 years of research in collaboration with Monsanto.

     Sales, Marketing and Advertising. We have a sales force of approximately
130 employees who promote the sale of our seed products throughout the country,
particularly in the Midwest. Our sales and marketing strategy is built upon the
relationships we have established with our local member cooperatives and our
ability to purchase and distribute quality seed products at a low cost. We
market our crop seed products under our brand name CROPLAN GENETICS. We also
distribute certain crop seed products under third-party brands, including
Northrop King, Asgrow and DeKalb, and under private labels. We engage in a
limited amount of advertising, primarily utilizing marketing brochures and field
signs. We are a leader in online customer communications and order processing.
We also participate in the Total Farm Solutions program with our affiliate,
Agriliance. Through this program, trained agronomists are placed at local
cooperatives to provide advisory services regarding crop seed and agronomy
products. We do not have any long-term commitments associated with this program.
We spent $5.6 million on advertising and promotion for the year ended December
31, 2005.

     Distribution. We distribute our seed products through our network of local
member cooperatives, to other seed companies and to retail distribution outlets.
We have strategic relationships with Syngenta and Monsanto, two leading crop
seed producers in the United States, to which we provide distribution and
research and development services. We also sell our proprietary products under
private labels to other seed companies for sale through their distribution
channels. Additionally, several of our product lines (particularly turf grasses)
are sold to farm supply retailers and home and garden centers. We use
third-party trucking companies for the nationwide distribution of our seed
products.

     Supply and Production. Our alfalfa, soybeans, corn and forage and turf
grass seed are produced to our specifications and under our supervision on farms
owned by us and by geographically diverse third-party producers. We maintain a
significant inventory of corn and alfalfa seed products in order to mitigate
negative effects caused by weather or pests. Our alfalfa and corn seed products
can be stored for up to four years after harvesting. Our seed segment has
foreign operations in Argentina and Canada.

     Customers. We sell our seed products to over 6,000 customers, none of which
represented more than 4% of our crop seed net sales in 2005. Our customers
consist primarily of our local member cooperatives and other seed companies
across the United States and internationally. Our customer base also includes
retail distribution outlets.

     Research and Development. We focus our research efforts on crop seed
products for which we have a significant market position, particularly alfalfa
seed. We also work with other seed companies to jointly develop beneficial crop
seed traits. In 2005, we spent $8.3 million on crop seed research and
development.

     Competition. Our competitors include Pioneer, Monsanto and Syngenta as well
as many small niche seed companies. We differentiate our seed business by
supplying a branded, technologically advanced, high quality product, and by
providing farmers with access to agronomists through our joint Total Farm
Solutions program with Agriliance. These Agronomists provide crop production
consultation to farmers who may or may not be our customers. Such services are
increasingly important as the seed industry becomes more dependent upon
biotechnology and crop production becomes more sophisticated. Due to the added
cost involved, our competitors, with the exception of Pioneer, generally do not
provide such services. We can provide these services at a relatively low cost
because we often share the costs of an agronomist with Agriliance or with a
local cooperative.


                                        8

<PAGE>

AGRONOMY

     Historically, our agronomy segment has consisted primarily of our joint
venture in Agriliance and our investment in CF Industries, Inc. In 2005,
however, we sold our entire interest in CF Industries, Inc., a domestic
manufacturer of crop nutrients, for $315.5 million in cash, which resulted in a
gain on sale of investment of $102.4 million. Our investment in Agriliance is
accounted for under the equity method, and accordingly, our Agronomy segment has
no net sales, but we allocate overhead to selling and administrative expense and
may recognize patronage as a reduction in cost of sales. Additional information
regarding Agriliance is provided below under the caption in "Item 1. Business --
Joint Ventures and Investments -- Agriliance LLC". For a discussion of our
agronomy accounting and results see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of
Operation--Overview--General--Unconsolidated Businesses."

LAYERS

     Overview. Our layers segment consists solely of our MoArk, LLC ("MoArk")
subsidiary, which produces and markets shell eggs and egg products. Through June
30, 2003, we carried a 50% ownership interest in MoArk under the equity method
and the remaining interest was owned by Osborne Investments, LLC ("Osborne"). In
2003, we increased our ownership from 50% to 57.5% with an additional investment
of $7.8 million; and in accordance with the provisions of FIN 46, "Consolidation
of Variable Interest Entities," effective July 1, 2003, MoArk was consolidated
into our financial statements. Although Osborne held a 42.5% ownership interest
in MoArk, the Company was allocated 100% of the earnings or loss from the
operations of MoArk.

     Land O'Lakes held a right to acquire (and Osborne held the right to require
the Company to acquire) the remaining 42.5% of MoArk owned by Osborne for a
$42.2 million minimum payment in 2007, plus an additional amount related to
market conditions. In 2005, Land O'Lakes and Osborne agreed to accelerate the
transfer of ownership. In January 2006, we purchased the remaining 42.5%
minority interest in MoArk for $71.0 million in cash. Accordingly, a $71.0
million accrued expense liability was included in the consolidated balance sheet
at December 31, 2005.

     In April 2004, we announced our intention to reposition our Layers
operations. As part of this effort, in the fourth quarter of 2005 we committed
to a plan to sell a portion of our Layers net assets. Management expects the
asset repositioning to occur within a year. Accordingly, certain assets and
liabilities were presented as assets held for sale in the consolidated financial
statements at December 31, 2005.

     Products. MoArk produces and markets shell eggs and egg products that are
sold to retail and wholesale customers for consumer and industrial use
throughout the United States. MoArk markets and processes 629 million dozen eggs
from approximately 26 million layers (hens) and owns approximately 12 million
layers (hens) which produce approximately 368 million dozen eggs annually. As
noted, approximately 45% of the eggs and egg products marketed are produced by
layers owned by MoArk. The remaining 55% are purchased on the spot market or
from third-party producers. Shell eggs represent approximately 74% of eggs MoArk
sells annually, and the balance are broken for use in egg products such as
refrigerated liquid, frozen, dried and extended shelf life liquid.

     Customers and Distribution. MoArk has approximately 600 retail grocery,
industrial, foodservice and institutional customers. While supply contracts
exist with a number of the larger retail organizations, the terms are typically
market based annual contracts and allow early cancellation by either party.
MoArk primarily delivers directly to its customer (including store door
delivery). Alternatively, some customers pick up product at one of MoArk's
facilities.

     Sales and Marketing. MoArk's internal sales force maintains direct
relationships with customers. MoArk also uses food brokers to maintain select
accounts and for niche and "spot" activity in situations where MoArk cannot
effectively support the customer or needs to locate a customer or customers for
excess products. With the exception of the advertising activity associated with
the launch of the LAND O LAKES brand eggs, amounts spent for advertising are
insignificant.

     Competition. MoArk competes with other egg processors, including Cal-Maine
Foods, Rose Acre Farms, Inc. and Michael Foods. MoArk competes with these
companies based upon its low cost production system, its high margin regional
markets and its diversified product line.

OTHER

     We also operate several other wholly owned businesses reflected in the
Other segment, such as our LOL Finance Co. and its subsidiary, LOLFC, LLC, which
provide operating loans and facility financing to farmers and livestock
producers.


                                        9

<PAGE>

JOINT VENTURES AND INVESTMENTS

     The joint ventures and investments described below are unconsolidated.

AGRILIANCE LLC

     Agriliance, a 50/50 joint venture with CHS Inc., was formed for the
purposes of distributing and manufacturing agronomy products. Prior to the
contribution of our agronomy assets to Agriliance in July 2000, the financial
results of these assets were consolidated for financial reporting purposes.

     Products. Agriliance markets and sells two primary product lines: crop
nutrients (including fertilizers and micronutrients) and crop protection
products (including herbicides, pesticides, fungicides and adjuvants). For
Agriliance's fiscal year ended August 31, 2005, approximately 92% of these
products were manufactured by third-party suppliers and marketed under the
suppliers' brand names. The remaining 8% was either manufactured by Agriliance
or by a third-party supplier and marketed under the brand names AgriSolutions
(for herbicides, pesticides and related products) and Origin (for
micronutrients).

     Sales and Marketing. Agriliance has an internal sales force of
approximately 320 employees. Agriliance's sales and marketing efforts serve the
entire United States and focus on areas in the Midwest, the Southeast, and the
eastern Corn Belt. Agriliance's strategy is built upon strong relationships with
local cooperatives and Agriliance's ability to purchase and distribute quality
agronomy products at a low cost. Agriliance engages in a limited amount of
advertising in trade journals and produces marketing brochures and
advertisements utilized by local cooperatives. In addition, Agriliance assists
local member cooperatives and independent farmers by identifying, recruiting and
training agronomists who provide advice relating to agronomy products. In the
Midwest, Agriliance has implemented the Total Farm Solutions program, an effort
to utilize the expertise of the agronomists to bundle Agriliance products with
our seed products.

     Production, Source of Supply and Raw Materials. Agriliance operates
primarily as a wholesale distributor of products purchased from other
manufacturers. Agriliance's primary suppliers of crop protection products are
Syngenta, Monsanto, BASF, Dow Chemical, DuPont and Bayer. Agriliance enters into
annual distribution agreements with these manufacturers. However, Agriliance
manufactures approximately 33% of its proprietary crop protection products.
Agriliance's production facilities are located in Iowa, Arkansas and Missouri.
Agriliance procures approximately 31% of its fertilizer needs from CF
Industries. In 2005, Agriliance began purchasing UREA and UAN product from
international suppliers. The majority of the tons were purchased from
Petrochemical Industries Company - Kuwait. Agriliance sources its remaining
fertilizer supply needs from a variety of suppliers including PCS, Mosaic, Terra
Nitrogen, Koch and Agrium. Agriliance also produces micronutrient products. In
2005, approximately 32% of Agriliance's agronomy products were sourced from
three suppliers.

     Customers and Distribution. Agriliance's customer base consists primarily
of farmers, many of whom are members of our cooperative. Agriliance distributes
its products through our local member cooperatives and also through retail
agronomy centers owned by Agriliance. Agriliance stores inventory at a number of
strategically positioned locations, including leased warehouses and storage
space at local cooperatives. Agriliance serves most of the key agricultural
areas of the United States, with its customers and distribution concentrated in
the Midwest.

     Competition. Agriliance's primary competitors are national crop nutrient
distributors, such as Helena, UAP, Agrium, Wilbur-Ellis, Koch, Mosaic and
Royster Clark, as well as smaller regional brokers and distributors. The
wholesale agronomy industry is consolidating as distributors attempt to expand
their distribution capabilities and efficiencies. Wholesale agronomy customers
tend to purchase products based upon a distributor's ability to provide ready
access to product at critical times prior to and during the growing season. In
addition, certain customers purchase on the basis of price. We believe
Agriliance distinguishes itself from its competitors as a result of its
distribution network, which enables it to efficiently distribute product to
customers. In addition, Agriliance provides access to trained agronomists who
give advice to farmers on both agronomy and crop seed products to optimize their
crop production.


                                       10

<PAGE>

Governance. Agriliance is managed by a four member board of managers. Land
O'Lakes and CHS Inc., each with 50% ownership positions, have the right to
appoint two of the managers. Certain actions require the unanimous approval of
the board, including (1) adopting or amending the annual business plan; (2)
distributing products produced by Agriliance to anyone other than the members or
patrons of Agriliance's members; (3) approving capital expenditures related to
the expansion of Agriliance's production capabilities, purchasing additional
inventory or changing the types of products produced by Agriliance; (4)
incurring indebtedness other than in the ordinary course of business; (5)
appointing, replacing, or discharging an executive officer; (6) making
distributions to members; and (7) changing income tax or special accounting
elections. Pursuant to the terms of Agriliance's operating agreement, Land
O'Lakes and CHS Inc. have each agreed to refrain from directly or indirectly
engaging in the wholesale marketing of fertilizer and agricultural chemicals in
North America, except through Agriliance, for so long as they, or an entity in
which they are a material owner, remain a member of Agriliance, and for a period
of four years following termination of their membership.

ADVANCED FOOD PRODUCTS, LLC

     We own a 35% interest in Advanced Food Products, a joint venture which
manufactures and markets a variety of custom and non-custom aseptic products.
Aseptic products are manufactured to have extended shelf life through
specialized production and packaging processes, enabling food to be stored
without refrigeration until opened. We formed Advanced Food Products in 2001,
with a subsidiary of Bongrain, S.A., a French food company, for the purpose of
manufacturing and marketing aseptically packaged cheese sauces, snack dips,
snack puddings, and ready to drink dietary beverages. The venture is governed by
a six member board of managers, and we have the right to appoint two members.
Bongrain manages the day-to-day operations of the venture. As of December 31,
2005, our investment in Advanced Food Products had a book value of $31.9 million
and is accounted for under the equity method. The Operating Agreement governing
the joint venture provides that, at any time after February 28, 2006, the
Company may put its membership interest in the joint venture to the other
member, or the other member may call the Company's membership interest in the
joint venture at a price determined by the joint venture's recent operating
performance.

COBANK

     CoBank is a cooperative lender of which we are a member. Our equity
interest in CoBank and the amount of patronage we receive is dependent upon our
outstanding borrowings from CoBank. As of December 31, 2005, our investment in
CoBank had a book value of $10.7 million and is accounted for under the cost
method.

AG PROCESSING INC

     Ag Processing Inc is a cooperative that produces soybean meal and soybean
oil. As a member of Ag Processing Inc, we are entitled to patronage based upon
our purchases of these products. We use soybean meal as an ingredient in our
feed products. Soybean oil is an ingredient used to produce our dairy spread
products. As of December 31, 2005, our investment in Ag Processing Inc had a
book value of $35.8 million and is accounted for under the cost method.

DESCRIPTION OF THE COOPERATIVE

     Land O'Lakes is incorporated in Minnesota as a cooperative corporation.
Cooperatives resemble traditional corporations in most respects, but with two
primary distinctions. First, a cooperative's common shareholders, its "members,"
supply the cooperative with raw materials, and/or purchase its goods and
services. Second, to the extent a cooperative allocates its earnings from member
business to its members and meets certain other requirements, it is allowed to
deduct this "patronage income," known as "qualified" patronage income, from its
taxable income. Patronage income is allocated in accordance with the amount of
business each member conducts with the cooperative.

     Cooperatives typically derive a majority of their business from members,
although they are allowed by the Internal Revenue Code to conduct non-member
business. Earnings from non-member business are retained as permanent equity by
the cooperative and taxed as corporate income in the same manner as a typical
corporation. Earnings from member business are either allocated to patronage
income or retained as permanent equity (in which case it is taxed as corporate
income) or some combination thereof.

     In order to obtain favorable tax treatment on allocated patronage income,
the Internal Revenue Code requires that at least 20% of each member's annual
allocated patronage income be distributed in cash. The portion of patronage
income that is not distributed in cash is retained by the cooperative, allocated
to member equities and distributed to the member at a later time as a
"revolvement" of equity. The cooperative's members must recognize the amount of
allocated patronage income (whether distributed to members or retained by the
cooperative) in the computation of their individual taxable income.


                                       11

<PAGE>

     At their discretion, cooperatives are also allowed to designate patronage
income as "nonqualified" patronage income and allocate it to member equities.
Unlike qualified patronage income, the cooperative pays taxes on this
nonqualified patronage income as if it was derived from non-member business. The
cooperative's members do not include undistributed nonqualified patronage income
in their current taxable income. However, the cooperative may revolve the equity
representing the nonqualified patronage income to members at some later date,
and is allowed to deduct those amounts from its taxable income at that time.
When nonqualified patronage income is revolved to the cooperative's members, the
revolvement must be included in the members' taxable income.

OUR STRUCTURE AND MEMBERSHIP

     We have both voting and nonvoting members, with differing membership
requirements for cooperative and individual members. We also separate our
members into two categories: "dairy members" supply our dairy foods segment with
dairy products, primarily milk, cream, cheese and butter, and "ag members"
purchase agricultural products, primarily agronomy products, feed and seed from
our other operations or joint ventures. We further divide our dairy and ag
members by region. There are seven dairy regions and five ag regions.

     All our members must acquire stock and comply with uniform conditions
prescribed by our board of directors and by-laws. The board of directors may
terminate a membership if it determines that the member has failed to adequately
patronize us or has become our competitor.

     A cooperative voting member (a "Class A" member) must be an association of
producers of agricultural products operating on a cooperative basis engaged in
either the processing, handling, or marketing of its members' products or the
purchasing, producing, or distributing of farm supplies or services. Class A
members are entitled to a number of votes based on the amount of business done
with the Company. Class A members tend to be ag members, although a Class A
member may be both an ag and dairy member if they both supply us with dairy
products and purchase agricultural products from us or our joint ventures.

     An individual voting member (a "Class B" member) is an individual,
partnership, corporation or other entity other than a cooperative engaged in the
production of agricultural commodities. Class B members are entitled to one
vote. Class B members tend to be dairy members. Class B members may be both an
ag and dairy member if they both provide us with dairy products and purchase
agricultural products from us or our joint ventures.

     Our nonvoting cooperative members ("Class C" members) are associations
operating on a cooperative basis but whose members are not necessarily engaged
in the production or marketing of agricultural products. Such members are not
given the right to vote, because doing so may jeopardize our antitrust exemption
under the Capper-Volstead Act (the exemption requires all our voting members be
engaged in the production or marketing of agricultural products). Class C
members also include cooperatives which are in direct competition with us.

     Nonvoting individual members ("Class D" members) generally do a low volume
of business with us and are not interested in our governance.

GOVERNANCE

     Our board is made up of 24 elected directors. Our dairy members nominate 12
directors from among the dairy members and our ag members nominate 12 directors
from among the ag members. The nomination of directors is conducted within each
group by region. The number of directors nominated from each region is based on
the total amount of business conducted with the cooperative by that region's
members. Directors are elected to four year terms at our annual meeting by
voting members in a manner similar to a typical corporation. Our by-laws require
that, at least every five years, we evaluate both the boundaries of our regions
and the number of directors from each region, so that the number of directors
reflects the proportion of patronage income from each region.

     The board may also choose to elect up to three non-voting advisory members.
Currently, we have two such members. The board governs our affairs in the same
manner as the boards of corporations that are not organized as cooperatives.


                                       12

<PAGE>

EARNINGS

     As described above, we divide our earnings between member and non-member
business and then allocate member earnings to dairy foods operations or
agricultural operations (our Feed, Seed and Agronomy segments). For our dairy
foods operations, the amount of member business is based on the amount of dairy
products supplied to us by our dairy members. In 2005, 71.2% of our dairy input
requirements came from our dairy members. For our agricultural operations, the
amount of member business is based on the dollar-amount of products sold to our
agricultural members. In 2005, 39.5% of our agricultural product net sales, and
93.2% of our agricultural pretax income was derived from sales to agricultural
members.

PATRONAGE INCOME AND EQUITY

     To acquire and maintain adequate capital to finance our business, our
by-laws allow us to retain up to 15% of our earnings from member business as
additions to retained earnings (permanent equity) or offsets to deferred member
equities. We currently retain 10% and apply the remainder of our earnings from
member business to allocated member equities.

     We have two plans through which we revolve patronage income to our members:
the Equity Target Program for our dairy foods operations and the Revolvement
Program for our agriculture businesses.

     The Equity Target Program provides a mechanism for determining the capital
requirements of our dairy foods operations and each dairy member's share of
those requirements. The board of directors has established an equity target
investment of $2.75 per hundred pounds of milk (or milk equivalent) delivered
per year by that member to us. We distribute 20% of allocated patronage income
to a dairy member annually until the investment target is reached by that
member. The remaining 80% of allocated patronage income is retained and
allocated to member equities and revolved in the twelve years after the member
becomes inactive. When the member's equity investment reaches the target, and
for as long as the member's equity target investment is maintained, we
distribute 100% of the member's future allocated patronage income. The equity
target as well as the revolvement period may be changed at the discretion of the
board.

     In 2005, we allocated $9.8 million of our member earnings to our dairy
members as a qualified allocation with an estimated $2.4 million in cash to be
paid in 2006. There was also a nonqualified loss of $3.6 million not allocated.
We also revolved $14.6 million of equities and paid $5.0 million of cash
patronage related to prior year's earnings to dairy members. In 2004, we
allocated $21.6 million of our member earnings to dairy members with an
estimated $5.6 million to be paid in cash in 2005. We also revolved $15.4
million of equities in 2004.

     In the Revolvement Program for our agricultural businesses, we currently
distribute 30% of allocated patronage income in cash and retain and allocate the
remaining 70% to member equity. This equity is currently revolved 13 1/2 years
later. Both the amount distributed in cash and the revolvement period are
subject to change by our board. In 2005, we allocated $112.0 million of our
member earnings to our agricultural members (which included $70.9 million of
patronage income from operations, an allocation of $31.8 million offsetting the
2004 patronage loss related to the loss on impairment of investment and a $9.3
million nonqualified patronage allocation) with estimated $21.3 million in cash
to be paid in 2006. We also paid $10.1 million of cash patronage related to
prior year's earnings in 2005. In 2004, we allocated $2.1 million of our member
earnings to our agricultural members (which included $33.9 million of patronage
income from operations and $31.8 million of patronage losses related to loss on
impairment of investment) with estimated $10.2 million in cash to be paid in
2005. We also paid $9.1 million of cash patronage related to prior year's
earnings in 2004. In 2004 and 2003 our board did not revolve agriculture member
equities.

     Our estate redemption policy provides that we will redeem equity holdings
of deceased natural persons upon the demise of the owner. The Company's age
retirement policy provides that we will redeem in full equity holdings of dairy
members who are natural persons when the member reaches age 75 or older. Subject
to various requirements, we may redeem the equity holdings of members in
bankruptcy or liquidation. All proposed equity redemptions must be presented to,
and are subject to the approval of, our board of directors before payment. In
connection with these programs, we redeemed $4.9 million in 2005 and $7.0
million in 2004.

EMPLOYEES

     At March 1, 2006, we had approximately 7,500 employees, approximately 23%
of whom were represented by unions having national affiliations. Our contracts
with these unions expire at various times throughout the next several years. We
consider our relationship with employees to be generally satisfactory. We have
had no labor strikes or work stoppages within the last five years.


                                       13

<PAGE>

PATENTS, TRADEMARKS AND INTELLECTUAL PROPERTY

     We rely on patents, copyrights, trademarks, trade secrets, confidentiality
provisions and licensing arrangements to establish and protect our intellectual
property. We believe that in addition to certain patented processes, the
formulas and production methods of our dairy foods products are trade secrets.
We also have patented formulations and processes for our milk replacer products
and deem our feed product formulations to be proprietary.

     We own a number of registered and unregistered trademarks used in
connection with the marketing and sale of our food products, as well as our
feed, seed and egg products including LAND O LAKES, the Indian Maiden logo,
Alpine Lace, New Yorker, Extra Melt, CROPLAN GENETICS, Maxi Care, Amplifier Max,
Cow's Match, Omolene and MoArk. Land O'Lakes Purina Feed licenses certain
trademarks from Land O'Lakes, including LAND O LAKES, the Indian Maiden logo,
Maxi Care, Cow's Match and Amplifier Max, for use in connection with its animal
feed and milk replacer products. We license the trademarks Purina, Chow and the
"Checkerboard" Nine Square logo from Nestle Purina PetCare Company under a
perpetual, royalty-free license. This license only gives us the right to use
these trademarks for particular products that we currently market with these
trademarks. We do not have the right to use these trademarks outside of the
United States or in conjunction with any products designed primarily for use
with cats, dogs or humans. We do not have the right to assign any of these
trademarks without the written consent of Nestle Purina PetCare Company. These
trademarks are important to us because brand name recognition is a key factor to
our success in marketing and selling our feed products. The registrations of
these trademarks in the United States and foreign countries are effective for
varying periods of time, and may be renewed periodically, provided that we, as
the registered owner, or our licensees, where applicable, comply with all
pertinent renewal requirements including, where necessary, the continued use of
the trademarks in connection with similar goods.

     In 2002, we expanded our licensing agreement with Dean Foods. Under the
expanded agreement, Dean Foods is granted exclusive rights to use the LAND O
LAKES brand and the Indian Maiden logo in connection with the manufacturing,
marketing, promotion, distribution and sale of certain products, including, but
not limited to, basic dairy products (milk, yogurt, cottage cheese, ice cream,
eggnog, juices and dips), creams, small bottle milk, infant formula products and
soy beverage products. Dean Foods is also granted the right to use the Company's
patented Grip 'n Go bottle and the Company's formula to fat-free half & half.
With respect to the basic dairy products and the small bottle milk, the license
is granted on a royalty-free basis. With respect to the remaining products
covered by the license agreement, Dean Foods pays a sales-based royalty, based
on volumes sold, subject to a guaranteed minimum annual royalty payment. In
addition, the license agreement is terminable by either party in the event that
certain minimum thresholds are not met on an annual basis.

     We have patented formulations and processes for our milk replacer and other
feed products which have expirations through 2018.

     We have also entered into other license agreements with other affiliated
and unaffiliated companies, such as MoArk, which permit these companies to
utilize our trademarks in connection with the marketing and sale of certain
products.

ENVIRONMENTAL MATTERS

     We are subject to various Federal, state, local and foreign environmental
laws and regulations, including those governing discharges of pollutants into
the air or water and the use, storage and disposal of hazardous materials or
wastes. Violations of these laws and regulations, or of the permits required for
our operations, may lead to civil and criminal fines and penalties or other
sanctions. For example, we are intermittently exceeding certain wastewater
discharge limitations at the Cheese and Protein International, LLC facility in
California and, as a result, have paid penalties or surcharges, to the City of
Tulare. To date, approximately $6.0 million was spent on the process systems,
contractors, and architectural work required to address the wastewater treatment
issues, with approximately $0.5 million estimated to be spent in 2006 to
complete the project. Based on wastewater compliance status, a portion of the
surcharges are returned to the facility for capital projects related to the
wastewater issue.


                                       14

<PAGE>

     Environmental laws and regulations may also impose liability for the
cleanup of environmental contamination. We generate large volumes of waste
water, we use regulated substances in operating our manufacturing equipment, and
we use and store other chemicals on site (including acids, caustics, fuels, oils
and refrigeration chemicals). Agriliance stores petroleum products and other
chemicals on-site (including fertilizers, pesticides and herbicides). Spills or
releases resulting in significant contamination, or changes in environmental
regulations governing the handling or disposal of these materials, could result
in significant costs that could have an impact on our business, financial
condition or results of operations.

     Many of our current and former facilities have been in operation for many
years, and over time, we and other operators of those facilities have generated,
used, stored, or disposed of substances or wastes that are or might be deemed
hazardous under applicable environmental laws, including chemicals and fuel
stored in underground and above-ground tanks, animal wastes and large volumes of
wastewater discharges. As a result, the soil and groundwater at or under certain
of our current and former facilities (and/or in the vicinity of such facilities)
is or may be contaminated, and we may be required in the future to make
significant expenditures to investigate, control and remediate such
contamination.

     We are also potentially responsible for environmental conditions at a
number of former facilities and at waste disposal facilities operated by third
parties. We have been identified as a Potentially Responsible Party ("PRP")
under the federal Comprehensive Environmental Response, Compensation, and
Liability Act ("CERCLA" or "Superfund") or similar state laws and have
unresolved liability with respect to the past disposal of hazardous substances
at several such sites. CERCLA imposes strict, joint and several liability on
certain statutory classes of persons, meaning that one party may be held
responsible for the entire cost of investigating and remediating contaminated
properties, regardless of fault or the legality of the original disposal. These
persons include the present and former owners or operators of a contaminated
property, and companies that generated, disposed of, or arranged for the
disposal of hazardous substances found at the property. We have contested our
liability at a Superfund site, as to which we have declined to pay past response
costs associated with an ongoing site study.

     We have, on average, paid less than $500,000 in each of the last five years
for investigation and remediation of environmental matters, including Superfund
and related matters. Expenditures for such activities could rise materially if
substantial additional contamination is discovered at any of our current or
former facilities or if other PRPs fail or refuse to participate in cost sharing
at any Superfund site, or similar disposal site, at which we are implicated.

REGULATORY MATTERS

     We are subject to Federal, state and local laws and regulations relating to
the manufacturing, labeling, packaging, health and safety, sanitation, quality
control, fair trade practices, and other aspects of our business. In addition,
zoning, construction and operating permits are required from governmental
agencies which focus on issues such as land use, environmental protection, waste
management, and the movement of animals across state lines. These laws and
regulations may, in certain instances, affect our ability to develop and market
new products and to utilize technological innovations in our business. In
addition, changes in these rules might increase the cost of operating our
facilities or conducting our business which would adversely affect our finances.

     Our dairy business is affected by Federal price support programs and
federal and state pooling and pricing programs. Since 1949, the Federal
government has maintained price supports for cheese, butter and nonfat dry milk.
The government stands as a ready purchaser of these products at their price
support levels. Historically, when the product price reached 110% of its price
support level, the government would sell its inventory into the market,
effectively limiting the price of these products. Because prices for these
products have generally been higher than their support level for a number of
years, the government currently has minimal inventories of cheese and butter. As
a result, these commodity prices have been greater than 110% of their price
support levels for several years. The Farm Security and Rural Investment Act of
2002 extends the dairy price support program through December 31, 2007.


                                       15

<PAGE>

     Federal and certain similar state regulations attempt to ensure that the
supply of raw milk flows in priority to fluid milk and soft cream producers
before producers of hard products such as cheese and butter. This is
accomplished in two ways. First, the Federal market order system sets minimum
prices for raw milk. The minimum price of raw milk for use in fluid milk and
soft cream production is set as a premium to the minimum price of raw milk used
to produce hard products. The minimum price of raw milk used to produce hard
products is, in turn, set based upon USDA survey data which includes market
pricing of butter and cheese. Second, the Federal market order system
establishes a pooling program under which participants are required to send at
least some of their raw milk to fluid milk producers. The specific amount varies
based on region, but is at least 10% of the raw milk a participant handles.
Certain areas in the country, such as California, have adopted systems which
supersede the Federal market order system but are similar to it. In addition,
because the Federal market order system is not intended as an exclusive
regulation of the price of raw milk, certain states have, and others could,
adopt regulations which could increase the price we pay for raw milk, which
could have an adverse effect on our financial results. We also pay a premium
above the market order price based on competitive conditions in different
regions.

     Producers of dairy products which are participants in the Federal market
order system pay into regional "pools" for the milk they use based on the amount
of each class of dairy product produced and the price of those products. As
described above, only producers of dairy products who send the required minimum
amount of raw milk to fluid milk producers may participate in the pool. The
amounts paid into the pool for raw milk used to make fluid milk and soft creams
are set at a premium to the amounts paid into the pool for raw milk used to make
cheese or butter. The pool then returns to each dairy product producer for raw
milk it handled the weighted average price for all raw milk (including that used
for fluid milk and soft creams, whose producers must pay into the pool) sold in
that region. The dairy product producer pays at least this pool price to the
dairy farmer for milk received. This pooling system provides an incentive for
hard product producers to participate in the pool (and therefore supply the
required minimum for fluid milk production), because the average price for raw
milk received by these producers from the pool is more than the average price
they pay into the pool.

     As a cooperative, we are exempt from the requirement that we pay pool
prices to our members for raw milk supplied to us. However, as a practical
matter, we must pay a competitive price to our members in order to ensure
adequate supply of raw milk for our production needs, and therefore our
operations are affected by these regulations.

     If we did not participate in the pool, we would not receive the advantage
of the average pool payment and we would not be able to pay our milk producers
as much as participating processors without incurring higher costs for our raw
milk. To maintain our participation in the Federal market order program and
avoid this competitive disadvantage, we must procure at least 110% of our raw
milk requirements to meet our production needs. If we are unable to procure at
least 110% of our requirements, we would have lower production which could have
a material adverse affect on our results of operations. In addition, if the pool
was eliminated we would be subject to additional market forces when procuring
raw milk, which could result in increased milk costs and decreased supply, which
could materially affect our business.

     As a manufacturer and distributor of food and animal feed products, we are
subject to the Federal Food, Drug and Cosmetic Act and regulations issued
thereunder by the Food and Drug Administration ("FDA"). This regulatory scheme
governs the manufacture (including composition and ingredients), labeling,
packaging, and safety of food. The FDA regulates manufacturing practices for
foods through its good manufacturing practices regulations, specifies the
standards of identity for certain foods and animal feed and prescribes the
format and content of certain information required to appear on food and animal
feed product labels. In addition, the FDA enforces the Public Health Service Act
and regulations issued thereunder, which authorize regulatory activity necessary
to prevent the introduction, transmission or spread of communicable diseases. We
and our products are also subject to state and local regulation through
mechanisms such as the licensing of dairy manufacturing facilities, enforcement
by state and local health agencies of state standards for food products,
inspection of facilities and regulation of trade practices. Modification of
these Federal, state and local laws and regulations could increase our costs of
sales or prevent us from marketing foods in the way we currently do and could
have a material adverse effect on our business prospects, results of operations
and financial condition.

     Pasteurization of milk and milk products is also subject to inspection by
the United States Department of Agriculture. We and our products are also
subject to state and local regulation through mechanisms such as the licensing
of dairy manufacturing facilities, enforcement by state and local health
agencies of state standards for food products, inspection of facilities, and
regulation of trade practices in connection with the sale of food products.
Modification of these Federal, state and local laws and regulations could
increase our costs of sales or prevent us from marketing foods in the way we
currently do and could have a material adverse effect on our business prospects,
results of operations and financial condition.


                                       16

<PAGE>

     Land O'Lakes Purina Feed distributes animal feed products through a network
of independent dealers. Various states in which these dealers are located have
enacted dealer protection laws which could have the effect of limiting our
rights to terminate dealers. In addition, failure to comply with such laws could
result in awards of damages or statutory sanctions. As a result, it may be
difficult to modify the way we distribute our feed products, which may put us at
a competitive disadvantage.

     Several states maintain "corporate farming laws" that restrict the ability
of corporations to engage in farming activities. Minnesota, North Dakota, South
Dakota, Nebraska, Kansas, Oklahoma, Missouri, Iowa and Wisconsin, states in
which we conduct business, have corporate farming laws. We believe that our
operations currently comply with the corporate farming laws in these states and
their exemptions, but these laws could change in the future and additional
states could enact corporate farming laws that regulate our businesses. Even
with the exemptions, these corporate farming laws restrict our ability to expand
or alter our operations in these states.

ITEM 1A. RISK FACTORS.

     Set forth below is a summary of the material risk factors for Land O'Lakes:

OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR ABILITY TO FULFILL OUR
OBLIGATIONS UNDER OUR DEBT FACILITIES AND TO OPERATE OUR BUSINESS.

     We are highly leveraged and have significant debt service obligations. As
of December 31, 2005, our aggregate outstanding consolidated indebtedness was
$737.9 million, excluding unused commitments and including our 7.45% Capital
Securities. Our total equity was $903.6 million. For the year ended December
31, 2005 our interest expense (net) was $79.9 million. We may incur additional
debt from time to time to finance strategic acquisitions, investments and
alliances, capital expenditures or for other purposes, subject to the
restrictions contained in our debt agreements.

     Our substantial debt could have important consequences to persons holding
our outstanding indebtedness, including the following:

     - we will be required to use a substantial portion of our cash flow from
operations to pay principal and interest on our debt, thereby reducing the
availability of our cash flow to fund working capital, capital expenditures,
strategic acquisitions, investments and alliances and other general corporate
requirements;

     - our interest expense could increase if interest rates in general increase
because a portion of our debt bears interest at floating rates;

     - our substantial leverage could increase our vulnerability to general
economic downturns and adverse competitive and industry conditions and could
place us at a competitive disadvantage compared to our competitors who are less
leveraged;

     - our debt service obligations could limit our flexibility to plan for, or
react to, changes in our business and the dairy and agricultural industries;

     - our level of debt may restrict us from raising additional financing on
satisfactory terms to fund working capital, capital expenditures, strategic
acquisitions, investments and joint ventures and other general corporate
requirements;

     our level of debt may prevent us from raising the funds necessary to
repurchase all of our 8 3/4% senior notes and the 9% senior secured notes
tendered to us upon the occurrence of a change of control, which would
constitute an event of default under the 8 3/4% senior notes and the 9% senior
secured notes; and

     - our failure to comply with the financial and other restrictive covenants
in our debt instruments could result in an event of default that, if not cured
or waived, could cause our debt to become due immediately and permit our lenders
to enforce their remedies.


                                       17
<PAGE>

SERVICING OUR INDEBTEDNESS REQUIRES A SIGNIFICANT AMOUNT OF CASH, AND OUR
ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.

     We expect to obtain the cash to make payments on our debt and to fund
working capital, capital expenditures, strategic acquisitions, investments and
joint ventures and other general corporate requirements from our operations. Our
ability to generate cash is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. We cannot
assure investors that our business will generate sufficient cash flow from
operations, that we will realize currently anticipated cost savings, net sales
growth and operating improvements on schedule, or at all, or that future
borrowings will be available to us under our senior bank facilities, in each
case, in amounts sufficient to enable us to service our indebtedness or to fund
our other liquidity needs.

     If we cannot service our indebtedness, we will have to take actions such as
reducing or delaying capital expenditures, strategic acquisitions, investments
and joint ventures, selling assets, restructuring or refinancing our
indebtedness, deferring revolvements and other member payments or seeking
additional equity capital, which may adversely affect our membership and affect
their willingness to remain members. These remedies may not be effected on
commercially reasonable terms, or at all. In addition, the terms of existing or
future financing agreements, including the credit agreement relating to our
senior bank facility, the agreements relating to our receivables securitization
and the indentures for our 8 3/4% senior notes and our 9% senior secured notes
may restrict us from adopting any of these alternatives.

DESPITE OUR SUBSTANTIAL LEVERAGE, WE WILL BE ABLE TO INCUR MORE DEBT, WHICH MAY
INTENSIFY THE RISKS ASSOCIATED WITH OUR SUBSTANTIAL LEVERAGE, INCLUDING OUR
ABILITY TO SERVICE OUR DEBT.

     The agreements governing our debt will permit us, subject to certain
conditions, to incur a significant amount of additional indebtedness. In
addition, we may incur additional debt under our $200 million revolving credit
facility, of which $147.6 million was available to us as of December 31, 2005.
If we incur additional debt, the risks associated with our substantial leverage,
including our ability to service our debt, could intensify.

IF CREDITORS OF OUR SUBSIDIARIES AND JOINT VENTURES MAKE CLAIMS WITH RESPECT TO
THE ASSETS AND EARNINGS OF THESE COMPANIES, SUFFICIENT FUNDS MAY NOT BE
AVAILABLE TO REPAY OUR INDEBTEDNESS AND WE MAY NOT RECEIVE THE CASH WE EXPECT
FROM INTERCOMPANY TRANSFERS.

     We conduct a substantial portion of our operations through our subsidiaries
and joint ventures. We are, therefore, dependent in part upon dividends or other
intercompany transfers of funds from these companies in order to pay the
principal of and interest on our indebtedness and to meet our other obligations.
Generally, creditors of these companies will have claims to the assets and
earnings of these companies that are superior to the claims of creditors of Land
O'Lakes, except to the extent the claims of Land O'Lakes creditors are
guaranteed by these entities.

     Although the Subsidiary Guarantees and the second-priority liens of the
Subsidiary Guarantors will provide the holders of the 9% senior secured notes
with a direct claim against the assets of the Subsidiary Guarantors, enforcement
of the Subsidiary Guarantees and the second-priority liens of the Subsidiary
Guarantors against any Subsidiary Guarantor may be challenged in a bankruptcy or
reorganization case or a lawsuit by or on behalf of creditors of the Subsidiary
Guarantor and could be subject to defenses. To the extent that the Subsidiary
Guarantees and the second-priority liens are not enforceable, the 9% senior
secured notes would be effectively subordinated to all liabilities of the
Subsidiary Guarantors, including trade payables and contingent liabilities, and
preferred stock of the Subsidiary Guarantors. In any event, the 9% senior
secured notes will be effectively subordinated to all liabilities of the
Non-Guarantors. After eliminating intercompany activity the Non-Guarantors:

     -    had assets of $412 million or 13% of our total assets as of December
          31, 2005;

     -    had liabilities of $259 million or 12% of our total liabilities as of
          December 31, 2005 (excluding the $190.7 million of Capital Securities,
          see "Description of capital securities"); and

     -    generated net sales of $694 million or 9% of our consolidated net
          sales for the year ended December 31, 2005.


                                       18

<PAGE>

RESTRICTIONS IMPOSED BY OUR DEBT AGREEMENTS LIMIT OUR ABILITY TO FINANCE FUTURE
OPERATIONS OR CAPITAL NEEDS OR ENGAGE IN OTHER BUSINESS ACTIVITIES THAT MAY BE
IN OUR INTEREST.

     The indentures for our 8 3/4% senior notes and our 9% senior secured notes
impose, and the terms of any future debt may impose, operating and other
restrictions on us and our restricted subsidiaries. In addition, our senior bank
facility includes other and more restrictive covenants and prohibit us from
prepaying our other debt, including the 8 3/4% senior notes and the 9% senior
secured notes, while debt under our senior bank facility is outstanding. The
agreement governing our senior bank facility also requires us to achieve
specified financial and operating results and maintain compliance with specified
financial ratios.

     The restrictions contained in our debt agreements could:

     -    limit our ability to plan for or react to market conditions or meet
          capital needs or otherwise restrict our activities or business plans;
          and

     -    adversely affect our ability to finance our operations, strategic
          acquisitions, investments or alliances or other capital needs or to
          engage in other business activities that would be in our interest.

     A breach of any of these restrictive covenants or our inability to comply
with the required financial ratios could result in a default under our senior
bank facility and could trigger cross default provisions in the agreements
governing our other debt. If a default occurs, certain of our debt agreements,
including our senior bank facility, allow the lenders to declare all borrowings
outstanding, together with accrued interest and other fees, to be immediately
due and payable which would result in an event of default under the indentures
governing our 8 3/4% senior notes and our 9% senior secured notes, and a
termination event under the agreements governing our receivables securitization.
Lenders will also have the right in these circumstances to terminate any
commitments they have to provide further borrowings. If we are unable to repay
outstanding borrowings when due, those lenders will also have the right to
proceed against the collateral, including our available cash, granted to them to
secure the indebtedness. If this debt was to be accelerated, our assets may not
be sufficient to repay in full that indebtedness and our other indebtedness. If
not cured or waived, such default could give our lenders the right to enforce
other remedies that would interrupt the operation of our business.

THE COLLATERAL PLEDGED IN SUPPORT OF OUR DEBT OBLIGATIONS MAY NOT BE VALUABLE
ENOUGH TO SATISFY ALL THE BORROWINGS SECURED BY THE COLLATERAL.

     The value of the collateral in the event of a liquidation will depend upon
market and economic conditions, the availability of buyers and similar factors.
No independent appraisals of any of the collateral have been prepared by or on
behalf of us.

     Accordingly, we cannot assure that the proceeds of any sale of the
collateral following an acceleration of maturity with respect to the 9% senior
secured notes or under our senior bank facility would be sufficient to satisfy,
or would not be substantially less than, amounts due on the 9% senior secured
notes and the senior bank facility secured thereby. In addition, some or all of
the collateral may be illiquid and may have no readily ascertainable market
value. Likewise, we cannot provide assurance that the collateral will be
saleable or, if saleable, that there will not be substantial delay in its
liquidation. To the extent that liens, rights and easements granted to third
parties encumber assets located on property owned by us or constitute
subordinate liens on the collateral, those third parties have or may exercise
rights and remedies with respect to the property subject to such encumbrances
(including rights to require marshalling of assets) that could adversely affect
the value of that collateral and the ability of the collateral trustee to
realize or foreclose on that collateral.

THE GEOGRAPHIC SHIFT IN DAIRY PRODUCTION HAS DECREASED SALES AND MARGINS AND
COULD CONTINUE TO NEGATIVELY IMPACT OUR SALES AND MARGINS.

     We operate dairy facilities located in different regions of the United
States. Milk production in certain regions, specifically the Midwest and
Northeast, is declining over time as smaller producers in these regions have
ceased milk production and larger producers in the West have increased milk
production. In addition, a producer, whether a member or a non-member, may
decide not to supply milk to us or may decide to stop supplying milk to us when
the term of their contractual obligation expires. Where milk production is not
sufficient to fully support our operations, such as the Midwest and Northeast,
we are not able to operate our plants at a level that is profitable, are forced
to transport milk from a distance or are forced to pay higher prices for our
milk supply. These conditions have decreased, and could continue to decrease
sales and operating margins.


                                       19

<PAGE>

     In response to these trends, we are restructuring our dairy facility
infrastructure in an effort to increase production efficiencies and reduce
costs. There can be no assurance that this restructuring will be successful in
increasing production efficiencies or reducing costs.

     In addition, as dairy production has shifted from the Upper Midwest to the
western United States, we have seen a change in our feed product mix, with lower
sales of complete feed and increased sales of simple blends. Dairy producers in
the western United States tend to purchase feed components and mix them at the
farm location rather than purchase higher margin mixed feed product delivered to
the farm. If this shift continues, we will continue to have decreased volumes of
animal feed in the Midwest and increased costs of production as we are unable to
profitably operate certain of our Midwestern plants.

CHANGES IN CONSUMER PREFERENCES AND DISTRIBUTION CHANNELS COULD DECREASE OUR
DAIRY FOODS REVENUES AND CASH FLOW.

     We are subject to the risks of:

     -    evolving consumer preferences and nutritional and health-related
          concerns; and

     -    changes in food distribution channels, such as consolidation of the
          supermarket industry and other retail outlets that result in a smaller
          customer base and intensify the competition for fewer customers.

     To the extent that consumer preference evolves away from products that we
produce for health or other reasons, and we are unable to create new products
that satisfy new consumer preferences, there will be a decreased demand for our
products. There has been a recent trend toward consolidation among food
retailers which we expect to continue. As a result, these food retailers are
selecting product suppliers who can meet their needs nationwide. If our products
are not selected by these food retailers, our sales volumes could be
significantly reduced. In addition, national distributors or regional food
brokers could choose not to carry our products. Because of the high degree of
consolidation of national food distributors, the decision of a single such
distributor not to carry our products could have a serious impact on our
revenues.

     Any shift in consumer preferences away from our products could decrease our
revenues and cash flow and impair our ability to fulfill our obligations under
our debt obligations and operate our business.

COMPETITION IN THE INDUSTRY MAY REDUCE OUR SALES AND MARGINS.

     Our business segments operate in highly competitive industries. In
addition, some of our business segments compete with companies that have greater
capital resources, research and development staffs, facilities, diversity of
product lines and brand recognition than we have. Increased competition against
any of our products could result in reduced prices which would reduce our sales
and margins.

     Our competitors may succeed in developing new or enhanced products. These
companies may also prove to be more successful in marketing and selling their
products.

     Sectors of the dairy industry are highly fragmented, with the bulk of the
industry consisting of national and regional competitors. However, consolidation
among food retailers is leading to increased competition for fewer customers. If
we are unable to meet our customers' needs, we may lose major customers, which
could materially adversely affect our business and financial condition.

     The animal feed industry is highly fragmented, with the bulk of the
industry consisting of many small local manufacturers, several regional
manufacturers and a limited number of national manufacturers. However, as meat
processors and livestock producers become larger they tend to integrate their
business by acquiring or constructing their own feed production facilities. As a
result, the available market for commercial feed may become smaller and
competition may increase, which could materially adversely affect our business
and financial condition. In addition, purchasers of commercial feed tend to
select products based on price and performance. Furthermore, some of our feed
products are purchased from third parties without further processing by us. As a
result of this price competition and the lack of processing for some of our
products, the barriers to entry for competing feed products are low.


                                       20

<PAGE>

     The crop seed industry consists of large companies such as Pioneer,
Monsanto and Syngenta which possess large genetic databases and produce and
distribute a wide range of seeds, as well as niche companies which distribute
seed products for only one or a few crops. Because approximately 90% of our crop
seed sales come from sales of alfalfa, soybeans, corn and forage and turf
grasses, technological developments by our competitors in these areas could
result in significantly decreased sales and could materially adversely affect
our business and financial condition. In addition, if any or all of these large
seed companies decide to sell directly to the market or increase the licensing
fees they charge us, we could experience decreased sales and margins.

     The wholesale agronomy industry consists of a few national crop protection
product distributors such as UAP, Helena and Wilbur-Ellis, a few national crop
nutrient product distributors such as Koch, Mosaic, PCS, Agrium and
Royster-Clark, as well as smaller regional brokers and distributors. Competition
in the industry may intensify as distributors consolidate to increase
distribution capabilities and efficiencies, which could materially adversely
affect Agriliance's business and our financial condition.

     MoArk competes with other egg processors, including Cal-Maine Foods, Rose
Acre Farms, Inc. and Michael Foods. MoArk competes with these companies based
upon its low cost production system and its diversified product line.
Competition in the egg industry may intensify as distributors consolidate to
increase efficiencies, which could materially adversely affect MoArk's business
and financial condition.

OUR OPERATING RESULTS FLUCTUATE BY SEASON AND ARE AFFECTED BY WEATHER
CONDITIONS.

     Operating results within many of our segments are affected by seasonal
fluctuations in sales and margins.

     There is significantly increased demand for butter in the months prior to
Thanksgiving and Christmas. Because our supply of milk is lowest at this time,
we produce and store surplus quantities of butter in the months preceding the
increase in demand for butter. As a result, we are subject both to the risk that
butter prices may decrease and that increased demand for butter may never
materialize, resulting in decreased net sales and negative margin impacts.

     Our animal feed sales are seasonal, with a higher percentage of sales
generated during the first and fourth quarters of the year. This seasonality is
driven largely by weather conditions affecting sales of our beef and grass
cattle products. If the weather is particularly warm during the winter, then
sales of feed for beef and grass cattle may decrease because the cattle may be
better able to graze under warmer conditions.

     The sales of crop seed and crop nutrient and crop protection products are
dependent upon the planting and growing season, which varies in timing from year
to year, resulting in both highly seasonal patterns and substantial fluctuations
in our quarterly sales and margin. Most sales of our seed products and of
Agriliance's agronomy products are sold in the first half of the year during the
spring planting season in the United States. If the spring is particularly wet,
farmers will not apply crop nutrient and crop protection products because they
will be washed away and ineffective if applied.

     In addition, severe weather conditions and natural disasters, such as
floods, droughts, frosts or earthquakes, or adverse growing conditions, diseases
and insect-infestation problems may reduce the quantity and quality of
commodities available for processing by us. For example, dairy cows produce less
milk when subjected to extreme weather conditions, including hot and cold
temperatures. A significant reduction in the quantity or quality of commodities
harvested or produced due to adverse weather conditions, disease, insect
problems or other factors could result in increased processing costs and
decreased production, with adverse financial consequences to us.


                                       21

<PAGE>

INCREASED ENERGY AND GAS COSTS COULD INCREASE OUR EXPENSES AND REDUCE OUR
PROFITABILITY.

     We require a substantial amount of electricity, natural gas and gasoline to
manufacture, store and transport our products. The price of electricity, natural
gas and gasoline fluctuate significantly over time. Many of our products compete
based on price, and we may not be able to pass on increased costs of production,
storage or transportation to our customers. As a result, increases in the cost
of electricity, natural gas or gasoline could substantially harm our margins.
Due to price competition in the marketplace, Agriliance may not be able to pass
on the entire increase in crop nutrient costs to customers (approximately 80% of
nitrogen-based crop nutrient input cost is natural gas), therefore Agriliance's
margins on crop nutrient products could be lower than they would be if natural
gas and fertilizer costs remain constant. In addition, a higher sales price of
fertilizer could result in a reduction of sales volume. Increases in natural gas
prices may not occur to the same degree in countries where natural gas does not
have as many other uses, such as countries with temperate climates where natural
gas is not used as a heating fuel or primary source of power generation. As a
result of these demand differences, crop nutrient producers in the United States
may be at a competitive disadvantage to some international competitors during
periods of high natural gas prices.

OUTBREAKS OF DISEASE CAN REDUCE OUR SALES AND MARGINS.

     The productivity and profitability of our businesses depend on animal and
crop health and on disease control.

     We face the risk of outbreaks of BSE, which could lead to decreased feed
and dairy sales and increased costs to produce feed and dairy products. In
response to the discovery of BSE in the U.S. marketplace, the USDA has increased
testing requirements for cows and is exploring additional inspection
requirements which could increase the cost of production of beef and dairy
products. The discovery of additional cases of BSE could lead to widespread
destruction of beef cattle and dairy cows, could cause consumer demand for beef
and dairy products to decrease and could result in increased inspection costs
and procedures. If this occurs, we could have decreased feed sales for beef
cattle and dairy cows as a result of animal destruction or producers lowering
their herd sizes in response to decreased consumer demand. In addition, we could
have decreased sales of our dairy products due to decreased consumer demand or
decreased milk supply and decreased margins as a result of increased dairy
production costs

     We face the risk of outbreaks of foot-and-mouth disease, which could lead
to a significant destruction of cloven-hoofed animals such as dairy cattle, beef
cattle, swine, sheep and goats and significantly reduce the demand for meat
products. Because foot-and-mouth disease is highly contagious and destructive to
susceptible livestock, any outbreak of foot-and-mouth disease could result in
the widespread destruction of all potentially infected livestock. Our feed
operations could suffer as a result of decreased demand for feed products. If
this happens, we could also have difficulty procuring the milk we need for our
dairy operations and incur increased cost to produce our dairy products, which
could reduce our sales and operating margins.

     We face the risk of outbreaks of poultry diseases, such as Newcastle
disease and avian influenza, which could lead to the destruction of poultry
flocks. Because these diseases can be highly contagious and destructive, any
such outbreak of disease could result in the widespread destruction of infected
flocks. If this happens, we could experience a decreased demand for our poultry
feed which could reduce our sales and margins. In addition, if such diseases
spread to flocks owned by MoArk, MoArk could experience a decreased supply of
layers and eggs, which could reduce MoArk's sales and margins.

     Outbreaks of plant diseases (including Asian Soybean Rust) and pests could
destroy entire crops of plants for which we sell crop seed. If this occurs, the
crops grown to produce seed could also be destroyed, resulting in a shortage of
crop seed available for us to sell for the next planting season. In addition,
there may be decreased demand for our crop seed from farmers who choose not to
plant those species of crops affected by these diseases or pests. These
shortages and decreased demand could reduce our sales. In addition, certain
plant diseases (including Asian Soybean Rust) could reduce the total available
supply of soybeans and soybean meal, which are inputs used in our feed business.
To the extent we are unable to find suitable alternatives, are unable to
completely hedge our exposure to such inputs or are unable to pass along price
increases to our customers, a price increase of these inputs could reduce our
sales and could reduce our margins.

CHANGES IN THE MARKET PRICES OF THE DAIRY AND AGRICULTURAL COMMODITIES THAT WE
USE AS INPUTS AS WELL AS THE PRODUCTS WE MARKET MAY CAUSE OUR MARGINS TO DECLINE
AND REDUCE THE LIKELIHOOD OF RECEIVING DIVIDENDS FROM OUR JOINT VENTURES.

     Many of our products, particularly in our dairy foods, animal feed and
layers businesses, use dairy or agricultural commodities as inputs or constitute
dairy or agricultural commodity outputs. Consequently, increased cost of
commodity inputs and decreased market price of commodity outputs may reduce
profitability.


                                       22

<PAGE>

     We are major purchasers of commodities used as inputs in our dairy foods
segment, namely milk, cream, butter and bulk cheese. Our dairy foods outputs,
namely butter, cheese and nonfat dry milk, are also commodities. We inventory a
significant amount of the cheese and butter products we produce for sale to our
customers at a later date and at the market price on that date. For example, we
build significant butter inventories in the spring when milk supply is highest
for sale to our retail customers in the fall when butter demand is highest. If
the market price we receive at the time we sell our products is less than the
market price on the day we made the products, we will have lower (or negative)
margins which may have a material adverse impact on our earnings. In addition,
we maintain significant inventories of cheese for aging and face the same risk
with respect to these products.

     The feed segment follows industry standards for feed pricing. The feed
industry generally prices products on the basis of income over ingredient cost
per ton of feed. This practice tends to mitigate the impact of volatility in
commodity ingredient markets on our animal feed margins. However, if our
commodity input prices were to increase dramatically, we may be unable to pass
these prices on to our customers, who may find alternative feed sources at lower
prices or may exit the market entirely. This increased expense could reduce our
margins.

     Our MoArk subsidiary produces and markets eggs. During periods of 2005, egg
prices, as measured by the Urner Barry South Central Large index, have been
below historical norms. To the extent the price of eggs remains at these low
levels MoArk's ability to make dividend distributions to the Company could be
diminished.

WE OPERATE THROUGH JOINT VENTURES IN WHICH OUR RIGHTS TO EARNINGS AND CONTROL OF
THE JOINT VENTURE ARE LIMITED.

     We produce, market and sell products through numerous joint ventures with
unaffiliated third parties. Our agronomy business is primarily operated through
a joint venture.

     The terms of each joint venture are different, but our joint venture
agreements generally contain:

     -    restrictions on our ability to transfer our ownership interest in the
          joint venture;

     -    no right to receive distributions without the unanimous consent of the
          members of the joint venture; and

     -    noncompetition arrangements restricting our ability to engage
          independently in the same line of business as the joint venture.

     In addition to these restrictions, in connection with the formation of some
of our joint ventures, we have entered into purchase or supply agreements which
require us to purchase a minimum amount of the products produced by the joint
venture or supply a minimum amount of the raw materials used by the joint
venture. The day-to-day operations of some of our joint ventures are managed by
us through a management contract and others are managed by other joint venture
members. As a result, we do not have day-to-day control over certain of these
companies. See "Item 1, Business--Joint Ventures and Investments" and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Unconsolidated Businesses" for a discussion of our material joint
ventures.

CERTAIN OF OUR BUSINESS MAY BE ADVERSELY AFFECTED BY THEIR DEPENDENCE UPON THEIR
SUPPLIERS.

     Certain of our businesses, particularly our Seed and Agronomy businesses,
rely on a limited number of suppliers for the products they sell. In the event
these businesses are unable to purchase their products on favorable terms from
these suppliers, they may be unable to find suitable alternatives to meet their
product needs.


                                       23

<PAGE>

A LOSS OF OUR COOPERATIVE TAX STATUS COULD INCREASE OUR TAX LIABILITY.

     Subchapter T of the Internal Revenue Code sets forth rules for the tax
treatment of cooperatives. As a cooperative, we are not taxed on earnings from
member business that we deem to be patronage income allocated to our members.
However, we are taxed as a typical corporation on the remainder of our earnings
from our member business (those earnings which we have not deemed to be
patronage income) and on earnings from nonmember business. If we were not
entitled to be taxed as a cooperative, our tax liability would be significantly
increased. For additional information regarding our cooperative structure and
the taxation of cooperatives, see "Item 1. Business -- Description of the
cooperative."

OUR LIMITED ACCESS TO EQUITY MARKETS COULD ADVERSELY AFFECT OUR ABILITY TO
OBTAIN ADDITIONAL EQUITY CAPITAL.

     As a cooperative, we may not sell our common stock in the traditional
equity markets. In addition, our articles of incorporation and by-laws contain
limitations on dividends and liquidation preferences on any preferred stock we
issue. These limitations restrict our ability to raise equity capital and may
adversely affect our ability to compete with entities that do not face similar
restrictions.

OUR OPERATIONS ARE SUBJECT TO NUMEROUS LAWS AND REGULATIONS, EXPOSING US TO
POTENTIAL CLAIMS AND COMPLIANCE COSTS THAT COULD ADVERSELY AFFECT OUR MARGINS.

     We are subject to Federal, state and local laws and regulations relating to
the manufacturing, labeling, packaging, health and safety, sanitation, quality
control, fair trade practices, and other aspects of our business. In addition,
zoning, construction and operating permits are required from governmental
agencies which focus on issues such as land use, environmental protection, waste
management, and the movement of animals across state lines. These laws and
regulations may, in certain instances, affect our ability to develop and market
new products and to utilize technological innovations in our business. In
addition, changes in these rules might increase the cost of operating our
facilities or conducting our business which would adversely affect our business.

     Our dairy business is affected by Federal price support programs and
federal and state pooling and pricing programs to support the prices of certain
products we sell. Federal and certain state regulations help ensure that the
supply of raw milk flows in priority to fluid milk and soft cream producers
before producers of hard products such as cheese and butter. In addition, as a
producer of dairy products, we participate in the Federal market order system
and pay into regional "pools" for the milk we use based on the amount of each
class of dairy product we produce and the price of those products. If any of
these programs was no longer available to us, the prices we pay for milk could
increase and reduce our profitability.

     As a manufacturer of food and animal feed products, we are subject to the
Federal Food, Drug and Cosmetic Act and regulations issued thereunder by the
Food and Drug Administration ("FDA"). The pasteurization of our milk and milk
products is also subject to inspection by the United States Department of
Agriculture. Several states also have laws that protect feed distributors or
restrict the ability of corporations to engage in farming activities. These
regulations may require us to alter or restrict our operations or cause us to
incur additional costs in order to comply with the regulations.

INABILITY TO PROTECT OUR TRADEMARKS AND OTHER PROPRIETARY RIGHTS COULD DAMAGE
OUR COMPETITIVE POSITION.

     We rely on patents, copyrights, trademarks, trade secrets, confidentiality
provisions and licensing arrangements to establish and protect our intellectual
property. Any infringement or misappropriation of our intellectual property
could damage its value and could limit our ability to compete. We may have to
engage in litigation to protect our rights to our intellectual property, which
could result in significant litigation costs and require a significant amount of
management time.

     We license our LAND O LAKES and the Indian Maiden logo trademarks to
certain of our joint ventures and other third parties for use in marketing
certain of their products. We have invested substantially in the promotion and
development of our trademarked brands and establishing their reputation as
high-quality products. Actions taken by these parties may damage our reputation
and our trademarks' value.


                                       24

<PAGE>

     We believe that the recipes and production methods for our dairy and spread
products and formulas for our feed products are trade secrets. In addition, we
have amassed a large body of knowledge regarding animal nutrition and feed
formulation which we believe to be proprietary. Because most of this proprietary
information is not patented, it may be more difficult to protect. We rely on
security procedures and confidentiality agreements to protect this proprietary
information, however such agreements and security procedures may be insufficient
to keep others from acquiring this information. Any such dissemination or
misappropriation of this information could deprive us of the value of our
proprietary information and negatively affect our results.

     We license the trademarks Purina, Chow and the "Checkerboard" Nine Square
logo under a perpetual, royalty-free license from Nestle Purina PetCare Company.
Under the terms of the license agreement, Nestle Purina PetCare Company retains
primary responsibility for protecting the licensed trademarks from infringement.
If Nestle Purina PetCare Company fails to assert its rights to the licensed
trademarks, we may be unable to stop such infringement or cause them to do so.
Any such infringement of the licensed trademarks, or of similar trademarks of
Nestle Purina PetCare Company, could result in a dilution in the value of the
licensed trademarks.

OUR BRAND NAMES COULD BE CONFUSED WITH NAMES OF OTHER COMPANIES WHO, BY THEIR
ACT OR OMISSION, COULD ADVERSELY AFFECT THE VALUE OF OUR BRAND NAMES.

     Many of our branded feed products are marketed under the trademarks Purina,
Chow and the "Checkerboard" Nine Square logo under a perpetual, royalty-free
license from Nestle Purina PetCare Company. Nestle Purina PetCare Company
markets widely recognized products under the same trademarks and has given other
unaffiliated companies the right to market products under these trademarks. A
competitor, Cargill, licenses from Nestle Purina PetCare Company the right to
market the same types of products which we sell under these trademarks in
countries other than the United States. Acts or omissions by Nestle Purina
PetCare Company or other unaffiliated companies may adversely affect the value
of the Purina, Chow and the "Checkerboard" Nine Square logo trademarks and the
demand for our products. Third-party announcements or rumors about these
unaffiliated companies could also have these negative effects.

PRODUCT LIABILITY CLAIMS OR PRODUCT RECALLS COULD ADVERSELY AFFECT OUR BUSINESS
REPUTATION AND EXPOSE US TO INCREASED SCRUTINY BY FEDERAL AND STATE REGULATORS.

     The sale of food products for human consumption involves the risk of injury
to consumers and the sale of animal feed products involves the risk of injury to
those animals as well as human consumers of those animals. Such hazards could
result from:

     -    tampering by unauthorized third parties;

     -    product contamination (such as listeria, e. coli. and salmonella) or
          spoilage;

     -    the presence of foreign objects, substances, chemicals, and other
          agents;

     -    residues introduced during the growing, storage, handling or
          transportation phases; or

     -    improperly formulated products which either do not contain the proper
          mixture of ingredients or which otherwise do not have the proper
          attributes.

     Some of the products that we sell are produced for us by third parties, or
contain inputs manufactured by third parties, and such third parties may not
have adequate quality control standards to assure that such products are not
adulterated, misbranded, contaminated or otherwise defective. In addition, we
license our LAND O LAKES brand for use on products produced and marketed by
third parties, for which we receive royalties. We may be subject to claims made
by consumers as a result of products manufactured by these third parties which
are marketed under our brand names.

     Consumption of our products may cause serious health-related illnesses and
we may be subject to claims or lawsuits relating to such matters. An inadvertent
shipment of adulterated products is a violation of law and may lead to an
increased risk of exposure to product liability claims, product recalls and
increased scrutiny by federal and state regulatory agencies. Such claims or
liabilities may not be covered by our insurance or by any rights of indemnity or
contribution which we may have against others in the case of products which are
produced by third parties. In addition, even if a product liability claim is not
successful or is not fully pursued, the negative publicity surrounding any
assertion that our products caused illness or injury could have a material
adverse effect on our reputation with existing and potential customers and on
our brand image. In the past, we have voluntarily recalled certain of our
products in response to reported or suspected contamination. If we determine to
recall any of our products, we may face material consumer claims.


                                       25

<PAGE>

WE COULD INCUR SIGNIFICANT COSTS FOR VIOLATIONS OF OR LIABILITIES UNDER
ENVIRONMENTAL LAWS AND REGULATIONS APPLICABLE TO OUR OPERATIONS.

     We are subject to various Federal, state, local, and foreign environmental
laws and regulations, including those governing the use, storage, discharge and
disposal of solid and hazardous materials and wastes. Violations of these laws
and regulations (or of the permits required for our operations) may lead to
civil and criminal fines and penalties or other sanctions.

     These laws and regulations may also impose liability for the clean-up of
environmental contamination. Many of our current and former facilities have been
in operation for many years and, over time, we and other operators of those
facilities have generated, used, stored, or disposed of substances or wastes
that are or might be defined as hazardous under applicable environmental laws,
including chemicals and fuel stored in underground and above-ground tanks,
animal wastes and large volumes of wastewater discharges. As a result, the soil
and groundwater at or under certain of our current and former facilities is or
may be contaminated, and we may be required in the future to make material
expenditures to investigate, control and remediate such contamination.

     We have been identified as a potentially responsible party under the
Federal Comprehensive Environmental Response, Compensation, and Liability Act
("CERCLA") or similar state statutes and currently have unresolved liability
with respect to the past disposal of hazardous substances at several of our
former facilities and at waste disposal facilities operated by third parties.
Under CERCLA, any current or former owner, operator or user of a contaminated
site may be held responsible for the entire cost of investigating and
remediating such contamination, regardless of fault or the legality of the
original disposal.

     Although compliance and clean-up costs have not been material in the past,
the imposition of additional or more stringent environmental laws or unexpected
remediation obligations could result in significant costs and have a material
adverse effect on our business, financial condition, or results of operations.

STRIKES OR WORK STOPPAGES BY OUR UNIONIZED WORKERS COULD DISRUPT OUR BUSINESS.

     As of December 31, 2005, approximately 23% of our employees were covered by
collective bargaining agreements, some of which are due to expire within the
next twelve months. Our inability to negotiate acceptable contracts with the
unions upon expiration of these contracts could result in strikes or work
stoppages and increased operating costs as a result of higher wages or benefits
paid to union members or replacement workers. If the unionized workers were to
engage in a strike or work stoppage, or other non-unionized operations were to
become unionized, we could experience a significant disruption of our operations
or higher ongoing labor costs. See "Item 1. Business -- Employees" for
additional information.

THERE IS NO ASSURANCE THAT OUR SENIOR MANAGEMENT TEAM OR OTHER KEY EMPLOYEES
WILL REMAIN WITH US.

     We believe that our ability to successfully implement our business strategy
and to operate profitably depends on the continued employment of our senior
management team and other key employees. If members of the management team or
other key employees become unable or unwilling to continue in their present
positions, the operation of our business would be disrupted and we may not be
able to replace their skills and leadership in a timely manner to continue our
operations as currently anticipated. We operate generally without employment
agreements with, or key person life insurance on the lives of, our key
personnel.


                                       26

<PAGE>

ITEM 2. PROPERTIES.

     We own the land underlying our corporate headquarters in Arden Hills,
Minnesota and lease the buildings. Our corporate headquarters, consisting of a
main office building and a research and development facility, has an aggregate
of approximately 275,000 gross square feet. In addition, we own offices,
manufacturing plants, storage warehouses and facilities for use in our various
business segments. Thirty of our owned properties are mortgaged to secure our
indebtedness. The following table provides summary information about our
principal facilities as of December 31, 2005:

<TABLE>
<CAPTION>
                    TOTAL NUMBER    TOTAL NUMBER       REGIONAL
                   OF FACILITIES   OF FACILITIES       LOCATION
BUSINESS SEGMENT       OWNED           LEASED        OF FACILITIES
----------------   -------------   -------------   ----------------
<S>                <C>             <C>             <C>
Dairy Foods.....        11(1)             4        Midwest(2) -- 10
                                                   West(3) -- 2
                                                   East(4) -- 3
                                                   South(5) -- 0

Feed............       103(6)            46        Midwest -- 79
                                                   West -- 35
                                                   East -- 10
                                                   South -- 25

Seed............        18                6        Midwest -- 14
                                                   West -- 9
                                                   East -- 1

Agronomy........         4                0        Midwest -- 4

Layers..........        18               29        Midwest -- 11
                                                   West -- 26
                                                   East -- 9
                                                   South -- 1
</TABLE>

(1)  Includes a facility the Company closed in the first quarter of 2006 and a
     non-edible foods manufacturing facility.

(2)  The Midwest region includes the states of Ohio, Michigan, Indiana,
     Illinois, Wisconsin, Minnesota, Iowa, Missouri, Oklahoma, Kansas, Nebraska,
     South Dakota and North Dakota and Ontario, Canada.

(3)  The West region includes the states of Montana, Wyoming, Colorado, Texas,
     New Mexico, Arizona, Utah, Idaho, Washington, Oregon, Nevada, California,
     Alaska and Hawaii.

(4)  The East region includes the states of Maine, New Hampshire, Vermont, New
     York, Massachusetts, Rhode Island, Connecticut, Pennsylvania, New Jersey,
     Delaware and Maryland.

(5)  The South region includes the states of West Virginia, Virginia, North
     Carolina, Kentucky, Tennessee, South Carolina, Georgia, Florida, Alabama,
     Mississippi, Louisiana and Arkansas.

(6)  Includes 8 closed facilities.

     We do not believe that we will have difficulty in renewing the leases we
currently have or in finding alternative space in the event those leases are not
renewed. We consider our properties suitable and adequate for the conduct of our
business.


                                       27
<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

     We are currently and from time to time involved in litigation and
environmental claims incidental to the conduct of business. The damages claimed
in some of these cases are substantial. Although the amount of liability that
may result from these matters cannot be ascertained, we do not currently believe
that, in the aggregate, they will result in liabilities material to the
Company's consolidated financial condition, future results of operations or cash
flows.

     On February 24, 2004, Cache La Poudre Feeds, LLC ("Cache") filed a lawsuit
in the United States District Court for the District of Colorado against the
Company, Land O'Lakes Farmland Feed LLC and certain named individuals claiming
trademark infringement with respect to certain animal feed sales under the
Profile trade name. Cache seeks damages of at least $132.8 million, which, it
claims, is the amount the named entities generated in gains, profits and
advantages from using the Profile trade name. In response to Cache's complaint,
the Company denied any wrongdoing and pursued certain counterclaims against
Cache relating to trademark infringement, and other claims against Cache for,
among other things, defamation and libel. In addition, the Company believes that
Cache's calculation of the Company's gains, profits and advantages allegedly
generated from the use of the Profile trade name are grossly overstated. The
Company believes that sales revenue generated from the sale of products carrying
the Profile trade name was immaterial. Although the amount of any loss that may
result from this matter cannot be ascertained with certainty, management does
not believe that it will result in a loss material to the Company's consolidated
financial condition, future results of operations or cash flow. The trial is
scheduled for June 2007.

     In 2003, several lawsuits were filed against the Company by Ohio alpaca
producers in which it was alleged that the Company manufactured and sold animal
feed that caused the death of, or damage to, certain of the producers' alpacas.
The two remaining lawsuits are scheduled to go to trial in 2006.

     In a letter dated January 18, 2001, the Company was identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party for cleanup costs in connection with hazardous substances and
wastes at the Hudson Refinery Superfund Site in Cushing, Oklahoma. The letter
invited the Company to enter into negotiations with the EPA for the performance
of a remedial investigation and feasibility study at the site and also demanded
that the Company reimburse the EPA approximately $8.9 million for remediation
expenses already incurred at the site. In March 2001, the Company responded to
the EPA denying any responsibility. No further communication has been received
from the EPA.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     None.

                                     PART II

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

     There is no established public market for the common equity of Land
O'Lakes. In view of the following, it is unlikely in the foreseeable future that
a public market for these securities will develop:

          (1) The common stock interests are non-dividend bearing;

          (2) The right of any holder of common stock to receive patronage
     income depends on the quantity and value of the business the member
     conducts with us (See "Item 1. Business -- Description of the Cooperative
     -- Patronage Income and Equity");

          (3) The class of common stock issued to a member depends on whether
     the member is a cooperative or individual member and whether the member is
     a "dairy member" or "ag member" (See "Item 1. Business -- Description of
     the Cooperative -- Our Structure and Membership");

          (4) We may redeem holdings of members under certain circumstances upon
     the approval of our board of directors (See "Item 1. Business --
     Description of the Cooperative -- Patronage Income and Equity"); and


                                       28

<PAGE>

          (5) Our board of directors may terminate a membership if it determines
     that the member has failed to adequately patronize us or has become our
     competitor (See "Item 1. Business -- Description of the Cooperative -- Our
     Structure and Membership").

     As of December 31, 2005, there are approximately 1,004 holders of Class A
common stock, 4,118 holders of Class B common stock, 175 holders of Class C
common stock and 1,024 holders of Class D common stock.

ITEM 6. SELECTED FINANCIAL DATA.

     The historical consolidated financial information presented below has been
derived from the Land O'Lakes consolidated financial statements for the periods
indicated. It should be read together with the audited consolidated financial
statements of Land O'Lakes and the related notes included elsewhere in the
Annual Report on Form 10-K. Read the selected consolidated historical financial
information along with "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements included in this Annual Report on Form 10-K.

<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                                                 ----------------------------------------------------
                                                                   2005       2004       2003       2002       2001
                                                                 --------   --------   --------   --------   --------
                                                                                     ($ IN MILLIONS)
<S>                                                              <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net sales ....................................................   $7,556.7   $7,656.8   $6,256.1   $5,779.5   $5,777.7
Cost of sales ................................................    6,971.7    7,063.1    5,671.9    5,273.6    5,305.1
                                                                 --------   --------   --------   --------   --------
   Gross profit ..............................................      585.0      593.7      584.2      505.9      472.6
Selling, general and administrative ..........................      494.9      501.0      464.6      466.5      376.8
Restructuring and impairment charges(1) ......................        6.4        7.8        6.3       31.4        3.7
                                                                 --------   --------   --------   --------   --------
   Earnings from operations ..................................       83.7       84.9      113.3        8.0       92.1
Interest expense, net ........................................       79.9       83.1       81.0       76.4       53.7
Other expense (income), net(2) ...............................        9.3       (7.5)     (24.4)    (163.9)      20.1
Gain on sale of investment in CF Industries, Inc(3) ..........     (102.4)        --         --         --         --
Loss on impairment of investment in CF Industries, Inc(4) ....         --       36.5         --         --         --
Equity in earnings of affiliated companies ...................      (36.7)     (58.4)     (57.3)     (24.2)     (45.3)
Minority interest in earnings of subsidiaries ................        1.3        1.6        6.4        5.5        6.9
                                                                 --------   --------   --------   --------   --------
   Earnings before income taxes and discontinued operations ..      132.3       29.6      107.6      114.2       56.7
Income tax expense (benefit) .................................        5.5        1.4       20.7        4.4       (8.4)
                                                                 --------   --------   --------   --------   --------
   Net earnings from continuing operations ...................      126.8       28.2       86.9      109.8       65.1
Earnings (loss) from discontinued operations, net of income
   taxes(5) ..................................................        2.1       (6.8)      (4.9)     (13.4)       3.0
                                                                 --------   --------   --------   --------   --------
   Net earnings ..............................................   $  128.9   $   21.4   $   82.0   $   96.4   $   68.1
                                                                 ========   ========   ========   ========   ========
OTHER FINANCIAL DATA:
Depreciation and amortization ................................   $  108.0   $  112.8   $  119.2   $  105.0   $   94.6
Unrealized hedging gains(losses)(6) ..........................        5.3      (23.1)      19.5      (20.7)      (6.6)
Capital expenditures .........................................       70.4       96.1       71.7       84.8       80.6
Cash patronage paid to members(7) ............................       15.1       11.4        4.2       20.2       30.7
Equity revolvement paid to members(8) ........................       53.6       23.2       20.2       17.7       16.2

BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents ....................................   $  179.7   $   73.1   $  110.3   $   64.3   $  130.2
Restricted cash(9) ...........................................         --       20.3       20.1         --         --
Working capital(10) ..........................................      186.2      306.8      401.2      370.9      311.0
Property, plant and equipment, net ...........................      658.2      610.0      617.4      572.1      669.3
Property under capital leases, net ...........................       10.4      100.2      109.1      105.7         --
Total assets .................................................    3,095.1    3,199.8    3,373.1    3,221.3    3,068.2
Total debt(11) ...............................................      547.2      805.0      963.2      959.0    1,010.3
Capital securities of trust subsidiary .......................      190.7      190.7      190.7      190.7      190.7
Obligations under capital leases .............................        9.3      100.9      110.0      108.3         --
Minority interests ...........................................        6.0        9.4       62.7       53.7       59.8
Total equities ...............................................      903.6      854.9      879.4      895.8      823.3
</TABLE>


                                       29

<PAGE>

<TABLE>
<CAPTION>
                                                        YEARS ENDED DECEMBER 31,
                                          ----------------------------------------------------
                                            2005       2004       2003       2002       2001
                                          --------   --------   --------   --------   --------
                                                              ($ IN MILLIONS)
<S>                                       <C>        <C>        <C>        <C>        <C>
SELECTED SEGMENT FINANCIAL INFORMATION:
DAIRY FOODS
Net sales .............................   $3,904.6   $3,956.9   $2,975.0   $2,898.8   $3,462.1
Earnings (loss) from operations .......       31.3       37.0       26.3      (20.5)      60.2
Depreciation and amortization .........       42.7       39.6       43.0       36.8       42.5
Capital expenditures ..................       20.5       53.1       28.2       32.3         .7
FEED (12)
Net sales .............................    2,586.9    2,626.6    2,467.2    2,444.7    1,864.0
Earnings from operations ..............       61.4       12.8       56.1       41.7       39.0
Depreciation and amortization .........       35.2       38.5       44.9       46.6       31.7
Capital expenditures ..................       25.9       26.3       24.0       26.0       24.9
SEED
Net sales .............................      653.9      518.8      466.2      396.8      413.6
Earnings from operations ..............       30.5       19.9       15.0        8.7       10.3
Depreciation and amortization .........        2.3        2.5        2.2        3.0        5.0
Capital expenditures ..................        2.4        1.6        0.5        0.6        2.7
AGRONOMY(13)
Net sales .............................         --         --         --         --         --
Loss from operations ..................      (27.6)     (12.8)     (14.0)     (18.9)     (16.5)
Depreciation and amortization .........        6.1        6.1        6.1        6.1        6.3
Capital expenditures ..................         --         --         --         --         --
LAYERS (14)
Net sales .............................      407.0      541.3      317.8         --         --
(Loss) earnings from operations .......      (11.1)      26.8       28.5       (2.1)      (0.3)
Depreciation and amortization .........       10.3       10.8        6.3        0.9        0.3
Capital expenditures ..................       17.7        8.9        3.8         --         --
OTHER/ELIMINATIONS
Net sales .............................        4.3       13.2       29.9       39.2       38.0
Earnings (loss) from operations .......       (0.8)       1.3        1.4       (1.0)      (0.6)
Depreciation and amortization .........       11.6       15.3       16.8       11.6        8.8
Capital expenditures ..................        4.0        6.2       15.1       25.9       15.3
</TABLE>

               See accompanying Notes to Selected Financial Data.

                        NOTES TO SELECTED FINANCIAL DATA

     (1) The following table summarizes restructuring and impairment charges
     (reversals):

<TABLE>
<CAPTION>

                                               YEARS ENDED DECEMBER 31,
                                        ----------------------------------
                                        2005   2004   2003    2002    2001
                                        ----   ----   ----   -----   -----
<S>                                     <C>    <C>    <C>    <C>     <C>
Restructuring charges (reversals) ...   $0.3   $2.4   $3.5   $13.2   $(4.1)
Impairment of assets ................    6.1    5.4    2.8    18.2     7.8
                                        ----   ----   ----   -----   -----
   Total ............................   $6.4   $7.8   $6.3   $31.4   $ 3.7
                                        ====   ====   ====   =====   =====
</TABLE>

     Restructuring charges resulted primarily from the closing of manufacturing
facilities in Dairy Foods and initiatives to consolidate facilities and reduce
personnel in Feed.


                                       30

<PAGE>

     The impairment charge of $6.1 million in 2005 related to the write-down of
various assets to their estimated fair value primarily due to closing facilities
in Dairy Foods and Feed. The impairment charge of $5.4 million in 2004 consisted
of the write-down of various assets to their estimated fair value in Dairy Foods
and Feed and a goodwill impairment in Seed due to the sale of a subsidiary. The
impairment charge of $2.8 million in 2003 related to the write-down of various
assets to their estimated fair value in Feed and Seed and a goodwill impairment
in Seed. The impairment charge of $18.2 million in 2002 consisted of the
write-down of certain impaired plant assets in Dairy Foods and Feed to their
estimated fair value. The impairment charge of $7.8 million in 2001 related to
the write-down of a Feed operation in Mexico to its estimated fair value.

(2) The following table summarizes other expense (income), net:

<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,
                                        ----------------------------------------
                                         2005    2004    2003      2002     2001
                                        -----   -----   ------   -------   -----
<S>                                     <C>     <C>     <C>      <C>       <C>
Loss on extinguishment of debt ......   $11.0   $  --   $  0.5   $    --   $23.4
Gain on legal settlements ...........    (0.6)   (5.4)   (22.8)   (155.5)   (3.0)
Gain on divestiture of businesses ...      --    (1.5)    (0.7)     (5.1)     --
Gain on sale of intangibles .........      --      --     (0.5)     (4.2)     --
(Gain) loss on sale of investments,
   excluding CF Industries ..........    (1.1)   (0.6)    (0.9)      0.9    (0.3)
                                        -----   -----   ------   -------   -----
   Total ............................   $ 9.3   $(7.5)  $(24.4)  $(163.9)  $20.1
                                        =====   =====   ======   =======   =====
</TABLE>

(3) In 2005, we recorded a $102.4 million gain on sale of our investment in CF
Industries, Inc., a domestic manufacturer of crop nutrients.

(4) In 2004, we reduced the carrying value of our investment in CF Industries,
Inc. by $36.5 million.

(5) Earnings (loss) from discontinued operations reflects the results of our
swine production operations, which were sold in 2005.

(6) Derivative commodity instruments, primarily futures contracts, are
marked-to-market each month and gains and losses on open positions are
recognized in earnings.

(7) Cash patronage paid to members reflects the portion of earnings allocated to
members for the prior fiscal year distributed in cash in the following fiscal
year.

<TABLE>
<CAPTION>
                                          YEARS ENDED DECEMBER 31,
                                    ------------------------------------
                                     2005    2004   2003    2002    2001
                                    -----   -----   ----   -----   -----
                                            (DOLLARS IN MILLIONS)
<S>                                 <C>     <C>     <C>    <C>     <C>
20% required for tax deduction ..   $11.0   $ 7.9   $2.8   $14.1   $28.5
Discretionary ...................     4.1     3.5    1.4     6.1     2.2
                                    -----   -----   ----   -----   -----
   Total ........................   $15.1   $11.4   $4.2   $20.2   $30.7
                                    =====   =====   ====   =====   =====
</TABLE>

(8) Equity revolvement reflects the distribution of earnings previously
allocated to members and not paid out initially as cash patronage. Also includes
the distribution of a portion of the equity issued in connection with the
acquisition of Dairyman's Cooperative Creamery Association and the acquisition
of certain assets of Countrymark Cooperative.

<TABLE>
<CAPTION>
                               YEARS ENDED DECEMBER 31,
                       -------------------------------------
                        2005    2004    2003    2002    2001
                       -----   -----   -----   -----   -----
                               (DOLLARS IN MILLIONS)
<S>                    <C>     <C>     <C>     <C>     <C>
Revolvement
   Dairy Foods .....   $17.1   $19.9   $18.0   $15.2   $14.0
   Ag Services(a) ..    36.5     3.3     2.2     2.5     2.2
                       -----   -----   -----   -----   -----
      Total ........   $53.6   $23.2   $20.2   $17.7   $16.2
                       =====   =====   =====   =====   =====
</TABLE>

          (a) Included equity revolvements to deceased members of local
     cooperatives.

(9) Cash held in a restricted account was required to support the CPI property
and equipment lease. This lease was prepaid in 2005 and the restricted cash was
released.

(10) Working capital is defined as current assets (less cash and cash
equivalents and restricted cash) minus current liabilities (less notes and
short-term obligations, and current maturities of long-term debt and obligations
under capital leases).


                                       31
<PAGE>

(11) Total debt excludes the 7.45% Capital Securities due on March 15, 2028, of
our trust subsidiary.

(12) In October 2001, we acquired Purina Mills, Inc. and since then we have
consolidated its operating activities in the Feed segment.

(13) In 2000, we contributed all of our revenue generating agronomy assets to
Agriliance LLC a joint venture with CHS Inc. in exchange for a 50% interest in
Agriliance. Our share of earnings or losses in Agriliance is reported under the
equity method of accounting, and accordingly, Agronomy, which primarily consists
of our Agriliance joint venture, has no net sales. Loss from operations reflects
overhead allocated to selling, general, and administrative expense and does not
include the equity earnings from Agriliance.

(14) Through June 30, 2003, our layers business, MoArk, was unconsolidated and
accounted for under the equity method. Effective July 1, 2003, MoArk was
consolidated in our financial statements. Financial statements for periods prior
to July 1, 2003 have not been restated.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     You should read the following discussions of financial condition and
results of operations together with the financial statements and the notes to
such statements included elsewhere in this Annual Report on Form 10-K. This
discussion contains forward-looking statements based on current expectations,
assumptions, estimates and projections of our management. These forward-looking
statements involve risks and uncertainties. Actual results could differ
materially from those anticipated in these statements as a result of certain
factors, as more fully described in "Item 1A. "Risk Factors" and elsewhere in
this Annual Report on Form 10-K. We undertake no obligation to publicly update
any forward-looking statements.

OVERVIEW

GENERAL

Segments

     We operate our business predominantly in the United States in five
segments: Dairy Foods, Feed, Seed, Agronomy and Layers.

-    Dairy Foods develops, produces, markets and sells premium butter, spreads,
     cheese and other dairy products.

-    Feed is largely comprised of the operations of Land O'Lakes Purina Feed LLC
     ("Land O'Lakes Purina Feed"), the Company's wholly-owned subsidiary. Land
     O'Lakes Purina Feed develops, produces, markets and distributes animal
     feeds such as ingredient feed, formula feed, milk replacers, vitamins and
     additives to both commercial and lifestyle customers.

-    Seed develops, markets and sells seed for a variety of crops, including
     alfalfa, corn, soybeans and forage and turf grasses.

-    Agronomy consists primarily of our 50% ownership in Agriliance LLC, which
     is accounted for under the equity method. Agriliance manufactures, markets
     and sells two primary products lines: crop protection (including herbicides
     and pesticides) and crop nutrients (including fertilizer and
     micronutrients).

-    Layers consists of MoArk, LLC, a consolidated subsidiary in which we held a
     57.5% ownership interest in 2005. The remaining interest was owned by
     Osborne Investments, LLC. MoArk produces and markets shell eggs and liquid
     egg products that are sold to retail and wholesale customers for consumer
     and industrial use throughout the United States. In 2004, we announced our
     intention to reposition our layers operations. As part of this effort, in
     the fourth quarter of 2005 we committed to a plan to sell a portion of our
     layers net assets. Management expects the asset repositioning to occur
     within a year. Accordingly, certain assets and liabilities were presented
     as assets held for sale in the consolidated financial statements at
     December 31, 2005. In January 2006, we purchased the remaining 42.5%
     minority interest in MoArk for $71.0 million in cash.

-    We also derive a portion of revenues and income from other related
     businesses, which are insignificant to our overall results.

     We allocate corporate administrative expense to all five of our business
segments using the following two methodologies: direct usage for services for
which we are able to track usage, such as payroll and legal, and invested
capital for all other expenses.


                                       32

<PAGE>

A majority of these costs is allocated based on direct usage. We allocate these
costs to all segments, including segments comprised solely of investments and
joint ventures.

     Unconsolidated Businesses

     We have investments in certain entities that are not consolidated in our
financial statements. Investments in which we hold a 20% to 50% ownership
interest are accounted for under the equity method and provided earnings and
cash flows for the three years ended December 31 as follows:

<TABLE>
<CAPTION>
                                                            DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                                2005           2004           2003
                                                            ------------   ------------   ------------
                                                                           (IN MILLIONS)
<S>                                                         <C>            <C>            <C>
Earnings from unconsolidated businesses..................       $36.7          $58.4          $57.2
Cash flow from investments in unconsolidated businesses..        35.3           47.8           37.4
</TABLE>

     We also hold investments in other cooperatives which are stated at cost
plus unredeemed patronage refunds received, or estimated to be received, in the
form of capital stock and other equities. Investments held in less than
20%-owned companies are stated at cost.

     Our investment in unconsolidated businesses was $263.8 million and $470.5
million as of December 31, 2005 and 2004, respectively. This decline is
primarily due to the sale of our investment in CF Industries, Inc., a domestic
manufacturer of crop nutrients in which we held a 38% ownership interest. In
August of 2005, we received $315.5 million in cash and recorded a gain on sale
of this investment of $102.4 million, before income taxes and related expenses.

     Agriliance LLC, which is reflected in our agronomy segment and is accounted
for under the equity method, constitutes the most significant of our investments
in unconsolidated businesses. Our investment in, and earnings and cash
distributions from, Agriliance are as follows as of and for the years ended:

<TABLE>
<CAPTION>
                                           DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                               2005           2004           2003
                                           ------------   ------------   ------------
                                                          (IN MILLIONS)
<S>                                        <C>            <C>             <C>
AGRILIANCE:
   Investment in Agriliance.............      $112.9         $101.3          $92.1
   Equity in earnings from Agriliance...        35.5           39.3           33.9
   Cash distributions from Agriliance...        28.9           32.1           25.8
</TABLE>

     Land O'Lakes, CHS Inc. ("CHS") and Farmland Industries contributed
substantially all of their agronomy marketing assets to Agriliance in July 2000.
Agriliance is a distributor of agricultural inputs and is owned equally by Land
O'Lakes and CHS. Prior to May 1, 2004, Agriliance was owned by Land O'Lakes (50%
voting interest) and CHS, Inc. (25% voting interest) and Farmland Industries,
Inc. (25% voting interest). Farmland Industries, Inc. filed for Chapter 11
bankruptcy court protection on May 31, 2002 and subsequently sold its ownership
interest to CHS effective April 30, 2004.

     Land O'Lakes provides certain support services to Agriliance at competitive
market prices. Agriliance was billed $12.9 million, $10.7 million and $9.2
million in 2005, 2004, and 2003, respectively, for these support services. In
addition, Land O'Lakes sells seed product to Agriliance and recorded sales of
$38.2 million, $31.7 million and $25.6 million in 2005, 2004, and 2003,
respectively.

     The fiscal year of Agriliance ends on August 31. Unless otherwise
indicated, references to the annual results of Agriliance in this Annual Report
on Form 10-K are presented on a calendar year basis to conform to Land O'Lakes'
presentation.

     Agriliance funds its operations from operating cash flows and with
borrowings from unaffiliated third parties. As of December 31, 2005, Agriliance
had syndicated secured and revolving credit arrangements in an aggregate amount
of $325 million and a $225 million receivables securitization with CoBank.
Agriliance also had $100 million of senior secured notes from a private
placement outstanding. Neither Land O'Lakes nor any of the restricted
subsidiaries guarantee these obligations. Land O'Lakes does not have an
obligation to contribute additional capital to finance Agriliance's operations.

     Agriliance's performance reflects the seasonal nature of its business. Most
of its annual sales and earnings, which are


                                       33

<PAGE>

principally derived from the distribution of crop nutrients and crop protection
products manufactured by others occur in the second quarter of each calendar
year.

<TABLE>
<CAPTION>
                                FOR THE YEARS
                             ENDED DECEMBER 31,
                             ------------------
                                 2005    2004     DECREASE
                                -----   -----     --------
                                     (IN MILLIONS)
<S>                          <C>        <C>       <C>
Agriliance net earnings...      $71.0   $78.6      $(7.6)
</TABLE>

     The $7.6 million decrease in earnings was primarily driven by lower
earnings from Agro Distribution, LLC, Agriliance's southern retail business,
partially offset by improved crop nutrient earnings. Earnings decreased by $12.1
million in Agro Distribution, LLC in 2005 compared to 2004. The change was
primarily driven by the impact of higher interest and bad debt costs in 2005.
Sales of crop protection products decreased 3% due to continued devaluation
related to products losing patent protection while earnings were down slightly
due to product mix and timing of sales programs. Partially offsetting these
decreases, crop nutrient earnings improved by $6.2 million due to a 2% volume
increase and improved product mix.

     We have an investment in CoBank, an agricultural cooperative bank, of $10.7
million at December 31, 2005, $15.5 million at December 31, 2004 and $18.6
million at December 31, 2003. This investment constitutes less than one percent
of CoBank's total shareholders' equity. We account for our investment in CoBank
under the cost method of accounting. The investment consists of an initial
nominal cash amount of $1,000 and net equity contributions based on a percentage
(currently 10.0%) of our five-year average loan volume. Since CoBank operates as
a cooperative, we receive patronage income from CoBank based on our annual loan
volume with CoBank. This patronage income reduces our interest expense. We
believe that our CoBank loan transactions are on terms comparable to those
available from unaffiliated third parties.

     Cooperative Structure

     Cooperatives typically derive a majority of their business from members,
although they are allowed by the Internal Revenue Code to conduct non-member
business. Earnings from non-member business are retained as permanent equity by
the cooperative and taxed as corporate income in the same manner as a typical
corporation. Earnings from member business are either applied to allocated
member equities, deferred member equities or retained as permanent equity (in
which case it is taxed as corporate income) or some combination thereof.

     For the year ended December 31, 2005, our net earnings from member business
were $120.1 million, excluding the portion (10% holdback) added to permanent
equity. Of this amount, $118.3 million was applied to allocated patronage
refunds and $1.8 million was applied to deferred equities. The $118.3 million of
allocated patronage refunds, which includes $63.7 million of patronage gains
related to the gain on sale of our CF Industries investment, consisted of an
estimated $23.7 million to be paid in cash in 2006 and $94.6 million to be
retained as allocated member equities and revolved at a later time, subject to
approval by the board of directors. The $1.8 million of deferred equities
represents earnings from member businesses that are held in an equity reserve
account rather than being allocated to members. For the year ended December 31,
2005 we had net earnings of $8.8 million applied to retained earnings, which
represents permanent equity derived from non-member business, the 10% holdback
of member earnings, unrealized hedging gains and income taxes.

     In 2005, we made payments of $68.7 million for the redemption of member
equities. This included $15.1 million for the cash patronage portion of the 2004
earnings allocated to members. It also included $53.6 million for the
revolvement of member equities previously allocated to members, and not paid as
cash patronage, and the revolvement of a portion of equities issued in
connection with the 1998 acquisitions of Dairyman's Cooperative Creamery
Association and certain assets of Countrymark Cooperative.

     Wholesaling and Brokerage Activities

     Dairy Foods operates a wholesale milk marketing program. We purchase excess
raw milk over our manufacturing needs from our members and sell it directly to
other dairy processors. We generate losses or insignificant earnings on these
transactions. There are three principal reasons for doing this: first, we need
to sell a certain percentage of our raw milk to fluid dairy processors in order
to participate in the Federal market order system, which lowers our input cost
of milk for the manufacture of dairy products; second, it reduces our need to
purchase raw milk from sources other than members during periods of low milk
production in the United States (typically August, September and October) and
third, it ensures that our members have a market for the milk that they produce
during periods of high milk production.


                                       34

<PAGE>

     For the year ended December 31, 2005, we sold 5,510.1 million pounds of
milk, which resulted in $1,186.9 million of net sales or 30.4% of our Dairy
Foods segment's net sales for that period, with cost of sales exceeding net
sales by $9.4 million.

     Feed, in addition to selling its own products, buys and sells or brokers
for a fee soybean meal and other feed ingredients. We market these ingredients
to our local member cooperatives and to other feed manufacturers, which use them
to produce their own feed. Although this activity generates substantial
revenues, it is a very low-margin business. We are generally able to obtain feed
inputs at a lower cost as a result of our ingredient merchandising business
because of lower per unit shipping costs associated with larger purchases and
volume discounts. For the year ended December 31, 2005, ingredient merchandising
generated net sales of $536.2 million, or 23.2% of total feed segment net sales,
and a gross profit of $17.6 million, or 4.7% of total feed segment gross profit.

     Seasonality

     Certain segments of our business are subject to seasonal fluctuations in
demand. In our Dairy Foods segment, butter sales typically increase in the fall
and winter months due to increased demand during holiday periods. Feed sales
tend to be highest in the first and fourth quarter of each year because cattle
are less able to graze during cooler months. Most Seed sales occur in the first
and fourth quarter of each year. Agronomy product sales tend to be much higher
in the first and second quarters of each year, as farmers buy crop nutrients and
crop protection products to meet their seasonal planting needs.

     FACTORS AFFECTING COMPARABILITY

     Dairy and Agricultural Commodity Inputs and Outputs

     Many of our products, particularly in Dairy Foods, Feed and Layers use
dairy or agricultural commodities as inputs or constitute dairy or agricultural
commodity outputs. Consequently, our results are affected by the cost of
commodity inputs and the market price of commodity outputs. Government
regulation of the dairy industry and industry practices in the animal feed
industry tend to stabilize margins in those segments but do not protect against
large movements in either input costs or output prices.

     Dairy Foods. Raw milk is the major commodity input for our Dairy Foods
segment. For the year ended December 31, 2005, our raw milk input cost was
$1,896.9 million, or 51.1% of the cost of sales for Dairy Foods. Cream, butter
and bulk cheese are also significant Dairy Foods commodity inputs. Cost of sales
for the year ended December 31, 2005 for these inputs was $182.3 million for
cream, $105.2 million for butter and $375.1 million for bulk cheese. Our Dairy
Foods outputs, namely butter, cheese and nonfat dry milk, are also commodities.

     The minimum price of raw milk and cream is set monthly by Federal
regulators based on the regional prices of dairy food products manufactured.
These prices provide the basis for our raw milk and cream input costs. As a
result, dairy foods products for which the sales price is fixed shortly after
production, such as most bulk cheese, are not usually subject to significant
commodity price risk as the price received for the output usually varies with
the cost of the significant inputs. For the year ended December 31, 2005, bulk
cheese, which is generally priced the date of make, represented $409.9 million,
or 10.2%, of our Dairy Foods segment's net sales.

     We also maintain significant inventories of butter and cheese for sale to
our retail and foodservice customers, which are subject to commodity price risk.
Because production of raw milk and demand for butter varies seasonally, we
inventory significant amounts of butter. Demand for butter is highest during the
fall and winter when milk supply is lowest. As a result, we produce and store
excess quantities of butter during the spring when milk supply is highest. In
addition, we maintain some inventories of cheese for aging. For the year ended
December 31, 2005, branded and private label retail, deli and foodservice net
sales of cheese and butter represented $1,366.4 million, or 35.0%, of our Dairy
Foods segment's net sales.

     Market prices for commodities such as butter and cheese can have a
significant impact on both the cost of products produced and the price for which
products are sold. In the past three years, the lowest monthly market price for
butter was $1.05 in February 2003, and the highest monthly market price was
$2.21 in April 2004. In the past three years, the lowest monthly market price
for block cheese was $1.07 in March 2003 and the highest monthly market price
was $2.14 in April 2004. The per pound average market price for each of the
three years ended December 31, 2005 and the per pound market price as of
December 31, 2005, 2004, and 2003 is as follows:


                                       35

<PAGE>

<TABLE>
<CAPTION>
                                           DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                               2005           2004          2003
                                           ------------   ------------   ------------
<S>                                        <C>            <C>            <C>
PER POUND MARKET PRICE AVERAGE FOR YEAR:
   Butter...............................       $1.55          $1.82         $1.14
   Block cheese.........................        1.49           1.65          1.32

PER POUND MARKET PRICE AT YEAR END:
  Butter................................        1.35           1.54          1.25
  Block cheese..........................        1.37           1.49          1.31
</TABLE>

     We maintain a significant dairy manufacturing presence in strategic
locations across the United States. As milk production continues to migrate to
the West, our plants in the Upper Midwest and East are competing with other
manufacturers for a declining amount of milk. The increased competition, coupled
with higher energy costs has pressured margins related to these facilities.

     Feed. The Feed segment follows industry standards for feed pricing. The
feed industry generally prices products based on income over ingredient cost per
ton of feed. This practice tends to mitigate the impact of volatility in
commodity ingredient markets on our animal feed profits. As ingredient costs
fluctuate, the changes are generally passed on to customers through weekly or
monthly changes in prices. Accordingly, net sales are less of an indicator of
performance since large fluctuations can occur from period-to-period due to
volatility in the underlying commodity ingredient prices.

     We enter into forward sales contracts to supply feed to customers, which
currently represent approximately 17% of our feed sales. When we enter into
these contracts, we also generally enter into forward purchase contracts on the
underlying commoditities to lock in our operating margins.

     Changes in commodity grain prices have an impact on the mix of products we
sell. When grain prices are relatively high, the demand for complete feed rises
since many livestock producers are also grain growers and sell their grain in
the market and purchase complete feed as needed. When grain prices are
relatively low, these producers feed their grain to their livestock and purchase
premixes and supplements to provide complete nutrition to their animals. These
fluctuations in product mix generally have minimal effects on our operating
results. Complete feed has a far lower margin per ton than supplements and
premixes. Thus, during periods of relatively high grain prices, although our
margins per ton are lower, we sell substantially more tonnage because the grain
portion of complete feed makes up the majority of its weight.

     As dairy production has shifted to the western United States, we have seen
a change in our feed product mix, with lower sales of complete feed and
increased sales of simple blends and supplemental feeds. Complete feed is
manufactured to meet the complete nutritional requirements of animals, whereas a
simple blend is a blend of unprocessed commodities to which the producer then
adds vitamins to supply the animal's nutritional need. A supplemental feed is
somewhere between these two points. Simple blends tend to have lower margins
than supplemental feeds, and both have lower margins than complete feeds. This
change in product mix is a result of differences in industry practices. Dairy
producers in the western United States tend to purchase feed components and mix
them at the farm location rather than purchasing a complete feed product
delivered to the farm. Producers purchase grain blends and concentrated premixes
from separate suppliers. This shift is reflected in increased sales of simple
blends in our western feed region and increases in our subsidiaries that
manufacture premixes in the West.

     The increase in vertical integration of swine and poultry producers has
also impacted our feed product mix by increasing sales of lower-margin feed
products. The vertically integrated producers tend to purchase feed components
and mix the components themselves rather than purchasing a complete feed product
delivered to the farm. For the year ended December 31, 2005, swine feed volumes
were down 23% compared to 2004, and poultry feed was down 33%. Some of this
volume reduction was deliberate due to plant closings, exiting company ownership
positions and an increased focus on value-added sales opportunities. We expect
downward pressure on volumes in dairy, poultry and swine feed to continue in
2006 as further integration occurs in these industries.

     Layers. MoArk produces and markets shell eggs and liquid egg products.
MoArk's sales and earnings fluctuate depending on egg prices. For the year ended
December 31, 2005, egg prices averaged $0.72 per dozen as measured by Urner
Barry South Central Large, compared to egg prices of $0.91 for 2004. Decreasing
market prices for eggs resulted, in part, from greater supply due to increased
layer flock size as well as seasonal demand fluctuations.


                                       36

<PAGE>

     Through June 30, 2003, MoArk was unconsolidated and our ownership interest
was recorded only as equity in earnings or loss from affiliated companies.
Effective July 1, 2003, MoArk was consolidated in our financial statements as
required by Financial Accounting Standards Board Interpretation No. 46 ("FIN
46") and we did not restate prior periods. Accordingly, the 2003 financial
statements are not comparable to 2005 and 2004 for several categories, including
sales and cost of sales in this segment. Sales of $407.0 million and $541.3
million were recorded for the years ended December 31, 2005 and 2004,
respectively, and sales of $317.8 million were recorded for the six months ended
December 31, 2003. Cost of sales of $385.1 million and $476.0 million was
recorded for the years ended December 31, 2005 and 2004, respectively, and cost
of sales of $264.7 million was recorded for the six months ended December 31,
2003. There were no sales and cost of sales recorded for the first six months of
the year ended December 31, 2003 as MoArk was accounted for under the equity
method during these periods.

Acquisitions/Joint Ventures/Divestitures

     In 2005, we paid $30.1 million for the remaining purchase price for Madison
Dairy Produce Company, a private label butter business acquired by Dairy Foods
in 2000. The $30.1 million was recorded in accrued liabilities in the
consolidated balance sheet as of December 31, 2004. In December 2005, we paid
$3.2 million for the remaining 1.5% minority interest in Cheese & Protein
International LLC, a cheese manufacturing and whey processing plant in Tulare,
California. In September 2005, we increased our ownership in Penny-Newman
Milling LLC, a grain and feed company in Fresno, California, from 40.0% to
50.01% with an additional investment of $4.0 million and began consolidating
Penny-Newman Milling, LLC into our financial statements effective September 30,
2005. In January 2006, we paid $13.2 million in cash to increase our ownership
of Penny-Newman Milling, LLC to 100%. In August 2005, we paid $8.2 million to
acquire the assets of an alfalfa seed company. The results of operations of this
Seed acquisition are included in the consolidated financial statements since
that date.

Discontinued Operations

     In February, 2005, we completed the sale of substantially all of the assets
of the swine production operations to Maschhoff West LLC. We received net
proceeds of $42.0 million, which resulted in a gain, net of income taxes, of
approximately $0.1 million. Under the terms of the agreement, Land O'Lakes, Inc.
continues to hold all current aligned system contracts. For the purposes of this
Form 10-K, certain components of the swine production operations are reported as
discontinued operations for all periods presented.

Derivative Commodity Instruments

     In the normal course of operations, we purchase commodities such as milk,
butter and soybean oil in Dairy Foods, soybean meal and corn in Feed, and
soybeans in Seed. Derivative commodity instruments, primarily futures contracts
offered through regulated commodity exchanges, are used to reduce our exposure
to changes in commodity prices. These contracts are not designated as hedges
under Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The futures contracts for open
positions are marked-to-market each month and these unrealized gains or losses
("unrealized hedging gains and losses") are recognized in earnings and are fully
taxed and applied to retained earnings on our balance sheet. Amounts recognized
in earnings, before income taxes, for the years ended December 31 are as
follows:

<TABLE>
<CAPTION>
                                    DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                        2005           2004           2003
                                    ------------   ------------   ------------
                                                   (IN MILLIONS)
<S>                                 <C>            <C>            <C>
Unrealized hedging gain (loss)...       $5.3          $(23.1)         $19.5
</TABLE>


                                       37
<PAGE>

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                FOR THE YEARS ENDED DECEMBER 31
                                                                       -------------------------------------------------
                                                                             2005             2004             2003
                                                                       ---------------  ---------------  ---------------
                                                                       $ AMOUNT         $ AMOUNT         $ AMOUNT
                                                                       --------         --------         --------
                                                                                     (DOLLARS IN MILLIONS)
<S>                                                                    <C>       <C>    <C>       <C>    <C>       <C>
Net sales............................................................  $7,556.7         $7,656.8         $6,256.1

                                                                                  % OF             % OF             % OF
                                                                                  NET              NET              NET
                                                                       $ AMOUNT  SALES  $ AMOUNT  SALES  $ AMOUNT  SALES
                                                                       --------  -----  --------  -----  --------  -----
Cost of sales .......................................................   6,971.7  92.3    7,063.1  92.2    5,671.9  90.7
                                                                       --------  ----   --------  ----   --------  ----
Gross profit ........................................................     585.0   7.7      593.7   7.8      584.2   9.3
Selling, general and administrative .................................     494.9   6.6      501.0   6.5      464.6   7.4
Restructuring and impairment charges ................................       6.4   0.1        7.8   0.1        6.3   0.1
                                                                       --------  ----   --------  ----   --------  ----
Earnings from operations ............................................      83.7   1.1       84.9   1.1      113.3   1.8
Interest expense, net ...............................................      79.9   1.1       83.1   1.1       81.0   1.3
Other expense (income), net .........................................       9.3   0.1       (7.5) (0.1)     (24.4) (0.4)
Gain on sale of investment in CF Industries, Inc. ...................    (102.4) (1.4)        --    --         --    --
Loss on impairment of investment in CF Industries, Inc. .............        --    --       36.5   0.5         --    --
Equity in earnings of affiliated companies ..........................     (36.7) (0.5)     (58.4) (0.8)     (57.3) (0.9)
Minority interest in earnings of subsidiaries .......................       1.3   0.0        1.6   0.0        6.4   0.1
                                                                       --------  ----   --------  ----   --------  ----
Earnings before income taxes and discontinued operations ............     132.3   1.8       29.6   0.4      107.6   1.7
Income tax expense ..................................................       5.5   0.1        1.4   0.0       20.7   0.3
                                                                       --------  ----   --------  ----   --------  ----
Net earnings from continuing operations .............................     126.8   1.7       28.2   0.4       86.9   1.4
Earnings (loss) from discontinued operations, net of income taxes ...       2.1   0.0       (6.8) (0.1)      (4.9) (0.1)
                                                                       --------  ----   --------  ----   --------  ----
Net earnings ........................................................  $  128.9   1.7   $   21.4   0.3   $   82.0   1.3
                                                                       ========  ====   ========  ====   ========  ====
</TABLE>

YEAR ENDED DECEMBER 31, 2005 COMPARED TO YEAR ENDED DECEMBER 31, 2004

     Overview of Results

<TABLE>
<CAPTION>
                         FOR THE YEARS ENDED DECEMBER 31,
                         --------------------------------
                              2005     2004   INCREASE
                             ------   -----   --------
                                   (IN MILLIONS)
<S>                      <C>          <C>     <C>
Net earnings..........       $128.9   $21.4    $107.5
</TABLE>


                                       38

<PAGE>

     Net earnings in 2005 were impacted by the gain on the sale of CF Industries
of $102.4, which was partially offset by related expenses of $28.9 million and
income tax expense of $3.8 million. In addition, we had an unrealized hedging
gain of $5.3 million in 2005, partially offset by income tax expense of $2.0
million. In 2004, net earnings were negatively impacted by $36.5 million for the
impairment of our investment in CF Industries, which was partially offset by a
$1.8 million income tax benefit. Unrealized hedging losses lowered earnings by
$23.1 million in 2004 partially offset by a tax benefit of $8.8 million.
Excluding these items, our net earnings decreased $14.5 million in 2005 compared
to 2004. This decrease reflects lower earnings in the Layers and Dairy Foods
segments, partially offset by improved volumes and margins in the Feed and Seed
segments.

<TABLE>
<CAPTION>
                         FOR THE YEARS ENDED DECEMBER 31,
                         --------------------------------
                            2005       2004     DECREASE
                          --------   --------   --------
                                   (IN MILLIONS)
<S>                      <C>         <C>        <C>
Net sales.............    $7,556.7   $7,656.8   ($100.1)
</TABLE>

     The decrease in net sales was primarily attributed to a $134.3 million
decrease in Layers due to lower egg prices in 2005 compared to 2004. The Dairy
Foods and Feed segments sales declined $52.3 million and $39.7 million,
respectively, mainly due to lower commodity prices in 2005 compared to 2004.
These declines were partially offset by a $135.1 million increase in sales in
the Seed segment due to volume and price increases. A discussion of net sales by
business segment is found below under the caption "Net Sales and Gross Profit by
Business Segment."

<TABLE>
<CAPTION>
                         FOR THE YEARS ENDED DECEMBER 31,
                         --------------------------------
                             2005     2004    DECREASE
                            ------   ------   --------
                                   (IN MILLIONS)
<S>                      <C>         <C>       <C>
Gross profit..........      $585.0   $593.7    $(8.7)
</TABLE>

     The decrease in gross profit was primarily due to a $43.4 million impact of
lower egg prices in the Layers segment. Partially offsetting the decline were
increases in the Feed and Seed segments due to volume improvements, margin
increases and unrealized hedging gains in 2005. A discussion of gross profit by
business segment is found below under the caption "Net Sales and Gross Profit by
Business Segment."

<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                       --------------------------------
                                                           2005     2004    DECREASE
                                                          ------   ------   --------
                                                                 (IN MILLIONS)
<S>                                                    <C>         <C>      <C>
Selling, general and administrative expense.........      $494.9   $501.0    $(6.1)
</TABLE>

     The decrease in selling, general and administrative expense was driven by
lower expenses in Dairy Foods, Feed and Layers. This was partially offset by
increased expenses in the Agronomy segment due to expenses related to the sale
of our investment in CF Industries.

<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                       --------------------------------
                                                            2005   2004   DECREASE
                                                            ----   ----   --------
                                                                 (IN MILLIONS)
<S>                                                    <C>         <C>    <C>
Restructuring and impairment charges................        $6.4   $7.8    $(1.4)
</TABLE>


                                       39

<PAGE>

     In 2005, we had restructuring charges of $0.3 million. Dairy Foods recorded
a $1.1 million restructuring charge, which represented severance for
approximately 30 employees and other exit costs related to the anticipated 2006
closure of a cheese facility in Greenwood, Wisconsin. Partially offsetting this
charge was a reversal of $0.4 million related to prior year restructuring
charges for the closure of the Volga, South Dakota cheese facility and $0.4
million related to prior year restructuring charges for downsizing of feed
operations. In 2005, we incurred $6.1 million of impairment charges. This
included write-downs of impaired plant fixed assets to their estimated fair
values of $3.4 million in Dairy Foods, $2.3 million in Feed and $0.4 million in
Layers.

     In 2004, we had restructuring charges of $2.4 million. Feed recorded a $2.9
million restructuring charge, which represented severance costs for
approximately 100 employees due to the downsizing of operations. Dairy Foods had
a reversal of $0.5 million related to prior year restructuring charges for the
closure of the Volga, South Dakota cheese facility. In 2004, we incurred $5.4
million of impairment charges. This included a $1.5 million charge for goodwill
impairment in Seed and impairments related to the write-down of certain assets
to their estimated fair value of $3.1 million in Feed, and $0.6 million in Dairy
Foods and $0.2 million in other.

<TABLE>
<CAPTION>
                                    FOR THE YEARS ENDED DECEMBER 31,
                                    --------------------------------
                                         2005    2004   DECREASE
                                        -----   -----   --------
                                              (IN MILLIONS)
<S>                                 <C>         <C>     <C>
Interest expense, net............       $79.9   $83.1    $(3.2)
</TABLE>

     The decrease in interest expense was driven by debt reduction efforts in
2005. Partially offsetting the impact of lower debt was an increase in average
interest rates and the impact of the write-off of deferred financing charges.
Interest rates on borrowings averaged 7.6% in 2005 compared to 6.5% in 2004.
Deferred financing amortization increased by $3.1 million in 2005 to $8.7
million due to the acceleration of deferred financing charges related to early
payments on Term B loan and the senior unsecured notes.

<TABLE>
<CAPTION>
                                                         FOR THE YEARS ENDED DECEMBER 31,
                                                         --------------------------------
                                                              2005    2004   DECREASE
                                                             -----   -----   --------
                                                                   (IN MILLIONS)
<S>                                                      <C>         <C>     <C>
Equity in earnings of affiliated companies............       $36.7   $58.4    $(21.7)
</TABLE>

     Results for 2005 included equity in earnings from Agriliance of $35.5
million compared to equity in earnings of $39.3 million for 2004. A discussion
of net earnings for Agriliance can be found under the caption "Overview --
General -- Unconsolidated Businesses." MoArk equity investments had equity
losses of $6.5 million for the year ended December 31, 2005 compared to equity
earnings of $7.9 million for the year ended December 31, 2004. This decrease in
earnings of $14.4 million was due to a decline in market prices for eggs.

     Net Sales and Gross Profit by Business Segment

     Our reportable segments consist of business units that offer similar
products and services and/or similar customers. We have five segments: Dairy
Foods, Feed, Seed, Agronomy and Layers. Agronomy consists primarily of our 50%
ownership in Agriliance, which is accounted for under the equity method.
Accordingly, no sales or gross profit are recorded in the Agronomy segment. A
discussion of net earnings for Agriliance can be found under the caption
"Overview -- General -- Unconsolidated Businesses."


                                       40

<PAGE>

     DAIRY FOODS

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31
                                              -------------------------------
                                                 2005       2004     % CHANGE
                                               --------   --------   --------
                                                   (DOLLARS IN MILLIONS)
<S>                                           <C>         <C>        <C>
Net sales .................................    $3,904.6   $3,956.9    (1.3%)
Gross profit ..............................       186.6      197.8    (5.7%)
   Gross profit as a % of sales ...........         4.8%       5.0%
</TABLE>

NET SALES VARIANCE SCHEDULE

<TABLE>
<CAPTION>
                                               INCREASE
                                              (DECREASE)
                                              ----------
                                                  (IN
                                               MILLIONS)
<S>                                           <C>
Pricing / product mix impact...............     $(57.7)
Volume impact..............................        5.4
                                                ------
   Total decrease..........................     $(52.3)
</TABLE>

     The net sales decrease in 2005 was primarily driven by the impact of lower
commodity prices. The negative pricing / mix variance of $57.7 million in 2005
was mainly due to the average full year market price decreasing $0.27 per pound
for butter. The negative pricing / mix variances in retail and private label
butter were $18.9 million and $59.4 million, respectively. Partially offsetting
this was an increase in dairy manufacturing due to the mix of products sold. The
volume variance of $5.4 million was primarily driven by increased volumes in
foodservice cheese, partially offset by lower volumes in raw milk sales.

GROSS PROFIT VARIANCE SCHEDULE

<TABLE>
<CAPTION>
                                               INCREASE
                                              (DECREASE)
                                              ----------
                                                  (IN
                                               MILLIONS)
<S>                                           <C>
Margin / product mix impact................     $(10.9)
Volume impact..............................        1.3
Unrealized hedging.........................       (1.6)
                                                ------
   Total decrease..........................     $(11.2)
</TABLE>

     The gross profit decline in 2005 was primarily due to higher energy prices
in industrial manufacturing and lower margins in branded cheese, partially
offset by improved margins in retail butter and increased volumes at CPI. The
negative margin / mix variance of $10.9 million was partially due to a $10.2
million increase in energy costs that impacted dairy manufacturing. In addition,
branded cheese was down $11.9 million due to the impact of lower prices.
Partially offsetting the margin / mix variances was higher prices in retail
butter which had a positive impact of $9.6 million. The volume variance impact
of $1.3 million was primarily due to improvements at CPI due to increased
volumes related to the completion of the Phase II expansion in June of 2004.
Partially offsetting this was the impact of lower volumes in retail butter.

     FEED

<TABLE>
<CAPTION>
                                              FOR THE YEARS ENDED DECEMBER 31
                                              -------------------------------
                                                 2005       2004     % CHANGE
                                               --------   --------   --------
                                                    (DOLLARS IN MILLIONS)
<S>                                           <C>         <C>        <C>
Net sales..................................    $2,586.9   $2,626.6    (1.5)%
Gross profit...............................       290.6      256.5    13.3%
   Gross profit as a % of sales............        11.2%       9.8%
</TABLE>

NET SALES VARIANCE SCHEDULE

<TABLE>
<CAPTION>
                                               INCREASE
                                              (DECREASE)
                                              ----------
                                                  (IN
                                               MILLIONS)
<S>                                           <C>
Pricing / product mix impact...............     $(37.7)
Volume impact..............................        3.4
One-time items.............................       (5.4)
                                                ------
   Total decrease..........................     $(39.7)
</TABLE>


                                       41
<PAGE>

     The decrease in net sales was due primarily to the impact of lower
commodity prices. The $37.7 million negative pricing / mix variance was
primarily related to a $74.8 million pricing impact to ingredient sales. In
addition, formula feed sales, which includes both lifestyle and livestock feeds,
decreased by $38.6 million, primarily in the livestock category due to the
impact of lower commodity prices. Partially offsetting these decreases were
increases in our premix subsidiaries and milk replacer sales of $43.2 million
and $30.1 million, respectively. The volume variance of $3.4 million was driven
by the impact of a 4% increase in ingredient volumes, which caused sales to
increase $27.7 million, and the impact of an 11% increase in volumes in our
premix subsidiaries, which caused sales to increase by $17.0 million. Partially
offsetting these was a $38.5 million negative impact of lower volumes in formula
feed, entirely in the livestock category. The one-time category includes the
sale of Heritage Trading Company, LLC in 2005 which was partially offset by
higher sales due to the consolidation of Penny-Newman Milling, LLC on September
30, 2005.

<TABLE>
<CAPTION>
                                    INCREASE
GROSS PROFIT VARIANCE SCHEDULE     (DECREASE)
------------------------------   -------------
                                 (IN MILLIONS)
<S>                              <C>
Margin / product mix impact ..       $12.7
Volume impact ................         1.8
Unrealized hedging ...........        19.4
One-time items ...............         0.2
                                     -----
   Total increase ............       $34.1
</TABLE>

     The increase in gross profit was primarily due to volume increases in
lifestyle feeds, cost control efforts, product mix adjustments, improved markets
and unrealized hedging. The positive margin / mix impact of $12.7 million was
primarily due to a $15.3 million improvement in the lifestyle category of
formula feed. In addition, improved markets increased gross profit in
ingredients by $5.2 million. Partially offsetting these was a negative margin /
mix impact in our premix subsidiaries of $4.2 million. The volume variance of
$1.8 million was due to improvements in our lifestyle business of $4.2 million,
driven by a 2% increase in volumes. In addition, the volume increase in the
ingredient business and premix subsidiaries caused gross profit to increase by
$1.0 million and $1.6 million, respectively. Partially offsetting these was the
$4.9 million impact of lower volumes in the livestock business. The one-time
category includes the impact from the sale of Heritage Trading Company, LLC in
2005 which was partially offset by higher gross profit due to the consolidation
of Penny Newman-Milling, LLC.

SEED

<TABLE>
<CAPTION>
                                      FOR THE YEARS ENDED DECEMBER 31
                                      -------------------------------
                                          2005     2004    % CHANGE
                                         ------   ------   --------
                                           (DOLLARS IN MILLIONS)
<S>                                   <C>         <C>      <C>
Net sales .........................      $653.9   $518.8     26.0%
Gross profit ......................        84.4     70.4     19.9%
   Gross profit as a % of sales ...        12.9%    13.6%
</TABLE>

<TABLE>
<CAPTION>
                                       INCREASE
NET SALES VARIANCE SCHEDULE           (DECREASE)
---------------------------         -------------
                                    (IN MILLIONS)
<S>                                 <C>
Pricing / product mix impact ....      $ 42.3
Volume impact ...................       108.5
Divestiture .....................       (15.7)
                                       ------
   Total increase ...............      $135.1
</TABLE>

     The net sales increase was primarily driven by double digit volume growth
in corn, alfalfa, soybeans and forages. The $42.3 million positive pricing / mix
variance was primarily related to higher prices in our partnered soybean and
corn seed. In addition, alfalfa and propriety corn and soybeans showed
improvement in 2005 compared to 2004. The volume variance of $108.5 million was
primarily driven by strength in our partnered soybeans and corn. Alfalfa also
had a significant sales increase due to strong markets. The sale of Seed
Research of Oregon in 2004 caused sales to decrease by $15.7 million in 2005
compared to 2004.


                                       42

<PAGE>

<TABLE>
<CAPTION>
                                      INCREASE
GROSS PROFIT VARIANCE SCHEDULE       (DECREASE)
------------------------------     -------------
                                   (IN MILLIONS)
<S>                                <C>
Margin / product mix impact ....       $ 0.4
Volume impact ..................        12.3
Unrealized hedging .............         3.5
One-time items .................        (2.2)
                                       -----
   Total increase ..............       $14.0
</TABLE>

     The gross profit margin / mix increase was $0.4 million in 2005 compared to
2004. Improvements in alfalfa and partnered corn and soybeans were mostly offset
by reductions in proprietary corn and soybeans. The volume improvement of $12.3
million was driven by 26% higher corn, 24% higher alfalfa, and 16% higher
soybeans sales. The sale of Seed Research of Oregon caused a decrease in gross
profit of $2.2 million in 2005 compared to 2004.

     LAYERS

<TABLE>
<CAPTION>
                                      FOR THE YEARS ENDED DECEMBER 31
                                      -------------------------------
                                          2005     2004    % CHANGE
                                         ------   ------   --------
                                             (DOLLARS IN MILLIONS)
<S>                                   <C>         <C>       <C>
Net sales .........................      $407.0   $541.3    (24.8%)
Gross profit ......................        21.9     65.3    (66.5%)
   Gross profit as a % of sales ...         5.4%    12.1%
</TABLE>

<TABLE>
<CAPTION>
                                       INCREASE
NET SALES VARIANCE SCHEDULE           (DECREASE)
---------------------------         -------------
                                    (IN MILLIONS)
<S>                                 <C>
Pricing / product mix impact ....      $(144.4)
Volume impact ...................         10.1
                                       -------
   Total decrease ...............      $(134.3)
</TABLE>

     The net sales decrease was primarily driven by lower egg market prices. The
average quoted price based on the South Central Large market decreased to $0.72
per dozen in 2005 compared to $0.91 per dozen in 2004. As a result, sales of
shell eggs decreased $74.5 million and sales of egg products decreased by $59.8
million.

<TABLE>
<CAPTION>
                                      INCREASE
GROSS PROFIT VARIANCE SCHEDULE       (DECREASE)
------------------------------     -------------
                                   (IN MILLIONS)
<S>                                <C>
Margin / product mix impact ....      $(46.6)
Volume impact ..................         1.2
Unrealized hedging .............         2.0
                                      ------
   Total decrease ..............      $(43.4)
</TABLE>

     The gross profit decline is primarily attributable to the drop in average
market price of eggs. Partially offsetting the impact of reduced egg prices were
lower feed costs and unrealized hedging gains in 2005.

YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

     Overview of Results

<TABLE>
<CAPTION>
                          FOR THE YEARS ENDED DECEMBER 31,
                          --------------------------------
                               2004    2003   DECREASE
                              -----   -----   --------
                                    (IN MILLIONS)
<S>                       <C>         <C>      <C>
Net earnings ..........       $21.4   $82.0    $(60.6)
</TABLE>


                                       43

<PAGE>

     Net earnings in 2004 were negatively impacted by a $36.5 million impairment
on our investment in CF Industries, partially offset by a $1.8 million income
tax benefit, and unrealized hedging losses of $23.1 million, partially offset by
an $8.8 million income tax benefit. In 2004, we also recorded a gain on legal
settlement of $5.4 million, partially offset by income tax expense of $1.9
million. In 2003, net earnings benefited from a gain on legal settlement of
$22.8 million, partially offset by income tax expense of $6.5 million, and
unrealized hedging gains of $19.5 million, partially offset by income tax
expense of $7.5 million. Excluding these items, the Company's net earnings
increased $13.2 million in 2004. This increase reflects improved margins in
Dairy Foods and Seed, and higher volume growth in Seed, partially offset by
lower earnings in the Feed and Layers segments.

<TABLE>
<CAPTION>
                          FOR THE YEARS ENDED DECEMBER 31,
                          --------------------------------
                             2004       2003     INCREASE
                           --------   --------   --------
                                    (IN MILLIONS)
<S>                       <C>        <C>        <C>
Net sales .............    $7,656.8   $6,256.1   $1,400.7
</TABLE>

     The primary increase in net sales is attributed to a $981.9 million
increase in Dairy Foods. Sales were also impacted from the consolidation of
MoArk effective July 1, 2003, which increased sales by $223.5 million in 2004
compared to 2003. Prior to July 1, 2003, MoArk was accounted for under the
equity method. Increased sales in Seed and Feed also contributed $211.9 million.
A discussion of net sales by business segment is found below under the caption
"Net Sales and Gross Profit by Business Segment."

<TABLE>
<CAPTION>
                          FOR THE YEARS ENDED DECEMBER 31,
                          --------------------------------
                              2004     2003    INCREASE
                             ------   ------   --------
                                     (IN MILLIONS)
<S>                       <C>         <C>      <C>
Gross profit ..........      $593.7   $584.2     $9.5
</TABLE>

     Increased volumes in Dairy Foods, improved margins in Seed and the
inclusion of a full year of MoArk gross profit in 2004 were the most significant
reasons for the increase in gross profit. Prior to July 1, 2003, MoArk was
accounted for under the equity method. Partially offsetting these increases was
a $37.8 million increase in unrealized hedging losses, mainly in Feed. A
discussion of gross profit by business segment is found below under the caption
"Net Sales and Gross Profit by Business Segment."

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                      2004     2003    INCREASE
                                                     ------   ------   --------
                                                            (IN MILLIONS)
<S>                                               <C>         <C>      <C>
Selling, general and administrative expense ...      $501.0   $464.6     $36.4
</TABLE>

     The increase in selling, general and administrative expense was primarily
due to the consolidation of MoArk effective July 1, 2003, which resulted in an
additional $13.6 million of expense for the year ended December 31, 2004. Prior
to July 1, 2003, MoArk was accounted for under the equity method. Also
contributing to the increase was a gain on the sale of the Perham and Gustine
dairy facilities of $9.4 million in 2003 compared to no recorded gain for 2004
and increased incentive expense of $5.0 million in 2004.

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                       2004   2003   INCREASE
                                                       ----   ----   --------
                                                            (IN MILLIONS)
<S>                                               <C>         <C>    <C>
Restructuring and impairment charges ..........        $7.8   $6.3     $ 1.5
</TABLE>

     In 2004, Feed reported a restructuring charge of $2.9 million for severance
costs for 100 employees affected by the restructuring of operations in 2004. In
addition, impairment of Feed assets held for sale was $3.1 million in 2004. We
had impairments of $0.6 million in Dairy Foods and $0.2 million in the other
segment related to the write-down of certain assets to their estimated fair
value. We also incurred $1.5 million for goodwill impairment in our Seed segment
and reversed $0.5 million of restructuring charges in our Dairy Foods segment
related to the closure of our Volga, South Dakota and Perham, Minnesota plants.


                                       44

<PAGE>

     The $6.3 million charge in 2003 related to $3.5 million of restructuring
charges primarily for Dairy Foods and $2.8 million for impairment charges for
the Feed and Seed segments.

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                       2004    2003   INCREASE
                                                      -----   -----   --------
                                                            (IN MILLIONS)
<S>                                               <C>        <C>     <C>
Interest expense, net .........................       $83.1   $81.0     $2.1
</TABLE>

     The consolidation of MoArk effective July 1, 2003 resulted in an additional
$2.3 million of interest expense for the year ended December 31, 2004. Prior to
July 1, 2003, MoArk was accounted for under the equity method. In addition, we
accelerated $1.5 million of deferred financing cost amortization as a result of
early payoff of our Term A loan and prepayment of a portion of the Term B loan
with proceeds from the $100 million expansion of our receivables securitization
facility. Partially offsetting these increases was a $2.5 million decrease in
interest expense from the interest rate swap entered into during 2004. Combined
interest rates for borrowings, excluding CoBank patronage, averaged 6.8% in
2004, compared to 7.2% in 2003.

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                      2004    2003   INCREASE
                                                     -----   -----   --------
                                                             (IN MILLIONS)
<S>                                               <C>        <C>     <C>
Equity in earnings of affiliated companies ....      $58.4   $57.3     $1.1
</TABLE>

     Results for 2004 included equity in earnings from Agriliance of $39.3
million compared to equity in earnings of $33.9 million for 2003. This increase
was primarily driven by improved crop protection product and crop nutrient
product margins, partially offset by increased selling, general and
administrative expense. A discussion of net earnings for Agriliance can be found
under the caption "Overview -- General -- Unconsolidated Businesses." MoArk
equity investments had equity earnings of $7.9 million for the year ended
December 31, 2004, a decrease of $2.3 million from 2003, due to a decline in
market prices for eggs.

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                      2004    2003   DECREASE
                                                      ----   -----   --------
                                                             (IN MILLIONS)
<S>                                               <C>        <C>     <C>
Income tax expense ............................       $1.4   $20.7    $(19.3)
</TABLE>

     The decline was primarily a result of unrealized hedging losses of $23.1
million in 2004 compared to unrealized hedging gains of $19.5 million in 2004. A
decline in MoArk earnings, which is a non-member business, also caused a
decrease in income tax expense.

<TABLE>
<CAPTION>
                                                  FOR THE YEARS ENDED DECEMBER 31,
                                                  --------------------------------
                                                       2004   2003   INCREASE
                                                       ----   ----   --------
                                                            (IN MILLIONS)
<S>                                               <C>         <C>     <C>

Loss from discontinued operations, net of
   income taxes ...............................        $6.8   $4.9     $1.9
</TABLE>

     The larger loss is primarily the result of an unrealized hedging loss of
$3.3 million in 2004 from our swine production operations compared to unrealized
hedging gains of $1.9 million in 2003 and higher feed input costs in 2004.
Partially offsetting the increase was savings from reduced expenses in our
cost-plus program and higher hog market prices in 2004 compared to 2003.

     Net Sales and Gross Profit by Business Segment


                                       45

<PAGE>

     DAIRY FOODS

<TABLE>
<CAPTION>
                                      FOR THE YEARS ENDED DECEMBER 31
                                      -------------------------------
                                         2004       2003     %CHANGE
                                       --------   --------   -------
                                            (DOLLARS IN MILLIONS)
<S>                                   <C>         <C>        <C>
Net sales .........................    $3,956.9   $2,975.0    33.0%
Gross profit ......................       197.8      170.3    16.2%
   Gross profit as a % of sales ...         5.0%       5.7%
</TABLE>

<TABLE>
<CAPTION>
                                      INCREASE
NET SALES VARIANCE SCHEDULE          (DECREASE)
---------------------------        -------------
                                   (IN MILLIONS)
<S>                                <C>
Pricing / product mix impact ...     $1,006.9
Volume impact ..................        (25.0)
                                     --------
   Total increase ..............     $  981.9
</TABLE>

     The net sales increase was driven primarily by the impact of higher
commodity prices. The pricing / mix variance of $1,006.9 million was due to a
higher average commodity price for butter of $0.68 per pound and an increase in
the average commodity prices for cheese of $0.34 per pound over 2003. The impact
of these market price changes increased net sales of butter by $246.6 million
and increased net sales of cheese by $94.4 million compared to 2003. Sales
through our wholesale milk marketing program increased $351.9 million primarily
due to increases in milk market prices. In the Upper Midwest region, net sales
of industrial bulk cheese increased by $90.2 million over 2003 due to higher
commodity prices. The negative volume impact of $25.0 million was primarily due
to the decrease in volumes from private label butter, resulting in a $26.0
million decrease in sales.

<TABLE>
<CAPTION>
                                      INCREASE
GROSS PROFIT VARIANCE SCHEDULE       (DECREASE)
------------------------------     -------------
                                   (IN MILLIONS)
<S>                                <C>
Margin / product mix impact ....       $30.2
Volume impact ..................         2.9
Unrealized hedging .............        (5.6)
                                       -----
   Total increase ..............       $27.5
</TABLE>

     The increase in gross profit was primarily driven by increased margins in
the retail butter and consumer cheese categories and increased volumes from CPI.
The margin / mix improvement of $30.2 million was driven primarily by improved
margins in retail butter and consumer cheese of $12.0 million and $13.8 million,
respectively. Improved gross profit due to volume of $2.9 million was primarily
due to the impact of increased production at CPI and higher volumes in consumer
cheese.

     FEED

<TABLE>
<CAPTION>
                                      FOR THE YEARS ENDED DECEMBER 31
                                      -------------------------------
                                         2004       2003     % CHANGE
                                       --------   --------   --------
                                            (DOLLARS IN MILLIONS)
<S>                                   <C>         <C>        <C>
Net sales .........................    $2,626.6   $2,467.2      6.5%
Gross profit ......................       256.5      288.1    (10.9)%
   Gross profit as a % of sales ...         9.8%      11.7%
</TABLE>

<TABLE>
<CAPTION>
                                      INCREASE
NET SALES VARIANCE SCHEDULE          (DECREASE)
---------------------------        -------------
                                   (IN MILLIONS)
<S>                                <C>
Pricing / product mix impact ...       $119.9
Volume impact ..................         39.5
                                       ------
   Total increase ..............       $159.4
</TABLE>

     The increase in net sales was primarily driven by the impact of higher
commodity prices in 2004 compared to 2003. The pricing / mix variance of $119.9
million was due to the impact of higher commodity prices of ingredients, which
caused sales to increase by $81.8 million in 2004. In addition, the pricing /
mix impact to formula feed, which includes both lifestyle and livestock feeds,
drove a sales increase of $19.1 million, primarily in the livestock category.
The volume variance of $39.5 million was due to volume improvements in formula
feed of $12.1 million, premix subsidiaries of $33.6 million and milk replacer of
$19.0 million, partially offset by a $24.3 million negative volume variance in
ingredients.


                                       46
<PAGE>

<TABLE>
<CAPTION>
GROSS PROFIT VARIANCE SCHEDULE                               INCREASE (DECREASE)
------------------------------                               -------------------
                                                                (IN MILLIONS)
<S>                                                          <C>
Margin / product mix impact...............................         $(16.4)
Volume impact.............................................           10.2
Unrealized hedging........................................          (25.4)
                                                                   ------
   Total decrease.........................................         $(31.6)
</TABLE>

     The gross profit decrease was mainly due to the impact of unrealized
hedging losses. The negative margin / mix variance of $16.4 million was
primarily due to a $9.1 million negative margin / mix impact in our milk
replacer products and $6.2 million margin / mix variance in lifestyle feed.
Partially offsetting the negative margin / mix variance was a $5.6 million
favorable impact in ingredients due to focused purchasing opportunities in
rising and volatile commodity markets. The volume increase of $10.2 million was
primarily related to increased volumes in milk replacer and lifestyle feed.

     SEED

<TABLE>
<CAPTION>
                                                 FOR THE YEARS ENDED DECEMBER 31
                                                 -------------------------------
                                                    2004     2003    % CHANGE
                                                   ------   ------   --------
                                                      (DOLLARS IN MILLIONS)
<S>                                              <C>        <C>      <C>
Net sales.....................................     $518.8   $466.2     11.3%
Gross profit..................................       70.4     63.1     11.6%
   Gross profit as a % of sales...............       13.6%    13.5%
</TABLE>

<TABLE>
<CAPTION>
NET SALES VARIANCE SCHEDULE                                           INCREASE
---------------------------                                        -------------
                                                                   (IN MILLIONS)
<S>                                                                <C>
Pricing / product mix impact....................................       $36.0
Volume impact...................................................        16.6
                                                                       -----
   Total increase...............................................       $52.6
</TABLE>

     Higher net sales were primarily driven by higher soybean and corn prices
and higher volumes for corn. The $36.0 million increase in sales caused by
pricing / mix is due to improved soybean, corn and alfalfa prices. The volume
impact of $16.6 million was primarily driven by higher corn volume.

GROSS PROFIT VARIANCE SCHEDULE

<TABLE>
<CAPTION>
                                    INCREASE
                                   (DECREASE)
                                 ------------
                                 (IN MILLIONS)
<S>                              <C>
Margin / product mix impact...       $10.7
Volume impact.................         2.2
Unrealized hedging............        (5.6)
                                     -----
   Total increase.............       $ 7.3
</TABLE>

     Increased gross profit was primarily driven by lower cost of product in
alfalfa and improved corn volumes. The margin / mix increase of $10.7 million
was primarily due to the margin improvement in alfalfa of $7.3 million mainly
due to lower inventory cost. The volume improvement of $2.2 million resulted
from an increase in corn gross profit due to a volume increase of 12%.

     LAYERS

     Effective July 1, 2003, we consolidated MoArk as required by FIN 46 and
presented the business as our Layers segment in our financial statements. Prior
periods were not restated. Prior to July 1, MoArk was accounted for under the
equity method; accordingly, sales and gross profit for the first six months
ended June 30, 2003 were not included in our Layers segment, which is comprised
solely of our ownership in MoArk.


                                       47

<PAGE>

     Net Sales

     Net sales for the year ended December 31, 2004 were $541.3 million compared
to $317.8 million for the year ended December 31, 2003. On a stand-alone basis,
MoArk had net sales of $552.4 million for the year ended December 31, 2003. The
decrease in sales was primarily driven by lower egg market prices. The average
quoted price based on the South Central Large market decreased to $0.91 per
dozen in 2004 compared to $0.94 per dozen in 2003. As a result, sales of shell
eggs decreased $26.9 million. Partially offsetting this decrease was a $12.8
million increase in the sales of liquid egg products, due to increased volumes
of 231 million dozen equivalents in 2004 compared to 226 million in 2003.

     Gross Profit

     Gross profit for the year ended December 31, 2004 was $65.3 million
compared to $53.1 million for the year ended December 31, 2003. On a stand-alone
basis, MoArk had a gross profit of $72.5 million for the year ended December 31,
2003. The margin decline is primarily a result of the drop in sales dollars due
to decreased egg market prices. This is partially offset by a decrease in the
cost of feed ingredients and the reduction of cost from the disposition of some
Georgia contract layer production operations. Gross profit as a percent of net
sales decreased to 12.1% for the year ended December 31, 2004 compared to 13.1%
for the year ended December 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW

     We rely on cash from operations, borrowings under our bank facilities and
other institutionally-placed debt as the main sources for financing working
capital requirements, additions to property, plant and equipment as well as
acquisitions and investments in joint ventures. Other sources of funding consist
of leasing arrangements, a receivables purchase facility and the sale of
non-strategic assets.

     Total long-term debt, including the current portion, was $661.4 million at
December 31, 2005 compared to $943.9 million at December 31, 2004. The decrease
was primarily due to term debt repayments of $118.4 million in February and
March of 2005 and a $153.5 million repurchase of the Company's 8.75% senior
unsecured notes due 2011 in November.

     Our primary sources of debt at December 31, 2005 included a $200 million
undrawn revolving credit facility, $175 million in senior secured notes, $196.5
million in senior unsecured notes and $191 million of capital securities. For
more information, please see the section below entitled "Principal Debt
Facilities."

     At December 31, 2005, $59.1 million of our long-term debt was attributable
to MoArk. Land O'Lakes does not provide any guarantees or support for MoArk's
debt. In addition, we had $40.1 million of other miscellaneous long-term debt at
December 31, 2005.

     In 2001, we entered into a $100 million (expanded to $200 million in 2004)
receivables purchase facility program with CoBank, ACB ("CoBank") in an effort
to reduce overall financing costs. At December 31, 2005 and 2004, no amounts
were outstanding under this facility. In accordance with generally accepted
accounting principles, this facility is not reflected as debt in our
consolidated balance sheet. A more complete description of this accounts
receivable securitization program is found below under the caption, "Off-balance
Sheet Arrangements."

     Our principal liquidity requirements are to service our debt and meet our
working capital and capital expenditure needs. At December 31, 2005, $147.6
million was available under our $200 million revolving credit facility for
working capital and general corporate purposes after giving effect to $52.4
million of outstanding letters of credit, which reduce availability. There was
no outstanding balance on the facility at December 31, 2005. Our peak borrowing
on the revolving credit facility in 2005 was $45 million in September.

     At December 31, 2005, we had available cash and cash equivalents on hand of
$179.7 million, including $6.0 million of cash at MoArk. Total equities at
December 31, 2005 were $903.6 million.


                                       48

<PAGE>

Our total liquidity as of December 31 is as follows:

<TABLE>
<CAPTION>
                                                        2005     2004
                                                       ------   ------
                                                       ($ in millions)
<S>                                                    <C>      <C>
Cash and cash equivalents...........................   $179.7   $ 73.1
Availability on revolving credit facility...........    147.6    145.3
Availability on receivable securitization program...    200.0    200.0
Total liquidity.....................................   $527.3   $418.4
</TABLE>

     We expect that funds from operations and available borrowings under our
revolving credit facility and receivables securitization facility will provide
sufficient working capital to operate our business, to make expected capital
expenditures and to meet liquidity requirements for at least the next twelve
months.

CASH FLOWS

     The following table summarizes the key elements in our cash flows for the
last three years ended December 31:

<TABLE>
<CAPTION>
                                                             2005          2004      2003
                                                       ---------------   -------   -------
                                                       ($ in millions)
<S>                                                    <C>               <C>       <C>
Net cash provided by operating activities...........      $ 223.1        $ 202.0   $ 230.5
Net cash provided (used) by investing activities....        275.8          (33.1)    (34.3)
Net cash used by financing activities...............       (438.3)        (206.8)   (146.3)
</TABLE>

     Operating Activities. Net cash provided by operating activities increased
$21.1 million in 2005 compared to 2004. Working capital cash flow improved,
primarily due to the seed segment customer prepay programs. Cash flows from
operating activities in 2004 declined $28.5 million as compared to 2003. A
decrease in cash proceeds from legal settlements which were $5.4 million in
2004, compared to $119.5 million in 2003, was partially offset by $109 million
in additional cash flows from working capital in 2004.

     Investing Activities. Net cash provided by investing activities was $275.8
million in 2005, primarily due to $315.5 million of cash received on the sale of
the company's investment in CF Industries, Inc. In addition, $20.3 million of
restricted cash was released as a result of the prepayment of a capital lease at
CPI, $24.8 million was received from the sale of assets, and $35.3 million was
received as dividends from affiliated companies. These proceeds were partially
offset by acquisition spending of $46.1 million in 2005 and $70.4 million of
capital expenditures. In 2004, net cash used by investing activities was $33.1
million. Of this amount, $108.2 million in cash was used for capital
expenditures and the purchase of a minority interest in Land O'Lakes Purina
Feed. Partially offsetting the cash use was $27.4 million of proceeds from sales
of assets and $47.8 million of dividends received from affiliated companies,
primarily dividends from Agriliance and MoArk. In 2003, we used $81.7 million
for investing spending and capital expenditures and received cash of $26.5
million from the sale of assets and $37.4 million from dividends from affiliated
companies.

     Financing Activities. In 2005, our financing activities resulted in a cash
outflow of $438.3 million. We paid $118.4 million principal for Term B loan,
$153.6 million for the repurchase of 8.75% senior unsecured notes due 2011,
$11.0 million of debt extinguishment costs related to the repurchase of the
senior unsecured notes, and $92.6 million of payments for obligations under
capital lease. We also paid $68.7 million for redemption of member equities in
2005. During 2004, our financing activities resulted in a cash outflow of $206.8
million. Principal payments in 2004 on term loans were $126.5 million, other
long-term debt principal payments for 2004 were $20.0 million and short-term
debt declined by $28.6 million. The redemption of member equities in 2004 was
$34.6 million. In 2003, we paid $274.8 million in term loan debt, partly offset
by the issuance of $175 million senior secured notes. In addition, in 2003 we
paid $30.1 million in other long-term debt principal payments and $24.4 million
in cash for redemption of member equities.


                                       49

<PAGE>

CASH REQUIREMENTS

At December 31, 2005, we had certain contractual obligations, which require us
to make payments as follows:

<TABLE>
<CAPTION>
                                                                  Payments Due by Year (as of December 31, 2005)
                                                         ---------------------------------------------------------------
                                                                           Less Than                           More Than
Contractual Commitments                                       Total         1 Year     1-3 Years   3-5 Years    5 Years
-----------------------                                  --------------   ----------   ---------   ---------   ---------
                                                         (In thousands)
<S>                                                      <C>              <C>          <C>         <C>         <C>
Debt and leases:
Revolving credit facility(1)                               $       --     $       --    $     --    $     --    $     --
Long-term debt                                                661,413         22,245      16,826     186,026     436,316
Obligations under capital lease                                 9,310          1,676       3,109       2,712       1,813
Operating leases                                              103,833         31,363      43,374      24,205       4,891
Other:
Penny-Newman Milling LLC minority interest purchase(2)         13,187         13,187          --          --          --
MoArk minority interest purchase(3)                            71,000         71,000          --          --          --
Swine contract payments (4)                                    87,482         42,196      39,041       5,569         676
Non-cancelable purchase commitments (5)                     1,330,279      1,306,276      18,000       6,000          --
Other obligations(6)                                           16,245          6,086       5,120       3,286       1,753
   TOTAL CONTRACTUAL OBLIGATIONS(7)                        $2,292,746     $1,494,029    $125,470    $227,798    $445,449
</TABLE>

(1)  A $200 million facility, of which $147.6 million was available as of
     December 31, 2005. A total of $52.4 million of this commitment was
     unavailable due to outstanding letters of credit. This facility was undrawn
     as of December 31, 2005. For more information regarding the credit
     facility, please see the caption below entitled "Principal Debt
     Facilities."

(2)  Represents the January 2006 purchase price for the 49.9% minority interest
     in Penny-Newman Milling, LLC.

(3)  Represents the January 2006 purchase price for the 42.5% minority interest
     in MoArk, LLC. See "Item 1. Business -- Business Segments -- Layers" for a
     discussion of this payment obligation.

(4)  Includes contractual commitments to purchase weaner pigs, feeder pigs, and
     producer services accounted for in our Feed and Other segments. In Feed, we
     enter into commitments to purchase weaner and feeder pigs from producers
     and generally have commitments to immediately resell the animals to swine
     producers. Market exposure is managed by procuring contracts to resell the
     pigs at terms that capture the pig cost and associated margin. In our Other
     segment, we account for purchase commitments used to source feeder pigs for
     our Aligned System program. We sold our sow herd and feeder pig inventory
     and the production facilities for our Aligned System program as part of the
     sale of swine production assets to Maschhoff West LLC in February 2005, but
     retained long-term agreements to supply feeder pigs to our local
     cooperative members. For the Aligned System program, pigs are purchased
     from Maschhoff West LLC utilizing fixed or variable pricing and immediately
     resold utilizing similar pricing under sales contracts with local
     cooperatives. Our profit or loss from these programs is minimal.

(5)  Primarily for raw materials in our Dairy Foods, Feed, Seed and Layers.
     These purchase commitments, estimated for this table, are contracted on a
     short-term basis, typically for one year or less.

(6)  Primarily represent contractual commitments to purchase marketing and
     consulting services and capital equipment.

(7)  Does not include contingent obligations under our pension and
     postretirement plans. For accounting disclosures of our pension and
     postretirement obligations, see Note 14 in "Item 8. Financial Statements
     and Supplementary Data."

     We expect total capital expenditures to be approximately $105 million in
2006. Of such amount, we currently estimate that a minimum range of $35 million
to $45 million of ongoing maintenance capital expenditures will be required. We
had $70.4 million in capital expenditures for the year ended December 31, 2005,
compared to $96.1 million and $71.7 million in capital expenditures for the
years ended December 31, 2004 and 2003, respectively.

     In 2006, we expect our total cash payments to members to be approximately
$80 million for revolvement, cash patronage and estates and age retirements.

     In 2006, we anticipate our total cash payments for interest on our
short-term and long-term debt obligations to be approximately $65 million.


                                       50
<PAGE>

GUARANTEES AND INDEMNIFICATION OBLIGATIONS

     The Company has provided various representations, warranties and other
standard indemnifications in various agreements with customers, suppliers and
other parties, as well as in agreements to sell business assets or lease
facilities. In general, these provisions indemnify the counterparty for matters
such as breaches of representations and warranties, certain environmental
conditions and tax matters, and, in the context of sales of business assets, any
liabilities arising prior to the closing of the transactions. Non-performance
under a contract could trigger an obligation of the Company. The ultimate effect
on future financial results is not subject to reasonable estimation because
considerable uncertainty exists as to the final outcome of any potential claims.
We do not believe that any of these commitments will have a material effect on
our results of operations or financial condition.

     MoArk has guaranteed certain loan agreements for an equity investee. MoArk
is responsible for 50% of the outstanding balance of these guaranteed notes
totaling $11.3 million as of December 31, 2005. These notes are fully secured by
collateral of the equity investee.

PRINCIPAL DEBT FACILITIES

     Under our revolving credit facility, lenders have committed to make
advances and issue letters of credit until January 2007 in an aggregate amount
not to exceed $200 million, subject to a borrowing base limitation. Borrowings
under the revolving credit facility bear interest at a variable rate (either
LIBOR or an Alternative Base Rate) plus an applicable margin. The margin is
dependent upon the Company's leverage ratio. Based on our leverage ratio at the
end of 2005, the LIBOR margin for the revolving credit facility is 200 basis
points. Spreads for the Alternative Base Rate are 100 basis points lower than
the applicable LIBOR spreads. LIBOR may be set for one, two, three or six month
periods at our election. As a result of the Company's January 2006 purchase of
the minority interest in MoArk, LLC, the revolving credit facility was amended
to allow for the continued treatment of MoArk as an unrestricted subsidiary
under this agreement.

     In December 2003, we issued $175 million of senior secured notes that
mature on December 15, 2010. Proceeds from the issuance were used to make
prepayments on the Company's term loans. These notes bear interest at a fixed
rate of 9.00% per annum, payable on June 15 and December 15 each year. The notes
are callable beginning in December 2007 at a redemption price of 104.5%. In
December 2008, the redemption price is 102.25%. The notes are callable at par
beginning in December 2009.

     In November 2001, we issued $350 million of senior unsecured notes that
mature on November 15, 2011. Proceeds from the issuance were used to refinance
the Company in connection with the acquisition of Purina Mills. These notes bear
interest at a fixed rate of 8.75% per annum, payable on May 15 and November 15
each year. The notes are callable beginning in November 2006 at a redemption
price of 104.375%. In November 2007 and 2008, the redemption price is 102.917%
and 101.458%, respectively. The notes are callable at par beginning in November
2009. In September 2005, $3.8 million of these notes were tendered as a result
of our required par offer in August 2005. The par offer was made upon receiving
the cash proceeds from the sale of our investment in CF Industries in accordance
with the terms of the indentures for our senior unsecured and senior secured
notes. In November 2005, we completed a "modified Dutch Auction" cash tender for
these notes and purchased $149.8 million in aggregate principal amount of the
notes at a purchase price of $1,070 per $1,000 principal amount.

     In addition to the modified Dutch Auction, we, or our affiliates, are
permitted by the indentures governing our 8.75% senior unsecured notes and our
9% senior secured notes to make open market purchases of such notes, on such
terms and at such prices as we or our affiliates may determine. No such
purchases were made in 2005.

     Until March of 2005, the company also had outstanding borrowings under a
syndicated Term B loan facility with a final maturity of October 10, 2008. The
Term B loan was prepayable at any time without penalty and was completely paid
off in 2005. In February 2005, we made a $50 million prepayment on the Term B
loan, of which approximately $46.5 million was mandatory based on an excess cash
flow calculation for the year ended December 31, 2004, as defined in the credit
agreement. The remaining $3.5 million was optional. In March 2005, we made a
further prepayment of the remaining $68.4 million outstanding on the Term B loan
due partly to cash proceeds received from the disposal of assets related to our
swine production operations.


                                       51

<PAGE>

     We use interest rate swap agreements, designated as fair value hedges, to
help manage exposure to interest rate fluctuations. The objective of the swaps
is to maintain an appropriate balance between fixed and floating interest rate
exposures. These swaps mirror the terms of the 8.75% senior unsecured notes and
effectively convert $102 million of such notes from a fixed 8.75% rate to an
effective rate of LIBOR plus 385 basis points. At December 31, 2005, the
aggregate notional amount of the swaps was $102 million. The swap fair value was
a liability of $1.9 million at December 31, 2005, which is reflected in employee
benefits and other liabilities in our consolidated balance sheet, and the fair
value adjustment on the hedged debt was included in long-term debt in the
consolidated balance sheet at December 31, 2005.

     In 1998, Capital Securities in an amount of $200 million were issued by our
trust subsidiary, and the net proceeds were used to acquire a junior
subordinated note of Land O'Lakes. The holders of the securities are entitled to
receive dividends at an annual rate of 7.45% until the securities mature in
2028. The payment terms of the Capital Securities correspond to the payment
terms of the junior subordinated debentures, which are the sole asset of the
trust subsidiary. Interest payments on the debentures can be deferred for up to
five years, and the obligations under the debentures are junior to all of our
debt. At December 31, 2005, the outstanding balance of Capital Securities was
$190.7 million.

     The Company's MoArk subsidiary had a $60 million revolving credit facility
due March 2006, subject to a borrowing base limitation. Borrowings of $19
million and $0, respectively, were outstanding at December 31, 2005 and 2004,
and are recorded as notes and short-term obligations. MoArk had outstanding
notes and term loans of $59.1 million and $73.5 million as of December 31, 2005
and 2004, respectively. The term loans and revolving credit facility are subject
to certain debt covenants, including a minimum interest coverage ratio and a
maximum net allowable capital expenditure calculation. At December 31, 2005,
MoArk was not in compliance with these covenant requirements and obtained
waivers until February 2007 for a term loan and until March 2006 for a term loan
and the revolving credit facility. MoArk is currently in the process of renewing
and extending its revolving credit facility, and expects to obtain appropriate
amendments or waivers for the remainder of 2006.

     The credit agreements relating to the revolving credit facility and the
indentures relating to the 8.75% senior unsecured notes and the 9.00% senior
secured notes impose certain restrictions on us, including restrictions on our
ability to incur indebtedness, make payments to members, make investments, grant
liens, sell our assets and engage in certain other activities. In addition, the
credit agreement relating to the revolving credit facility requires us to
maintain an interest coverage ratio and a leverage ratio. These actual and
required ratios for the years ended December 31 are as follows:

<TABLE>
<CAPTION>
                                     AT DECEMBER 31,   AT DECEMBER 31,   AT DECEMBER 31,
                                           2005              2004              2003
                                     ---------------   ---------------   ---------------
<S>                                  <C>               <C>               <C>
Actual Interest Coverage Ratio ...      3.91 to 1         3.23 to 1         4.55 to 1
Required Interest Coverage Ratio:
   Must be at least ..............      2.50 to 1         2.50 to 1         2.50 to 1
Actual Leverage Ratio ............      1.71 to 1         3.17 to 1         2.62 to 1
Required Leverage Ratio:
   Must be no greater than .......      4.00 to 1         4.50 to 1         3.75 to 1
</TABLE>

     Indebtedness under the revolving credit facility is secured by
substantially all of the material assets of Land O'Lakes and its wholly-owned
domestic subsidiaries (other than MoArk, LLC, LOL Finance Co., LOLFC, LLC and
LOL SPV, LLC (formerly named LOL Farmland Feed SPV, LLC)), including real and
personal property, inventory, accounts receivable (other than those receivables
which have been sold in connection with our receivables securitization),
intellectual property and other intangibles. Indebtedness under the revolving
credit facility is also guaranteed by our wholly-owned domestic subsidiaries
including CPI (other than MoArk, LLC, LOL Finance Co., LOLFC, LLC, and LOL SPV,
LLC). The 9.00% senior notes are secured by a second lien on essentially all of
the assets which secure the revolving credit agreement, and are guaranteed by
the same entities. The 8.75% senior notes are unsecured but are guaranteed by
the same entities that guarantee the obligations under the revolving credit
facility.


                                       52

<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

     In December 2001, we established a $100 million (expanded to $200 million
in 2004) receivables purchase facility with CoBank, ACB ("CoBank") in an effort
to reduce our overall financing costs. A wholly-owned, unconsolidated special
purpose entity ("SPE") was established for the limited purpose of purchasing and
obtaining financing for these receivables. Under this facility, Land O'Lakes,
Land O'Lakes Purina Feed and Purina Mills sell Feed, Dairy Foods, Seed and
certain other receivables to LOL SPV, LLC, a wholly owned subsidiary of Land
O'Lakes Purina Feed. This subsidiary is a qualifying special purpose entity
(QSPE) under applicable accounting rules. Transfers of receivables from the
Company to the SPE are structured as sales; accordingly, the receivables
transferred to the SPE are not reflected in our consolidated balance sheets. The
Company sells the receivables to the SPE in exchange for a note equal to the
present value of the receivables, adjusted for risk of loss. Amounts owing on
the note are paid back to the Company upon collection of the receivables by the
SPE or when the SPE enters into borrowings with CoBank. The Company is subject
to credit risk related to the repayment of the notes receivable with the SPE,
which, in turn, is dependent upon the collection of the SPE's receivables pool.
Accordingly, the Company has retained reserves for estimated losses. The Company
expects no significant gains or losses from the facility. The facility with
CoBank expires in 2007 and the effective cost of the facility is LIBOR plus
137.5 basis points. At December 31, 2005 and 2004, the SPE had no borrowings
outstanding with CoBank and $200 million was available under this facility.

     We also lease various equipment and real properties under long-term
operating leases. Total consolidated rental expense was $53.1 million for the
year ended December 31, 2005, $51.5 million for the year ended December 31, 2004
and $51.7 million for the year ended December 31, 2003. Most of the leases
require payment of operating expenses applicable to the leased assets. We expect
that in the normal course of business most leases that expire will be renewed or
replaced by other leases.

CAPITAL LEASES

     Cheese & Protein International (CPI), a consolidated subsidiary of Land
O'Lakes, leased certain equipment and the buildings related to its cheese
manufacturing and whey processing plant in Tulare, California (the "Lease"). At
June 30, 2005, the Lease was accounted for as a capital lease in our
consolidated financial statements. On July 1, 2005, the remaining $85.9 million
Lease balance was voluntarily prepaid. The cash for the prepayment was made
available to CPI from Land O'Lakes as an equity injection on July 1, 2005,
thereby increasing Land O'Lakes ownership interest in the venture from 97.5% to
98.5%. This prepayment permitted the release of $20.3 million of cash which the
Company had pledged to support the lease. Simultaneous with the prepayment of
the CPI Lease, the Company elected to designate CPI as a restricted subsidiary
under the Land O'Lakes senior bond indentures, and a loan party under the
Company's revolving credit facility. Beginning July 1, 2005, CPI's on-balance
sheet debt and earnings or loss is included in the covenant calculations for the
Company's senior debt facilities. Effective as of July 1, 2005, CPI guarantees
the Company's obligations under the revolving credit facility, the 8.75% senior
unsecured notes, and the 9.00% senior secured notes. CPI's assets have also been
pledged to support the revolving credit facility and the 9.00% senior secured
notes. In December 2005, the Company paid $3.2 million for the remaining 1.5%
minority interest in CPI from the minority partner, MMDI, Inc., an affiliate of
Mitsui & Co., USA.

     MoArk, a consolidated subsidiary of Land O'Lakes, had capital leases at
December 31, 2005 of $9.3 million for land, buildings, machinery and equipment
at various locations. The interest rates on the capital leases range from 5.22%
to 8.95% with the weighted average rate of 7.0%. The weighted average term until
maturity is three years. Land O'Lakes does not provide any guarantees or support
for MoArk's capital leases.

CRITICAL ACCOUNTING ESTIMATES

     We utilize certain accounting measurements under applicable generally
accepted accounting principles, which involve the exercise of management's
judgment about subjective factors and estimates about the effect of matters
which are inherently uncertain. The following is a summary of those accounting
measurements which we believe are most critical to our reported results of
operations and financial condition.

     Inventory Valuation. Inventories are valued at the lower of cost or market.
Cost is determined on a first-in, first-out or average cost basis. Many of our
products, particularly in our Dairy Foods and Feed segments, use dairy or
agricultural commodities as inputs or constitute dairy or agricultural commodity
outputs. Consequently, our results are affected by the cost of commodity inputs
and the market price of outputs. Government regulation of the dairy industry and
industry practices in the animal feed industry tend to stabilize margins in
those segments but do not protect against large movements in either input costs
or output prices. Such large movements in commodity prices could result in
significant write-downs to our inventories, which could have a significant
negative impact on our operating results.


                                       53

<PAGE>

     Derivative Commodity Instruments. In the normal course of operations, we
purchase commodities such as milk, butter and soybean oil in Dairy Foods,
soybean meal and corn in Feed; and soybeans in Seed. In addition, sales
contracts with various customers are used to varying degrees to lock in prices.
We use derivative commodity instruments, primarily futures contracts offered
through regulated commodity exchanges, to reduce exposure to changes in
commodity prices for our inventory and fixed or partially fixed purchase and
sales contracts. The futures contracts are not designated as hedges under
Statement of Financial Accounting Standards "(SFAS)" No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The futures contracts are
marked-to-market (either Chicago Mercantile Exchange or Chicago Board of Trade)
on the last day of each month and gains and losses ("unrealized hedging gains
and losses") are recognized as an adjustment to cost of sales. The Company has
established formal position limits to monitor its hedging activities and
generally does not use derivative commodity instruments for speculative
purposes.

     Allowance for Doubtful Accounts. We estimate our allowance for doubtful
accounts based on an analysis of specific accounts, an analysis of historical
trends, payment and write-off histories, current sales levels and the state of
the economy. In addition, we estimate losses and retain reserves for the credit
risk related to the repayment of the notes receivable with the qualifying
special purpose entity ("QSPE") (See "Off-balance sheets arrangements"). Our
credit risks are continually reviewed and management believes that adequate
provisions have been made for doubtful accounts. However, unexpected changes in
the financial strength of customers or changes in the state of the economy could
result in write-offs which exceed estimates and negatively impact our financial
results.

     Trade Promotion and Consumer Incentive Activities. We report sales net of
costs incurred to promote our products through various trade promotion and
consumer incentive activities. These activities include volume discounts,
coupons, payments to gain distribution of new products, and other activities.
The recognition of some of the costs related to these activities requires the
use of estimates based on historical utilization and redemption rates. Actual
costs may differ if the utilization and redemption rates vary from the
estimates.

     Recoverability of Long-Lived Assets. Our test for goodwill impairment is a
two-step process and is performed on at least an annual basis. The first step is
a comparison of the fair value of the reporting unit with its carrying amount,
including goodwill. If this step reflects impairment, then the loss would be
measured as the excess of recorded goodwill over its implied fair value. Implied
fair value is the excess of fair value of the reporting unit over the fair value
of all identified assets and liabilities. We assess the recoverability of other
long-lived assets annually or whenever events or changes in circumstances
indicate that expected future undiscounted cash flows might not be sufficient to
support the carrying amount of an asset. We deem an asset to be impaired if a
forecast of undiscounted future operating cash flows is less than an asset's
carrying amount. If an asset is determined to be impaired, the loss is measured
as the amount by which the carrying value of the asset exceeds its fair value.
Changes in our business strategies and/or changes in the economic environment in
which we operate may result in future impairment charges.

     Pension and Other Post-Retirement Plans. Accounting for pension and other
postretirement liabilities requires the estimation of several critical factors.
Key assumptions that determine this liability and related earnings or expense
include the discount rate and expected rate of return on plan assets. The
discount rate for our pension and other postretirement benefit plans is
determined annually based on market trends and prevailing interest rates on
long-term corporate bonds for which the timing and amount of cash outflows is
comparable to our projected benefit obligations. Specific indicators for
establishing a discount rate include long-term Treasury rates, corporate bond
spreads as reported by Reuters and the Moody's Investor Services AA corporate
bond index. The discount rate used to determine the benefit obligations at
December 31 is also used to determine the interest component of pension and
postretirement expense for the following year.

     Our expected rate of return on plan assets is determined by our asset
allocation, historical long-term investment performance, and our expectation of
the plans' investment strategies. The expected rate of return on plan assets for
2006 is 8.25% compared to 8.50% for 2005. A one-percentage point change in the
assumed rate of return on plan assets would impact net earnings by $3.6 million.
Actual future net pension and postretirement benefits expense will depend on
each plan's investment performance, changes in future discount rates and various
other factors related to the populations participating in the plans.


                                       54

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Staff Position (FSP) No. 109-1, "Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004." FSP No. 109-1
states that the tax deduction on qualified domestic production activities should
be accounted for as a special deduction under SFAS No. 109, "Accounting for
Income Taxes," and not be treated as a rate reduction. Accordingly, any benefit
from the deduction should be reported in the period in which the deduction is
claimed on the tax return. This FSP was effective January 1, 2005, and the
Company has included a $0.6 million income tax benefit related to this deduction
in its consolidated financial statements for the year ended December 31, 2005.

     In December 2004, the FASB issued Statement No. 123(R), "Share-Based
Payment." This Statement eliminated the alternative of accounting for
share-based compensation under APB Opinion No. 25, "Accounting for Stock Issued
to Employees." The revised standard requires compensation expense for shares
with accelerated vesting provisions to be recognized in the period the employee
becomes eligible for the award. This Statement is effective January 1, 2006 and
is not expected to have a significant impact on the Company's consolidated
financial statements.

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB 51" ("FIN 46"). The primary
objectives of FIN 46 are to provide guidance on the identification and
consolidation of variable interest entities, or VIEs, which are entities for
which control is achieved through means other than through voting rights. As
permitted by the Interpretation, the Company early-adopted FIN 46 as of July 1,
2003 and began consolidating MoArk, LLC ("MoArk"), an egg production and
marketing company. FIN 46 was revised in December 2003 and was effective for the
Company on January 1, 2005 and had no material impact to the Company's
consolidated financial statements.

     In November 2004, the FASB issued Statement No. 151, "Inventory Costs."
This Statement requires that abnormal idle facility expense, spoilage, freight
and handling costs be recognized as current-period charges. In addition,
Statement No. 151 requires that allocation of fixed production overhead costs to
inventories be based on the normal capacity of the production facility. The
Company is required to adopt the provisions of this Statement prospectively
after January 1, 2006. The effect of adoption is not expected to be material to
the Company's consolidated financial statements.

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

COMMODITY RISK

     In the ordinary course of business, we purchase and sell commodities which
are subject to market risk resulting from changes in prices. We rigorously
monitor our positions for all commodities and utilize futures and option
contracts offered through regulated commodity exchanges to reduce exposure to
changes in commodity prices. Certain commodities cannot be hedged with futures
or option contracts because such contracts are not offered for these commodities
by regulated commodity exchanges. Inventories and purchase contracts for those
commodities are hedged with forward contracts to the extent practical so as to
arrive at a net commodity position within the formal position limits set by us
and deemed prudent for each of those commodities. Commodities for which futures
and options contracts are available are also typically hedged first in this
manner, with futures and options used to hedge within position limits that
portion not covered by forward contracts. We generally do not use derivative
instruments for speculative purposes. See "Item 7. Management Discussion and
Analysis of Financial Condition and Results of Operation" for further
information.

     The notional or contractual amount of derivative commodity contracts
provides an indication of the extent of our involvement in such instruments for
the dates and the periods provided below, but does not represent exposure to
market risk or future cash requirements under certain of these instruments. A
summary of our derivative commodity contracts follows:

<TABLE>
<CAPTION>
                                                       AT DECEMBER 31,
                                           ---------------------------------------
                                                  2005                 2004
                                           ------------------   -------------------
                                           NOTIONAL     FAIR    NOTIONAL     FAIR
                                            AMOUNT     VALUE     AMOUNT     VALUE
                                           --------   -------   --------   -------
                                                        (IN THOUSANDS)
<S>                                        <C>        <C>       <C>        <C>
Commodity futures and options contracts
   Commitments to purchase .............   $177,507   $  (433)  $147,965   $(3,790)
   Commitments to sell .................    (61,162)   (4,477)   (62,224)   (4,171)
</TABLE>


                                       55

<PAGE>

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                -----------------------------------------------
                                                         2005                     2004
                                                ----------------------   ----------------------
                                                              REALIZED                 REALIZED
                                                  NOTIONAL      GAINS      NOTIONAL      GAINS
                                                   AMOUNT     (LOSSES)      AMOUNT     (LOSSES)
                                                -----------   --------   -----------   --------
                                                                 (IN THOUSANDS)
<S>                                             <C>           <C>        <C>           <C>
Commodity futures and options contracts
   Total volume of exchange traded contracts:
   Commitments to purchase ..................   $ 1,150,192   $ 21,305   $ 2,333,863    $36,389
   Commitments to sell ......................    (1,080,452)   (18,904)   (2,215,442)     2,003
</TABLE>

INTEREST RATE RISK

     We are exposed to market risk from fluctuations in interest rates. Market
risk for fixed-rate, long-term debt is estimated as the potential increase in
fair value resulting from a decrease in interest rates. The fixed rate debt as
of December 31, 2005 totaled $600.0 million. A 10% adverse change in market
rates would potentially impact the fair value of our fixed rate debt by
approximately $14 million. Interest rate changes generally do not affect the
market value of floating rate debt but do impact the amount of our interest
payments and, therefore, our future earnings and cash flows. Holding other
variables constant, including levels of floating-rate indebtedness, a
one-percentage point increase in interest rates would have an immaterial impact
on net earnings and cash flows for 2005.

     We manage our exposure to interest rate fluctuations through the use of
interest rate swaps. The objective of the swaps is to maintain an appropriate
balance between fixed and floating interest rate exposures. As of December 31,
2005, we had three interest rate swaps relating to our 8.75% senior unsecured
notes. These swaps mirror the terms of the 8.75% notes and effectively convert
$102 million of such notes from a fixed 8.75% rate to an effective rate of LIBOR
plus 385 basis points. The interest rate swaps are designated as fair value
hedges of our fixed rate debt. As critical terms of the swaps and the debt are
the same, the swap is assumed to be 100 percent effective and the fair value
gains or losses on the swaps are completely offset by the fair value adjustment
to the underlying debt. At December 31, 2005 the notional amount of the swaps
was $102 million in aggregate and the fair value was a liability of $1.9
million.

INFLATION RISK

     Inflation is not expected to have a significant impact on our business,
financial condition or results of operations. We generally have been able to
offset the impact of inflation through a combination of productivity
improvements and price increases.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The financial statements and notes thereto required pursuant to this Item 8
begin immediately after the signature page of this annual report on Form 10-K.

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

     None.

ITEM 9A. CONTROLS AND PROCEDURES.

     (a) Evaluation of disclosure controls and procedures.

     As of the end of the period covered by this report, the Company conducted
an evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation,
the principal executive officer and principal financial officer concluded that
the Company's disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.

     (b) Change in internal controls


                                       56

<PAGE>

     There were no changes in our internal controls over financial reporting
during the most recently completed fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.

ITEM 9B. OTHER INFORMATION.

     None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The following table sets forth certain information with respect to our
directors and executive officers as of March 15, 2006:

<TABLE>
<CAPTION>
NAME                   AGE   TITLE
----                   ---   -----
<S>                    <C>   <C>
Chris Policinski....    47   President and Chief Executive Officer
Daniel Knutson......    49   Senior Vice President and Chief Financial Officer
Steve Dunphy........    48   Executive Vice President and Chief Operating
                             Officer, Dairy Foods Value Added
Alan Pierson........    55   Executive Vice President and Chief Operating
                             Officer, Dairy Foods Industrial
Fernando Palacios...    46   Executive Vice President and Chief Operating
                             Officer Feed
David Seehusen......    59   Executive Vice President and Chief Operating
                             Officer - Seed
Barry Wolfish.......    49   Vice President, Corporate Strategy & Business
                             Development
Jim Fife............    56   Vice President, Public Affairs
Peter Janzen........    46   Vice President, General Counsel
Karen Grabow........    56   Vice President, Human Resources
Robert Bignami......    63   Director
Lynn Boadwine.......    42   Director
Harley Buys.........    53   Director
Dennis Cihlar.......    57   Director
Ben Curti...........    55   Director
Richard Epard.......    66   Director
Jim Hager...........    54   Director
Gordon Hoover.......    48   Director
Pete Kappelman......    43   Director, Chairman of the Board
Cornell Kasbergen...    48   Director
Paul Kent, Jr.......    55   Director
Larry Kulp..........    63   Director
Charles Lindner.....    53   Director
Manuel Maciel, Jr...    61   Director, Second Vice Chairman of the Board
Robert Marley.......    54   Director
Jim Miller..........    64   Director
Ronnie Mohr.........    57   Director, First Vice Chairman of the Board
Ron Muzzall.........    43   Director
Art Perdue..........    61   Director
Douglas Reimer......    55   Director, Secretary
Richard Richey......    58   Director
Floyd Trammell......    50   Director
Thomas Wakefield....    56   Director
John Zonneveld, Jr..    52   Director
Bobby Moser.........    62   Nonvoting Advisory Member
Mary Shefland ......    55   Nonvoting Advisory Member
</TABLE>

     Unless otherwise indicated below, each officer is elected by and serves at
the pleasure of the Board of Directors and each director and officer of Land
O'Lakes has been in his current profession for at least the past five years.


                                       57
<PAGE>

     Chris Policinski, President and Chief Executive Officer since October 2005.
Prior to becoming President and Chief Executive Officer, Mr. Policinski was the
Executive Vice President and Chief Operating Officer of the Dairy Foods division
beginning in March 2002. From 1999 to 2002, Mr. Policinski served as our
Executive Vice President of the Dairy Foods division's Value Added Group. Prior
to his current position, he was Vice President of Strategy, Business Development
and International Development. Before joining Land O'Lakes, Chris spent four
years with The Pillsbury Company in leadership roles in Marketing/General
Management as Vice President of their Pizza and Mexican Food Groups.

     Daniel Knutson, Senior Vice President and Chief Financial Officer of Land
O'Lakes since 2000. Mr. Knutson began his career at the Company in 1978. He
received his BS Degree in Accounting in 1977 and MBA with emphasis in Finance in
1991, both from Minnesota State University - Mankato, and has earned his CPA and
CMA certifications.

     Fernando Palacios, Executive Vice President and Chief Operating Officer of
the Feed division since December 2004. Prior to his appointment to this
position, Mr. Palacios served as Vice President Operations and Supply Chain of
the Dairy Foods division since 2000. Before joining Land O'Lakes, Mr. Palacios
served as the Director of Consumer Goods Consulting at KPMG LLP from 1997 to
2000. Mr. Palacios also serves as the Chief Operating Officer of Melrose Dairy
Proteins.

     Alan Pierson, Executive Vice President and Chief Operating Officer of Dairy
Foods Industrial business since August 2005. Mr. Pierson joined the Company in
1998 and most recently served as Vice President of Dairy Foods Western Region
Manufacturing and Fluid Milk Procurement and Marketing. Prior to joining the
Company, Mr. Pierson was Chief Financial Officer for Dairymans Cooperative
Creamery Association and held senior level positions at the Pillsbury Company.

     Steve Dunphy, Executive Vice President and Chief Operating Officer of Dairy
Foods Value-Added business since August 2005. Mr. Dunphy joined the Company in
2001 and most recently held the position of Vice President of Dairy Foods Retail
and Deli Sales. Prior to joining the Company, Mr. Dunphy was Senior Vice
President and Chief Customer Officer with the Kellogg Company, Vice President of
Sales for the Pillsbury Company and held sales management positions with Procter
& Gamble.

     Barry Wolfish, Vice President of Strategy and Business Development since
August 2005. Mr. Wolfish joined the Company in 1999, most recently serving as
Vice President of Dairy Foods Cheese and Foodservice businesses. Prior to
joining the Company, Mr. Wolfish worked at General Mills, where he held Vice
President positions for several businesses including: Adult Cereals, New
Channels, Yoplait Foodservice.

     Jim Fife, Vice President of Public Affairs since August 2004. Prior to his
appointment to this position Mr. Fife was the General Manager of the Ag Supply
Co-op located in Wenatchee, Washington for 21 years. Mr. Fife sat on the
Company's board of directors from 1991-2004, serving the final three years as
Chairman.

     Peter Janzen, Vice President and General Counsel since February 2004. Mr.
Janzen joined our company as an attorney in 1984. He holds a Juris Doctor degree
from Hamline University.

     Karen Grabow, Vice President of Human Resources since September 2001. Prior
to joining our company, Karen was employed as the Vice President, Human
Resources of Target Corporation, starting in 1993.

     Robert Bignami has held his position as director since February 2005 and
his present term of office will end in February 2010. Mr. Bignami operates the
Brentwood Farms, a dairy operation located in Orland, California.

     Lynn Boadwine has held his position as director since 1999 and his present
term of office will end in February 2008. Mr. Boadwine operates Boadwine Farms,
Inc., a farm in South Dakota.

     Harley Buys has held his position as director since February 2003 and his
present term of office will end in February 2008. Mr. Buys farms corn, soybeans
and alfalfa and operates a dairy farm in partnership with his son in Edgerton,
Minnesota.

     Dennis Cihlar has held his position as director since February 2005 and his
present term of office will end in February 2009. Mr. Cihlar is a dairy farm
owner/operator of Cihlar Farms, Inc., located in Mosinee, Wisconsin.

     Ben Curti has held his position as director since February 2003 and his
present term of office will end in February 2009. Mr. Curti maintains a dairy
operation and farms field crops and pistachios in Tulare, California.


                                       58

<PAGE>

     Richard Epard has held his position as director since February 2003 and his
present term of office will end in February 2007. Mr. Epard farms wheat, corn,
soybeans and sunflowers in Colby, Kansas.

     Jim Hager has held his position as director since February 2006 and his
present term of office will end in February 2010. Mr. Hager manages Harmony
Country Cooperative, located in Colby, Wisconsin.

     Gordon Hoover has held his position as director since 1997 and his present
term of office will end in February 2009. Mr. Hoover owns a dairy operation in
Pennsylvania that consists of 120 head of Holstein cows and 120 replacements and
farms 188 acres of corn and alfalfa.

     Pete Kappelman has held his position as Chairman since February 2004, and
as director since 1996. Mr. Kappelman's present term of office as a director
will end in February 2007. Mr. Kappelman is co-owner of Meadow Brook Dairy
Farms, LLC, a dairy farm in Wisconsin.

     Cornell Kasbergen has held his position as director since 1998 and his
present term of office will end in February 2008. Mr. Kasbergen operates a dairy
in California.

     Paul Kent, Jr. has held his position as director since 1990 and his present
term of office will end in February 2010. Mr. Kent operates a dairy farm in
Minnesota.

     Larry Kulp has held his position as director since February 2003 and his
present term of office will end in February 2007. Mr. Kulp is a partner in his
family dairy farm, Kulp Family Dairy, LLC, located in Martinsburg, Pennsylvania.

     Charles Lindner has held his position as director since 1996 and his
present term of office will end in February 2009. Mr. Lindner operates a dairy
farm in Wisconsin.

     Manuel Maciel, Jr. has held his position as director since 1998 and his
present term of office will end in February 2007. Mr. Maciel operates Macy-L
Holsteins, a dairy farm in California.

     Robert Marley has held his position as director since 2000 and his present
term of office will end in February 2007. Mr. Marley is President and Chief
Executive Officer of Jackson Jennings Farm Bureau Co-operative Association, a
local cooperative located in Seymour, Indiana.

     Jim Miller has held his position as director since February 2003 and his
present term of office will end in February 2010. Mr. Miller farms grain and
raises beef cattle in Hardy, Nebraska.

     Ronnie Mohr has held his position as director since 1998 and his present
term of office will end in February 2009. Mr. Mohr operates a farm, hog
finishing operation and grain bin and equipment sales business in Indiana. Mr.
Mohr has served as a director of Holiday Gulf Homes Inc. since 1996.

     Ron Muzzal has held his position as director since February 2006 and his
present term of office will end in February 2010. Mr. Muzzal operates a dairy
and beef operation in Oak Harbor, Washington.

     Art Perdue has held his position since February 2004 and his present term
of office will end in February 2008. Mr. Perdue manages Farmers Union Oil
Company in North Dakota, a diversified cooperative.

     Douglas Reimer has held his position as director since 2001 and his present
term of office will end in February 2007. Mr. Reimer is the managing partner of
Deer Ridge S.E.W. Feeder Pig LLC, located in Iowa.

     Richard Richey has held his position as director since February 2004 and
his present term of office will end in February 2008. Mr. Richey is the general
manager of Husker Co-Op in Columbus, Nebraska, a full-service cooperative with
10 locations.

     Floyd Trammell has held his position as director since February 2005 and
his present term of office will end in February 2009. Mr. Trammell is the manger
of Farmers, Inc., a locally-owned cooperative located in Mississippi.


                                       59

<PAGE>

     Thomas Wakefield has held his position since 2004 and his present term will
end in February 2008. Mr. Wakefield operates JTJ Wakefield Farms, a 400 acre
operation located in Bedford, Pennsylvania, that includes corn, alfalfa and
grass hay production, along with a milking herd of approximately 120.

     John Zonneveld, Jr. has held his position as director since 2000 and his
present term of office will end in February 2010. Mr. Zonneveld operates a dairy
farm in California.

     Bobby Moser is a nonvoting advisory member of the board. He is appointed by
the Board of Directors annually and has held his position since 2002. Mr. Moser
is Vice President for Agricultural Administration at The Ohio State University
in Columbus, Ohio.

     Mary Shefland is a nonvoting advisory member of the board. Ms. Shefland is
appointed by the Board of Directors annually, and was first appointed in 2004.
Ms. Shefland is a certified public accountant and works as a tax manager at
Olsen, Thielen & Co., Ltd., a Minnesota-based accounting and consulting firm.
Ms. Shefland received her B.S. in economics from Minnesota State University -
Mankato and operates a corn and soybean farm with her husband in southern
Minnesota.

     The Land O'Lakes board is made up of 24 directors. Twelve directors are
chosen by our dairy members and 12 by our Ag members. Each board member must
also be a member of the group of members, dairy or Ag, which elects him or her.
The board may also choose to elect up to 3 nonvoting advisory members.
Currently, there are two such advisory board members, one of whom, Ms. Shefland,
was appointed to the audit committee to provide additional guidance to the audit
committee with respect to financial matters. Our board of directors governs our
affairs in virtually the same manner as any other corporation. See "Item 1.
Business -- Description of the Cooperative -- Governance" for more information
regarding the election of our directors.

     We have seven committees of our board of directors: the Executive
Committee, the Advisory Committee, the Audit Committee, the Governance
Committee, the Expense Committee, the PAC Committee and the Board
Performance/Operations Committee.

     The Company's Board of Directors passed a resolution in 2004, stating that
the Company will not designate an audit committee financial expert, as such term
is defined in Item 401(h) of Regulation S-K promulgated by the Securities and
Exchange Commission. Similar to other cooperative corporations, the Company's
Board of Directors is comprised of cooperative members who become members by
virtue of purchases they make of cooperative products or sales they make to the
cooperative. Accordingly, while each Board member possesses a strong
agricultural background, no current member possesses, in the Board's present
estimation, the requisite experience to qualify as audit committee financial
expert. As noted above, the Board of Directors, in December 2004, appointed Ms.
Shefland, a non-voting advisory member of the Board, to the audit committee to
provide additional guidance to the committee with respect to financial matters.

     We transact business in the ordinary course with our directors and with our
local cooperative members with which the directors are associated. Such
transactions are on terms no more favorable than those available to our other
members.

     The Company maintains a code of ethics applicable to it senior financial
officers, which include, the chief executive officer, the chief financial
officer, the chief operating officers of each operating division, the treasurer,
the controller and any person serving in a similar capacity. The code is a "code
of ethics" as defined by applicable rules promulgated by the Securities and
Exchange Commission. The code is publicly available on the Company's website at
www.landolakesinc.com. If the Company makes any amendments to the code other
than technical, administrative or other non-substantive amendments, or grants
any waivers from a provision of this code to a senior financial officer, the
Company will disclose, on its website, the nature of the amendment or waiver,
its effective date and to whom it applies.


                                       60

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION.

     The following table shows, for the Chief Executive Officer of Land O'Lakes
and each of our four other most highly compensated executive officers (including
Mr. Gherty, who retired as President and Chief Executive Officer, effective
September 30, 2005), information concerning compensation earned for services in
all capacities during the years ended December 31, 2005, 2004 and 2003.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                   LONG-TERM COMPENSATION
                                                                                ----------------------------
                                                                                     AWARDS
                                                      ANNUAL COMPENSATION          SECURITIES       PAYOUTS
                                                  ---------------------------      UNDERLYING        LTIP           ALL OTHER
NAME AND PRINCIPAL POSITION                       YEAR   SALARY($)   BONUS($)   OPTIONS/SARS(#)   PAYOUTS($)   COMPENSATION($)(3)
---------------------------                       ----   ---------   --------   ---------------   ----------   ------------------
<S>                                               <C>    <C>         <C>        <C>               <C>          <C>
Chris Policinski, President and Chief Executive
   Officer (1).................................   2005    $550,000   $265,342         5,250           $--            $46,905
                                                  2004     489,423    237,690         7,000            --             42,782
                                                  2003     453,269    251,515         7,000            --             32,504

John E. Gherty, President and Chief Executive
   Officer (2).................................   2005    $829,423   $901,749        12,000           $--            $94,285
                                                  2004     825,770    408,960        16,000            --             79,398
                                                  2003     700,000    307,440        16,000            --             56,828

Dan Knutson, Senior Vice President and Chief
   Financial Officer...........................   2005    $437,423   $351,426         5,250           $--            $46,387
                                                  2004     437,500    222,997         7,000            --             33,974
                                                  2003     402,115    176,965         7,000            --             27,380

Fernando Palacios, Executive Vice President and
   Chief Operating Officer, Feed...............   2005    $426,812   $367,229         5,250           $--            $35,903
                                                  2004     355,192    162,244         3,000            --             28,582
                                                  2003     306,723     86,625         3,000            --             21,606

Karen Grabow, Vice President, Human Resources..   2005    $300,308   $204,059         2,250           $--            $39,759
                                                  2004     301,962    119,061         3,000            --             21,104
                                                  2003     279,269     95,990         3,000            --             24,588

David Seehusen, Executive Vice President and      2005    $255,962   $202,459         2,250           $--            $35,767
   Chief Operating Officer, Seed...............   2004     251,365    155,379         3,000            --             27,159
                                                  2003     233,504    109,997         3,000            --             30,990
</TABLE>

(1)  Chris Policinski became President and Chief Executive Officer, effective as
     of October 1, 2005. During the previous reported periods, Mr. Policinski
     was the Executive Vice President and Chief Operating Officer of Dairy
     Foods.

(2)  John Gherty was President and Chief Executive Officer for all reported
     periods through September 30, 2005. Mr. Gherty remained an employee of the
     Company through year end.

(3)  The amounts shown in the table for 2005 reflect life insurance premiums
     paid by Land O'Lakes in the amount of $6,875 for Mr. Policinski, $25,600
     for Mr. Gherty, $7,562 for Mr. Knutson, $5,726 for Mr. Palacios, $8,898 for
     Ms. Grabow and $8,650 for Mr. Seehusen. In addition, the following amounts
     were provided as car allowance: $12,539 for Mr. Policinski, $14,000 for Mr.
     Gherty, $12,000 for Mr. Knutson, $12,000 for Mr. Palacios, $6,277 for Ms.
     Grabow and $9,969 for Mr. Seehusen. The above amounts also include
     contributions made by Land O'Lakes on behalf of the named individuals under
     the qualified and non-qualified defined contribution plans of Land O'Lakes
     as follows:


                                       61

<PAGE>

<TABLE>
<CAPTION>
                    COMPANY MATCHING
                      CONTRIBUTION     COMPANY CONTRIBUTION
NAME                (QUALIFIED PLAN)   (NON-QUALIFIED PLAN)
----                ----------------   --------------------
<S>                 <C>                <C>
Mr. Policinski ..        $6,300               $13,078
Mr. Gherty ......         6,300                27,846
Mr. Knutson .....         6,300                12,284
Mr. Palacios ....         6,300                 5,805
Ms. Grabow ......         6,300                11,927
Mr. Seehusen ....         6,300                 5,167
</TABLE>

OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                             INDIVIDUAL GRANTS
                       ----------------------------                              AT ASSUMED ANNUAL
                                        PERCENT OF                                 RATES OF STOCK
                         NUMBER OF         TOTAL                                       PRICE
                         SECURITIES    OPTIONS/SARS                              APPRECIATION FOR
                         UNDERLYING     GRANTED TO                                 OPTION TERM(2)
                        OPTIONS/SARS   EMPLOYEES IN     EXERCISE    EXPIRATION   -----------------
NAME                   GRANTED(#)(1)    FISCAL YEAR   PRICE($/SH)      DATE       5%($)     10%($)
----                   -------------   ------------   -----------   ----------   -------   -------
<S>                    <C>             <C>            <C>           <C>          <C>       <C>
Chris Policinski ...        5,250          11.2%         34.47       3/31/2015   128,548   335,354
John Gherty ........       12,000          25.6%         34.47       3/31/2015   155,945   628,643
Daniel Knutson .....        5,250          11.2%         34.47       3/31/2015   128,548   335,354
Fernando Palacios ..        5,250           4.8%         34.47       3/31/2015   128,548   335,354
Karen Grabow .......        2,250           4.8%         34.47       3/31/2015    55,092   143,723
Dave Seehusen ......        2,250           4.8%         34.47       3/31/2015    55,092   143,723
</TABLE>

(1)  Value Appreciation Right (VAR) Units are described below under the Land
     O'Lakes Long-Term Incentive Plan. The vesting schedule for all grants of
     Units is set forth below in the plan descriptions.

(2)  The dollar amounts under these columns are the results of calculations at
     the 5% and 10% annual appreciation rates set by the Securities and Exchange
     Commission for illustrative purposes, and, therefore, are not intended to
     forecast future financial performance. Accordingly, these calculations
     assume 5% and 10% appreciation in the value of the Units.

AGGREGATED VAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VAR VALUES

     The purpose of the following table is to report exercises of VAR units by
the named executive officers of Land O'Lakes during the fiscal year ended
December 31, 2005 and any value of their unexercised VAR units as of December
31, 2005. The named executive officers did not exercise VAR units in fiscal year
2005. Land O'Lakes has not issued any stock appreciation rights to the named
executive officers.

<TABLE>
<CAPTION>
                                                                                         VALUE OF UNEXERCISED
                                                                                             IN-THE-MONEY
                                                          NUMBER OF UNEXERCISED              OPTIONS/SARS
                                                           OPTIONS AT FY-END(#)            AT FY-END($)(1)
                       SHARES ACQUIRED      VALUE      ---------------------------   ---------------------------
NAME                    ON EXERCISE(#)   REALIZED($)   EXERCISABLE   UNEXERCISABLE   EXERCISABLE   UNEXERCISABLE
----                   ---------------   -----------   -----------   -------------   -----------   -------------
<S>                    <C>               <C>           <C>           <C>             <C>           <C>
Chris Policinski ...          --              --          24,063          9,188        166,110         98,630
John Gherty ........          --              --          55,000         21,000        379,680        225,440
Daniel Knutson .....          --              --          24,063          9,188        166,110         98,630
Fernando Palacios ..          --              --          11,063          6,188         76,170         57,210
Karen Grabow .......          --              --           7,313          3,938         71,190         42,270
Dave Seehusen ......          --              --          10,313          3,938         71,190         42,270
</TABLE>

(1)  Value is based on the December 31, 2005 Unit price of $41.11, minus the
purchase price for the grants in a particular year, multiplied by the
exercisable and unexercisable units granted in a particular year.


                                       62
<PAGE>

LAND O'LAKES EMPLOYEES SAVINGS AND SUPPLEMENTAL RETIREMENT PLAN

     The Land O'Lakes Employee Savings and Supplemental Retirement Plan is a
qualified defined contribution 401(k) plan which permits employees to make both
pre-tax and after-tax contributions. All full-time, non-union Land O'Lakes
employees are eligible to participate. Union employees may participate if their
participation is specified by their collective bargaining agreement. Subject in
all cases to maximum contribution limits established by law, the maximum total
contribution for non-highly compensated employees is 60% of compensation; the
maximum pre-tax contribution for such employees is 50%. For highly compensated
employees, the maximum total contribution is 12% of compensation and the maximum
pre-tax contribution is 8%. The Company matches 50% of the first 6% of pre-tax
contributions made by employees. Employees are immediately 100% vested in their
full account balance, including the Company match.

EXECUTIVE ANNUAL VARIABLE COMPENSATION PLAN

     The Executive Annual Variable Compensation Plan is a plan for executive
officers of Land O'Lakes. For 2005, the target award opportunity varies by the
participant's position up to a maximum target award of 80% of base salary.
Awards from this plan are dependent on a combination of three elements of
performance: 1) company overall results (20%); 2) targets for business
performance (65%); and 3) individual performance commitments (15%). Company net
earnings of $0 dollars (breakeven) are required to trigger payments from this
plan. Targets for company results, business performance, and individual
performance commitments are established annually. Once maximum results from all
of these components are achieved, the maximum award of 80-160% of base salary
may be granted.

LAND O'LAKES, INC. EXECUTIVE LONG-TERM VARIABLE COMPENSATION PLAN

     The Land O'Lakes, Inc. Executive Long-Term Variable Pay Compensation Plan
is effective for the 3-year performance periods of 2004-2006 and 2005-2007. The
President and all officers of Land O'Lakes who were not otherwise participating
in a long-term variable plan are eligible. The target award is 50-90% of base
salary and the maximum award is 62.5-112.5% of base salary at the end of the
performance period. Corporate Staff Officers awards are made based on Total Land
O' Lakes Return on Invested Capital (ROIC) and Pretax Earnings and Business Unit
Officers awards are made based on Business Unit Return on Invested Capital
(ROIC) and Pretax Earnings for the 3-year performance periods of January 1, 2004
through December 31, 2006 and January 1, 2005 through December 31, 2007. The
awards are payable in cash or eligible to be deferred at the option of the award
recipient.

LAND O'LAKES LONG-TERM INCENTIVE PLAN

     The Land O'Lakes Cooperative Value Incentive Plan, initiated in 2001, was
amended and restated effective January 1, 2005 to conform to Code section 409A,
which was established by the American Job Creations Act of 2004. The restated
plan is a phantom value appreciation right plan. Value Appreciation Right Units
granted under the plan may not be transferred, assigned, pledged, encumbered, or
otherwise alienated from the grantee. Officers are eligible to participate, as
are selected non-officers identified by the Chief Executive Officer.
Participants are granted an annual award of Value Appreciation Right (VAR)
Units. One quarter of the grant vests on December 31 of the year in which the
grant is made, with the remainder of the grant vesting ratably on December 31 of
the succeeding three years. VAR Units are not traditional stock, and do not
provide the grant holder with any voting rights or rights to receive assets of
Land O'Lakes.

     The grant price of the VAR Unit is established as of December 31 of the
year prior to the grant of the unit, based on a formula reflecting the value of
the enterprise at the close of the fiscal year preceding the grant of the unit.
The value of the VAR Unit is the difference between the "current price" of the
unit and the grant price. The current price is determined each year on December
31, through application of the same formula by which the grant price of the unit
is determined.

     Participants are required to elect, generally in the calendar year prior to
the calendar year in which the VAR Unit grant is received, the year in which the
value of each unit will be distributed. Changes to distribution elections are
allowed on a restricted basis, in conformance with Code section 409A. Special
distribution rules apply in the event of death, inability to work due to
disability, retirement or other termination.

     Participants may, after a VAR Unit grant is fully vested, elect to have the
VAR Unit valued in a manner different than that described above. Subsequent to
said election, the value of the VAR Unit will increase based on application of a
company-specified interest rate.


                                       63

<PAGE>

     As part of the restatement of the plan, any options that had been granted
as of December 31, 2004 under this plan and the California Cooperative Value
Incentive Plan were converted to VAR Units as of January 1, 2005.

CALIFORNIA COOPERATIVE VALUE INCENTIVE PLAN

     This plan is no longer in operation and any grants made under the plan
through December 31, 2004 have been converted to Value Appreciation Rights under
the Land O'Lakes Cooperative Value Incentive Plan.

LAND O'LAKES NON-QUALIFIED DEFERRED COMPENSATION PLAN

     The Land O'Lakes Non-Qualified Deferred Compensation Plan provides a select
group of employees with base salaries equal to or in excess of $95,000 an
opportunity to elect to defer a portion of their compensation for later payment
at the earlier of their death, disability, retirement or other termination.
Eligible employees may elect to defer a minimum of $1,000 up to a maximum 30% of
base compensation and 100% of variable pay. The default distribution is monthly
installments over a five year period. Deferred compensation is included as
compensation for purposes of the company's qualified retirement plan, but is
excluded from the company's qualified savings plan. The Company adds an
additional amount equal to three percent (3%) of the participant's elective
deferrals to this plan. In addition, at the end of each calendar quarter, the
Company credits the participant's account balance with interest at a rate
announced in advance of each calendar year. Benefits of this plan are paid out
of the general assets of the corporation.

     Land O'Lakes maintains three non-qualified excess benefit plans for its
officers. Benefits for all three of these plans are paid out of the general
assets of the corporation.

NON-QUALIFIED EXECUTIVE EXCESS BENEFIT SAVINGS PLAN

     The Non-Qualified Executive Excess Benefit Savings Plan provides a benefit
to officers who participate in this savings plan by crediting an amount to a
deferred compensation account which represents 3% of total compensation, net of
any deferred compensation, less the amount of the Company match contributed to
the qualified savings plan. Account balances are credited with interest
quarterly. Distributions are made under the same circumstances and on the same
terms as the individual has elected under the Land O'Lakes Non-Qualified
Deferred Compensation Plan, or according to the default provisions of the Land
O'Lakes Non-Qualified Deferred Compensation Plan in the absence of an election.

NON-QUALIFIED EXECUTIVE EXCESS BENEFIT PLAN (IRS LIMITS)

     The Non-Qualified Executive Excess Benefit Plan (IRS Limits) provides a
non-qualified benefit to officers which is the equivalent of the difference
between the benefit that would have been payable to the executive if the Land
O'Lakes Employee Retirement Plan benefit formula were applied to the executive's
actual compensation, without regard for limitations on compensation or benefits
imposed by the Internal Revenue Code, and the benefit actually payable under the
Land O'Lakes Employee Retirement Plan with IRS compensation limits in place.

NON-QUALIFIED EXECUTIVE EXCESS BENEFIT PLAN (1989 FORMULA)

     The Non-Qualified Executive Excess Benefit Plan (1989 Formula) provides a
non-qualified benefit to individuals who were officers as of January 1, 1989 at
the time the defined benefit formula was changed. This excess benefit plan
provides a benefit representing the difference between the accrued benefit using
the 1989 Formula to the executive's actual compensation, without regard for
limitations on compensation or benefits imposed by the Internal Revenue Code,
and the benefit actually payable under the Land O'Lakes Employee Retirement Plan
with IRS compensation limits in place.


                                       64

<PAGE>

LAND O'LAKES EMPLOYEE RETIREMENT PLAN

     The Land O'Lakes Employee Retirement Plan is a qualified defined benefit
pension plan. All full-time, non-union Land O'Lakes employees are eligible to
participate. Union employees may participate if their participation is specified
by their collective bargaining agreement. An employee is fully vested in the
plan after five years of vesting service. For most employees, the plan provides
for a monthly benefit for the employee's lifetime beginning at normal retirement
age (social security retirement age), calculated according to the following
formula: [[1.08% x Final Average Pay] + [.52% x (Final Average Pay-Covered
Compensation)]] x years of credited service (up to a maximum of 30 years). These
estimated benefit amounts are illustrated by Table A below. Due to provisions of
this plan providing that certain benefits existing in a previous version of the
plan will not be reduced, certain employees, including Mr. Gherty, will instead
receive the compensation at levels previously in effect for the retirement plan
under the 1989 Formula. These approximate benefit amounts are described in Table
B below.

     Final Average Pay is average monthly compensation for the highest paid 60
consecutive months of employment out of the last 132 months worked. Covered
Compensation is an amount used to coordinate pension benefits with Social
Security benefits. It is adjusted annually to reflect changes in the Social
Security Taxable Wage Base, and varies with the employee's year of birth and the
year in which employment ends. The normal form of benefit for a single employee
is a life-only annuity; for a married employee, the normal form is a 50% joint
and survivor annuity. There are other optional annuity forms available.
Terminated or retired employees who are at least 55 with 10 years of vesting
service may elect a reduced early retirement benefit.

     As of December 31, 2005, Mr. Gherty had 30 years of credited service (the
maximum credited service allowed under the Land O'Lakes Employee Retirement
Plan), Mr. Policinski had 8 years and 7 months of credited service, Mr. Knutson
had 28 years of credited service, Mr. Palacios had 5 years and 2 months of
credited service, Ms. Grabow had 4 years and 4 months of credited service, and
Mr. Seehusen had 33 years and 9 months of credited service (Through prior
participation in the F.G.D.A. Retirement Plan II, Mr. Seehusen is entitled to
credited service beyond 30 years).

SAMPLE PENSION PLAN TABLE

<TABLE>
<CAPTION>
                FINAL                 YEARS OF SERVICE AT RETIREMENT
             AVERAGE PAY   ----------------------------------------------------
               (ANNUAL)       10         15         20         25         30
             -----------   --------   --------   --------   --------   --------
<S>          <C>           <C>        <C>        <C>        <C>        <C>
TABLE A...    $  200,000   $ 30,100   $ 45,100   $ 60,100   $ 75,200   $ 90,200
                 400,000     62,100     93,100    124,100    155,200    186,200
                 600,000     94,100    141,100    188,100    235,200    282,200
                 800,000    126,100    189,100    252,100    315,200    378,200
               1,000,000    158,100    237,100    316,100    395,200    474,200
               1,200,000    190,100    285,100    380,100    475,200    570,200

TABLE B...    $  200,000   $ 34,700   $ 52,000   $ 69,400   $ 86,700   $104,100
                 400,000     76,000    114,000    152,100    190,100    228,100
                 600,000    117,400    176,000    234,700    293,400    352,100
                 800,000    158,700    238,000    317,400    396,700    476,100
               1,000,000    200,000    300,000    400,100    500,100    600,100
               1,200,000    241,400    362,000    482,700    603,400    724,100
</TABLE>

     The amounts illustrated are a combination of the Land O'Lakes Employee
Retirement Plan and the Non-Qualified Executive Excess Benefit Plan.

COMPENSATION OF DIRECTORS

     Beginning in July 2005, the compensation paid to directors was modified. In
previous years, the Chairman was paid $30,000 annually, and each director
received $10,000 annually. Starting on July 1, 2005, on a pro rated basis, the
Chairman will now receive $50,000 annually, and each director will receive
$30,000 annually. The non-voting members may also receive additional
compensation at the discretion of the board of directors. In addition, all
directors receive a $300 per diem and are reimbursed for their reasonable
expenses incurred in attending board of directors meetings.

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

     At December 31, 2005 no person, either individually or as a member of a
group, beneficially owned in excess of five percent of any class of our voting
securities, and our directors and executive officers did not, either
individually or as a member of a group, beneficially own in excess of one
percent of any class of our voting securities.


                                       65

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Land O'Lakes transacts business in the ordinary course with our directors
and with our local cooperative members with which the directors are associated
on terms no more favorable than those available to our other members.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     The following table presents fees for professional audit services rendered
by KPMG LLP for the audit of the Company's annual financial statements for 2005
and 2004, and fees billed for other services rendered by KPMG LLP.

<TABLE>
<CAPTION>
                                       2005     2004
                                     -------   ------
                                     ($ IN THOUSANDS)
<S>                                  <C>       <C>
Audit fees .......................    $  869   $  943
Audit-related fees(1) ............        61      102
                                      ------   ------
   Audit and audit-related fees ..       930    1,045
Tax fees(2) ......................       105      110
                                      ------   ------
   Total fees ....................    $1,035   $1,155
                                      ======   ======
</TABLE>

(1)  Audit-related fees consist principally of fees for audits of financial
     statements of certain employee benefit plans in 2005 and 2004 and the
     restatement of the consolidated financial statements in 2004.

(2)  Tax fees in 2005 and 2004 consist of benefit plan filings and international
     services.

     The Audit Committee's policy on pre-approval of services performed by the
independent auditor is to approve all audit and permissible non-audit services
to be provided by the independent auditor during the calendar year. The Audit
Committee reviews each non-audit service to be provided and assesses the impact
of the service on the auditor's independence.

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

     (A) Documents filed as part of this Annual Report on Form 10-K:

-    Consolidated Financial Statements:

<TABLE>
<S>                                                                          <C>
LAND O'LAKES, INC.
Financial Statements for the years ended December 31, 2005, 2004 and 2003
Report of KPMG LLP, Independent Registered Public Accounting Firm ........    72
Consolidated Balance Sheets as of December 31, 2005 and 2004 .............    73
Consolidated Statements of Operations for the years ended
   December 31, 2005, 2004 and 2003 ......................................    74
Consolidated Statements of Cash Flows for the years ended
   December 31, 2005, 2004 and 2003 ......................................    75
Consolidated Statements of Equities for the years ended
   December 31, 2005, 2004 and 2003 ......................................    76
Notes to Consolidated Financial Statements ...............................    77

MOARK, LLC
Financial Statements for the year ended December 24, 2005,
   December 25, 2004 and the eleven months ended December 27, 2003
Report of Moore Stephens Frost, Independent Registered Public Accounting
   Firm ..................................................................   107
Consolidated Balance Sheets as of December 24, 2005 and
   December 25, 2004 .....................................................   108
Consolidated Statement of Operations for the year ended
   December 24, 2005, December 25, 2004 and the eleven months ended
   December 27, 2003 .....................................................   109
Consolidated Statement of Members' Equity for the year ended
   December 24, 2005, December 25, 2004 and the eleven months
   ended December 27, 2003 ...............................................   110
Consolidated Statement of Cash Flows for the year ended
   December 24, 2005, December 25, 2004 and the eleven months
   ended December 27, 2003 ...............................................   111
Notes to Consolidated Financial Statements ...............................   112
</TABLE>


                                       66

<PAGE>

<TABLE>
<S>                                                                          <C>
AGRILIANCE LLC
Financial Statements (unaudited) for the three months ended
   November 30, 2005 and 2004
Consolidated Balance Sheets as of November 30, 2005 and August 31, 2005 ..   124
Consolidated Statements of Operations for the three months ended
   November 30, 2005 and 2004 ............................................   125
Consolidated Statements of Cash Flows for the three months ended
   November 30, 2005 and 2004 ............................................   126
Notes to Consolidated Financial Statements ...............................   127

Financial Statements for the years ended August 31, 2005, 2004 and 2003
Report of KPMG LLP, Independent Registered Public Accounting Firm ........   128
Consolidated Balance Sheets as of August 31, 2005 and 2004 ...............   129
Consolidated Statements of Operations for the years ended
   August 31, 2005, 2004 and 2003 ........................................   130
Consolidated Statements of Cash Flows for the years ended
   August 31, 2005, 2004 and 2003 ........................................   131
Consolidated Statements of Members' Equity for the years ended
   August 31, 2005, 2004 and 2003 ........................................   132
Notes to Consolidated Financial Statements ...............................   133
</TABLE>

(B) Exhibits

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit   Description
-------   -----------
<S>       <C>
3.1       Restated Articles of Incorporation of Land O'Lakes, Inc., as amended,
          August 1998.(1)

3.2       By-Laws of Land O'Lakes Inc., as amended, February 2003 (3).

4.1       Credit Agreement among Land O'Lakes, Inc., the Lenders party thereto
          and The Chase Manhattan Bank, dated as of October11, 2001.(1)

4.2       First Amendment dated November 6, 2001 to the Credit Agreement dated
          October 11, 2001.(1)

4.3       Second Amendment dated February 15, 2002 to the Credit Agreement dated
          October 11, 2001.(1)

4.4       Guarantee and Collateral Agreement among Land O'Lakes, Inc. and
          certain of its subsidiaries and The Chase Manhattan Bank, dated as of
          October 11, 2001.(1)

4.5       Indenture dated as of November 14, 2001, among Land O'Lakes, Inc. and
          certain of its subsidiaries, and U.S. Bank, including Form of 8 3/4%
          Senior Notes due 2011 and Form of 8 3/4% Senior Notes due 2011.(1)

4.6       Registration Rights Agreement dated November 14, 2001 by and among
          Land O'Lakes, Inc. and certain of its subsidiaries, J.P. Morgan
          Securities Inc., SPP Capital Partners, LLC, SunTrust Robinson Capital
          Markets, Inc., Tokyo-Mitsubishi International plc and U.S. Bancorp
          Piper Jaffray, Inc.(1)

4.7       Purchase Agreement by and between Land O'Lakes, Inc., and certain of
          its subsidiaries, J.P. Morgan Securities Inc., SPP Capital Partners,
          LLC, SunTrust Robinson Capital Markets, Inc., Tokyo-Mitsubishi
          International plc and U.S. Bancorp Piper Jaffray, Inc., dated as of
          November 8, 2001.(1)

4.8       Form of Old Note under the Indenture dated as of November14, 2001
          (included as part of Exhibit 4.5).(1)

4.9       Form of New Note under the Indenture dated as of November14, 2001
          (included as part of Exhibit 4.5).(1)

4.10      Indenture dated as of December 23, 2003, among Land O'Lakes, Inc., and
          certain of its subsidiaries, and U.S. Bank, National Association,
          including Form of 9% Senior Notes due 2010. (3)

4.11      Registration Rights Agreement dated as of December 23, 2003, by and
          among Land O'Lakes, Inc., and certain of its subsidiaries, and J.P.
          Morgan Securities Inc. (3)

4.12      Purchase Agreement dated as of December 23, 2003, by and between Land
          O'Lakes, Inc., and certain of its subsidiaries, and J.P. Morgan
          Securities, Inc. (3)

4.13      Lien Subordination and Inter creditor Agreement dated as of December
          23, 2003, by and among Land O'Lakes, Inc., and certain of its
          subsidiaries, JP Morgan Chase Bank and U.S. Bank, National
          Association. (3)

4.14      Third Amendment dated December 8, 2003 to the Credit Agreement dated
          October 11, 2001.(3)

4.15      Fourth Amendment dated January 13, 2004 to the Credit Agreement dated
          October 11, 2001. (3)

4.16      Form of Old Note (included as part of Exhibit 4.12). (3)

4.17      Form of New Note (included as part of Exhibit 4.12). (3)

4.18      Second Priority Collateral Agreement dated as of December 23, 2003, by
          and among Land O'Lakes, Inc. and certain of its subsidiaries, and U.S.
          Bank National Association.(3)

4.19      Amended and Restated Five Year Credit Agreement dated as of October
          11, 2001 among Land O'Lakes, Inc., The Chase Manhattan Bank, CoBank,
          ACB, and the Lenders party thereto.(1)

4.20      First Amendment dated November 6, 2001 to the Amended and Restated
          Five-Year Credit Agreement dated October 11, 2001.(1)
</TABLE>


                                       67
<PAGE>

<TABLE>
<S>       <C>
4.21      Second Amendment dated February 15, 2002 to the Amended and Restated
          Five-Year Credit Agreement dated October 11, 2001.(1)

4.22      Purchase and Sale Agreement dated as of December 18, 2001, among Land
          O'Lakes, Inc., Land O'Lakes Farmland Feed LLC, Purina Mills, LLC and
          LOL Farmland Feed SPV, LLC.(1)

4.23      Receivables Purchase Agreement dated as of December 18, 2001, among
          Land O'Lakes Farmland Feed LLC, LOL Farmland Feed SPV, LLC, and
          CoBank, ACB.(1)

4.24      Indenture dated as of March 25, 1998 for the 7.45% Capital Securities
          due March 25, 2028.(3)

4.25      Third Amendment dated December 8, 2003 to the Five-Year Amended and
          Restated Credit Agreement dated October 11, 2001.(3)

4.26      Fourth Amendment dated January 13, 2004 to the Amended and Restated
          Five-Year Credit Agreement dated October 11, 2001.(3)

4.27      Fifth Amendment, dated April 1, 2005, to the Amended and Restated
          Five-Year Credit Agreement, dated October 11, 2001.*

4.28      Sixth Amendment, dated June 15, 2005, to the Amended and Restated
          Five-Year Credit Agreement, dated October 11, 2001.*

4.29      Seventh Amendment, dated August 9, 2005, to the Amended and Restated
          Five-Year Credit Agreement, dated October 11, 2001.*

4.30      Eighth Amendment, dated January 10, 2006, to the Amended and Restated
          Five-Year Credit Agreement, dated October 11, 2001.*

10.1      Joint Venture Agreement by and between Farmland Industries, Inc. and
          Land O'Lakes, Inc. dated as of July 18, 2000.(1)

10.2      Operating Agreement of Agriliance LLC among United Country Brands,
          LLC, Cenex Harvest States Cooperatives, Farmland Industries, Inc. and
          Land O'Lakes, Inc. dated as of January 4, 2000.(1)

10.3      Joint Venture Agreement among Cenex Harvest States Cooperatives,
          Farmland Industries, Inc. and Land O'Lakes Inc. dated as of January 1,
          2000.(1)

10.4      Operating Lease between Arden Hills Associates and Land O'Lakes, Inc.
          dated as of May 31, 1980.(1)

10.5      Ground Lease between Land O'Lakes, Inc. and Arden Hills Associates
          dated as of May 31, 1980.(1)

10.6      License Agreement among Ralston Purina Company, Purina Mills, Inc. and
          BP Nutrition Limited dated as of October 1, 1986.(1)

10.7      License Agreement between Land O'Lakes, Inc. and Land O'Lakes Farmland
          Feed LLC dated September 25, 2000.(1)

10.8      Trademark License Agreement by and between Land O'Lakes, Inc. and Dean
          Foods dated as of July 10, 2000.(1)

10.9      Asset Purchase Agreement between Land O'Lakes, Inc. and Dean Foods
          dated as of May 30, 2000.(1)

10.10     Agreement and Plan of Merger, dated as of June 17, 2001, by and among
          Purina Mills, Inc., Land O'Lakes, Inc., LOL Holdings II, Inc. and LOL
          Holdings III, Inc.(1)

10.11     Management Services Agreement, dated September 1, 2000, by and between
          Land O'Lakes and Land O'Lakes Farmland Feed LLC.(1)

10.12     Asset Purchase and Sale Agreement, dated February 15, 2005, by and
          between Land O'Lakes, Inc. and Maschhoff West, LLC.*

10.13     Purchase Agreement, dated January 27, 2006, by and between Osborne
          Investments, LLC and Land O'Lakes, Inc.*

10.14     Executive Annual Variable Compensation Plan of Land O'Lakes.(1)#

10.15     Land O'Lakes Long Term Incentive Plan.(1)#

10.16     Land O'Lakes Non-Qualified Deferred Compensation Plan.(1)#

10.17     Land O'Lakes Non-Qualified Executive Excess Benefit Plan (IRS
          Limits).(1)#

10.18     Land O'Lakes Non-Qualified Executive Excess Benefit Plan (1989
          Formula).(1)#

10.19     Land O'Lakes Non-Qualified Executive Excess Benefit Savings Plan.(1)#

10.20     California Cooperative Value Incentive Plan of Land' O'Lakes.(2)#

10.21     Amended Land O'Lakes Long Term Incentive Plan.#

10.22     Amended California Cooperative Value Incentive Plan of Land O'Lakes.#

10.23     License Agreement, by and between Land O'Lakes, Inc., Dean Foods
          Company, Morningstar Foods, Inc. and Dairy Marketing Alliance, LLC,
          dated July 24, 2002.

10.24     Land O'Lakes Cooperative Value Incentive Plan.*

10.25     Land O'Lakes Cooperative Value Incentive Plan (2005).*

12        Statement regarding the computation of ratios of earnings to fixed
          charges*

21        Subsidiaries of the Registrant*

31.1      Certification Pursuant to 15 U.S.C. Section 7241, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002*
</TABLE>


                                       68

<PAGE>

<TABLE>
<S>       <C>
31.2      Certification Pursuant to 15 U.S.C. Section 7241, as adopted pursuant
          to Section 302 of the Sarbanes-Oxley Act of 2002*

32.1      Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002*

32.2      Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002*
</TABLE>

(1)  Incorporated by reference to the identical exhibit to the Registrant's
     Registration Statement on Form S-4 filed March 18, 2002.

(2)  Incorporated by reference to the identical exhibit to the Registrant's
     Registration Statement on Form S-4 filed May 9, 2002

(3)  Incorporated by reference to the identical exhibit filed with the Company's
     Form 10-K on March 30, 2004.

#    Management contract, compensatory plan or arrangement required to be filed
     as an exhibit to this Form 10-K

*    Filed electronically herewith.

                                   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, on March 20, 2006.

                                        LAND O'LAKES, INC.


                                        By /s/ DANIEL KNUTSON
                                           -------------------------------------
                                           Daniel Knutson
                                           Senior Vice President and
                                           Chief Financial 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 indicated on March 20, 2006.

<TABLE>
<S>                                     <C>


/s/ CHRISTOPHER J. POLICINSKI           President and Chief Executive Officer
-------------------------------------   (Principal Executive Officer)
Christopher J. Policinski


/s/ DANIEL KNUTSON                      Senior Vice President and Chief
-------------------------------------   Financial Officer (Principal Financial
Daniel Knutson                          and Accounting Officer)


/s/ ROBERT BIGNAMI                                      Director
-------------------------------------
Robert Bignami


/s/ LYNN BOADWINE                                       Director
-------------------------------------
Lynn Boadwine


/s/ HARLEY BUYS                                         Director
-------------------------------------
Harley Buys


/s/ DENNIS CIHLAR                                       Director
-------------------------------------
Dennis Cihlar


/s/ BEN CURTI                                           Director
-------------------------------------
Ben Curti


/s/ RICHARD EPARD                                       Director
-------------------------------------
Richard Epard
</TABLE>


                                       69

<PAGE>

<TABLE>
<S>                                     <C>


/s/ JIM HAGER                                           Director
-------------------------------------
Jim Hager


/s/ GORDON HOOVER                                       Director
-------------------------------------
Gordon Hoover


/s/ PETE KAPPELMAN                                      Director
-------------------------------------
Pete Kappelman


/s/ CORNELL KASBERGEN                                   Director
-------------------------------------
Cornell Kasbergen


/s/ PAUL KENT, JR.                                      Director
-------------------------------------
Paul Kent, Jr.


/s/ LARRY KULP                                          Director
-------------------------------------
Larry Kulp


/s/ CHARLES LINDNER                                     Director
-------------------------------------
Charles Lindner


/s/ MANUEL MACIEL, JR.                                  Director
-------------------------------------
Manuel Maciel, Jr.


/s/ ROBERT MARLEY                                       Director
-------------------------------------
Robert Marley


/s/ JIM MILLER                                          Director
-------------------------------------
Jim Miller


/s/ RONNIE MOHR                                         Director
-------------------------------------
Ronnie Mohr


/s/ RON MUZZAL                                          Director
-------------------------------------
Ron Muzzal


/s/ ART PERDUE                                          Director
-------------------------------------
Art Perdue


/s/ DOUGLAS REIMER                                      Director
-------------------------------------
Douglas Reimer


/s/ RICHARD RICHEY                                      Director
-------------------------------------
Richard Richey


/s/ FLOYD TRAMMELL                                      Director
-------------------------------------
Floyd Trammell


/s/ THOMAS WAKEFIELD                                    Director
-------------------------------------
Thomas Wakefield


/s/ JOHN ZONNEVELD, JR.                                 Director
-------------------------------------
John Zonneveld, Jr.
</TABLE>


                                       70

<PAGE>


SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15 (D) OF THE ACT BY REGISTRANT WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT

     No proxy statement, form of proxy or other proxy soliciting material with
respect to any annual or other meeting of security holders has been or will be
sent to security holders.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                          <C>
LAND O'LAKES, INC.
Financial Statements for the years ended December 31, 2005, 2004 and 2003
Report of KPMG LLP, Independent Registered Public Accounting Firm ........    72
Consolidated Balance Sheets as of December 31, 2005 and 2004 .............    73
Consolidated Statements of Operations for the years ended December 31,
   2005, 2004 and 2003 ...................................................    74
Consolidated Statements of Cash Flows for the years ended December 31,
   2005, 2004 and 2003 ...................................................    75
Consolidated Statements of Equities for the years ended December 31, 2005,
   2004 and 2003 .........................................................    76
Notes to Consolidated Financial Statements ...............................    77

MOARK, LLC
Financial Statements for the year ended December 24, 2005, December 25,
   2004 and the eleven months ended December 27, 2003
Report of Moore Stephens Frost, Independent Registered Public Accounting
   Firm ..................................................................   107
Consolidated Balance Sheets as of December 24, 2005 and December 25,
   2004 ..................................................................   108
Consolidated Statement of Operations for the years ended December 24,
   2005, December 25, 2004 and the eleven months ended December 27,
   2003 ..................................................................   109
Consolidated Statement of Members' Equity for the years ended December 24,
   2005, December 25, 2004 and the eleven months ended December 27,
   2003 ..................................................................   110
Consolidated Statement of Cash Flows for the years ended December 24,
   2005, December 25, 2004 and the eleven months ended December 27,
   2003 ..................................................................   111
Notes to Consolidated Financial Statements ...............................   112

AGRILIANCE LLC
Financial Statements (unaudited) for the three months ended November 30,
   2005 and 2004
Consolidated Balance Sheets as of November 30, 2005 and August 31, 2005 ..   124
Consolidated Statements of Operations for the three months ended November
   30, 2005 and 2004 .....................................................   125
Consolidated Statements of Cash Flows for the three months ended November
   30, 2005 and 2004 .....................................................   126
Notes to Consolidated Financial Statements ...............................   127

Financial Statements for the years ended August 31, 2005, 2004 and 2003
Report of KPMG LLP, Independent Registered Public Accounting Firm ........   128
Consolidated Balance Sheets as of August 31, 2005 and 2004 ...............   129
Consolidated Statements of Operations for the years ended August 31, 2005,
   2004 and 2003 .........................................................   130
Consolidated Statements of Cash Flows for the years ended August 31, 2005,
   2004 and 2003 .........................................................   131
Consolidated Statements of Members' Equity for the years ended August 31,
   2005, 2004 and 2003 ...................................................   132
Notes to Consolidated Financial Statements ...............................   133
</TABLE>


                                       71
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Land O'Lakes, Inc.:

     We have audited the accompanying consolidated balance sheets of Land
O'Lakes, Inc. and subsidiaries as of December 31, 2005 and 2004, and the related
consolidated statements of operations, cash flows and equities for each of the
years in the three-year period ended December 31, 2005. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. We did not audit the consolidated financial
statements of MoArk, LLC, a majority-owned subsidiary, which financial
statements reflect total assets constituting eight percent and eight percent as
of December 31, 2005 and 2004, respectively, and total revenues constituting
five percent, seven percent and five percent for each of the years in the
three-year period ended December 31, 2005, respectively, of the related
consolidated totals. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for MoArk, LLC, is based solely on the report of the other
auditors.

     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
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 and the report of other auditors provide a reasonable basis for our
opinion.

     In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Land O'Lakes, Inc. and subsidiaries
as of December 31, 2005 and 2004, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
2005 in conformity with U.S. generally accepted accounting principles.

     As discussed in Note 1 to the consolidated financial statements, in 2003,
the Company adopted the provisions of the Financial Accounting Standards Board's
Interpretation No. 46, "Consolidation of Variable Interest Entities, an
Interpretation of ARB 51."

                                        /s/ KPMG LLP

Minneapolis, Minnesota
February 10, 2006


                                       72

<PAGE>

                               LAND O'LAKES, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                            -----------------------
                                                               2005         2004
                                                            ----------   ----------
                                                                ($ IN THOUSANDS)
<S>                                                         <C>          <C>
                                     ASSETS

Current assets:
   Cash and cash equivalents ............................   $  179,704   $   73,136
   Restricted cash ......................................           --       20,338
   Receivables, net .....................................      591,445      558,841
   Inventories ..........................................      453,135      454,015
   Prepaid expenses .....................................      333,023      284,484
   Other current assets .................................       81,075       73,560
                                                            ----------   ----------
      Total current assets ..............................    1,638,382    1,464,374

Investments .............................................      263,786      470,550
Property, plant and equipment, net ......................      658,208      610,012
Property under capital lease, net .......................       10,442      100,179
Goodwill, net ...........................................      327,059      331,582
Other intangibles, net ..................................       96,767       99,016
Other assets ............................................      100,414      124,069
                                                            ----------   ----------
      Total assets ......................................   $3,095,058   $3,199,782
                                                            ==========   ==========

                            LIABILITIES AND EQUITIES

Current liabilities:
   Notes and short-term obligations .....................   $   76,465   $   51,753
   Current portion of long-term debt ....................       22,245       10,680
   Current portion of obligations under capital lease ...        1,676       10,378
   Accounts payable .....................................      976,959      813,328
   Accrued expenses .....................................      265,924      228,435
   Patronage refunds and other member equities payable ..       29,622       22,317
                                                            ----------   ----------
      Total current liabilities .........................    1,372,891    1,136,891

Long-term debt ..........................................      639,168      933,236
Obligations under capital lease .........................        7,634       90,524
Employee benefits and other liabilities .................      165,796      174,877
Minority interests ......................................        6,012        9,350
Equities:
   Capital stock ........................................        1,967        2,059
   Member equities ......................................      893,518      852,759
   Accumulated other comprehensive loss .................      (75,163)     (73,792)
   Retained earnings ....................................       83,235       73,878
                                                            ----------   ----------
      Total equities ....................................      903,557      854,904
                                                            ----------   ----------

Commitments and contingencies ...........................           --           --
Total liabilities and equities ..........................   $3,095,058   $3,199,782
                                                            ==========   ==========
</TABLE>

           See accompanying notes to consolidated financial statements.


                                       73

<PAGE>

                               LAND O'LAKES, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                             YEARS ENDED DECEMBER 31,
                                                                       ------------------------------------
                                                                          2005         2004         2003
                                                                       ----------   ----------   ----------
                                                                                 ($ IN THOUSANDS)
<S>                                                                    <C>          <C>          <C>
Net sales ..........................................................   $7,556,677   $7,656,826   $6,256,101
Cost of sales ......................................................    6,971,660    7,063,118    5,671,869
                                                                       ----------   ----------   ----------
Gross profit .......................................................      585,017      593,708      584,232
Selling, general and administrative ................................      494,971      500,935      464,610
Restructuring and impairment charges ...............................        6,381        7,815        6,342
                                                                       ----------   ----------   ----------
Earnings from operations ...........................................       83,665       84,958      113,280

Interest expense, net ..............................................       79,873       83,114       80,972
Other expense (income), net ........................................        9,295       (7,476)     (24,428)
Gain on sale of investment in CF Industries, Inc. ..................     (102,446)          --           --
Loss on impairment of investment in CF Industries, Inc. ............           --       36,500           --
Equity in earnings of affiliated companies .........................      (36,692)     (58,412)     (57,249)
Minority interest in earnings of subsidiaries ......................        1,354        1,648        6,366
                                                                       ----------   ----------   ----------
Earnings before income taxes and discontinued operations ...........      132,281       29,584      107,619
Income tax expense .................................................        5,505        1,404       20,703
                                                                       ----------   ----------   ----------
Net earnings from continuing operations ............................      126,776       28,180       86,916
Earnings (loss) from discontinued operations, net of income taxes ..        2,167       (6,747)      (4,922)
                                                                       ----------   ----------   ----------
Net earnings .......................................................   $  128,943   $   21,433   $   81,994
                                                                       ==========   ==========   ==========

Applied to:
   Member equities
      Allocated patronage ..........................................   $  118,273   $   23,636   $   40,045
      Deferred equities ............................................        1,847        1,920         (312)
                                                                       ----------   ----------   ----------
                                                                          120,120       25,556       39,733
      Retained earnings ............................................        8,823       (4,123)      42,261
                                                                       ----------   ----------   ----------
                                                                       $  128,943   $   21,433   $   81,994
                                                                       ==========   ==========   ==========
</TABLE>

           See accompanying notes to consolidated financial statements.


                                       74

<PAGE>

                               LAND O'LAKES, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                   YEARS ENDED DECEMBER 31,
                                                                                              ---------------------------------
                                                                                                 2005        2004        2003
                                                                                              ---------   ---------   ---------
                                                                                                       ($ IN THOUSANDS)
<S>                                                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings ...........................................................................   $ 128,943   $  21,433   $  81,994
      (Earnings) loss from discontinued operations, net of income taxes ...................      (2,167)      6,747       4,922
      Adjustments to reconcile net earnings to net cash provided by operating activities:
      Depreciation and amortization .......................................................      99,312     107,214     111,500
      Amortization of deferred financing costs ............................................       8,733       5,625       7,736
         Loss on extinguishment of debt ...................................................      11,014          --          --
      Bad debt expense ....................................................................       1,967       2,351       5,214
      Proceeds from patronage revolvement received ........................................       8,123       6,043       5,000
      Non-cash patronage income ...........................................................      (1,852)     (1,355)     (3,578)
      Receivable from legal settlement ....................................................          --          --      96,707
      Deferred income tax expense (benefit) ...............................................       5,177      (4,977)     11,675
      Decrease in other assets ............................................................      13,246       5,740       5,865
      Increase (decrease) in other liabilities ............................................       3,570      (3,499)     (2,216)
      Restructuring and impairment charges ................................................       6,381      44,315       6,342
      Gain from divestiture of businesses .................................................          --      (1,438)       (684)
      Gain on sale of investment in CF Industries, Inc. ...................................    (102,446)         --          --
      Equity in earnings of affiliated companies ..........................................     (36,692)    (58,412)    (57,249)
      Minority interests ..................................................................       1,354       1,648       6,366
      Other ...............................................................................      (7,389)     (1,239)    (12,125)
      Changes in current assets and liabilities, net of acquisitions and divestitures:
      Receivables .........................................................................     (38,964)     37,586     (46,484)
      Inventories .........................................................................      (6,058)     15,105     (14,314)
      Other current assets ................................................................     (50,468)    (36,152)    (56,926)
      Accounts payable ....................................................................     164,155      72,378      36,345
      Accrued expenses ....................................................................      17,143     (17,089)     44,400
                                                                                              ---------   ---------   ---------
   Net cash provided by operating activities ..............................................     223,082     202,024     230,490

CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to property, plant and equipment ..........................................     (70,424)    (96,099)    (71,651)
      Acquisitions, net of cash acquired ..................................................     (46,101)    (12,150)         --
      Payments for investments ............................................................      (5,566)       (703)    (10,047)
      Net proceeds from divestiture of businesses .........................................       2,635      13,068       1,815
      Proceeds from sale of investments ...................................................     316,900       2,342       3,000
      Proceeds from sale of property, plant and equipment .................................      22,197      11,990      21,727
      Dividends from investments in affiliated companies ..................................      35,250      47,846      37,356
      Decrease (increase) in restricted cash ..............................................      20,338        (220)    (20,118)
      Other ...............................................................................         543         860       3,667
                                                                                              ---------   ---------   ---------
   Net cash provided (used) by investing activities .......................................     275,772     (33,066)    (34,251)

CASH FLOWS FROM FINANCING ACTIVITIES:
      Increase (decrease) increase in short-term debt .....................................      21,256     (28,616)     11,683
      Proceeds from issuance of long-term debt ............................................       2,022      17,416     185,037
      Principal payments on long-term debt ................................................    (287,344)   (146,011)   (304,910)
      Principal payments on obligations under capital lease ...............................     (92,556)    (10,367)     (9,590)
      Payments for debt extinguishment costs ..............................................     (11,014)         --          --
      Payments for debt issuance costs ....................................................          --      (4,323)     (3,486)
      Payments for redemption of member equities ..........................................     (68,714)    (34,615)    (24,380)
      Other ...............................................................................      (1,993)       (304)       (688)
                                                                                              ---------   ---------   ---------
   Net cash used by financing activities ..................................................    (438,343)   (206,820)   (146,334)
   Net cash provided (used) by operating activities of discontinued operations (revised) ..       3,922      (1,449)     (2,987)
   Net cash provided by investing activities of discontinued operations (revised) .........      42,135       2,173        (971)
                                                                                              ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents ......................................     106,568     (37,138)     45,947
Cash and cash equivalents at beginning of year ............................................      73,136     110,274      64,327
                                                                                              ---------   ---------   ---------
   Cash and cash equivalents at end of year ...............................................   $ 179,704   $  73,136   $ 110,274
                                                                                              =========   =========   =========
</TABLE>

           See accompanying notes to consolidated financial statements.


                                       75
<PAGE>

                               LAND O'LAKES, INC.

                       CONSOLIDATED STATEMENTS OF EQUITIES

<TABLE>
<CAPTION>

                                                                                                ACCUMULATED
                                                                      MEMBER EQUITIES              OTHER
                                                   CAPITAL   --------------------------------  COMPREHENSIVE   RETAINED     TOTAL
                                                    STOCK    ALLOCATED   DEFERRED      NET     INCOME (LOSS)   EARNINGS   EQUITIES
                                                    -----    ---------   --------   --------- --------------  ---------   --------
<S>                                                <C>       <C>         <C>        <C>       <C>             <C>        <C>
BALANCE, DECEMBER 31, 2002 .......................  $2,190   $884,697    $(25,701)  $858,996    $   (622)      $35,201   $895,765
Capital stock issued .............................       3         --          --         --          --            --          3
Capital stock redeemed ...........................     (68)        --          --         --          --            --        (68)
2003 earnings, as applied ........................      --     40,045        (312)    39,733          --        42,261     81,994
   Less portion stated as current liability ......      --    (11,640)         --    (11,640)         --            --    (11,640)
Portion of member equities stated as current
   liability .....................................      --     (7,809)         --     (7,809)         --            --     (7,809)
Cash patronage and redemption of member equities .      --    (24,380)         --    (24,380)         --            --    (24,380)
Redemption included in prior year's liabilities ..      --     12,388          --     12,388          --            --     12,388
Minimum pension liability adjustment, net of
   income taxes ..................................      --         --          --         --     (65,617)           --    (65,617)
Unrealized gain on available-for-sale investment
   securities ....................................      --         --          --         --       1,062            --      1,062
Foreign currency translation adjustment ..........      --         --          --         --        (508)           --       (508)
Other, net .......................................      --       (702)         --       (702)         --        (1,124)    (1,826)
                                                    ------   --------    --------   --------    --------       -------   --------
BALANCE, DECEMBER 31, 2003 .......................   2,125    892,599     (26,013)   866,586     (65,685)       76,338    879,364

Capital stock issued .............................       2         --          --         --          --            --          2
Capital stock redeemed ...........................     (68)        --          --         --          --            --        (68)
2004 earnings, as applied ........................      --     23,636       1,920     25,556          --        (4,123)    21,433
   Less portion stated as current liability ......      --    (15,757)         --    (15,757)         --            --    (15,757)
Portion of member equities stated as current
   liability .....................................      --     (6,560)         --     (6,560)         --            --     (6,560)
Cash patronage and redemption of member equities .      --    (34,615)         --    (34,615)         --            --    (34,615)
Redemption included in prior year's liabilities ..      --     19,449          --     19,449          --            --     19,449
Minimum pension liability adjustment, net of
   income taxes ..................................      --         --          --         --      (7,402)           --     (7,402)
Unrealized loss on available-for-sale
   investment securities .........................      --         --          --         --        (521)           --       (521)
Foreign currency translation adjustment ..........      --         --          --         --        (184)           --       (184)
Other, net .......................................      --     (1,615)       (285)    (1,900)         --         1,663       (237)
                                                    ------   --------    --------   --------    --------       -------   --------
BALANCE, DECEMBER 31, 2004 .......................   2,059    877,137     (24,378)   852,759     (73,792)       73,878    854,904

Capital stock issued .............................       9         --          --         --          --            --          9
Capital stock redeemed ...........................    (101)        --          --         --          --            --       (101)
2005 earnings, as applied ........................      --    118,273       1,847    120,120          --         8,823    128,943
   Less portion stated as current liability ......      --    (23,655)         --    (23,655)         --            --    (23,655)
Portion of member equities stated as current
   liability .....................................      --     (5,967)         --     (5,967)         --            --     (5,967)
Cash patronage and redemption of member equities .      --    (68,714)         --    (68,714)         --            --    (68,714)
Redemption included in prior year's liabilities ..      --     22,317          --     22,317          --            --     22,317
Minimum pension liability adjustment, net of
   income taxes ..................................      --         --          --         --      (2,603)           --     (2,603)
Unrealized loss on available-for-sale investment
   securities ....................................      --         --          --         --        (155)           --       (155)
Foreign currency translation adjustment, net of
   income taxes ..................................      --         --          --         --       1,387            --      1,387
Other, net .......................................      --     (3,181)       (161)    (3,342)         --           534     (2,808)
                                                    ------   --------    --------   --------    --------       -------   --------
BALANCE, DECEMBER 31, 2005 .......................  $1,967   $916,210    $(22,692)  $893,518    $(75,163)      $83,235   $903,557
                                                    ======   ========    ========   ========    ========       =======   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       76

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           ($ IN THOUSANDS IN TABLES)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

     Land O'Lakes, Inc. is a diversified member-owned food and agricultural
cooperative serving agricultural producers throughout the United States. Through
its five operating segments of Dairy Foods, Feed, Seed, Agronomy and Layers,
Land O'Lakes, Inc. procures approximately 12 billion pounds of member milk
annually, markets more than 300 dairy products and provides member cooperatives,
farmers and ranchers with an extensive line of agricultural supplies (including
feed, seed, crop nutrients and crop protection products).

REVENUE RECOGNITION

     Revenue is recognized when products are shipped and the customer takes
ownership and assumes risk of loss, collection of the relevant receivables is
probable, persuasive evidence of an arrangement exists and the sales price is
fixed or determinable. Sales are reduced by certain coupon, trade promotion and
other costs, some of which are recorded by estimating expense based on the
Company's historical experience. Estimated product returns in Seed are deducted
from sales at the time of shipment.

STATEMENT PRESENTATION

     The consolidated financial statements include the accounts of Land O'Lakes,
Inc. and wholly owned and majority owned subsidiaries and limited liability
companies ("Land O'Lakes" or the "Company"). Intercompany transactions and
balances have been eliminated. Certain reclassifications have been made to the
2004 and 2003 consolidated financial statements to conform to the 2005
presentation. These reclassifications had no effect on gross profit or net
earnings. The reclassifications relate to the presentation of certain customer
discounts as seed sales deductions in the consolidated statements of operations.
In addition, in 2005, the Company has separately disclosed the operating and
investing portions of the cash flows attributable to its discontinued operations
which in prior periods were reported on a combined basis as a single amount.

CASH AND CASH EQUIVALENTS

     Cash and cash equivalents include short-term, highly liquid investments
with original maturities of three months or less.

INVENTORIES

     Inventories are valued at the lower of cost or market. Cost is determined
on a first-in, first-out or average cost basis.

DERIVATIVE COMMODITY INSTRUMENTS

     In the normal course of operations, the Company purchases commodities such
as milk, butter and soybean oil in Dairy Foods; soybean meal and corn in Feed;
and soybeans in Seed. Derivative commodity instruments, consisting primarily of
futures contracts offered through regulated commodity exchanges, are used to
reduce exposure to changes in commodity prices. These contracts are not
designated as hedges under Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities." The
futures contracts are marked-to-market each month and gains and losses
("unrealized hedging gains and losses") are recognized in cost of sales. The
Company has established formal position limits to monitor its hedging activities
and generally does not use derivative commodity instruments for speculative
purposes.

     The Company uses interest rate swaps to help manage its exposure to
interest rate fluctuations. The objective of the swaps is to maintain an
appropriate balance between fixed and floating interest rate exposures. Both
changes in the fair value of the interest rate swaps designated and effective as
fair value hedges and changes in the fair value of the underlying hedged debt
are recorded as adjustments to interest expense.


                                       77

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVESTMENTS

     Investments in other cooperatives are stated at cost plus unredeemed
patronage refunds received, or estimated to be received, in the form of capital
stock and other equities. Estimated patronage refunds are not recognized for tax
purposes until notices of allocation are received. The equity method of
accounting is used for investments in other companies in which Land O'Lakes
voting interest is 20 to 50 percent. Investments in less than 20-percent-owned
companies are stated at cost as the Company does not have the ability to exert
significant influence.

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are stated at cost. Depreciation is
calculated using the straight-line method over the estimated useful life (10 to
30 years for land improvements and buildings and building equipment, 3 to 10
years for machinery and equipment and 3 to 5 years for software) of the
respective assets in accordance with the straight-line method. Accelerated
methods of depreciation are used for income tax purposes.

GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill represents the excess of the purchase price of an acquired entity
over the amounts assigned to assets acquired and liabilities assumed. Other
intangible assets consist primarily of trademarks, patents and agreements not to
compete. Certain trademarks are not amortized because they have indefinite
lives. The remaining other intangible assets are amortized using the
straight-line method over the estimated useful lives, ranging from 3 to 17
years.

RECOVERABILITY OF LONG-LIVED ASSETS

     The test for goodwill impairment is a two-step process and is performed on
at least an annual basis. The first step is a comparison of the fair value of
the reporting unit with its carrying amount, including goodwill. If this step
reflects impairment, then the loss would be measured as the excess of recorded
goodwill over its implied fair value. Implied fair value is the excess of fair
value of the reporting unit over the fair value of all identified assets and
liabilities. The Company assesses the recoverability of other long-lived assets
annually or whenever events or changes in circumstance indicate that expected
future undiscounted cash flows might not be sufficient to support the carrying
amount of an asset. The Company deems an asset to be impaired if a forecast of
undiscounted future operating cash flows is less than its carrying amount. If an
asset is determined to be impaired, the loss is measured as the amount by which
the carrying value of the asset exceeds its fair value.

INCOME TAXES

     Land O'Lakes is a non-exempt agricultural cooperative and is taxed on all
non-member earnings and any member earnings not paid or allocated to members by
qualified written notices of allocation as that term is used in section 1388(c)
of the Internal Revenue Code. The Company files a consolidated tax return with
its fully taxable subsidiaries. The Company establishes deferred income tax
assets and liabilities based on the difference between the financial and income
tax carrying values of assets and liabilities using existing tax rates.

ADVERTISING AND PROMOTION COSTS

     Advertising and promotion costs are expensed as incurred. Advertising and
promotion costs were $54.0 million, $52.9 million and $52.1 million in 2005,
2004 and 2003, respectively.

RESEARCH AND DEVELOPMENT

     Expenditures for research and development are charged to administrative
expense in the year incurred. Total research and development expenses were $30.3
million, $29.6 million and $29.0 million in 2005, 2004 and 2003, respectively.


                                       78

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK-BASED COMPENSATION

     The Company offers a Value Appreciation Right Awards (VAR) plan to certain
eligible employees. Participants are granted an annual award of VAR "Units,"
which are not traditional stock and do not provide the employee any voting right
or right to receive assets of Land O'Lakes. This plan is accounted for in
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," using
the fair-value method. Units are issued as of January 1 and valued based on a
formula reflecting the fair value of the Company at the close of the preceding
year. Compensation cost is recognized for the appreciation in the value of the
Units over a four-year vesting period, including participant awards which become
fully vested upon retirement, using the graded vesting method as described in
SFAS Interpretation No. 28, "Accounting for Stock Appreciation Rights and Other
Variable Stock Option or Award Plans." Stock-based compensation expenses were
$2.3 million in 2005, $0.8 million in 2004 and $0 in 2003, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board ("FASB") issued
FASB Staff Position (FSP) No. 109-1, "Application of FASB Statement No. 109,
Accounting for Income Taxes, to the Tax Deduction on Qualified Production
Activities Provided by the American Jobs Creation Act of 2004." FSP No. 109-1
states that the tax deduction on qualified domestic production activities should
be accounted for as a special deduction under SFAS No. 109, "Accounting for
Income Taxes," and not be treated as a rate reduction. Accordingly, any benefit
from the deduction should be reported in the period in which the deduction is
claimed on the tax return. This FSP was effective January 1, 2005, and the
Company has included a $0.6 million income tax benefit related to this deduction
in its consolidated financial statements for the year ended December 31, 2005.

     In December 2004, the FASB issued Statement No. 123(R), "Share-Based
Payment." This Statement eliminated the alternative of accounting for
share-based compensation under APB Opinion No. 25, "Accounting for Stock Issued
to Employees." The revised standard requires compensation expense for shares
with accelerated vesting provisions to be recognized in the period the employee
becomes eligible for the award. This Statement is effective January 1, 2006 and
is not expected to have a significant impact on the Company's consolidated
financial statements.

     In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an Interpretation of ARB 51" ("FIN 46"). The primary
objectives of FIN 46 are to provide guidance on the identification and
consolidation of variable interest entities, or VIEs, which are entities for
which control is achieved through means other than through voting rights. As
permitted by the Interpretation, the Company early-adopted FIN 46 as of July 1,
2003 and began consolidating MoArk, LLC ("MoArk"), an egg production and
marketing company. FIN 46 was revised in December 2003 and was effective for the
Company on January 1, 2005 and had no material impact to the Company's
consolidated financial statements.

     In November 2004, the FASB issued Statement No. 151, "Inventory Costs."
This Statement requires that abnormal idle facility expense, spoilage, freight
and handling cost be recognized as current-period charges. In addition,
Statement No. 151 requires that allocation of fixed production overhead costs to
inventories be based on the normal capacity of the production facility. The
Company is required to adopt the provisions of this Statement prospectively
after January 1, 2006. The effect of adoption is not expected to be material to
the Company's consolidated financial statements.

ACCOUNTING ESTIMATES

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


                                       79
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2.   MOARK, LLC CONSOLIDATION AND PLANNNED ACQUISITION OF MINORITY INTEREST

     Through June 30, 2003, the Company carried its 50% ownership interest in
MoArk, LLC ("MoArk") under the equity method and the remaining interest was
owned by Osborne Investments, LLC ("Osborne"). In 2003, the Company increased
its ownership from 50% to 57.5% with an additional investment of $7.8 million;
and in accordance with the provisions of FIN 46, "Consolidation of Variable
Interest Entities," effective July 1, 2003, the Company consolidated MoArk into
its financial statements. Although Osborne held a 42.5% ownership interest in
MoArk, the Company was allocated 100% of the earnings or loss from the
operations of MoArk.

     The Company held a right to acquire (and Osborne held the right to require
the Company to acquire) the remaining 42.5% of MoArk owned by Osborne for a
$42.2 million minimum payment in 2007, plus an additional amount related to
market conditions. In 2005, the Company and Osborne agreed to accelerate the
transfer of ownership; and, in January 2006, the Company purchased the remaining
42.5% minority interest in MoArk for $71.0 million in cash. Accordingly, the
Company had a $71.0 million accrued expense liability in the consolidated
balance sheet at December 31, 2005.

3.   RESTRICTED CASH

     On March 28, 2003, Cheese & Protein International LLC ("CPI"), a
consolidated subsidiary, amended its lease for property and equipment relating
to its cheese manufacturing and whey processing plant in Tulare, California. The
amendment required Land O'Lakes to maintain a $20 million restricted cash
account to support the lease. In 2005, this amount was released to the Company
as more fully described in Note 21.

4.   RECEIVABLES

     A summary of receivables at December 31 is as follows:

<TABLE>
<CAPTION>
                                                         2005       2004
                                                       --------   --------
<S>                                                    <C>        <C>
Trade accounts .....................................   $ 95,040   $ 67,687
Notes and contracts ................................     90,119     65,003
Notes from sale of trade receivables (see Note 5) ..    369,429    362,123
Other ..............................................     51,167     79,566
                                                       --------   --------
                                                        605,755    574,379
Less allowance for doubtful accounts ...............     14,310     15,538
                                                       --------   --------
Total receivables, net .............................   $591,445   $558,841
                                                       ========   ========
</TABLE>

     A substantial portion of Land O'Lakes receivables is concentrated in
agriculture as well as in the wholesale and retail food industries. Collection
of receivables may be dependent upon economic returns in these industries. The
Company's credit risks are continually reviewed and management believes that
adequate provisions have been made for doubtful accounts.

     The Company operates a wholly owned subsidiary which provides operating
loans and facility financing to farmers and livestock producers. These loans,
which relate primarily to dairy, swine, cattle and other livestock production,
are presented as notes and contracts for the current portion and as other assets
for the noncurrent portion.

5.   RECEIVABLES PURCHASE FACILITY

     In December 2001, the Company established a $100 million (expanded to $200
million in 2004) receivables purchase facility with CoBank, ACB ("CoBank") in an
effort to reduce the Company's overall financing costs. A wholly owned,
unconsolidated special purpose entity ("SPE") was established for the limited
purpose of purchasing and obtaining financing for these receivables. The
transfers of the receivables from the Company to the SPE are structured as
sales; accordingly, the receivables transferred to the SPE are not reflected in
the Company's consolidated balance sheets. The Company sells the receivables to
the SPE in exchange for a note equal to the present value of the receivables,
adjusted for risk of loss. Amounts owing on the note are paid back to the
Company upon collection of the receivables by the SPE or when the SPE enters
into borrowings with CoBank. Accordingly, cash flows between the Company and the
SPE represent collections on the notes receivable, which were $6,626.8 million
and $5,658.4 million in 2005 and 2004, respectively. The Company is subject to
credit risk related to the repayment of the notes receivable with the SPE,
which, in turn, is dependent upon the collection of the SPE's receivables pool.
The Company has retained reserves for estimated losses. The Company expects no
significant gains or losses from the facility. At December 31, 2005 and 2004,
the SPE had no borrowings outstanding with CoBank under this facility.


                                       80

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6.   INVENTORIES

     A summary of inventories at December 31 is as follows:

<TABLE>
<CAPTION>
                                   2005       2004
                                 --------   --------
<S>                              <C>        <C>
Raw materials ................   $148,560   $159,842
Work in process ..............      2,297      9,216
Finished goods ...............    302,278    284,957
                                 --------   --------
Total inventories ............   $453,135   $454,015
                                 ========   ========
</TABLE>

7.   INVESTMENTS

     A summary of investments at December 31 is as follows:

<TABLE>
<CAPTION>
                                                           2005       2004
                                                         --------   --------
<S>                                                      <C>        <C>
Agriliance LLC .......................................   $112,932   $101,263
Ag Processing Inc. ...................................     35,831     37,461
Advanced Food Products, LLC ..........................     31,904     31,322
Agronomy Company of Canada Ltd. ......................     14,464     10,549
CoBank, ACB ..........................................     10,688     15,467
Universal Cooperatives, Inc. .........................      7,716      7,629
Melrose Dairy Proteins, LLC ..........................      7,495      7,293
Prairie Farms Dairy, Inc. ............................      4,315      4,795
MoArk/Fort Recovery Egg Marketing, LLC ...............      1,103        541
Other - principally cooperatives and joint ventures ..     37,338     41,228
CF Industries, Inc. ..................................         --    213,002
                                                         --------   --------
Total investments ....................................   $263,786   $470,550
                                                         ========   ========
</TABLE>

     In 2005, the Company sold its entire interest in CF Industries, Inc., a
domestic manufacturer of agronomy crop nutrients, for $315.5 million in cash,
which resulted in a gain on sale of investment of $102.4 million. In 2004, the
Company sold certain investments in Feed for $2.3 million in cash.

     As of December 31, 2005, the Company has a 50-percent voting interest in
numerous joint ventures including Agriliance LLC, Agronomy Company of Canada
Ltd., Melrose Dairy Proteins, LLC, and MoArk/Fort Recovery Egg Marketing, LLC.
The Company also holds a 35-percent voting interest in Advanced Food Products,
LLC. The Company's two largest equity investments based on each investee's total
assets or earnings were Agriliance LLC and MoArk/Fort Recovery Egg Marketing,
LLC. Summarized financial information as of and for the years ended December 31
is as follows:

Agriliance LLC:

<TABLE>
<CAPTION>
                                    2005         2004
                                 ----------   ----------
<S>                              <C>          <C>
Net sales ....................   $3,819,523   $3,489,824
Gross profit .................      377,682      360,252
Net earnings .................       71,011       78,624
Current assets ...............    1,712,290    1,696,688
Non-current assets ...........      154,270      124,751
Current liabilities ..........    1,520,780    1,490,313
Non-current liabilities ......      119,917      128,631
Total equity .................      225,863      202,495
</TABLE>


                                       81

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

MoArk/Fort Recovery Egg Marketing, LLC:

<TABLE>
<CAPTION>
                                   2005      2004
                                 -------   -------
<S>                              <C>       <C>
Net sales ....................   $61,937   $81,152
Gross (loss) profit ..........    (9,356)   12,918
Net (loss) earnings ..........    (9,776)   12,561
Current assets ...............     7,402     6,034
Non-current assets ...........        80        --
Current liabilities ..........     5,276     4,952
Non-current liabilities ......        --        --
Total equity .................     2,206     1,082
</TABLE>

8.   PROPERTY, PLANT AND EQUIPMENT

     A summary of property, plant and equipment at December 31 is as follows:

     Owned property, plant and equipment:

<TABLE>
<CAPTION>
                                                 2005         2004
                                              ----------   ----------
<S>                                           <C>          <C>
Machinery and equipment ...................   $  698,751   $  637,394
Buildings and building equipment ..........      351,626      318,868
Land and land improvements ................       64,060       60,797
Software ..................................       61,603       61,847
Construction in progress ..................       27,778       30,452
                                              ----------   ----------
                                               1,203,818    1,109,358
Less accumulated depreciation .............      545,610      499,346
                                              ----------   ----------
Total property, plant and equipment, net ..   $  658,208   $  610,012
                                              ==========   ==========
</TABLE>

     Property under capital lease:

<TABLE>
<CAPTION>
                                               2005      2004
                                             -------   --------
<S>                                          <C>       <C>
Machinery and equipment ..................   $ 7,599   $ 80,974
Buildings and building equipment .........     7,251     35,629
Land and land improvements ...............       200      2,346
                                             -------   --------
                                              15,050    118,949
Less accumulated depreciation ............     4,608     18,770
                                             -------   --------
Total property under capital lease, net ..   $10,442   $100,179
                                             =======   ========
</TABLE>

9.   GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill: The carrying amount of goodwill at December 31 is as follows:

<TABLE>
<CAPTION>
                                   2005       2004
                                 --------   --------
<S>                              <C>        <C>
Feed .........................   $115,593   $113,806
Layers .......................     79,567     79,764
Dairy Foods ..................     69,904     69,904
Agronomy .....................     51,566     57,643
Seed .........................     10,429     10,465
                                 --------   --------
Total goodwill ...............   $327,059   $331,582
                                 ========   ========
</TABLE>

     In 2005, goodwill increased by $1.8 million in Feed due to the partial
purchase of a minority interest of a subsidiary for a price in excess of the
minority interest share acquired. Goodwill decreased by $0.2 million in Layers,
which resulted from the reclassification of $33.8 million of goodwill to assets
held for sale in other current assets, partially offset by $33.6 million of
additional goodwill from the anticipated purchase of the minority interest in
MoArk, LLC. The goodwill decrease in Agronomy resulted from amortization
associated with investments in joint ventures and cooperatives.


                                       82

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     Other Intangible Assets: A summary of other intangible assets at December
31 is as follows:

<TABLE>
<CAPTION>
                                                              2005      2004
                                                            -------   -------
<S>                                                         <C>       <C>
Amortized other intangible assets:
Patents, less accumulated amortization of
   $4,909 and $3,757, respectively ......................   $11,802   $12,960
Trademarks, less accumulated amortization of
   $2,078 and $2,048 respectively .......................     1,892     1,845
Other intangible assets, less accumulated amortization
   of $8,543 and $9,620, respectively ...................     6,448     7,586
                                                            -------   -------
Total amortized other intangible assets .................    20,142    22,391
Total non-amortized other intangible assets --
   trademarks and dealer networks .......................    76,625    76,625
                                                            -------   -------
Total other intangible assets ...........................   $96,767   $99,016
                                                            =======   =======
</TABLE>

     Amortization expense for the years ended December 31, 2005, 2004 and 2003
was $4.7 million, $4.3 million and $5.3 million, respectively. The estimated
amortization expense related to other intangible assets subject to amortization
for the next five years will approximate $2.4 million annually. The
weighted-average life of the intangible assets subject to amortization is
approximately nine years.

10.  DEBT OBLIGATIONS

     The Company had notes and short-term obligations at December 31, 2005 and
2004 of $76.5 million and $51.8 million, respectively. The weighted average
interest rates on short-term borrowings and notes outstanding at December 31,
2005 and 2004 were 5.67% and 4.19%, respectively.

     A summary of long-term debt at December 31 is as follows:

<TABLE>
<CAPTION>
                                                              2005       2004
                                                            --------   --------
<S>                                                         <C>        <C>
Senior unsecured notes - due 2011 (8.75%) ...............   $196,452   $350,000
Senior secured notes - due 2010 (9.00%) .................    175,000    175,000
Term B loan - paid in full in 2005 ......................         --    118,373
Capital Securities of Trust Subsidiary -
   due 2028 (7.45%) .....................................    190,700    190,700
MoArk LLC debt - due 2006 through 2023
   (7.58% weighted average) .............................     59,136     73,471
Industrial development revenue bonds and other secured
   notes payable - due 2006 through 2016
   (1.65% to 6.00%) .....................................     14,893     14,917
Other debt ..............................................     25,232     21,455
                                                            --------   --------
                                                             661,413    943,916
Less current portion ....................................     22,245     10,680
                                                            --------   --------
Total long-term debt ....................................   $639,168   $933,236
                                                            ========   ========
</TABLE>

     In November 2005, the Company completed a "modified Dutch Auction" cash
tender of its 8.75% senior unsecured notes due 2011. The Company purchased
$149.8 million in aggregate principal amount of the notes at a purchase price of
$1,070 per $1,000 principal amount.

     In September 2005, the Company initiated a par offer in accordance with the
indentures governing the 8.75% senior unsecured notes and 9.00% senior secured
notes as a result of proceeds received from the sale of its investment in CF
Industries. A total of $3.8 million of the Company's 8.75% senior unsecured
notes were tendered. None of the 9.00% senior secured notes were tendered.

     During February and March 2005, the Company paid off the remaining balance
of the Term B loan without penalty. In February 2005, the Company made a $50.0
million prepayment on the Term B loan, of which approximately $46.5 million was
mandatory based on an excess cash flow calculation for the year ended December
31, 2004, as defined in the credit agreement. The remaining $3.5 million was
optional. In March 2005, the Company made a further prepayment of the remaining
$68.4 million on the Term B loan due, in part, from cash proceeds received from
the disposal of assets related to its swine production operations.

     Land O'Lakes Capital Trust I (the "Trust") was created for the sole purpose
of issuing $200.0 million of Capital Securities and investing the proceeds
thereof in an equivalent amount of debentures of the Company. The sole assets of
the Trust, $206.2 million principal amount Junior Subordinated Deferrable
Interest Debentures (the "Debentures") of the Company, bearing interest at 7.45%
and maturing on March 15, 2028, are eliminated upon consolidation.


                                       83

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     Interest paid on debt obligations was $78.0 million, $80.3 million and
$79.9 million in 2005, 2004 and 2003, respectively.

     At December 31, 2005, the Company also had a $200 million revolving credit
facility due January 2007, subject to a borrowing base limitation. There were no
borrowings on this facility as of December 31, 2005. As of December 31, 2005,
$147.6 million was available under the revolving credit facility after giving
effect to $52.4 million of outstanding letters of credit, which reduce
availability. Borrowings under the revolving credit facility bear interest at a
variable rate (either LIBOR or an Alternative Base Rate) plus an applicable
margin. The margin depends on Land O'Lakes leverage ratio. Based upon Land
O'Lakes leverage ratio at the end of 2005, the LIBOR margin for the revolving
credit facility is 200 basis points. Spreads for the Alternative Base Rate are
100 basis points lower than the applicable LIBOR spreads. LIBOR may be set for
one, two, three or six month periods at the election of the Company. As a result
of the Company's January 2006 purchase of the minority interest in MoArk, LLC,
the revolving credit facility was amended to allow for the continued treatment
of MoArk as an unrestricted subsidiary under this agreement.

     The Company's MoArk subsidiary had a $60 million revolving credit facility
due March 2006, subject to a borrowing base limitation. Borrowings of $19
million and $0, respectively, were outstanding at December 31, 2005 and 2004,
and are recorded as notes and short-term obligations. MoArk had outstanding
notes and term loans of $59.1 million and $73.5 million as of December 31, 2005
and 2004, respectively. The term loans and revolving credit facility are subject
to certain debt covenants, including a minimum interest coverage ratio and a
maximum net allowable capital expenditure calculation. At December 31, 2005,
MoArk was not in compliance with these covenant requirements and obtained
waivers until February 2007 for a term loan and until March 2006 for a term loan
and the revolving credit facility.

     Substantially all of the Company's assets, excluding assets of MoArk, have
been pledged to its lenders under the terms of its financing arrangements
including, but not limited to, the revolving credit facility and the senior
secured notes due 2010. Land O'Lakes debt covenants include certain minimum
financial ratios that were all satisfied as of December 31, 2005.

     The Company uses interest rate swaps to help manage exposure to interest
rate fluctuations. These swaps mirror the terms of the 8.75% senior unsecured
notes and effectively convert $102 million of such notes from a fixed 8.75% rate
to an effective rate of LIBOR plus 385 basis points. At December 31, 2005, the
aggregate notional amount of the swaps was $102 million. The fair value of the
interest rate swaps at December 31, 2005 was a liability of $1.9 million, which
is reflected in employee benefits and other liabilities, and the fair value
adjustment on the hedged debt was included in long-term debt in the consolidated
balance sheets.

     The maturity of long-term debt for the next five years and thereafter is
summarized in the table below.

<TABLE>
<CAPTION>
YEAR                             $ AMOUNT
----                             --------
<S>                              <C>
2006 .........................     22,245
2007 .........................     11,078
2008 .........................      5,748
2009 .........................      5,437
2010 .........................    180,589
2011 and thereafter ..........    436,316
</TABLE>


                                       84
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. OTHER COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                  2005       2004      2003
                                                                                --------   -------   --------
<S>                                                                             <C>        <C>       <C>
Net earnings ................................................................   $128,943   $21,433   $ 81,994
Minimum pension liability adjustment (net of income taxes of $1,5921 in 2005,
   $4,698 in 2004 and $40,645 in 2003) ......................................     (2,603)   (7,402)   (65,617)
Unrealized (loss) gain on available-for-sale investment securities ..........       (155)     (521)     1,062
Foreign currency translation adjustment .....................................      1,387      (184)      (508)
                                                                                --------   -------   --------
Total comprehensive income ..................................................   $127,572   $13,326   $ 16,931
                                                                                ========   =======   ========
</TABLE>

     The minimum pension liability adjustment for 2005, 2004 and 2003 reflects
$(5.7) million, $(8.6) million and $(60.9) million, respectively, for Land
O'Lakes defined benefit pension plans and $3.1 million, $1.2 million and $(4.7)
million, respectively, for the Company's portion of the minimum pension
liability adjustment for its joint venture in Agriliance LLC.

The components of accumulated other comprehensive loss at December 31 are as
follows:

<TABLE>
<CAPTION>
                                                                   2005       2004
                                                                 --------   ---------
<S>                                                              <C>        <C>
Minimum pension liability, net of income taxes ...............   $(76,638)  $(74,035)
Unrealized gain on available-for-sale investment securities ..        404        559
Foreign currency translation adjustment ......................      1,071       (316)
                                                                 --------   --------
Accumulated other comprehensive loss .........................   $(75,163)  $(73,792)
                                                                 ========   ========
</TABLE>

12. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following tables provide information about the carrying amount,
notional amount and fair value of financial instruments, including derivative
financial instruments. The Company believes it is not practical to estimate the
fair value of investments in other cooperatives due to the excessive cost
involved, as there is no established market for these investments. The carrying
value of financial instruments classified as current assets and current
liabilities, such as cash and short-term investments, receivables, accounts
payable and notes and short-term obligations, approximate fair value due to the
short-term maturity of the instruments. The carrying value of MoArk's
LIBOR-based debt also approximates fair value since the interest rate
automatically adjusts every one to three months and credit spreads are not
believed to have changed materially since the facilities were established. The
fair value of fixed rate long-term debt was estimated through a present value
calculation based on available information on prevailing market interest rates
for similar securities on the respective reporting dates and is summarized at
December 31, as follows:

<TABLE>
<CAPTION>
                                                             2005                  2004
                                                     -------------------   -------------------
                                                     CARRYING     FAIR     CARRYING     FAIR
                                                      AMOUNT      VALUE     AMOUNT      VALUE
                                                     --------   --------   --------   --------
<S>                                                  <C>        <C>        <C>        <C>
Senior unsecured notes due 2011 ..................   $196,452   $205,601   $350,000   $348,406
Senior secured notes due 2010 ....................    175,000    192,021    175,000    191,329
MoArk fixed rate debt ............................     37,843     36,744     50,943     51,986
Capital Securities of Trust Subsidiary due 2028 ..    190,700    153,031    190,700     78,957
</TABLE>

     The Company enters into futures and options contract derivatives to reduce
risk on the market value of inventory and fixed or partially fixed purchase and
sale contracts. The notional or contractual amount of derivatives provides an
indication of the extent of the Company's involvement in such instruments at
that time but does not represent exposure to market risk or future cash
requirements under certain of these instruments. A summary of the notional or
contractual amounts of these instruments at December 31 is as follows:

<TABLE>
<CAPTION>
                                                    2005                 2004
                                             ------------------   ------------------
                                             NOTIONAL     FAIR    NOTIONAL     FAIR
                                              AMOUNT     VALUE     AMOUNT     VALUE
                                             --------   -------   --------   -------
<S>                                          <C>        <C>       <C>        <C>
Derivative financial instruments:
   Commodity futures and options contracts
   Commitments to purchase ...............   $177,507   $  (433)  $147,965   $(3,790)
   Commitments to sell ...................    (61,162)   (4,477)   (62,224)   (4,171)
</TABLE>


                                       85

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. INCOME TAXES

The components of the income tax provision are summarized as follows:

<TABLE>
<CAPTION>
                                   2005      2004      2003
                                  ------   -------   -------
<S>                               <C>      <C>       <C>
Current expense (benefit)
   Federal ....................   $ (584)  $ 5,071   $ 7,999
   State ......................      912     1,310     1,029
                                  ------   -------   -------
                                     328     6,381     9,028
Deferred expense (benefit) ....
   Federal ....................    4,377    (4,368)    9,279
   State ......................      800      (609)    2,396
                                  ------   -------   -------
                                   5,177    (4,977)   11,675
                                  ------   -------   -------
Income tax expense ............   $5,505   $ 1,404   $20,703
                                  ======   =======   =======
</TABLE>

     The effective tax rate differs from the statutory rate primarily as a
result of the following:

<TABLE>
<CAPTION>
                                               2005     2004     2003
                                              ------   ------   ------
<S>                                           <C>      <C>      <C>
Statutory rate ............................    35.0%    35.0%    35.0%
Patronage refunds .........................   (31.3)   (28.0)   (13.0)
State income tax, net of federal benefit ..     0.8      1.5      2.1
Amortization of goodwill ..................      --      1.6      0.3
Effect of foreign operations ..............    (0.7)    (4.0)    (1.4)
Disposal of investment ....................      --     (4.2)      --
Additional taxes provided (benefited) .....     1.4      0.9     (5.0)
Meals and entertainment ...................     0.6      3.3      1.3
Tax credits ...............................    (0.6)    (2.9)    (0.6)
Other, net ................................    (1.0)     1.5      0.5
                                              -----    -----    -----
Effective tax rate ........................     4.2%     4.7%    19.2%
                                              =====    =====    =====
</TABLE>

     The significant components of the deferred tax assets and liabilities at
December 31 are as follows:

<TABLE>
<CAPTION>
                                            2005       2004
                                          --------   --------
<S>                                       <C>        <C>
Deferred tax assets related to:
   Deferred patronage .................   $ 45,864   $ 31,889
   Accrued expenses ...................     71,438     67,389
   Allowance for doubtful accounts ....      4,973      6,125
   Inventories ........................         --      3,673
   Asset impairments ..................      4,233     16,039
   Joint ventures .....................         --     20,553
   Net operating loss carryforwards ...     36,447     32,178
   Deferred tax credits ...............      7,502      6,773
                                          --------   --------
Total deferred tax assets .............    170,457    184,619
                                          --------   --------
Deferred tax liabilities related to:
   Property, plant and equipment ......    105,162    101,022
   Inventories ........................      3,779         --
   Joint Ventures .....................        989         --
   Intangibles ........................     10,778     26,643
   Deferred revenue ...................     13,827     17,265
   Other, net .........................        787      2,123
                                          --------   --------
Total deferred tax liabilities ........    135,322    147,053
                                          --------   --------
Net deferred tax assets ...............   $ 35,135   $ 37,566
                                          ========   ========
</TABLE>


                                       86

<PAGE>

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The net deferred tax assets are classified in the consolidated balance sheets as
follows:

<TABLE>
<CAPTION>
                                     2005      2004
                                   -------   -------
<S>                                <C>       <C>
Other current assets ...........   $26,402   $28,797
Other assets ...................     8,733     8,769
                                   -------   -------
Total net deferred tax assets ..   $35,135   $37,566
                                   =======   =======
</TABLE>

     As of December 31, 2005, the Company had net operating loss carryforwards
of approximately $95.3 million for tax purposes available to offset future
taxable income. If not used, these carryforwards will expire, primarily in years
2022 and 2024.

     As of December 31, 2005, a basis difference of approximately $13.0 million
existed with respect to investments in foreign subsidiaries and foreign
corporate joint ventures that are considered to be indefinite in nature. The
underlying deferred tax liability has not been recognized due to the permanent
nature of the investment.

     SFAS No. 109, "Accounting for Income Taxes," requires consideration of a
valuation allowance if it is "more likely than not" that benefits of deferred
tax assets will not be realized. The Company has determined, based on prior
earnings history, reversal of deferred liabilities and anticipated earnings,
that no valuation allowance is necessary.

     Income taxes paid (recovered) in 2005, 2004 and 2003 were $0.1 million,
$11.1 million and $(6.6) million, respectively.

14. PENSION AND OTHER POSTRETIREMENT PLANS

     The Company has a qualified, defined benefit pension plan which generally
covers all eligible employees not participating in a labor negotiated plan. Plan
benefits are generally based on years of service and employees' highest
compensation during five consecutive years of employment. Annual payments to the
pension trust fund are determined in compliance with the Employee Retirement
Income Security Act ("ERISA"). In addition, the Company has a noncontributory,
supplemental executive retirement plan ("SERP") and a discretionary capital
accumulation plan ("CAP"), both of which are non-qualified, defined benefit
pension plans and are unfunded.

     The Company also sponsors plans that provide certain health care benefits
for retired employees. Generally, employees hired by Land O'Lakes prior to
October 1, 2002 become eligible for these benefits upon meeting certain age and
service requirements; employees hired by Land O'Lakes after September 30, 2002
are eligible for access-only retirement health care benefits at their expense.
The Company funds only the plans' annual cash requirements.

The Company uses a November 30 measurement date for its plans.


                                       87

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OBLIGATION AND FUNDED STATUS AT DECEMBER 31

<TABLE>
<CAPTION>
                                                                               PENSION BENEFITS                      OTHER
                                                                  -----------------------------------------      POSTRETIREMENT
                                                                     QUALIFIED PLAN     NON-QUALIFIED PLANS         BENEFITS
                                                                  -------------------   -------------------   -------------------
                                                                    2005       2004       2005       2004       2005       2004
                                                                  --------   --------   --------   --------   --------   --------
<S>                                                               <C>        <C>        <C>        <C>        <C>        <C>
Change in benefit obligation:
   Benefit obligation at beginning of year ....................   $440,637   $415,398   $ 46,666   $ 47,732   $ 71,194   $ 67,924
   Service cost ...............................................     17,143     16,957        297        154        650        804
   Interest cost ..............................................     27,084     24,627      2,939      2,745      3,913      4,079
   Plan participants' contributions ...........................         --         --         --         --      2,185      2,043
   Plan amendments ............................................         --     (3,309)        --       (199)        --         --
   Actuarial loss (gain) ......................................     44,747      5,584      6,476     (1,329)      (454)     4,481
   Benefits paid ..............................................    (20,751)   (18,620)    (2,629)    (2,437)    (7,489)    (8,137)
                                                                  --------   --------   --------   --------   --------   --------
   Benefit obligation at end of year ..........................   $508,860   $440,637   $ 53,749   $ 46,666   $ 69,999   $ 71,194
                                                                  ========   ========   ========   ========   ========   ========
Change in plan assets:
   Fair value of plan assets at beginning of year .............   $390,390   $361,265   $     --   $     --   $     --   $     --
   Actual gain on plan assets .................................     31,101     37,745         --         --         --         --
   Company contributions ......................................     25,000     10,000      2,629      2,437      5,304      6,094
   Plan participants' contributions ...........................         --         --         --         --      2,185      2,043
   Benefits paid ..............................................    (20,751)   (18,620)    (2,629)    (2,437)    (7,489)    (8,137)
                                                                  --------   --------   --------   --------   --------   --------
   Fair value of plan assets at end of year ...................   $425,740   $390,390   $     --   $     --   $     --   $     --
                                                                  ========   ========   ========   ========   ========   ========
   Funded status ..............................................   $(83,120)  $(50,247)  $(53,749)  $(46,666)  $(69,999)  $(71,194)
   Unrecognized net actuarial loss ............................    167,403    130,200     14,288      8,738     34,142     37,062
   Unrecognized prior service cost ............................        149        182     (2,076)    (2,539)     2,128      2,394
   Unrecognized transition obligation .........................         --         --         --         --      4,500      5,143
                                                                  --------   --------   --------   --------   --------   --------
   Net amount recognized ......................................   $ 84,432   $ 80,135   $(41,537)  $(40,467)  $(29,229)  $(26,595)
                                                                  ========   ========   ========   ========   ========   ========
Amounts recognized in consolidated balance sheets consist of:
   Accrued benefit liability ..................................   $(30,681)  $(28,798)  $(50,064)  $(45,934)  $(29,229)  $(26,595)
   Intangible asset ...........................................        149        182         --         --         --         --
   Accumulated other comprehensive loss before income taxes ...    114,964    108,751      8,527      5,467         --         --
                                                                  --------   --------   --------   --------   --------   --------
   Net amount recognized ......................................   $ 84,432   $ 80,135   $(41,537)  $(40,467)  $(29,229)  $(26,595)
                                                                  ========   ========   ========   ========   ========   ========
</TABLE>

     The accumulated benefit obligation for the Company's defined benefit
pension plan was $456.4 million and $419.2 million at December 31, 2005 and
2004, respectively. The accumulated benefit pension obligation for the Company's
non-qualified, defined benefit pension plans was $50.1 million and $45.9 million
at December 31, 2005 and 2004, respectively.


                                       88
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     Information for pension plans with an accumulated benefit obligation in
excess of plan assets at December 31 is as follows:

<TABLE>
<CAPTION>
                                                 PENSION BENEFITS
                                    -----------------------------------------
                                       QUALIFIED PLAN     NON-QUALIFIED PLANS
                                    -------------------   -------------------
                                      2005       2004        2005      2004
                                    --------   --------    -------   -------
<S>                                 <C>        <C>         <C>       <C>
Projected benefit obligation ....   $508,860   $440,637    $53,749   $46,666
Accumulated benefit obligation ..    456,421    419,188     50,064    45,934
Fair value of plan assets .......    425,740    390,390         --        --
</TABLE>

     Components of net periodic benefit cost are as follows:

<TABLE>
<CAPTION>
                                                  PENSION BENEFITS          OTHER POSTRETIREMENT BENEFITS
                                           ------------------------------   -----------------------------
                                             2005       2004       2003         2005     2004     2003
                                           --------   --------   --------      ------   ------   ------
<S>                                        <C>        <C>        <C>        <C>         <C>      <C>
Service cost ...........................   $ 17,440   $ 17,111   $ 16,586      $  650   $  804   $  803
Interest cost ..........................     30,023     27,372     27,169       3,913    4,079    4,353
Expected return on assets ..............    (33,577)   (32,736)   (32,806)         --       --       --
Amortization of actuarial loss .........     10,946      5,923      1,771       2,465    2,346    2,169
Amortization of prior service cost .....       (430)       723        844         266      266      266
Amortization of transition obligation ..         --         --         --         643      643      643
                                           --------   --------   --------      ------   ------   ------
Net periodic benefit cost ..............   $ 24,402   $ 18,393   $ 13,564      $7,937   $8,138   $8,234
                                           ========   ========   ========      ======   ======   ======
</TABLE>

     ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
                                                         PENSION BENEFITS
                                              --------------------------------------
                                               QUALIFIED PLAN    NON-QUALIFIED PLANS
                                              ----------------   -------------------
                                               2005      2004       2005     2004
                                              ------   -------     ------   ------
<S>                                           <C>      <C>       <C>        <C>
(Decrease) increase in intangible asset ...   $  (33)  $(4,470)    $   --   $   --
Increase in additional minimum liability ..    6,180     7,376      3,060    2,130
                                              ------   -------     ------   ------
Increase in other comprehensive loss,
   before income taxes ....................   $6,213   $11,846     $3,060   $2,130
                                              ======   =======     ======   ======
</TABLE>

     Weighted-average assumptions used to determine benefit obligations at
December 31:

<TABLE>
<CAPTION>
                                                                      OTHER
                                                                 POSTRETIREMENT
                                              PENSION BENEFITS      BENEFITS
                                              ----------------   --------------
                                                2005   2004       2005   2004
                                                ----   ----       ----   ----
<S>                                           <C>      <C>       <C>     <C>
Discount rate..............................     5.75%  6.00%      5.75%  6.00%
Rate of long-term return on plan assets....     8.25%  8.50%      N/A    N/A
Rate of compensation increase..............     4.25%  4.25%      N/A    N/A
</TABLE>

     Weighted-average assumptions used to determine net periodic benefit cost
for years ended December 31:

<TABLE>
<CAPTION>
                                               PENSION BENEFITS    OTHER POSTRETIREMENT BENEFITS
                                              ------------------   -----------------------------
                                              2005   2004   2003        2005   2004   2003
                                              ----   ----   ----        ----   ----   ----
<S>                                           <C>    <C>    <C>    <C>         <C>    <C>
Discount rate..............................   6.00%  6.25%  7.00%       6.00%  6.25%  7.00%
Rate of long-term return on plan assets....   8.50%  8.50%  8.50%       N/A    N/A    N/A
Rate of compensation increase..............   4.25%  4.25%  4.25%       N/A    N/A    N/A
</TABLE>

     The Company employs a building block approach in determining the long-term
rate of return for the assets in the qualified, defined benefit pension plan.
Historical markets are studied and long-term historical relationships between
equities and fixed income are preserved consistent with the widely accepted
capital market principle that assets with higher volatility generate a greater
return over the long run. Current market factors, such as inflation and interest
rates, are evaluated before long-term capital market assumptions are determined.
Diversification and rebalancing of the plan assets are properly considered as
part of establishing the long-term portfolio return. Peer data and historical
returns are reviewed to check for reasonability and appropriateness. The Company
determined its discount rate assumption at year end based on market trends and
prevailing interest rates on long-term corporate bonds. Specific indicators
included long-term Treasury rates, corporate bond spreads as reported by Reuters
and the Moody's Investor Services AA corporate bond index.


                                       89

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     Assumed health care cost trend rates at December 31:

<TABLE>
<CAPTION>
                                                         2005    2004
                                                        -----   -----
<S>                                                     <C>     <C>
Health care cost trend rate assumed for next year ...   10.00%  10.00%
Rate of which the cost trend is assumed to decline
   (ultimate trend rate) ............................    5.50%   5.50%
Year that rate reaches ultimate trend rate ..........    2011    2010
</TABLE>

     Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage point change in the
assumed health care cost trend rate at December 31, 2005 would have the
following effects:

<TABLE>
<CAPTION>
                                                  1-PERCENTAGE   1-PERCENTAGE
                                                      POINT          POINT
                                                    INCREASE       DECREASE
                                                  ------------   ------------
<S>                                               <C>            <C>
Effect on total of service and interest cost...      $  242        $  (214)
Effect on postretirement benefit obligation....      $4,316        $(3,903)
</TABLE>

     PLAN ASSETS

     The Company's qualified, defined benefit pension plan weighted-average
asset allocations at December 31, 2005 and December 31, 2004, by asset category,
are as follows:

<TABLE>
<CAPTION>
                                       2005   2004   TARGET
                                       ----   ----   ------
<S>                                    <C>    <C>    <C>
Asset category
U.S. equity securities .............    55%    55%     55%
International equity securities ....    10%    10%     10%
Fixed income securities and bonds ..    35%    35%     35%
                                       ---    ---     ---
Total ..............................   100%   100%    100%
                                       ===    ===     ===
</TABLE>

     The Company has a Statement of Pension Investment Policies and Objectives
(the "Statement") that guides the retirement plan committee in its mission to
effectively monitor and supervise the pension plan assets. Two general
investment goals are reflected in the Statement: 1) the investment program for
the pension plan should provide returns which improve the funded status of the
plan over time and reduce the Company's pension costs, and 2) the Company
expects to receive above-average performance from the pension portfolio's
managers in exchange for the fees paid to them. As a result, the total fund's
annualized return before fees should, over a five-year horizon, exceed the
annualized, weighted total rate of return of a customized index by 1 percentage
point and rank in the top 35% on the Hewitt Associates pension fund universe.
Although not a guarantee of future results, the total fund's five-year
annualized return before fees was 5.25%, which exceeded the custom index by 2
percentage points, and ranked in the top 39% on the Hewitt Associates pension
fund universe. The 2005 total fund's annualized return was 7.34%, which exceeded
the custom index by 1.74 percentage points. The customized index contains the
S&P 500 (weighted 55%), EAFE Index (weighted 10%) and Lehman Bros. Aggregate
Bond Index (weighted 35%). Beginning April 1, 2005, the composite of the
customized index changed by eliminating the S&P (weighted 55%) and replacing it
with the Russell 1000 (weighted 45%) and Russell 2000 (weighted 10%).

     CASH FLOW

     The Company expects to contribute approximately $17.8 million to its
defined benefit pension plans and $5.9 million to its other postretirement
benefit plans in 2006.

     The benefits anticipated to be paid from the benefit plans, which reflect
expected future years of service, and the Medicare subsidy expected to be
received are as follows:

<TABLE>
<CAPTION>
                  QUALIFIED     NON-QUALIFIED   OTHER POSTRETIREMENT   HEALTH CARE SUBSIDY
                 PENSION PLAN   PENSION PLANS         BENEFITS              RECEIPTS
                 ------------   -------------   --------------------   -------------------
<S>              <C>            <C>             <C>                    <C>
2006 .........       21,000          2,800              5,900                (1,100)
2007 .........       22,000          2,900              6,200                (1,200)
2008 .........       23,000          3,000              6,500                (1,300)
2009 .........       24,000          3,200              6,700                (1,400)
2010 .........       26,000          3,400              6,900                (1,500)
2011-2015 ....      163,000         19,900             36,000                (9,200)
</TABLE>


                                       90

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     OTHER BENEFIT PLANS

Certain eligible employees are covered by defined contribution plans. The
expense for these plans was $14.3 million, $14.2 million and $12.7 million for
2005, 2004 and 2003, respectively.

15.  EQUITIES

     The authorized capital stock at December 31, 2005 consists of 2,000 shares
of Class A Common, $1,000 par value; 50,000 shares of Class B Common, $1 par
value; 500 shares of nonvoting Class C Common, $1,000 par value; 10,000 shares
of nonvoting Class D Common, $1 par value; and 1,000,000 shares of nonvoting, 8%
non-cumulative Preferred, $10 par value.

     The following details the activity in membership shares during the three
years ended December 31, 2005:

<TABLE>
<CAPTION>
                                              NUMBER OF SHARES
                                  ---------------------------------------
                                            COMMON
                                  ---------------------------   ---------
                                    A       B      C      D     PREFERRED
                                  -----   -----   ---   -----   ---------
<S>                               <C>     <C>     <C>   <C>     <C>
December 31, 2002 .............   1,127   5,207   194   1,105    86,280
   New Members ................       3     247    --     156        --
   Redemptions ................     (36)   (540)   (4)   (119)   (2,762)
                                  -----   -----   ---   -----    ------
December 31, 2003 .............   1,094   4,914   190   1,142    83,518
   New Members ................       1     188     1     141        --
   Redemptions ................     (38)   (758)   (8)   (165)   (2,130)
                                  -----   -----   ---   -----    ------
December 31, 2004 .............   1,057   4,344   183   1,118    81,388
   New Members ................       8     168    --      31        --
   Redemptions ................     (61)   (394)   (8)   (125)   (3,072)
                                  -----   -----   ---   -----    ------
December 31, 2005 .............   1,004   4,118   175   1,024    78,316
                                  =====   =====   ===   =====    ======
</TABLE>

     Allocated patronage to members of $118.3 million, $23.6 million and $40.0
million for the years ended December 31, 2005, 2004 and 2003, respectively, is
based on earnings in specific patronage or product categories and in proportion
to the business each member does within each category. For 2005, Land O'Lakes
issued qualified patronage and non-qualified patronage equities in the amounts
of $80.8 million and $37.5 million, respectively. Qualified patronage equities
are tax deductible by the Company when qualified written notices of allocation
are issued and non-qualified patronage equities are tax deductible when redeemed
with cash.

     The allocation to retained earnings of $8.8 million in 2005, $(4.1) million
in 2004 and $42.3 million in 2003 represents earnings or (losses) generated by
non-member businesses plus amounts under the retained earnings program as
provided in the bylaws of the Company.

16.  ACQUISITIONS

     In 2005, Land O'Lakes paid $30.1 million for the final payment on the
Madison Dairy Produce Company acquisition, a private label butter business
acquired by Dairy Foods in 2000. The $30.1 million was recorded in accrued
liabilities in the consolidated balance sheet as of December 31, 2004. In
December 2005, the Company paid $3.2 million for the remaining 1.5% minority
interest in Cheese & Protein International LLC, a Dairy Foods cheese
manufacturing and whey processing plant in Tulare, California. In September
2005, Feed increased the Company's ownership in Penny-Newman Milling LLC, a
grain and feed company in Fresno, California, from 40.0% to 50.01% with an
additional investment of $4.0 million and began consolidating Penny-Newman
Milling LLC in its financial statements effective September 30, 2005. In August
2005, the Company paid $8.2 million to acquire the assets of an alfalfa seed
company. The results of operations of this Seed acquisition are included in the
consolidated financial statements since that date. Other acquisition spending
totaled $0.6 million.

     In June 2004, the Company completed the purchase of Farmland Industries 8%
ownership position in Land O'Lakes Farmland Feed LLC, which gave Land O'Lakes
100% ownership of the entity. The Company paid $12.2 million to purchase the
minority interest. Effective October 21, 2004, Land O'Lakes Farmland Feed LLC
was renamed Land O'Lakes Purina Feed LLC.


                                       91

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

17.  RESTRUCTURING AND IMPAIRMENT CHARGES

     A summary of restructuring and impairment charges is as follows:

<TABLE>
<CAPTION>
                                                         2005     2004     2003
                                                        ------   ------   ------
<S>                                                     <C>      <C>      <C>
Restructuring charges ...............................   $  328   $2,441   $3,532
Impairment charges ..................................    6,053    5,374    2,810
                                                        ------   ------   ------
Total restructuring and impairment charges ..........   $6,381   $7,815   $6,342
                                                        ======   ======   ======
</TABLE>

     RESTRUCTURING CHARGES

     In 2005, the Company had restructuring charges of $0.3 million. As a result
of competitive conditions in the Upper Midwest, Dairy Foods will close a cheese
facility in Greenwood, Wisconsin in 2006. A $1.1 million restructuring charge
was recorded in December 2005, which represented severance for approximately 30
employees and other exit costs. The Company expects to incur an additional $1.9
million of restructuring charges in 2006 related to contract termination and
other shut-down costs for this facility. Partially offsetting this charge were
reversals of $0.4 million related to prior year restructuring charges for the
closure of the Volga, South Dakota cheese facility and $0.4 million related to
prior year restructuring charges for downsizing Feed operations. The balance
remaining to be paid at December 31, 2005 for employee severance, outplacement
and other exit costs was $1.6 million.

     In 2004, the Company had restructuring charges of $2.4 million. Feed
recorded a $2.9 million restructuring charge, which represented severance costs
for approximately 100 employees due to the downsizing of operations. Dairy Foods
had a reversal of $0.5 million related to prior year restructuring charges for
the closure of the Volga, S.D. cheese facility. The balance remaining to be paid
at December 31, 2004 for employee severance and outplacement costs was $3.8
million.

     In 2003, the Company recorded restructuring charges of $3.5 million. Of
this amount, Dairy Foods recorded restructuring charges of $2.6 million for
severance costs related to the closure of facilities in Perham, Minnesota and
Volga, S.D. Feed recorded a restructuring charge of $0.6 million for severance
costs related to the closure of feed plants, and Seed recorded a restructuring
charge of $0.3 million for severance costs related to the closure of a facility.
The balance remaining to be paid at December 31, 2003 for employee severance and
outplacement costs was $4.2 million.

     IMPAIRMENT CHARGES

     In 2005, the Company incurred $6.1 million of impairment charges as the
book values of certain fixed assets were written down to fair value based on
estimated selling prices. In Dairy Foods, a $2.5 million impairment charge was
incurred for the write-down of the Greenwood, Wisconsin cheese facility and $0.9
million was incurred for the write-down of manufacturing equipment at another
facility. In Feed, $2.3 million of impairment charges were recorded, primarily
related to the write-down of the Liberal, Kansas feed plant. This was the result
of a decision to close and sell the facility due to declines in livestock
numbers in the region. In Layers, a $0.4 million impairment charge for the
write-down of plant fixed assets was recorded.

     In 2004, the Company incurred $5.4 million of impairment charges. This
included a $1.5 million charge for goodwill impairment in Seed due to the sale
of a subsidiary as well as charges for impairments related to the write-down of
certain assets to their estimated fair value of $3.1 million in Feed, $0.6
million in Dairy Foods and $0.2 million in Other.

     In 2003, the Company recorded impairment charges of $2.8 million.
Impairment charges of $1.3 million in Feed and $0.5 million in Seed were
recognized for write-downs of certain assets to their estimated value. The
Company also recorded a goodwill impairment in Seed for $1.0 million.


                                       92
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

18. ASSETS AND LIABILITIES HELD FOR SALE

     As part of its ongoing efforts to reposition non-strategic assets, the
Company committed to a plan in the fourth quarter of 2005 to sell a portion of
net assets in Layers. Management expects the asset repositioning to occur within
a year. Accordingly, certain assets and liabilities were presented as assets
held for sale in the consolidated financial statements. Balance sheet amounts
for assets of $48.7 million and liabilities of $0.4 million have been
reclassified to other current assets and accrued expenses, respectively, in the
consolidated balance sheet at December 31, 2005.

19. DISCONTINUED OPERATIONS

     During 2005, the Company completed the sale of its swine production assets
for net proceeds of $42.0 million which resulted in a gain, net of income taxes,
of $0.1 million. Results from operations and balance sheet information have been
classified and reported as discontinued operations and are set forth in the
table below. The balance sheet amounts listed below are classified in other
current assets and accrued expenses in the consolidated financial statements.
The Company allocated interest to discontinued operations based on the amount of
debt repaid as a result of the divestiture of these assets. Interest allocated
to discontinued operations was $0.4 million in 2005, $2.1 million in 2004 and
$1.9 million in 2003.

<TABLE>
<CAPTION>
                                                     2005      2004       2003
                                                   -------   --------   -------
<S>                                                <C>       <C>        <C>
Net sales ......................................   $10,737   $ 65,691   $56,918

Earnings (loss) from discontinued operations
   before income taxes .........................     3,509    (10,955)   (8,022)
Income tax (expense) benefit ...................    (1,342)     4,208     3,100
                                                   -------   --------   -------
Earnings (loss) from discontinued operations,
   net of income taxes .........................   $ 2,167   $ (6,747)  $(4,922)
                                                   =======   ========   =======
</TABLE>

<TABLE>
<CAPTION>
                                                   2005     2004
                                                   ----   -------
<S>                                                <C>    <C>
Current assets of discontinued operations.......   $ --   $36,955
Current liabilities of discontinued operations..    349     6,725
</TABLE>

20. OTHER EXPENSE (INCOME), NET

<TABLE>
<CAPTION>
                                                     2005      2004      2003
                                                   -------   -------   --------
<S>                                                <C>       <C>       <C>
Loss on extinguishment of debt .................   $11,014   $    --   $    525
Gain on legal settlements ......................      (584)   (5,415)   (22,842)
Gain on sale of investments, excluding CF
   Industries ..................................    (1,135)     (623)      (877)
Gain on divestiture of businesses ..............        --    (1,438)      (684)
Gain on sale of intangibles ....................        --        --       (550)
                                                   -------   -------   --------
Total ..........................................   $ 9,295   $(7,476)  $(24,428)
                                                   =======   =======   ========
</TABLE>

     In 2005, the Company recorded an $11.0 million loss on extinguishment of
$149.8 million of its senior unsecured notes due 2011. In 2003, a prepayment
penalty on Term loan B resulted in a loss of $0.5 million.

     In 2005, 2004 and 2003, the Company recorded gain on legal settlements of
$0.6 million, $5.4 million and $22.8 million, respectively. The gains represent
cash received in judgment from product suppliers against whom the Company
alleged certain price-fixing claims.

     In 2005, the Company recorded a gain of $1.1 million on the sale of
investments in Feed, from which the Company received $1.5 million in cash. In
2004, the Company recorded gains of $0.6 million on the sale of investments in
Feed and received $2.3 million in cash. In 2003, the Company sold its investment
in a swine joint venture in Feed for $3.0 million in cash and recorded a $0.9
million gain on sale of investment.


                                       93

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     In 2005, Feed divested of a subsidiary and received $2.6 million in cash,
which resulted in no gain or loss. During 2004, Land O'Lakes divested of a Dairy
foods business for $7.5 million in cash, which resulted in a gain of $1.5
million. The Company also divested of a seed business for $5.6 million in cash,
which resulted in a loss of $0.1 million. In 2003, the divestiture of a powdered
cocoa business in Dairy Foods resulted in a gain of $1.4 million and $1.4
million in cash, which was partially offset by a $0.7 million loss on a
divestiture of a Feed business in Taiwan, from which the Company received $0.4
million.

     In 2003, the Company recorded a $0.6 million gain on the sale of a customer
list relating to the divestiture of a joint venture in Taiwan.

21. COMMITMENTS AND CONTINGENCIES

     The Company leases various equipment and real properties under long-term
operating leases. Total rental expense was $53.1 million in 2005, $51.5 million
in 2004 and $51.7 million in 2003. Most of the leases require payment of
operating expenses applicable to the leased assets. Management expects that in
the normal course of business most leases that expire will be renewed or
replaced by other leases.

     Minimum lease commitments under noncancelable operating leases at December
31, 2005 totaled $103.8 million composed of $31.4 million for 2006, $24.8
million for 2007, $18.6 million for 2008, $13.9 million for 2009, $10.3 million
for 2010 and $4.8 million for later years.

     At December 31, 2005, the Company had $9.3 million in obligations under
capital lease which represents the present value of the future minimum lease
payments for the leases of MoArk, LLC. MoArk leases machinery, buildings and
equipment at various locations. In July 2005, the Company voluntarily prepaid
the remaining $85.9 million balance on its capital lease obligation for Cheese &
Protein International LLC. This prepayment permitted the release of $20.3
million of restricted cash, which the Company had pledged to support the lease.
Simultaneous with the prepayment of the CPI lease, the Company elected to
designate CPI as a restricted subsidiary under the Land O'Lakes senior bond
indentures and a loan party under the Company's revolving credit facility. In
2005, CPI was included in the Company's covenant calculations for the senior
debt facilities and CPI now guarantees the Company's obligations under the
revolving credit facility, the 8.75% senior unsecured notes and the 9.00% senior
secured notes. CPI's assets have also been pledged to support the revolving
credit facility and the 9.00% senior secured notes.

     Minimum commitments under obligations under capital leases at December 31,
2005 total $9.3 million, including $1.2 million of interest, composed of $1.7
million for 2006, $1.7 million for 2007, $1.4 million for 2008, $1.4 million for
2009, $1.3 million for 2010 and $1.8 million for later years.

     At December 31, 2005, the Company had a commitment to purchase the
remaining 49.9% minority interest of Penny-Newman Milling LLC, a consolidated
subsidiary. In January 2006, the Company paid $13.2 million in cash to increase
its ownership of the entity to 100%.

     At December 31, 2005, the Company had a commitment to issue allocated
member equities to patrons from the 1998 acquisition of Dairyman's Cooperative
Creamery Association (DCCA). The amount of this commitment is estimated at
approximately $13 million as of December 31, 2005 and is contingent on milk
supplies received from DCCA members through December 31, 2006. The equities are
to be allocated to members by 2007.

     The Company has contracted commitments to purchase weaner and feeder pigs
which are sold to producers or local cooperatives under long-term supply
contracts. At December 31, 2005 these commitments total $87.5 million, composed
of $42.2 million in 2006, $28.2 million in 2007, $10.8 million in 2008, $3.8
million in 2009, $1.8 million in 2010, and $0.7 million thereafter.

     The Company's MoArk, LLC subsidiary has guaranteed certain loan agreements
for an equity investee. MoArk is responsible for 50% of the outstanding balance
of these guaranteed notes totaling $11.3 million as of December 31, 2005. These
notes are fully secured by collateral of the equity investee.

     The Company is currently and from time to time involved in litigation and
environmental claims incidental to the conduct of business. The damages claimed
in some of these cases are substantial. Although the amount of liability that
may result from these matters cannot be ascertained, the Company does not
currently believe that, in the aggregate, they will result in liabilities
material to the Company's consolidated financial condition, future results of
operations or cash flows.


                                       94

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     On February 24, 2004, Cache La Poudre Feeds, LLC ("Cache") filed a lawsuit
in the United States District Court for the District of Colorado against the
Company, Land O'Lakes Farmland Feed LLC and certain named individuals claiming
trademark infringement with respect to certain animal feed sales under the
Profile trade name. Cache seeks damages of at least $132.8 million, which, it
claims, is the amount the named entities generated in gains, profits and
advantages from using the Profile trade name. In response to Cache's complaint,
the Company denied any wrongdoing and pursued certain counterclaims against
Cache relating to trademark infringement, and other claims against Cache for,
among other things, defamation and libel. In addition, the Company believes that
Cache's calculation of the Company's gains, profits and advantages allegedly
generated from the use of the Profile trade name are grossly overstated. The
Company believes that sales revenue generated from the sale of products carrying
the Profile trade name was immaterial. Although the amount of any loss that may
result from this matter cannot be ascertained with certainty, management does
not believe that it will result in a loss material to the Company's consolidated
financial condition, future results of operations or cash flow. The trial is
scheduled for June 2007.

     In 2003, several lawsuits were filed against the Company by Ohio alpaca
producers in which it was alleged that the Company manufactured and sold animal
feed that caused the death of, or damage to, certain of the producers' alpacas.
The two remaining lawsuits are scheduled to go to trial in 2006.

     In a letter dated January 18, 2001, the Company was identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party for cleanup costs in connection with hazardous substances and
wastes at the Hudson Refinery Superfund Site in Cushing, Oklahoma. The letter
invited the Company to enter into negotiations with the EPA for the performance
of a remedial investigation and feasibility study at the site and also demanded
that the Company reimburse the EPA approximately $8.9 million for remediation
expenses already incurred at the site. In March 2001, the Company responded to
the EPA denying any responsibility. No further communication has been received
from the EPA.

22. SEGMENT INFORMATION

     The Company operates in five segments: Dairy Foods, Feed, Seed, Agronomy
and Layers.

     Dairy Foods produces, markets and sells products such as butter, spreads,
cheese, and other dairy related products. Products are sold under
well-recognized national brand names including LAND O LAKES, the Indian Maiden
logo and Alpine Lace, as well as under regional brand names such as New Yorker.

     Feed is largely comprised of the operations of Land O'Lakes Purina Feed LLC
("Land O'Lakes Purina Feed"), the Company's wholly owned subsidiary. Land
O'Lakes Purina Feed develops, produces, markets and distributes animal feeds
such as ingredient feed, formula feed, milk replacers, vitamins and additives.

     Seed is a supplier and distributor of crop seed products in the United
States. A variety of crop seed is sold, including alfalfa, soybeans, corn and
forage and turf grasses.

     Agronomy consists primarily of the Company's 50% ownership interest in
Agriliance LLC ("Agriliance"), which is accounted for under the equity method.
Agriliance markets and sells two primary product lines: crop protection
(including herbicides and pesticides) and crop nutrients (including fertilizers
and micronutrients).

     Layers consists of the Company's MoArk subsidiary, which was consolidated
as of July 1, 2003. MoArk produces and markets shell eggs and egg products that
are sold to retail and wholesale customers for consumer and industrial use
throughout the United States.


                                       95
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

     The Company allocates corporate administrative expense to all of its
business segments, both directly and indirectly. Corporate staff functions that
are able to determine actual services provided to each segment allocate expense
on a direct and predetermined basis. All other corporate staff functions
allocate expense indirectly based on each segment's percentage of total invested
capital. A majority of corporate administrative expense is allocated directly.

<TABLE>
<CAPTION>
                                                                                                            OTHER/
                                           DAIRY FOODS      FEED        SEED      AGRONOMY     LAYERS    ELIMINATIONS   CONSOLIDATED
                                           -----------   ----------   --------   ---------    --------   ------------   ------------
<S>                                        <C>           <C>          <C>        <C>          <C>        <C>            <C>
FOR THE YEAR ENDED DECEMBER 31, 2005
Net sales ................................  $3,904,618   $2,586,870   $653,871   $      --    $406,965     $  4,353      $7,556,677
Cost of sales(1) .........................   3,718,051    2,296,280    569,503          --     385,062        2,764       6,971,660
Selling, general and administrative ......     151,147      227,433     53,827      27,574      32,588        2,402         494,971
Restructuring and impairment charges .....       4,121        1,770         --          --         433           57           6,381
Interest expense, net ....................      34,889       26,320      1,146       6,248      14,235       (2,965)         79,873
Other expense (income), net ..............         (14)      (1,603)        --      11,014          --         (102)          9,295
Gain on sale of investment in CF
   Industries, Inc........................          --           --         --    (102,446)         --           --        (102,446)
Equity in (earnings) loss of affiliated
   companies .............................      (3,969)      (1,341)        --   $ (37,870)   $  6,477     $     11      $  (36,692)
Minority interest in earnings of
   subsidiaries ..........................          --        1,349          5          --          --           --            1354
                                            ----------   ----------   --------   ---------    --------     --------      ----------
Earnings (loss) before income taxes and
   discontinued operations ...............  $      393   $   36,662   $ 29,390   $  95,480    $(31,830)    $  2,186      $  132,281
                                            ==========   ==========   ========   =========    ========     ========      ==========
FOR THE YEAR ENDED DECEMBER 31, 2004
Net sales ................................  $3,956,883   $2,626,577   $518,754   $      --    $541,318     $ 13,294      $7,656,826
Cost of sales(1) .........................   3,759,134    2,370,029    448,383          --     476,039        9,533       7,063,118
Selling, general and administrative ......     160,705      237,687     48,953      12,846      38,499        2,245         500,935
Restructuring and impairment charges .....          54        6,040      1,480          --          --          241           7,815
Interest expense, net ....................      28,142       26,676      3,938       9,273      14,127          958          83,114
Other expense (income), net ..............      (1,006)      (6,169)       146          --        (448)           1          (7,476)
Loss on impairment of investment in
   CF Industries, Inc. ...................          --           --         --      36,500          --           --          36,500
Equity in (earnings) loss of affiliated
   companies .............................      (6,614)      (2,007)        --     (41,923)     (7,918)          50         (58,412)
Minority interest in earnings of
   subsidiaries ..........................          --        1,641          8          --          --           (1)          1,648
                                            ----------   ----------   --------   ---------    --------     --------      ----------
Earnings (loss) before income taxes and
   discontinued operations ...............  $   16,468   $   (7,320)  $ 15,846   $ (16,696)   $ 21,019     $    267      $   29,584
                                            ==========   ==========   ========   =========    ========     ========      ==========
FOR THE YEAR ENDED DECEMBER 31, 2003
Net sales ................................  $2,975,027   $2,467,207   $466,225   $      --    $317,829     $ 29,813      $6,256,101
Cost of sales(1) .........................   2,804,770    2,179,115    403,129          --     264,727       20,128       5,671,869
Selling, general and administrative ......     141,368      229,989     46,354      13,993      24,598        8,308         464,610
Restructuring and impairment charges .....       2,605        1,962      1,775          --          --           --           6,342
Interest expense, net ....................      29,107       28,133      3,384       9,019       9,869        1,460          80,972
Other expense (income), net ..............      (1,487)     (23,156)        --          --        (310)         525         (24,428)
Equity in (earnings) loss of affiliated
   companies .............................      (4,952)      (1,641)        --     (36,237)    (14,480)          61         (57,249)
Minority interest in earnings of
   subsidiaries ..........................          --        6,366         --          --          --           --           6,366
                                            ----------   ----------   --------   ---------    --------     --------      ----------
Earnings (loss) before income taxes and
   discontinued operations ...............  $    3,616   $   46,439   $ 11,583   $  13,225    $ 33,425     $   (669)     $  107,619
                                            ==========   ==========   ========   =========    ========     ========      ==========
2005
Total assets .............................  $  899,019   $  920,956   $471,121   $ 187,565    $311,558     $304,839      $3,095,058
Depreciation and amortization ............      42,697       35,196      2,257       6,088      10,251       11,556         108,045
Capital expenditures .....................      20,462       25,912      2,374          --      17,714        3,962          70,424

2004
Total assets .............................  $  976,788   $  890,304   $398,924   $ 391,532    $276,859     $265,375      $3,199,782
Depreciation and amortization ............      39,551       38,544      2,546       6,101      10,825       15,272         112,839
Capital expenditures .....................      53,130       26,342      1,571          --       8,878        6,178          96,099

2003
Total assets .............................  $  939,610   $  945,497   $423,927   $ 423,341    $315,555     $325,199      $3,373,129
Depreciation and amortization ............      42,958       44,895      2,156       6,101       6,326       16,800         119,236
Capital expenditures .....................      28,220       24,049        542          --       3,769       15,071          71,651

(1) Cost of sales includes unrealized
   hedging (gains) of:
2005 .....................................  $    4,201   $   (5,815)  $   (518)  $      --    $   (844)    $     --      $   (2,976)
2004 .....................................       2,601       13,551      2,992          --       1,106           --          20,250
2003 .....................................      (3,035)     (11,802)    (2,645)         --          --           --         (17,482)
</TABLE>

Unrealized hedging (gains) losses are also recognized in earnings (loss) from
discontinued operations, net of income taxes.


                                       96
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-- (CONTINUED)

23. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
                            FIRST       SECOND        THIRD       FOURTH
                           QUARTER      QUARTER      QUARTER      QUARTER     FULL YEAR
                         ----------   ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>          <C>          <C>
2005
Net sales ............   $2,031,234   $1,806,659   $1,717,509   $2,001,275   $7,556,677
Gross profit .........      181,969      126,962      127,229      148,857      585,017
Net earnings (loss) ..       24,296       25,847       80,438       (1,638)     128,943
</TABLE>

<TABLE>
<CAPTION>
                            FIRST       SECOND        THIRD       FOURTH
                           QUARTER      QUARTER      QUARTER      QUARTER     FULL YEAR
                         ----------   ----------   ----------   ----------   ----------
<S>                      <C>          <C>          <C>          <C>          <C>
2004
Net sales ............   $1,994,199   $1,991,394   $1,779,598   $1,891,635   $7,656,826
Gross profit .........      199,802      113,372       93,337      187,197      593,708
Net earnings (loss) ..       45,125       16,744      (29,883)     (10,553)      21,433
</TABLE>

In the third quarter of 2005, the Company sold its investment in CF Industries,
Inc. for a gain on sale of $102.4 million.

24. RELATED PARTY TRANSACTIONS

     The Company has related party transactions, primarily with equity
investees. The Company purchases products from and sells products to Melrose
Dairy Proteins, LLC, a 50% voting interest joint venture with Dairy Farmers of
America formed in 2001. The Company sells seed products to and purchases from
and sells services to Agriliance LLC, a 50% voting interest joint venture with
CHS Inc. formed in 2000. The Company's MoArk subsidiary purchases product from
and sells product to equity investees and other related parties. In addition,
the Company has financing arrangements with Melrose Dairy Proteins, LLC, and
Agriliance LLC.

     Related party transactions as of and for the years ended December 31, 2005,
2004 and 2003 are as follows:

<TABLE>
<CAPTION>
                                     2005       2004       2003
                                   --------   --------   --------
<S>                                <C>        <C>        <C>
Sales...........................   $156,172   $155,726   $123,203
Purchases.......................     61,215     72,507     31,114
Services provided (purchased)...     19,540     14,432     12,645
Notes receivable................     25,600      3,080      5,600
</TABLE>

25. ALLOWANCE FOR DOUBTFUL ACCOUNTS

     The activity in the allowance for doubtful accounts is as follows:

<TABLE>
<CAPTION>
                                   BALANCE AT
                                    BEGINNING   CHARGES TO               BALANCE AT
           DESCRIPTION               OF YEAR      EXPENSE    OTHER(a)   END OF YEAR
           -----------             ----------   ----------   --------   -----------
<S>                                <C>          <C>          <C>        <C>
Year ended December 31, 2005....     15,538        1,967      (3,241)      14,310
Year ended December 31, 2004....     19,544        2,351      (6,357)      15,538
Year ended December 31, 2003....     18,255        5,214      (3,925)      19,544
</TABLE>

----------
(a)  Includes accounts written-off, recoveries, acquisitions, and the impact of
     consolidations.


                                       97

<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

26. CONSOLIDATING FINANCIAL INFORMATION

     The Company has entered into financing arrangements which are guaranteed by
the Company and certain of its wholly owned and majority owned subsidiaries (the
"Guarantor Subsidiaries"). Such guarantees are full, unconditional and joint and
several.

     In conjunction with the purchase of the minority interest in MoArk, in
January of 2006 the Company amended its revolving credit facility to allow for
the continued treatment of MoArk as a nonguarantor subsidiary.

     On July 1, 2005, the Company voluntarily prepaid the remaining $85.9
million balance on a capital lease held by Cheese & Protein International (CPI),
a consolidated joint venture of Land O'Lakes. Simultaneous with the lease
prepayment, the Company elected to designate CPI as a restricted subsidiary
under the Land O'Lakes senior bond indentures, and a loan party under the
Company's revolving credit facility. Consistent with such designations, CPI now
guarantees the Company's obligations arising under these facilities.
Accordingly, the CPI financial information has been combined with the
consolidated guarantors in the following supplemental financial information as
of and for the six-month period ended December 31, 2005.

     In June 2004, the Company completed the purchase of Farmland Industries 8%
ownership position in Land O'Lakes Farmland Feed LLC, which gave Land O'Lakes
100% ownership of the entity; effective October 21, 2004, Land O'Lakes Farmland
Feed LLC was renamed Land O' Lakes Purina Feed LLC. Accordingly, the Land
O'Lakes Purina Feed LLC financial information, except for its majority-owned
subsidiaries which are excluded from the guarantee, has been combined with the
consolidated guarantors in the following supplemental financial information as
of and for the years ended December 31, 2005 and 2004. Financial information for
2003 has not been restated.

     The following supplemental financial information sets forth, on an
unconsolidated basis, balance sheet, statement of operations and cash flow
information for the Company, Guarantor Subsidiaries and the Company's other
subsidiaries and limited liability companies (the "Non-Guarantor Subsidiaries").
The supplemental financial information reflects the investments of the Company
in the Guarantor and Non-Guarantor Subsidiaries using the equity method of
accounting.


                                       98

<PAGE>

                               LAND O'LAKES, INC.

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                               LAND
                                                          O'LAKES, INC.                    NON-
                                                              PARENT     CONSOLIDATED    GUARANTOR
                                                             COMPANY      GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                                          -------------  ------------  ------------  ------------  ------------
<S>                                                       <C>            <C>           <C>           <C>           <C>
                                     ASSETS
Current assets:
   Cash and cash equivalents ...........................   $  157,445     $       --     $ 22,259     $      --     $  179,704
   Receivables, net ....................................      325,878        185,356      110,550       (30,339)       591,445
   Inventories .........................................      240,388        173,849       38,898            --        453,135
   Prepaid expenses ....................................      321,843          8,494        2,686            --        333,023
   Other current assets ................................       29,806         11,747       39,522            --         81,075
                                                           ----------     ----------     --------     ---------     ----------
      Total current assets .............................    1,075,360        379,446      213,915       (30,339)     1,638,382

Investments ............................................    1,019,020         43,743        8,077      (807,054)       263,786
Property, plant and equipment, net .....................      182,905        387,752       87,551            --        658,208
Property under capital lease, net ......................           --             --       10,442            --         10,442
Goodwill, net ..........................................      201,037         82,686       43,336            --        327,059
Other intangibles, net .................................        4,192         90,269        2,306            --         96,767
Other assets ...........................................       27,718         35,008       45,932        (8,244)       100,414
                                                           ----------     ----------     --------     ---------     ----------
   Total assets ........................................   $2,510,232     $1,018,904     $411,559     $(845,637)    $3,095,058
                                                           ==========     ==========     ========     =========     ==========

                            LIABILITIES AND EQUITIES
Current liabilities:
   Notes and short-term obligations ....................   $      300     $    2,269     $109,484     $ (35,588)    $   76,465
   Current portion of long-term debt ...................        6,659            390       15,196            --         22,245
   Current portion of obligations under capital lease ..           --             --        1,676            --          1,676
   Accounts payable ....................................      692,907        242,397       45,124        (3,469)       976,959
   Accrued expenses ....................................      168,397         79,940       17,113           474        265,924
   Patronage refunds and other member equities
      payable ..........................................       29,622             --           --            --         29,622
                                                           ----------     ----------     --------     ---------     ----------
      Total current liabilities ........................      897,885        324,996      188,593       (38,583)     1,372,891

Long-term debt .........................................      579,032         11,019       49,117            --        639,168
Obligations under capital lease ........................           --              2        7,632            --          7,634
Employee benefits and other liabilities ................      128,042         27,198       10,556            --        165,796
Minority interests .....................................        1,716            711        3,585            --          6,012

Equities:
   Capital stock .......................................        1,967        497,811       15,974      (513,785)         1,967
   Member equities .....................................      893,518             --           --            --        893,518
   Accumulated other comprehensive loss ................      (75,163)          (460)          --           460        (75,163)
   Retained earnings ...................................       83,235        157,627      136,102      (293,729)        83,235
                                                           ----------     ----------     --------     ---------     ----------
      Total equities ...................................      903,557        654,978      152,076      (807,054)       903,557
                                                           ----------     ----------     --------     ---------     ----------
Commitments and contingencies
      Total liabilities and equities ...................   $2,510,232     $1,018,904     $411,559     $(845,637)    $3,095,058
                                                           ==========     ==========     ========     =========     =========
</TABLE>


                                       99

<PAGE>

                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                               LAND
                                                          O'LAKES, INC.                    NON-
                                                              PARENT     CONSOLIDATED    GUARANTOR
                                                             COMPANY      GUARANTORS   SUBSIDIARIES  ELIMINATIONS  CONSOLIDATED
                                                          -------------  ------------  ------------  ------------  ------------
<S>                                                        <C>            <C>            <C>          <C>           <C>
Net sales ..............................................   $3,634,582     $3,227,703    $694,392       $     --     $7,556,677
Cost of sales ..........................................    3,393,820      2,915,261     662,579             --      6,971,660
                                                           ----------     ----------    --------       --------     ----------
Gross profit ...........................................      240,762        312,442      31,813             --        585,017

Selling, general and administrative ....................      215,731        240,958      38,282             --        494,971
Restructuring and impairment charges ...................        4,179          1,769         433             --          6,381
                                                           ----------     ----------    --------       --------     ----------
Earnings (loss) from operations ........................       20,852         69,715      (6,902)            --         83,665

Interest expense, net ..................................       72,846          1,471       5,556             --         79,873
Other expense(income), net .............................       10,335         (1,040)         --             --          9,295
Gain on sale of investment in CF Industries, Inc. ......     (102,446)            --          --                      (102,446)
Equity in (earnings) loss of affiliated companies ......      (92,019)        (1,369)      6,477         50,219        (36,692)
Minority interest in earnings of subsidiaries ..........          240            142         972             --          1,354
                                                           ----------     ----------    --------       --------     ----------
Earnings (loss) before income taxes and discontinued
   operations ..........................................      131,896         70,511     (19,907)       (50,219)       132,281
Income tax expense (benefit) ...........................        5,120          2,844      (2,459)            --          5,505
                                                           ----------     ----------    --------       --------     ----------
Net earnings (loss) from continuing operations .........      126,776         67,667     (17,448)       (50,219)       126,776
Earnings from discontinued operations, net of income
   taxes ...............................................        2,167             --          --             --          2,167
                                                           ----------     ----------    --------       --------     ----------
Net earnings(loss) .....................................   $  128,943     $   67,667    $(17,448)      $(50,219)    $  128,943
                                                           ==========     ==========    ========       ========     ==========
</TABLE>


                                       100
<PAGE>

                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                                LAND
                                                              O'LAKES,
                                                            INC. PARENT   CONSOLIDATED   NON-GUARANTOR
                                                              COMPANY      GUARANTORS     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                            -----------   ------------   -------------   ------------   ------------
<S>                                                         <C>           <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings (loss)...................................    $ 128,943     $  67,667       $(17,448)      $ (50,219)     $ 128,943
   Earnings from discontinued operations, net of
      income tax benefit.................................       (2,167)           --             --              --         (2,167)
      Adjustments to reconcile net earnings to net cash
         provided by operating activities:
         Depreciation and amortization...................       42,237        38,434         18,641              --         99,312
         Amortization of deferred financing costs........        7,188         1,222            323              --          8,733
         Loss on extinguishment of debt..................       11,014            --             --              --         11,014
         Bad debt expense................................          762         1,029            176              --          1,967
         Proceeds from patronage revolvement received....        5,551         2,572             --              --          8,123
         Non-cash patronage income.......................         (408)       (1,444)            --              --         (1,852)
         Deferred income tax expense.....................        5,177            --             --              --          5,177
         Decrease (increase) in other assets.............       11,021         2,150           (256)            331         13,246
         Increase (decrease) in other liabilities........        4,554          (984)            --              --          3,570
         Restructuring and impairment charges............        4,179         1,769            433              --          6,381
         Gain on sale of investment in CF Industries.....     (102,446)           --             --              --       (102,446)
         Equity in (earnings) loss of affiliated
            companies....................................      (92,019)       (1,369)         6,477          50,219        (36,692)
         Minority interests..............................          240           142            972              --          1,354
            Other........................................         (420)       (1,678)        (5,291)             --         (7,389)
      Changes in current assets and liabilities, net of
         acquisitions and divestitures:
         Receivables.....................................     (279,140)       70,286          9,857         160,033        (38,964)
         Inventories.....................................          283       (19,278)        12,937              --         (6,058)
         Other current assets............................      (17,449)       (2,180)       (30,839)             --        (50,468)
         Accounts payable................................       95,909        74,987          6,524         (13,265)       164,155
         Accrued expenses................................       (7,063)       26,037         (1,357)           (474)        17,143
                                                             ---------     ---------       --------       ---------      ---------
   Net cash provided by operating activities.............     (184,054)      259,362          1,149         146,625        223,082

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment............      (17,882)      (26,669)       (25,873)             --        (70,424)
   Acquisitions, net of cash acquiredt...................      (38,304)       (7,797)            --              --        (46,101)
   Payments for investments..............................      (93,616)           --         (5,450)         93,500         (5,566)
   Net proceeds from divestitures of businesses..........           --            --          2,635              --          2,635
   Proceeds from sale of investments.....................      315,900         1,000             --              --        316,900
   Proceeds from sale of property,
      plant and equipment................................          397         9,218         12,582              --         22,197
   Dividends from investments in affiliated companies....       33,201         1,323            726              --         35,250
   Increase in restricted cash...........................       20,338            --             --              --         20,338
   Other.................................................          723            (1)          (179)             --            543
                                                             ---------     ---------       --------       ---------      ---------
   Net cash provided (used) by investing activities......      220,757       (22,926)       (15,559)         93,500        275,772

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase (decrease) in short-term debt................      172,787       (36,594)        22,688        (137,625)        21,256
   Proceeds from issuance of long-term debt..............         (129)          629          1,522              --          2,022
   Principal payments on long-term debt..................     (264,247)           --        (14,097)         (9,000)      (287,344)
   Principal payments on obligations under capital
      lease..............................................           --            --        (92,556)             --        (92,556)
   Payments for debt extinguishment costs................      (11,014)           --             --              --        (11,014)
   Distribution to members...............................      183,830      (183,830)            --              --             --
   Payments for redemption of member equities............      (68,714)           --             --              --        (68,714)
   Other.................................................       (2,957)            2         94,462         (93,500)        (1,993)
                                                             ---------     ---------       --------       ---------      ---------
Net cash (used) provided by financing activities.........        9,556      (219,793)        12,019        (240,125)      (438,343)
Net cash provided by operating activities of
   discontinued operations...............................        3,922            --             --              --          3,922
Net cash provided by investing activities of
   discontinued operations...............................       42,135            --             --              --         42,135
                                                             ---------     ---------       --------       ---------      ---------
Net increase (decrease) in cash..........................       92,316        16,643         (2,391)             --        106,568
Cash and cash equivalents at beginning of year...........       65,129       (16,643)        24,650              --         73,136
                                                             ---------     ---------       --------       ---------      ---------
Cash and cash equivalents at end of year.................    $ 157,445     $      --       $ 22,259       $      --      $ 179,704
                                                             =========     =========       ========       =========      =========
</TABLE>


                                      101

<PAGE>

                               LAND O'LAKES, INC.

                    SUPPLEMENTAL CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                              LAND
                                                          O'LAKES, INC.
                                                             PARENT       CONSOLIDATED   NON-GUARANTOR
                                                             COMPANY       GUARANTORS     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                          -------------   ------------   -------------   ------------   ------------
<S>                                                       <C>             <C>            <C>             <C>            <C>
                         ASSETS
Current assets:
   Cash and cash equivalents...........................     $   65,129      $(16,643)       $ 24,650     $        --    $   73,136
   Restricted cash.....................................         20,338            --              --              --        20,338
   Receivables, net....................................        380,149       259,080         109,984        (190,372)      558,841
   Inventories.........................................        247,609       154,571          51,835              --       454,015
   Prepaid expenses....................................        270,717         6,835           6,932              --       284,484
   Other current assets................................         57,897        11,226           4,437              --        73,560
                                                            ----------      --------        --------     -----------    ----------
      Total current assets.............................      1,041,839       415,069         197,838        (190,372)    1,464,374

Investments............................................      1,283,735        17,254           9,651        (840,090)      470,550
Property, plant and equipment, net.....................        213,786       235,286         160,940              --       610,012
Property under capital lease, net......................             15            --         100,164              --       100,179
Goodwill, net..........................................        184,323        83,098          64,161              --       331,582
Other intangibles, net.................................          2,484        93,373           3,159              --        99,016
Other assets...........................................         46,607        33,943          52,094          (8,575)      124,069
                                                            ----------      --------        --------     -----------    ----------
      Total assets.....................................     $2,772,789      $878,023        $588,007     $(1,039,037)   $3,199,782
                                                            ==========      ========        ========     ===========    ==========

                LIABILITIES AND EQUITIES

Current liabilities:
   Notes and short-term obligations....................     $   90,944      $    990        $ 94,827     $  (135,008)   $   51,753
   Current portion of long-term debt...................          3,457        38,263           7,165         (38,205)       10,680
   Current portion of obligations under capital lease..             --            --          10,378              --        10,378
   Accounts payable....................................        654,660       131,798          43,604         (16,734)      813,328
   Accrued expenses....................................        156,062        53,903          18,470              --       228,435
   Patronage refunds and other member equities
      payable..........................................         22,245            72              --              --        22,317
                                                            ----------      --------        --------     -----------    ----------
      Total current liabilities........................        927,368       225,026         174,444        (189,947)    1,136,891

Long-term debt.........................................        856,070         9,474          76,692          (9,000)      933,236
Obligations under capital lease........................             --            --          90,524              --        90,524
Employee benefits and other liabilities................        134,447        28,289          12,141              --       174,877
Minority interests.....................................             --         3,192           6,158              --         9,350

Equities:
   Capital stock.......................................          2,059       463,941         134,536        (598,477)        2,059
   Member equities.....................................        852,759            --              --              --       852,759
   Accumulated other comprehensive loss................        (73,792)         (500)             --             500       (73,792)
   Retained earnings...................................         73,878       148,601          93,512        (242,113)       73,878
                                                            ----------      --------        --------     -----------    ----------
      Total equities...................................        854,904       612,042         228,048        (840,090)      854,904
                                                            ----------      --------        --------     -----------    ----------
Commitments and contingencies
      Total liabilities and equities...................     $2,772,789      $878,023        $588,007     $(1,039,037)   $3,199,782
                                                            ==========      ========        ========     ===========    ==========
</TABLE>


                                      102

<PAGE>

                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                              LAND
                                                          O'LAKES, INC.
                                                             PARENT       CONSOLIDATED   NON-GUARANTOR
                                                             COMPANY       GUARANTORS     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                          -------------   ------------   -------------   ------------   ------------
<S>                                                       <C>             <C>            <C>             <C>            <C>
Net sales .............................................    $3,897,673      $2,872,181      $886,972        $     --      $7,656,826
Cost of sales .........................................     3,637,366       2,608,479       817,273              --       7,063,118
                                                           ----------      ----------      --------        --------      ----------
Gross profit ..........................................       260,307         263,702        69,699              --         593,708

Selling, general and administrative ...................       208,829         246,751        45,355              --         500,935
Restructuring and impairment charges ..................           105           7,710            --              --           7,815
                                                           ----------      ----------      --------        --------      ----------
Earnings from operations ..............................        51,373           9,241        24,344              --          84,958

Interest expense (income), net ........................        77,150          (1,658)        7,622              --          83,114
Other income, net .....................................        (4,338)         (2,690)         (448)             --          (7,476)
Equity in (earnings) loss of affiliated companies .....       (84,960)         (1,876)       (7,918)         36,342         (58,412)
Loss on impairment of investment in CF
   Industries, Inc. ...................................        36,500              --            --              --          36,500
Minority interest in earnings of subsidiaries .........           459             678           511              --           1,648
                                                           ----------      ----------      --------        --------      ----------
Earnings (loss) before income taxes and
   discontinued operations ............................        26,562          14,787        24,577         (36,342)         29,584
Income tax (benefit) expense ..........................        (1,618)             59         2,963              --           1,404
                                                           ----------      ----------      --------        --------      ----------
Net earnings (loss) from continuing operations ........        28,180          14,728        21,614         (36,342)         28,180
Loss from discontinued operations, net of
   income tax benefit .................................        (6,747)             --            --              --          (6,747)
                                                           ----------      ----------      --------        --------      ----------
Net earnings(loss) ....................................    $   21,433      $   14,728      $ 21,614        $(36,342)     $   21,433
                                                           ==========      ==========      ========        ========      ==========
</TABLE>


                                      103
<PAGE>

                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS

                      FOR THE YEAR ENDED DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                               LAND
                                                             O'LAKES,
                                                            INC. PARENT   CONSOLIDATED   NON-GUARANTOR
                                                              COMPANY      GUARANTORS     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                            -----------   ------------   -------------   ------------   ------------
<S>                                                         <C>           <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings (loss) ..................................    $  21,433      $ 14,728       $ 21,614        $(36,342)     $  21,433
   Loss from discontinued operations, net of income tax
      benefit
   Adjustments to reconcile net earnings (loss) to net
      cash provided by operating activities: ............        6,747            --             --              --          6,747
      Depreciation and amortization .....................       47,133        36,192         23,889              --        107,214
      Amortization of deferred financing costs ..........        5,004            --            621              --          5,625
      Bad debt expense ..................................          696         1,191            464              --          2,351
      Proceeds from patronage revolvement received ......        6,043            --             --              --          6,043
      Non-cash patronage income .........................       (1,355)           --             --              --         (1,355)
      Deferred income tax expense .......................       (4,977)           --             --              --         (4,977)
      (Increase) decrease in other assets ...............       22,543        (6,096)            (3)        (10,704)         5,740
      (Decrease) increase in other liabilities ..........        1,977            --         (6,108)            632         (3,499)
      Restructuring and impairment charges ..............       36,605         7,710             --              --         44,315
      (Gain) loss from divestitures of businesses .......       (1,584)          146             --              --         (1,438)
      Equity in (earnings) loss of affiliated companies .      (84,960)       (1,876)        (7,918)         36,342        (58,412)
      Minority interests ................................          459           678            511              --          1,648
         Other ..........................................       (2,131)         (623)         1,515              --         (1,239)
      Changes in current assets and  liabilities, net of
         acquisitions and divestitures:
      Receivables .......................................       (5,460)        2,312          9,616          31,118         37,586
      Inventories .......................................       (4,352)       18,398          1,059              --         15,105
      Other current assets ..............................      (29,328)       (6,025)          (799)             --        (36,152)
      Accounts payable ..................................      109,203       (38,061)         4,898          (3,662)        72,378
      Accrued expenses ..................................       (5,741)      (11,611)           263              --        (17,089)
                                                             ---------      --------       --------        --------      ---------
   Net cash provided by operating activities ............      117,955        17,063         49,622          17,384        202,024

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment ...........      (27,909)      (28,673)       (39,517)             --        (96,099)
   Acquisition of minority interest .....................      (12,150)           --             --              --        (12,150)
   Payments for investments .............................      (39,203)           --             --          38,500           (703)
   Net proceeds from divestitures of businesses .........        7,500         5,568             --              --         13,068
   Proceeds from sale of investments ....................           --         2,342             --              --          2,342
   Proceeds from sale of property, plant and equipment ..        8,483         1,716          1,791              --         11,990
   Dividends from investments in affiliated companies ...       47,100         1,784          9,562         (10,600)        47,846
   Increase in restricted cash ..........................         (220)           --             --              --           (220)
   Other ................................................          999           (71)           (68)             --            860
                                                             ---------      --------       --------        --------      ---------
   Net cash (used) provided by investing activities .....      (15,400)      (17,334)       (28,232)         27,900        (33,066)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase (decrease) in short-term debt ...............       28,418       (20,269)       (19,381)        (17,384)       (28,616)
   Proceeds from issuance of long-term debt .............          404            80         16,932              --         17,416
   Principal payments on long-term debt .................     (127,735)         (138)       (18,138)             --       (146,011)
   Principal payments on obligations under capital
      lease .............................................           --            --        (10,367)             --        (10,367)
   Payments for debt issuance costs .....................       (4,323)           --             --              --         (4,323)
   Payments for redemption of member equities ...........      (34,615)           --             --              --        (34,615)
   Other ................................................          (52)         (252)        27,900         (27,900)          (304)
                                                             ---------      --------       --------        --------      ---------
   Net cash used by financing activities ................     (137,903)      (20,579)        (3,054)        (45,284)      (206,820)
   Net cash provided by operating activities of
      discontinued operations ...........................       (1,449)           --             --              --         (1,449)
   Net cash provided by investing activities of
      discontinued operations ...........................        2,173            --             --              --          2,173
                                                             ---------       --------       --------        --------      ---------
   Net (decrease) increase in cash and cash
      equivalents .......................................      (34,624)      (20,850)        18,336              --        (37,138)
   Cash and cash equivalents at beginning of year .......       99,753         4,207          6,314              --        110,274
                                                             ---------      --------       --------        --------      ---------
Cash and cash equivalents at end of year ................    $  65,129      $(16,643)      $ 24,650        $     --      $  73,136
                                                             =========      ========       ========        ========      =========
</TABLE>


                                      104

<PAGE>

                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                              LAND                       MAJORITY-
                                            O'LAKES,    WHOLLY-OWNED       OWNED
                                          INC. PARENT   CONSOLIDATED   CONSOLIDATED   NON-GUARANTOR
                                            COMPANY      GUARANTORS     GUARANTORS     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                          -----------   ------------   ------------   -------------   ------------   ------------
<S>                                       <C>            <C>           <C>            <C>             <C>            <C>
Net sales .............................   $3,130,810      $227,445      $2,349,658      $548,188        $     --      $6,256,101
Cost of sales .........................    2,875,665       220,353       2,074,563       501,288              --       5,671,869
                                          ----------      --------      ----------      --------        --------      ----------
Gross profit ..........................      255,145         7,092         275,095        46,900              --         584,232
Selling, general and administrative ...      198,687        13,246         220,856        31,821              --         464,610
Restructuring and impairment charges ..        3,605           775           1,962            --              --           6,342
                                          ----------      --------      ----------      --------        --------      ----------
Earnings (loss) from operations .......       52,853        (6,929)         52,277        15,079              --         113,280
Interest expense (income), net ........       73,865         2,517            (941)        5,531              --          80,972
Other income, net .....................      (20,343)           --          (4,085)           --              --         (24,428)
Equity in (earnings) loss of affiliated
   companies ..........................     (110,570)           --          (1,421)      (10,179)         64,921         (57,249)
Minority interest in earnings (loss) of
   subsidiaries .......................        4,935            --              (8)        1,439              --           6,366
                                          ----------      --------      ----------      --------        --------      ----------
Earnings (loss) before income taxes and
    discontinued operations ...........      104,966        (9,446)         58,732        18,288         (64,921)        107,619
Income tax (benefit) expense ..........       18,050        (2,935)             84         5,504              --          20,703
                                          ----------      --------      ----------      --------        --------      ----------
Net earnings (loss) from continuing
   operations .........................       86,916        (6,511)         58,648        12,784         (64,921)         86,916
Loss from discontinued operations, net
   of income tax benefit ..............       (4,922)           --              --            --              --          (4,922)
                                          ----------      --------      ----------      --------        --------      ----------
Net earnings (loss) ...................   $   81,994      $ (6,511)     $   58,648      $ 12,784        $(64,921)     $   81,994
                                          ==========      ========      ==========      ========        ========      ==========
</TABLE>


                                      105

<PAGE>

                               LAND O'LAKES, INC.

               SUPPLEMENTAL CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                LAND                       MAJORITY-
                                              O'LAKES,    WHOLLY-OWNED       OWNED
                                            INC. PARENT   CONSOLIDATED   CONSOLIDATED   NON-GUARANTOR
                                              COMPANY      GUARANTORS     GUARANTORS     SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                            -----------   ------------   ------------   -------------   ------------   ------------
<S>                                         <C>            <C>           <C>            <C>             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings (loss) ..................    $  81,994      $ (6,511)      $ 58,648       $ 12,784        $(64,921)     $  81,994
   Loss from discontinued operations
      net of income tax benefit .........        4,922            --             --             --              --          4,922
   Adjustments to reconcile net
      earnings (loss) to net cash
      provided by operating activities:
      Depreciation and amortization .....       53,919         1,956         39,549         16,076              --        111,500
      Amortization of deferred
         financing costs ................        7,092            --             --            644              --          7,736
      Bad debt expense ..................        1,875           134          1,889          1,316              --          5,214
      Proceeds from patronage
         revolvement received ...........        5,000            --             --             --              --          5,000
      Non-cash patronage income .........       (3,578)           --             --             --              --         (3,578)
      Receivable from legal settlement...       90,707            --          6,000             --              --         96,707
      Deferred income tax expense .......       11,675            --             --             --              --         11,675
      (Increase) decrease in other
         assets .........................       (8,955)        4,628          1,475          3,375           5,342          5,865
      (Decrease) increase in other
         liabilities ....................       (1,081)          (77)         3,265         (3,691)           (632)        (2,216)
      Restructuring and impairment
         charges ........................        3,605           775          1,962             --              --          6,342
      Gain from divestitures of
         businesses .....................         (684)           --             --             --              --           (684)
      Equity in (earnings) loss of
         affiliated companies ...........     (110,570)           --         (1,421)       (10,179)         64,921        (57,249)
      Minority interests ................        4,935            --             (8)         1,439              --          6,366
      Other .............................      (11,249)           --           (876)            --              --        (12,125)
   Changes in current assets and
      liabilities, net of acquisitions
      and divestitures:
      Receivables .......................       27,969       (34,801)       (55,601)       (12,843)         28,792        (46,484)
      Inventories .......................      (14,813)       28,416        (23,534)        (4,383)             --        (14,314)
      Other current assets ..............      (58,632)        3,268         (3,350)         1,788              --        (56,926)
      Accounts payable ..................       57,583        (8,708)        (7,325)         1,357          (6,562)        36,345
      Accrued expenses ..................       21,396        22,266         (6,537)         2,050           5,225         44,400
                                             ---------      --------       --------       --------        --------      ---------
   Net cash provided by operating
      activities ........................      163,110        11,346         14,136          9,733          32,165        230,490

CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to property, plant and
         equipment ......................      (33,654)         (871)       (24,068)       (13,058)             --        (71,651)
      Payments for investments ..........      (41,421)           --             --             --          31,374        (10,047)
      Net proceeds from divestitures of
         businesses .....................        1,815            --             --             --              --          1,815
      Proceeds from sale of
         investments ....................           --            --          3,000             --              --          3,000
      Proceeds from sale of property,
         plant and equipment ............       16,370            --          5,357             --              --         21,727
      Dividends from investments in
         affiliated companies ...........       29,420            --          1,956          5,980              --         37,356
      Increase in restricted cash .......      (20,118)           --             --             --              --        (20,118)
      Other .............................        2,380            --          1,287             --              --          3,667
                                             ---------      --------       --------       --------        --------      ---------
   Net cash (used) provided by
      investing activities ..............      (45,208)         (871)       (12,468)        (7,078)         31,374        (34,251)

CASH FLOWS FROM FINANCING ACTIVITIES:
      Increase (decrease) in short-term
         debt ...........................       60,600           109           (207)       (16,654)        (32,165)        11,683
      Proceeds from issuance of
         long-term debt .................      185,037            --             --             --              --        185,037
      Principal payments on long-term
         debt .........................       (289,608)       (8,961)            --         (6,341)             --       (304,910)
      Principal payments on obligations
         under capital lease ............           --            --             --         (9,590)             --         (9,590)
      Payments for debt issuance costs          (3,486)           --             --             --              --         (3,486)
      Payments for redemption of member
         equities .......................      (24,380)           --             --             --              --        (24,380)
      Other ...........................           (688)           --             --         31,374         (31,374)          (688)
                                             ---------      --------       --------       --------        --------      ---------
   Net cash used by financing
      activities ........................      (72,525)       (8,852)          (207)        (1,211)        (63,539)      (146,334)
   Net cash used by operating
      activities of discontinued
      operations ........................       (2,987)           --             --             --              --         (2,987)
   Net cash provided by investing
      activities of discontinued
      operations ........................         (971)           --             --             --              --           (971)
                                             ---------      --------       --------       --------        --------      ---------
   Net increase in cash and cash
      equivalents .......................       41,419         1,623          1,461          1,444              --         45,947
   Cash and cash equivalents at
      beginning of year .................       58,334         2,584         (1,461)         4,870              --         64,327
                                             ---------      --------       --------       --------        --------      ---------
   Cash and cash equivalents at end of
      year ..............................    $  99,753      $  4,207       $     --       $  6,314        $     --      $ 110,274
                                             =========      ========       ========       ========        ========      =========
</TABLE>


                                      106
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Members and Management
Moark, LLC and Subsidiaries
Chesterfield, Missouri

     We have audited the accompanying consolidated balance sheet of Moark, LLC
and Subsidiaries as of December 24, 2005 and December 25, 2004, and the related
consolidated statements of operations, members' equity and cash flows for the
years ended December 24, 2005 and December 25, 2004 and the eleven months ended
December 27, 2003. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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
consolidated financial statements are free of material misstatement. The Company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included 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 express no such opinion. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated 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 consolidated financial position of
MoArk, LLC and Subsidiaries as of December 24, 2005 and December 25, 2004, and
the consolidated results of their operations and their cash flows for the years
ended December 24, 2005 and December 25, 2004 and the eleven months ended
December 27, 2003, in conformity with U.S. generally accepted accounting
principles.


                                        /s/ Moore Stephens Frost
                                        ----------------------------------------

Little Rock, Arkansas
January 19, 2006


                                      107

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                     DECEMBER 24, 2005 AND DECEMBER 25, 2004

<TABLE>
<CAPTION>
                                                                           DECEMBER 24,   DECEMBER 25,
                                                                               2005           2004
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
                                 ASSETS

Current assets
   Cash and cash equivalents ...........................................   $  6,032,290   $ 22,320,743
   Accounts receivable -- trade, less allowance for doubtful accounts
      of $1,699,494 and $1,940,087, respectively .......................     39,629,709     40,346,090
   Inventories .........................................................     30,434,202     30,899,635
   Refundable income taxes .............................................             --        863,258
   Current portion of notes receivable .................................        140,942        141,425
   Prepaid expenses and other current assets ...........................      2,462,016      2,399,959
   Assets held for sale ................................................     35,890,108     36,070,076
                                                                           ------------   ------------
Total current assets ...................................................    114,589,267    133,041,186
                                                                           ------------   ------------
Property, plant and equipment
   Land ................................................................      6,776,034      7,483,582
   Land improvements ...................................................        650,169        843,783
   Buildings and leasehold improvements ................................     39,202,937     37,748,766
   Machinery and equipment .............................................     57,102,336     53,760,517
   Vehicles ............................................................      6,107,315      5,723,362
   Furniture and fixtures ..............................................      1,356,590      1,036,485
   Construction in progress ............................................      4,610,695      2,815,366
                                                                           ------------   ------------
                                                                            115,806,076    109,411,861
   Less accumulated depreciation .......................................    (34,090,370)   (29,155,686)
                                                                           ------------   ------------
Net property, plant and equipment ......................................     81,715,706     80,256,175
                                                                           ------------   ------------
Investments, intangibles and other assets
   Notes receivable, less current portion ..............................      3,255,061      3,385,827
   Investment in affiliates ............................................      5,652,780      7,358,051
   Other assets ........................................................         69,940        197,088
   Intangible assets -- finite-lived, net ..............................      2,130,608      2,504,770
   Goodwill ............................................................     43,223,768     42,973,768
                                                                           ------------   ------------
Total investments, intangibles and other assets ........................     54,332,157     56,419,504
                                                                           ------------   ------------
Total assets ...........................................................   $250,637,130   $269,716,865
                                                                           ============   ============

                    LIABILITIES AND MEMBERS' EQUITY

Current liabilities
   Notes payable .......................................................   $ 19,000,000   $         --
   Accounts payable ....................................................     21,034,575     24,220,462
   Accrued expenses and other current liabilities ......................     13,705,556      9,168,514
   Income taxes payable ................................................        742,200             --
   Liabilities held for sale ...........................................        351,210        541,657
   Current maturities of long-term debt and capital lease obligations ..     16,629,382      8,369,727
   Current deferred income taxes .......................................        123,354      2,144,000
                                                                           ------------   ------------
Total current liabilities ..............................................     71,586,277     44,444,360
                                                                           ------------   ------------
Long-term debt and capital lease obligations, less current maturities ..     51,804,841     75,086,465
Deferred income taxes ..................................................     10,321,162     15,500,000
Members' equity ........................................................    116,924,850    134,686,040
                                                                           ------------   ------------
Total liabilities and members' equity ..................................   $250,637,130   $269,716,865
                                                                           ============   ============
</TABLE>

   The accompanying notes are an integral part of these consolidated
                         financial statements.


                                  108

<PAGE>

                       MOARK, LLC AND SUBSIDIARIES

                  CONSOLIDATED STATEMENT OF OPERATIONS

        FOR THE YEARS ENDED DECEMBER 24, 2005, DECEMBER 25, 2004
             AND THE ELEVEN MONTHS ENDED DECEMBER 27, 2003

<TABLE>
<CAPTION>
                                          DECEMBER 24,   DECEMBER 25,   DECEMBER 27,
                                             2005            2004           2003
                                          ------------   ------------   ------------
<S>                                       <C>            <C>            <C>
Net sales .............................   $406,965,095   $549,648,703   $515,455,221
Cost of sales .........................    385,673,833    484,864,691    446,665,872
                                          ------------   ------------   ------------
Gross profit ..........................     21,291,262     64,784,012     68,789,349
Expenses
   General and administrative .........     23,159,719     24,545,410     25,937,184
   Selling ............................     14,982,068     11,067,885      9,794,678
                                          ------------   ------------   ------------
Total expenses ........................     38,141,787     35,613,295     35,731,862
                                          ------------   ------------   ------------
Operating income(loss) ................    (16,850,525)    29,170,717     33,057,487

Other income (expense)
   Interest expense ...................     (5,737,363)    (6,190,652)    (6,580,460)
   Interest and other income ..........      2,004,171      1,455,163      1,893,880
   Equity in earnings of affiliates ...     (6,477,425)     7,918,034     11,282,607
   Gain (loss) on sale of assets ......      5,718,015     (1,354,141)       553,903
                                          ------------   ------------   ------------
Total other income (expense) ..........     (4,492,602)     1,828,404      7,149,930
                                          ------------   ------------   ------------

Income (loss) before income taxes .....    (21,343,127)    30,999,121     40,207,417
Income tax expense (benefit) ..........     (3,581,937)     2,342,666      4,054,164
                                          ------------   ------------   ------------
Net income (loss) .....................   $(17,761,190)  $ 28,656,455   $ 36,153,253
                                          ============   ============   ============
</TABLE>

   The accompanying notes are an integral part of these consolidated
                         financial statements.


                                  109

<PAGE>

                       MOARK, LLC AND SUBSIDIARIES

                CONSOLIDATED STATEMENT OF MEMBERS' EQUITY

        FOR THE YEARS ENDED DECEMBER 24, 2005, DECEMBER 25, 2004
             AND THE ELEVEN MONTHS ENDED DECEMBER 27, 2003

<TABLE>
<CAPTION>
                                     MEMBERS'
                                      EQUITY
                                   ------------
<S>                                <C>
Balance -- February 2, 2003 ....   $ 89,076,332
Net income .....................     36,153,253
Distributions to members, net ..     (8,600,000)
                                   ------------
Balance -- December 27, 2003 ...    116,629,585
Net income .....................     28,656,455
Distributions to members, net ..    (10,600,000)
                                   ------------
Balance -- December 25, 2004 ...    134,686,040
Net loss .......................    (17,761,190)
                                   ------------
Balance -- December 24, 2005 ...   $116,924,850
                                   ============
</TABLE>

   The accompanying notes are an integral part of these consolidated
                         financial statements.


                                      110
<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

 FOR THE YEARS ENDED DECEMBER 24, 2005, DECEMBER 25, 2004 AND THE ELEVEN MONTHS
                             ENDED DECEMBER 27, 2003

<TABLE>
<CAPTION>
                                                            DECEMBER 24,   DECEMBER 25,   DECEMBER 27,
                                                                2005           2004           2003
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Cash flows from operating activities
Net income (loss) .......................................   $(17,761,190)  $ 28,656,455   $ 36,153,253
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities
   Depreciation .........................................      7,406,448      8,470,773      6,744,317
   Amortization .........................................        374,162        276,954      1,041,625
   Gain on sale of assets ...............................     (6,043,797)      (111,421)      (566,062)
   Loss on sale of assets held for sale .................             --      1,454,728             --
   Equity in loss (income) of affiliates ................      6,477,425     (7,918,034)   (11,282,607)
   Net change in operating assets held for sale .........        (10,479)     6,102,669     (1,853,046)
   Change in deferred income taxes ......................     (7,199,484)    (2,281,000)     3,491,700
Change in operating assets and liabilities
   Accounts receivable -- trade .........................        716,381     19,652,751    (16,310,829)
   Inventories ..........................................        465,433      2,701,468       (909,843)
   Refundable income taxes ..............................        863,258       (863,258)        63,380
   Prepaid expenses and other current assets ............        (62,057)        30,972        (49,071)
   Accounts payable .....................................     (3,185,887)    (6,911,921)     7,690,293
   Accrued expenses and other current liabilities .......      4,537,041     (1,422,691)     2,211,517
   Income taxes payable .................................        742,200       (580,224)       580,224
                                                            ------------   ------------   ------------
Net cash provided (used) by operating activities ........    (12,680,546)    47,258,221     27,004,851
                                                            ------------   ------------   ------------
Cash flows from investing activities
   Proceeds from sale of property, plant and equipment ..     12,539,058      1,350,105      1,321,185
   Purchase of property, plant and equipment ............    (15,310,448)    (6,262,813)    (4,374,684)
   Purchase of subsidiaries, net of cash acquired .......       (250,000)            --     (1,750,000)
   Distributions from affiliates ........................             --      9,561,677      5,980,000
   Investments of affiliates ............................     (4,772,154)            --             --
   Proceeds from sale of assets held for sale ...........             --        530,000             --
   Other assets .........................................        127,149        589,396        500,004
   Collections on notes receivable ......................        131,249        256,591        186,745
                                                            ------------   ------------   ------------
Net cash provided (used) by investing activities ........     (7,535,146)     6,024,956      1,863,250
                                                            ------------   ------------   ------------
Cash flows from financing activities
   Net borrowings (repayments) on notes payable .........     19,000,000    (19,977,518)    (8,299,978)
   Proceeds from long-term debt .........................             --     16,065,771         21,581
   Repayments of long-term debt .........................    (13,653,172)   (18,728,213)   (14,121,980)
   Repayments of capital lease obligations ..............     (1,419,589)    (1,329,868)    (2,781,003)
   Distributions to members, net ........................             --    (10,600,000)    (8,600,000)
                                                            ------------   ------------   ------------
Net cash provided (used) by financing activities ........      3,927,239    (34,569,828)   (33,781,380)
                                                            ------------   ------------   ------------
Net increase (decrease) in cash and cash equivalents ....    (16,288,453)    18,713,349     (4,913,279)
Cash and cash equivalents -- beginning of year ..........     22,320,743      3,607,394      8,520,673
                                                            ------------   ------------   ------------
Cash and cash equivalents -- end of year ................   $  6,032,290   $ 22,320,743   $  3,607,394
                                                            ============   ============   ============
Supplementary disclosures of cash flow information
   Cash paid during the year for
      Interest ..........................................   $  5,666,853   $  6,055,538   $  6,586,193
      Income taxes (net of refunds received) ............      1,046,453      6,067,148        581,195
Supplementary disclosure of non-cash transactions
Purchase of property, plant and equipment through
   capital lease obligations ............................   $     50,792   $  1,758,108   $         --
</TABLE>

   The accompanying notes are an integral part of these consolidated financial
                                   statements.


                                       111

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION - On February 2, 2000, Land O'Lakes, Inc. and the
     Moark group of affiliated companies established a new joint venture
     ("Moark, LLC") to facilitate the strategy of becoming a top tier marketer
     and producer of shell eggs and processed egg products in the United States.
     In connection with the formation of this venture, Land O'Lakes, Inc.
     contributed cash and a commitment to provide additional funding and the
     Moark group contributed their existing egg and egg product operations.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
     the accounts of Moark, LLC and all subsidiaries in which Moark, LLC has the
     ability to exercise significant control over operating and financial
     policies. The entities (collectively referred to as the "Company") which
     are included in the consolidated financial statements are Moark, LLC,
     Premier Farms, LLC, Moark Egg Corporation, Norco Ranch Holding Company,
     Inc., Norco Ranch, Inc., Hi Point Industries, LLC, L&W Egg Products, Inc.,
     Kofkoff Egg Farm, LLC, Whip-O-Will Egg Farms, LLC, Pacheco Egg Farms, LLC,
     Kofkoff Feed, Inc., Colchester Foods, Inc., Fitchville Realty, Inc., Egg
     Express, Inc., McAnally Enterprises, LLC, Southern New England Egg, LLC,
     Cutler at Philadelphia, LLC (disposed of in 2004 - see Note 7), Cutler at
     Abbeville, LLC, Sunbest Farms of Iowa, LLC, and Sunbest Foods of Iowa, Inc.
     All significant intercompany balances and transactions have been
     eliminated.

     BUSINESS ENVIRONMENT - The Company operates as a marketer and producer of
     shell eggs and egg products covering the majority of the United States. As
     such, it operates in an environment wherein the commodity nature of both
     its products for sale and its primary raw materials causes sales prices and
     production costs to fluctuate, often on a short-term basis, due to the
     world-wide supply and demand situation for those commodities. The supply
     and demand factors for its products for sale and the supply and demand
     factors for its primary raw materials correlate to a degree, but are not
     the same, thereby causing margins between sales prices and production costs
     to increase, to decrease, or to invert, often on a short-term basis.

     LIMITED LIABILITY COMPANY - Since Moark, LLC is a limited liability
     company, no interest holder of the Company shall be personally liable for
     the debts, obligations or liabilities of Moark, LLC, unless the individual
     has signed a specific personal guarantee. Moark, LLC shall dissolve upon
     the sale of all or substantially all of the property of Moark, LLC; the
     vote by the managers to dissolve, wind up and liquidate the Company; entry
     of a decree of judicial dissolution pursuant to a legal authority; on
     December 31, 2050.

     FISCAL YEAR - During the eleven months ended December 27, 2003, the Company
     changed its fiscal year end to use a 52-53 week fiscal year ending during
     December. Prior to this change, the Company's fiscal year ended on the
     Saturday closest to January 31. The years ended December 24, 2005 and
     December 25, 2004 consisted of 52 week periods and the eleven months ended
     December 27, 2003 consisted of a 48 week period.

     REVENUE RECOGNITION - Revenue is recognized by the Company when the
     following criteria are met: persuasive evidence of an agreement exists;
     delivery has occurred or services have been rendered; the Company's price
     to the buyer is fixed and determinable; and collectibility is reasonably
     assured.

     CASH EQUIVALENTS - For purposes of the consolidated statement of cash
     flows, the Company considers all highly liquid instruments with an original
     maturity of three months or less to be cash equivalents.

     ACCOUNTS RECEIVABLE - The Company reviews their customer accounts on a
     periodic basis and records a reserve for specific amounts that the Company
     feels may not be collected. In addition, the Company has established a
     general reserve based on historical percentages of bad debts. Amounts will
     be written off at the point when collection attempts on the accounts have
     been exhausted. Management uses significant judgment in estimating
     uncollectible amounts. In estimating uncollectible amounts, management
     considers factors such as current overall economic conditions,
     industry-specific economic conditions, historical customer performance and
     anticipated customer performance. Past due status is determined based upon
     contractual terms. While management believes the Company's processes
     effectively address its exposure to doubtful accounts, changes in economic,
     industry or specific customer conditions may require adjustment to the
     allowance recorded by the Company.


                                       112

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     INVENTORIES - Layer flock inventories are valued at amortized cost. All
     other inventories are stated at the lower of cost, determined using the
     first-in, first-out method, or market.

     PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment contributed
     in connection with the initial establishment of the Company was recorded at
     its estimated fair values at the date of contribution. Additions to
     property, plant and equipment are recorded at original cost. Depreciation
     is provided by the straight-line method over the estimated useful lives of
     the related assets.

     LONG-LIVED ASSETS -Statement of Financial Accounting Standards ("SFAS") No.
     144 "Accounting for the Impairment or Disposal of Long-Lived Assets"
     requires that long-lived assets and certain identifiable intangibles be
     reviewed for impairment whenever events or changes in circumstances
     indicate that the carrying amounts of any asset may not be recoverable.
     Recoverability of 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 the carrying amount
     of the assets exceeds the fair value of the assets. During 2005, the
     Company adopted a plan to dispose of a certain piece of equipment and its
     egg products subsidiaries. Based upon management's assessment of the
     existing assets, management recorded an impairment loss of approximately
     $423,000, which represents the excess of the carrying value of the asset
     over its fair value. The impairment change is included in the Company's
     general and administrative expense in the statement of operations for 2005.
     The carrying value of the assets that are held for sale is presented in the
     balance sheet in the caption "assets held for sale", and these assets are
     no longer depreciated.

     GOODWILL - As a result of certain acquisition and merger transactions, the
     Company has recorded goodwill for the excess of the amount paid over the
     fair value of the assets acquired at the date of the acquisition or merger.

     SFAS No. 142 "Goodwill and Other Intangible Assets" requires companies to
     evaluate goodwill for impairment at least on an annual basis. No impairment
     loss resulted from the impairment test completed, using a discounted cash
     flow analysis that requires certain assumptions and estimates be made
     regarding industry economic factors and future profitability, during the
     year ended December 24, 2005.

     FRANCHISE AGREEMENTS - Fees paid to acquire franchises are reported as
     intangible assets-finite-lived, net of accumulated amortization and are
     being amortized to operations over the life of the franchise on the
     straight-line method. The franchise agreements granted certain rights to
     the Company to produce, sell and distribute certain product lines for an
     initial term of twenty years with options to renew. The agreements required
     an initial payment and monthly service fees based on a percentage of net
     sales of the products sold. The Company has also agreed to comply with
     franchise requirements relating to insurance limits, feed additives,
     packaging supplies and promotional materials.

     OTHER ASSETS - Other assets consist primarily of long-term grower advances,
     the long-term portion of a prepaid lease agreement and deposits. The
     prepaid lease agreement is being expensed over the term of the lease.

     INCOME TAXES - The Company utilizes the liability method of accounting for
     income taxes. This method requires the Company to recognize deferred tax
     assets and liabilities for the expected future tax consequences of events
     that have been recognized in its financial statements or tax returns. Under
     this method, deferred tax assets and liabilities are determined based on
     the difference between the financial statement basis of assets and
     liabilities and their related tax basis using enacted tax rates in effect
     for the years in which the differences are expected to be recovered.

     A portion of the Company's inventory has been valued using the farm price
     method for income tax reporting purposes. This results in these inventories
     being reflected at a lower value in the tax returns with lower taxable
     income reported. Current deferred income taxes relate primarily to this
     difference between financial statement and taxable income. Net operating
     loss carryforwards have been used to reduce current deferred income taxes.


                                       113

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

          Timing differences exist for depreciation on certain assets due to the
     use of the accelerated cost recovery system of depreciation for income tax
     reporting purposes. In addition, certain of the Company's incorporated
     subsidiaries utilized the cash basis method of accounting for income tax
     reporting prior to being acquired. The difference between this method and
     the accrual method is being recorded in taxable income over a ten year
     period. Long-term deferred income taxes relate primarily to these
     differences.

          Moark, LLC and several of its subsidiaries are limited liability
     companies and as such, are treated as partnerships for income tax purposes.
     Accordingly, the taxable income or loss of these entities is reported on
     the individual income tax returns of their members. No provisions for
     income taxes or deferred income tax liability related to these entities are
     included in the accompanying consolidated financial statements.

     ADVERTISING - The Company expenses the costs of advertising as incurred.
     Advertising costs for the periods ended December 24, 2005, December 25,
     2004 and December 27, 2003 were approximately $6,900,000, $3,144,000 and
     $2,793,000, respectively.

     SHIPPING AND HANDLING - All shipping and handling costs are expensed as
     incurred and are included in cost of sales in the accompanying consolidated
     statement of operations.

     ESTIMATES - The preparation of consolidated financial statements in
     conformity with accounting principles generally accepted in the United
     States of America requires management to make estimates and assumptions
     that affect the reported amounts of certain assets and liabilities and
     disclosures of contingent assets and liabilities at the date of the
     consolidated financial statements and the amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     FAIR VALUE - As of December 24, 2005 and December 25, 2004, the stated
     value of the Company's long-term receivables approximates their fair value
     based on current market rates for financial instruments of the same
     remaining maturities and with similar credit quality.

          The following table sets forth the carrying amounts and fair values of
     the Company's significant financial instruments where the carrying amount
     differs from the fair value.

<TABLE>
<CAPTION>
                                                              DECEMBER 24, 2005                DECEMBER 25, 2004
                                                       ------------------------------   ------------------------------
                                                       CARRYING AMOUNT    FAIR VALUE    CARRYING AMOUNT    FAIR VALUE
                                                         OF LIABILITY    OF LIABILITY     OF LIABILITY    OF LIABILITY
                                                       ---------------   ------------   ---------------   ------------
<S>                                                    <C>               <C>            <C>               <C>
Long-term debt and capital lease obligations .......     $68,434,223      $67,593,022     $83,456,192      $4,498,916
</TABLE>

     DERIVATIVE COMMODITY INSTRUMENTS - The Company uses derivative commodity
     instruments, primarily futures contracts, to reduce the exposure to changes
     in grain commodity prices. These contracts are not designated as hedges
     under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
     Activities." The futures contracts are marked to market each month and
     gains and losses ("unrealized gains and losses") are recognized in
     earnings.

     RECLASSIFICATIONS - Certain reclassifications have been made to the
     December 25, 2004 and December 27, 2003 amounts to conform to the December
     24, 2005 presentation. The reclassifications had no impact on net income
     (loss).


                                       114

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)

     RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - In December 2004, the Financial
     Accounting Standards Board ("FASB") issued SFAS No. 151, "Inventory Costs."
     SFAS No. 151 requires abnormal amounts of inventory costs related to idle
     facility, freight handling and wasted material expenses to be recognized as
     current period charges. Additionally, SFAS No. 151 requires that allocation
     of fixed production overheads to the costs of conversion be based on the
     normal capacity of the production facilities. The standard is effective for
     fiscal years beginning after June 15, 2005. The Company believes the
     adoption of SFAS No. 151 will not have a material impact on its
     consolidated financial statements.

2.   INVENTORIES

     Inventories consist of:

<TABLE>
<CAPTION>
                              DECEMBER 24,   DECEMBER 25,
                                  2005           2004
                              ------------   ------------
<S>                           <C>            <C>
Layer flocks and pullets...   $ 21,426,338   $$22,254,045
Feed and feed ingredients..      3,733,473      2,906,693
Eggs and egg products......      2,080,432      3,121,701
Supplies and other.........      3,193,959      2,617,196
                              ------------   ------------
                              $$30,434,202   $$30,899,635
                              ============   ============
</TABLE>

3.   NOTES RECEIVABLE

     Notes receivable consist of the following:

<TABLE>
<CAPTION>
                                                                           DECEMBER 24,   DECEMBER 25,
                                                                               2005           2004
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
Note receivable from an individual; interest at 8%; due in monthly
   installments of  $34,942, including interest, through January 2019...    $3,396,003     $3,527,252
Less current portion ...................................................       140,942        141,425
                                                                            ----------     ----------
Notes receivable, less current portion..................................    $3,255,061     $3,385,827
                                                                            ==========     ==========
</TABLE>

     Principal and contractual maturities on the notes receivable are as
follows:

<TABLE>
<S>            <C>
2006........   $  140,942
2007........      165,875
2008........      179,643
2009........      194,553
2010........      210,701
Thereafter..    2,504,289
               ----------
               $3,369,003
               ==========
</TABLE>

          The Company reviews their notes receivable on a periodic basis and
     records a reserve for specific amounts that the Company feels may not be
     collected. At the point the Company records this amount in reserve,
     interest income will no longer be accrued. Amounts will be written off when
     collection attempts on the amounts have been exhausted. All notes
     receivable are considered fully collectible, and accordingly, no provisions
     have been made at December 24, 2005 and December 25, 2004.


                                       115
<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

4. CAPITAL LEASES

     The Company is obligated for certain property, plant and equipment under
capital leases that expire at various dates during the next several years.
Assets under capital leases, excluding land, are being amortized over their
useful lives which range from five to twenty years. The amortization expense is
included with depreciation expense in the accompanying consolidated statement of
operations and cash flows.

     Assets under capital leases consist of the following:

<TABLE>
<CAPTION>
                                      DECEMBER 24,    DECEMBER 25,
                                          2005            2004
                                      ------------    ------------
<S>                                   <C>             <C>
Land ..............................   $    200,000     $    200,000
Buildings .........................      7,199,618        7,199,618
Machinery and equipment ...........      7,574,914        7,523,322
Accumulated amortization ..........     (4,535,629)      (3,283,095)
                                      ------------     ------------
Net assets under capital leases ...   $ 10,438,903     $ 11,639,845
                                      ============     ============
</TABLE>

     As of December 24, 2005, the future minimum lease payments under capital
leases are as follows:

<TABLE>
<S>                                                  <C>
2006 .............................................   $ 2,285,301
2007 .............................................     2,215,798
2008 .............................................     1,709,658
2009 .............................................     1,545,917
2010 .............................................     1,424,000
Thereafter .......................................     1,661,333
                                                     -----------
Total minimum lease payments .....................    10,842,007
Less amounts representing interest ...............     1,172,031
                                                     -----------
Present value of future minimum lease payments ...   $ 9,669,976
                                                     ===========
</TABLE>

5. INTANGIBLE ASSETS - FINITE-LIVED

     Intangible assets - finite-lived consisted of the following:

<TABLE>
<CAPTION>
                                                   FRANCHISE
                                                     FEES         OTHER        TOTAL
                                                  ----------   ----------   ----------
<S>                                               <C>          <C>          <C>
Original cost .................................   $3,073,985   $1,364,125   $4,438,110
                                                  ----------   ----------   ----------
Accumulated amortization, December 27, 2003 ...      735,696      920,692    1,656,388
Amortization ..................................      120,506      156,446      276,952
                                                  ----------   ----------   ----------
Accumulated amortization, December 25, 2004 ...      856,202    1,077,138    1,933,340
Amortization ..................................      174,556      199,606      374,162
                                                  ----------   ----------   ----------
Accumulated amortization, December 24, 2005 ...    1,030,758    1,276,744    2,307,502
                                                  ----------   ----------   ----------
Net intangible assets -- finite-lived .........   $2,043,227   $   87,381   $2,130,608
                                                  ==========   ==========   ==========
</TABLE>

     These intangible assets - finite-lived are being amortized over the term of
the agreement or the estimated useful period. These lives range from 4 to 20
years. Estimated future amortization expense at December 24, 2005 is as follows:


                                      116

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

<TABLE>
<S>              <C>
2006 .........   $  261,937
2007 .........      174,556
2008 .........      174,556
2009 .........      174,556
2010 .........      174,556
Thereafter ...    1,170,447
                 ----------
                 $2,130,608
                 ==========
</TABLE>

6. GOODWILL

     The changes in the carrying value of goodwill during the periods ended
December 24, 2005 and December 25, 2004 are as follows:

<TABLE>
<CAPTION>
                                          DECEMBER 24,   DECEMBER 25,
                                              2005           2004
                                          ------------   ------------
<S>                                       <C>            <C>
Balance -- beginning of the period ....    $42,973,768    $42,973,768
Goodwill acquired during the period ...        250,000             --
                                           -----------    -----------
Balance -- end of the period ..........    $43,223,768    $42,973,768
                                           ===========    ===========
</TABLE>

7. DISPOSAL OF A SUBSIDIARY

     In November 2004, the Company disposed of its wholly-owned subsidiary,
Cutler at Philadelphia, LLC, in an asset sale. The Company sold 100% of
Philadelphia's inventories and property, plant and equipment, along with certain
receivables, in exchange for cash and a note receivable. The sale resulted in a
loss of approximately $1,450,000 during the year ended December 25, 2004 , which
has been included in gain (loss) on sale of assets in the accompanying
consolidated statement of operations. As part of the terms of the sale, the
Company signed a long-term supply agreement with the acquiring entity.

     As of December 27, 2003, the assets and liabilities of Cutler at
Philadelphia, LLC were reflected as assets and liabilities held for sale in the
accompanying consolidated balance sheet. Previously, the Company had reported
the operations of Cutler at Philadelphia, LLC as discontinued operations in the
consolidated statement of operations. As part of the terms of the sale, the
long-term supply agreement with the acquiring entity will enable the Company to
have significant continuing cash flows. Therefore, the Company has determined
that classification as a discontinued operation would not be appropriate and has
reclassified the operating results for the year ended December 27, 2003 to
conform to the December 25, 2004 presentation.

8. ASSETS AND LIABILITIES HELD FOR SALE

     The Company committed to a plan to reposition a portion of its operations.
Management expects the repositioning to occur within a year. Accordingly,
certain assets and liabilities were presented as assets held for sale in the
consolidated financial statements. At December 24, 2005, balance sheet amounts
for assets of $35.8 million and liabilities of $0.4 million have been
reclassified to other current assets and accrued expenses, respectively.

9. INVESTMENT IN AFFILIATES

     The Company owns fifty percent of Grand Mesa Eggs, Inc., which operates as
a commercial egg producer with operations located in Colorado. The Company owns
fifty percent of Delta Egg Farm, LLC ("Delta") which operates as a producer of
shell eggs with operations located in Utah. In addition, the Company owns a
fifty percent interest in Moark/Fort Recovery Egg Marketing, LLC, which operates
as a wholesale egg distributor. The Company accounts for these investments under
the equity method. The investment reflects the initial price paid for the
ownership and there has been no amortization of any differences between the
level of investment and the underlying net assets. The following is summarized
information regarding one hundred percent of the affiliated companies' assets,
liabilities, equity and results of operations:


                                      117

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 24, 2005
                                         -------------------------------------------------------
                                                                      MOARK/FORT
                                                                     RECOVERY EGG
                                          GRAND MESA    DELTA EGG     MARKETING,
                                          EGGS, INC.    FARM, LLC         LLC           TOTAL
                                         -----------   -----------   ------------   ------------
<S>                                      <C>           <C>           <C>            <C>
Current assets .......................   $ 2,372,673   $ 4,910,132   $ 7,402,039    $ 14,684,844
Property, plant and equipment, net ...     1,616,384    16,463,986            --      18,080,370
Other assets .........................       156,218       279,248        80,364         515,830

Current liabilities ..................     2,323,774       667,839     5,276,164       8,267,777
Other liabilities ....................       438,429    11,278,000            --      11,716,429
Stockholders' or members' equity .....     1,383,072     9,707,527     2,206,239      13,296,838

Net sales ............................     9,952,674    14,958,481    61,937,400      86,848,555
Cost of goods sold ...................    10,720,844    15,323,125    71,292,927      97,336,896
Selling, general and administrative
   expenses ..........................       661,200       950,095       420,518       2,031,813
Net finance expense ..................        28,410       872,778            --         901,188
Income tax benefit ...................      (466,490)           --            --        (466,490)
Net loss .............................      (991,290)   (2,187,517)   (9,776,045)    (12,954,852)
</TABLE>

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 25, 2004
                                         -------------------------------------------------------
                                                                      MOARK/FORT
                                                                     RECOVERY EGG
                                          GRAND MESA    DELTA EGG     MARKETING,
                                          EGGS, INC.    FARM, LLC         LLC           TOTAL
                                         -----------   -----------   ------------   ------------
<S>                                      <C>           <C>           <C>            <C>
Current assets .......................   $ 2,901,099   $ 8,150,674    $ 6,034,158   $ 17,085,931
Property, plant and equipment, net ...     1,898,365    17,924,481             --     19,822,846
Other assets .........................       149,974       296,141             --        446,115

Current liabilities ..................     2,136,075     1,842,560      4,951,874      8,930,509
Other liabilities ....................       439,000    11,278,000             --     11,717,000
Stockholders' or members' equity .....     2,374,363    13,250,736      1,082,284     16,707,383

Net sales ............................    14,222,450    20,729,977     81,152,078    116,104,505
Cost of goods sold ...................    12,667,613    16,265,604     68,234,451     97,167,668
Selling, general and administrative
   expenses ..........................       704,839       814,047        356,313      1,875,199
Net finance expense (benefit) ........       (89,173)      938,943             --        849,770
Income tax expense ...................       375,800            --             --        375,800
Net income ...........................       563,371     2,711,383     12,561,314     15,836,068
</TABLE>


                                       118

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

<TABLE>
<CAPTION>
                                                  ELEVEN MONTHS ENDED DECEMBER 27, 2003
                                         -------------------------------------------------------
                                                                      MOARK/FORT
                                                                     RECOVERY EGG
                                          GRAND MESA    DELTA EGG     MARKETING,
                                          EGGS, INC.    FARM, LLC         LLC           TOTAL
                                         -----------   -----------   ------------   ------------
<S>                                      <C>           <C>           <C>            <C>
Current assets .......................   $ 4,788,016   $ 7,071,326    $ 8,527,172   $ 20,386,514
Property, plant and equipment, net ...     2,172,268    19,060,973             --     21,233,241
Other assets .........................       156,945       313,034             --        469,979

Current liabilities ..................     1,875,843       671,638      4,066,054      6,613,535
Other liabilities ....................     1,630,394    13,726,000             --     15,356,394
Stockholders' or members' equity .....     3,610,992    12,047,695      4,461,118     20,119,805

Net sales ............................    12,133,716    48,769,188     77,969,744    138,872,648
Cost of goods sold ...................     9,502,318    41,015,749     62,011,274    112,529,341
Selling, general and administrative
   expenses ..........................       574,517     1,026,067        228,254      1,828,838
Net finance expense ..................        60,536     1,173,222             --      1,233,758
Other income (expense), net ..........       (89,505)           --             --        (89,505)
Income tax expense ...................       805,000            --             --        805,000
Net income ...........................     1,280,850     5,554,150     15,730,216     22,565,216
</TABLE>

10. NOTES PAYABLE

     The Company has available a revolving line of credit with availability not
to exceed $60,000,000, subject to a borrowing base computation, payable to a
lender group made up of certain banks and agricultural credit associations.
Borrowings under the line of credit bear varying interest rates from 6.94% to
7.12%. All borrowings are collateralized by substantially all assets of the
Company and matures March 26, 2006. The outstanding balance on the line of
credit was $19,000,000 at December 24, 2005. There were no amounts outstanding
under this line of credit at December 25, 2004.

     The Company has an available line of credit with availability not to exceed
$10,000,000 to a related party. Borrowings under the line of credit bear
interest equal to LIBOR plus 200 basis points. All borrowings are unsecured,
maturing December 31, 2006. There were no amounts outstanding under this line of
credit at December 24, 2005.


                                      119
<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

11. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS

     Long-term debt and capital lease obligations consist of:

<TABLE>
<CAPTION>
                                                                           DECEMBER 24,   DECEMBER 25,
                                                                               2005           2004
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
Notes payable to a company and trusts; interest at 8%; secured by
   the common stock of Norco Ranch, Inc. and the membership interest
   of McAnally Enterprises, LLC and Hi Point Industries, LLC; payable
   in monthly installments ranging from $34,880 to $135,394, including
   interest, through April 2011 to February 2023 .......................    $31,743,041    $32,778,871

Credit agreements, consisting of: (1) a revolving commitment not to
   exceed $60,000,000, subject to a borrowing base computation,
   payable to a lender group made up of certain banks and agricultural
   credit associations; and (2) a term loan commitment not to exceed
   $15,000,000, to a bank; interest is to be charged as defined (8.03%
   as of December 24, 2005) with quarterly principal payments of
   $535,715; secured by substantially all assets of the Company and
   matures March 26, 2006 ..............................................     11,138,207     13,281,069

Note payable to an agricultural credit association; interest at
   6.50%; secured by certain real estate; payable in monthly
   installments of $258,550, including interest, through September
   2011 ................................................................      9,084,580     17,803,059

Capital lease obligation payable to a company; interest imputed at
   7.00%; payable in monthly installments of $118,667, including
   interest, through February 2012 .....................................      7,667,806      8,522,314

Notes payable to an agricultural credit association; interest
   ranging from 5.75% to 7.15%; secured by certain accounts
   receivable, inventories, and property and equipment; monthly
   installments ranging from $1,449 to $75,593, including interest,
   through dates ranging from June 2008 to June 2011 ...................      6,532,357      8,038,022

Various capital lease obligations with a financing company;
   interest ranging from 5.92% to 8.95%; secured by certain equipment;
   payable in monthly installments ranging from $313 to $17,457,
   including interest, through dates ranging from April 2007 through
   January 2009 ........................................................      2,002,170      2,685,888

Various notes payable to financing companies; secured by certain
   equipment; payable in various monthly installments, including
   interest, through dates ranging from December 2006 to August
   2009 ................................................................        266,062        346,969
                                                                            -----------    -----------
                                                                             68,434,223     83,456,192
Less current maturities ................................................     16,629,382      8,369,727
                                                                            -----------    -----------
Long-term debt and capital lease obligations, less current maturities ..    $51,804,841    $75,086,465
                                                                            ===========    ===========
</TABLE>


                                       120

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

          Annual maturities of long-term debt and capital lease obligations are
     as follows:

<TABLE>
<CAPTION>
                  LONG-TERM    CAPITAL LEASE
                     DEBT       OBLIGATIONS       TOTAL
                 -----------   -------------   -----------
<S>              <C>           <C>             <C>
2006 .........   $14,883,669    $ 1,745,713    $16,629,382
2007 .........     4,087,317      1,751,544      5,838,861
2008 .........     4,190,699      1,334,481      5,525,180
2009 .........     4,268,131      1,252,482      5,520,613
2010 .........     4,437,579      1,211,372      5,648,951
Thereafter ...    26,896,852      2,374,384     29,271,236
                 -----------    -----------    -----------
                 $58,764,247    $ 9,669,976    $68,434,223
                 ===========    ===========    ===========
</TABLE>

          The Company's notes payable and revolving line of credit agreements
     with certain banks, agricultural credit associations, and certain
     individuals require compliance with certain restrictive covenants,
     including the maintenance of minimum levels of equity and working capital.
     In addition, these covenants restrict dividend payments, capital
     expenditures, investments, stockholder loans, fundamental changes in
     ownership, and the granting of loans or extensions of credit. As of
     December 24, 2005, the Company had obtained waivers for any non-compliance
     with these restrictions and covenants.

12. BANK OVERDRAFTS

          The Company had outstanding checks in excess of bank balances on
     certain of its subsidiaries of approximately $3,780,000 and $2,079,000 as
     of December 24, 2005 and December 25, 2004, respectively. The bank accounts
     utilized by the subsidiaries do not automatically draft funds from Moark,
     LLC's corporate bank, therefore, these outstanding checks were reclassified
     into accounts payable for the consolidated financial statement
     presentation.

13. INCOME TAXES

          Income taxes consist of:

<TABLE>
<CAPTION>
                                           DECEMBER 24,   DECEMBER 25,   DECEMBER 27,
                                               2005           2004           2003
                                           ------------   ------------   ------------
<S>                                        <C>            <C>            <C>
Current provision ......................   $ 3,617,546    $ 4,623,666     $  562,464
Deferred provision (benefit) ...........    (7,199,483)    (2,281,000)     3,491,700
                                           -----------    -----------     ----------
                                           $(3,581,937)   $ 2,342,666     $4,054,164
                                           ===========    ===========     ==========
</TABLE>

          The Company's provision for income taxes varies from the statutory
     U.S. tax rate primarily due to the effect of state income taxes, certain
     nondeductible expenses and the partnership tax treatment for certain of the
     entities.

          Total gross deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                    DECEBER 24,   DECEMBER 25,
                                        2005          2004
                                    -----------   ------------
<S>                                 <C>           <C>
Gross deferred tax liabilities ..   $12,841,112   $19,680,000
Gross deferred tax assets .......     2,396,596     2,036,000
                                    -----------   -----------
Net deferred tax liability ......   $10,444,516   $17,644,000
                                    ===========   ===========
</TABLE>

          At December 24, 2005, the Company has net operating loss carryforwards
     for federal income tax purposes of approximately $10,000,000 available to
     offset future taxable income. Unless utilized, these carryforwards will
     begin expiring in 2024. These carryforwards have been used to reduce
     deferred tax liabilities that would otherwise exist for consolidated
     financial statement purposes.


                                       121

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

14. RELATED PARTIES

          The Company is related by common ownership to other corporations and
     proprietorships engaged in operations related to the commercial shell egg
     industry. The Company also held an equity interest in an affiliated
     Company, which was engaged in related operations. The Company sells
     products to and purchases products from certain of these related entities.
     In addition, the Company pays a member fees for environmental services and
     certain royalty fees. Activity between the Company and these related
     entities and the balances owed to and from these entities are summarized as
     follows:

<TABLE>
<CAPTION>
                                                            DECEMBER 24,   DECEMBER 25,   DECEMBER 27,
                                                                2005           2004           2003
                                                            ------------   ------------   ------------
<S>                                                         <C>            <C>            <C>
Sales to related parties ................................    $ 3,964,000    $ 3,017,000   $ 2,424,000
Purchases from and payments of fees to related parties ..     47,172,000     70,321,000    34,141,000
Accounts receivable from related parties ................        367,000        516,000       812,000
Accounts payable to related parties .....................      5,769,000      5,823,000    11,347,000
</TABLE>

          The Company also has guaranteed certain loan agreements for Delta Egg
     Farm, LLC of which the Company is a 50% owner. The Company is responsible
     for 50% of the outstanding balance on these guaranteed notes totaling
     approximately $11,278,000 as of December 24, 2005. It is estimated that
     these notes are fully secured by collateral of the borrower.

          In March 2003, the members of the Company advanced $5,000,000 to the
     Company. These advances, along with interest of approximately $181,000,
     were repaid to the members prior to December 25, 2004.

          The Company is a party to a consulting agreement with one of its
     members for an annual amount of approximately $1,445,000 due February 1 of
     each year. Included in the statement of operations for the periods ended
     December 24, 2005, December 25, 2004 and December 27, 2003 is $1,445,000,
     $1,445,000 and $1,325,000, respectively, related to this agreement.

          A subsidiary of one of the Company's members has written insurance
     policies for the Company providing for general liability, property and
     workers compensation insurance policies covering most of the Company's
     employees. Premiums during the periods ended December 24, 2005, December
     25, 2004 and December 27, 2003 were approximately $3,611,144, $3,020,000
     and $5,200,000, respectively.

15. COMMITMENTS AND CONTINGENCIES

     a.   Non-cancelable operating leases of certain vehicles, equipment and
          real estate expire in various years through 2013. These leases
          generally contain renewal options for periods ranging from two years
          to five years and require the Company to pay all executory costs
          (property taxes, maintenance and insurance).

               Future minimum lease payments at December 24, 2005 are as
          follows:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S>             <C>
2006 ........   $ 4,203,875
2007 ........     3,822,416
2008 ........     3,295,203
2009 ........     2,900,130
2010 ........     1,687,096
Thereafter ..     3,567,088
                -----------
                $19,475,808
                ===========
</TABLE>

               Rent expense for all operating leases approximated $5,900,000,
          $6,751,000 and $5,399,000 for the periods ended December 24, 2005,
          December 25, 2004 and December 27, 2003, respectively. Included in
          operating leases are certain leases with related parties. Payments to
          the related parties in connection with these leases totaled
          approximately $410,000, $479,000 and $506,000, respectively.


                                      122

<PAGE>

                           MOARK, LLC AND SUBSIDIARIES

              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED

15. COMMITMENTS AND CONTINGENCIES (CONT.)

     b.   The Company has a defined contribution retirement plan that contains a
          401(k) salary deferral feature that covers essentially all of the
          full-time employees of Moark, LLC and its affiliated companies. Those
          who have attained the age of eighteen and who have completed minimum
          periods of service are eligible to participate. The Company makes
          matching contributions as required by the plan document and is
          permitted to make discretionary contributions if desired by the
          Company's management.

               There were no discretionary contributions made for the periods
          ended December 24, 2005, December 25, 2004 and December 27, 2003.
          Matching contributions to the above plans during 2005, 2004, and 2003
          were approximately $774,000, $712,000 and $289,000, respectively.

     c.   The Company had a non-qualified retirement plan for certain key
          employees. The benefits under this plan require the participants to
          remain in the employment of the Company for a specified number of
          years, or until retirement age, in order to obtain any benefits and to
          observe certain covenants dealing with competition. No contributions
          were made to this plan during the periods ended December 24, 2005,
          December 25, 2004 and December 27, 2003. This plan was terminated
          effective January 2004.

     d.   The Company is self-insured for health insurance purposes. The Company
          has obtained stop-loss insurance policies to cover losses in excess of
          $150,000 per employee and aggregate losses in excess of $4,900,000 per
          plan year. Provisions have been made in these consolidated financial
          statements to cover losses incurred under this self-insurance program.

     e.   The Company is self-insured for workers compensation insurance
          purposes. Provisions have been made in these consolidated financial
          statements to cover losses incurred under this self-insurance program.

     f.   The Company has outstanding commodity contracts for the future
          purchases of grain at December 24, 2005. These commitments are not in
          excess of the current operating requirements of the Company.

16. CONCENTRATIONS OF CREDIT RISK

          Financial instruments which potentially subject the Company to
     concentrations of credit risk consist primarily of trade receivables with a
     variety of customers and cash and cash investments deposited with financial
     institutions and credit associations.

          Concentrations of credit risk with respect to accounts receivable are
     limited because a large number of geographically diverse customers make up
     the Company's customer base, thus spreading the trade credit risk. At
     December 24, 2005, four customers represent greater than 10% of total
     accounts receivable. At December 25, 2004, only one single group or
     customer represents greater than 10% of total accounts receivable. The
     Company controls credit risk through credit approvals, credit limits, and
     monitoring procedures. The Company performs ongoing credit evaluations of
     its customers but generally does not require collateral to support accounts
     receivable.

          At December 24, 2005 and December 25, 2004 and at times during the
     periods then ended, the Company maintained cash and cash investment
     balances with financial institutions in excess of Federal Deposit Insurance
     Corporation ("FDIC") insured limits.


                                      123
<PAGE>

                                 AGRILIANCE LLC

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                        (UNAUDITED)
                                                       NOVEMBER 30,   AUGUST 31,
                                                           2005          2005
                                                       ------------   ----------
                                                            ($ IN THOUSANDS)
<S>                                                    <C>            <C>
                       ASSETS
Current assets:
   Cash ............................................    $       --    $   31,854
   Trade receivables, net of allowance for bad debts
      of $13,558 and $12,384, respectively .........       421,759       318,238
   Rebates receivable ..............................       114,752       134,132
   Other receivables ...............................         9,967         8,149
   Receivable from Land O' Lakes, Inc. .............            --         4,243
   Receivable from CHS, Inc. .......................             4            --
   Inventories .....................................       676,551       659,213
   Vendor prepayments ..............................       321,438       171,119
   Prepaid expenses ................................         8,950        10,960
                                                        ----------    ----------
      Total current assets .........................     1,553,421     1,337,908
Property, plant and equipment:
   Land and land improvements ......................        18,878        19,117
   Buildings .......................................        70,473        70,773
   Machinery and equipment .........................       138,101       136,899
   Construction in progress ........................        26,536        20,451
                                                        ----------    ----------
      Total property, plant and equipment ..........       253,988       247,240
   Less accumulated depreciation ...................      (125,762)     (122,264)
                                                        ----------    ----------
      Net property, plant and equipment ............       128,226       124,976
Other assets .......................................        24,374        23,635
                                                        ----------    ----------
      Total assets .................................    $1,706,021    $1,486,519
                                                        ==========    ==========

          LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
   Cash overdraft ..................................    $   34,657    $       --
   Accounts payable ................................       600,893       718,774
   Customer prepayments ............................       444,041       171,518
   Accrued expenses ................................        95,917       140,363
   Payable to Land O'Lakes, Inc. ...................        18,590            --
   Payable to CHS, Inc. ............................            --         3,253
   Other current liabilities .......................         6,617         6,865
   Short-term debt .................................        99,747        23,650
                                                        ----------    ----------
      Total current liabilities ....................     1,300,462     1,064,423
   Long-term debt ..................................       100,000       100,000
   Other non-current liabilities ...................        14,620        14,850
   Minority interest in subsidiary .................         4,344         4,944
Members' equity:
   Contributed capital .............................       159,089       159,089
   Retained earnings ...............................       128,928       144,636
   Accumulated other comprehensive loss ............        (1,422)       (1,423)
                                                        ----------    ----------
      Total members' equity ........................       286,595       302,302
                                                        ----------    ----------
      Total liabilities and members' equity ........    $1,706,021    $1,486,519
                                                        ==========    ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       124

<PAGE>

                                 AGRILIANCE LLC

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED
                                                       NOVEMBER 30,
                                                   -------------------
                                                     2005       2004
                                                   --------   --------
                                                     ($ IN THOUSANDS)
                                                       (UNAUDITED)
<S>                                                <C>        <C>
Net sales ......................................   $692,461   $598,732
Cost of sales ..................................    634,896    540,925
                                                   --------   --------
   Gross profit ................................     57,565     57,807
Selling, general, and administrative expense ...     71,862     59,213
Loss (gain) on sale of assets ..................     (2,980)       (94)
                                                   --------   --------
   Loss from operations ........................    (11,317)    (1,500)
Interest expense, net ..........................      4,991      3,269
Equity in earnings of affiliated company .......       (600)         6
                                                   --------   --------
   Net loss ....................................   $(15,708)  $ (4,775)
                                                   ========   ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       125

<PAGE>

                                 AGRILIANCE LLC

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                       THREE MONTHS ENDED
                                                                                          NOVEMBER 30,
                                                                                     ---------------------
                                                                                        2005        2004
                                                                                     ---------   ---------
                                                                                        ($ IN THOUSANDS)
                                                                                          (UNAUDITED)
<S>                                                                                  <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss ......................................................................   $ (15,708)  $  (4,775)
   Adjustments to reconcile net loss to net cash used by operating activities:
      Depreciation and amortization ..............................................       4,434       4,657
      Bad debt expense ...........................................................          53         812
      Loss (gain) on sale of assets ..............................................      (2,980)         94
      Equity earnings in affiliated company ......................................        (600)          6
      Increase (decrease) in other non-current assets ............................        (758)        330
      Increase (decrease) in other non-current liabilities .......................        (230)         47
   Changes in current assets and liabilities:
      Trade receivables ..........................................................    (103,574)   (136,705)
      Receivables/payables from related parties ..................................      19,576      (8,029)
      Rebates receivable .........................................................      19,380      14,591
      Other receivables ..........................................................      (1,818)      4,306
      Inventories ................................................................     (17,338)    (76,807)
      Vendor prepayments .........................................................    (150,319)   (215,169)
      Accounts payable and customer prepayments ..................................     154,642     439,935
      Accrued expenses ...........................................................     (44,446)    (35,613)
      Other current assets and liabilities .......................................       1,762       2,392
                                                                                     ---------   ---------
   Net cash used by operating activities .........................................    (137,924)     (9,928)
                                                                                     ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment ....................................      (8,599)     (7,653)
   Proceeds from sale of property, plant and equipment ...........................       3,915       1,811
                                                                                     ---------   ---------
   Net cash used by investing activities .........................................      (4,684)     (5,842)
                                                                                     ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from short-term debt .................................................      76,097     110,000
   Increase (decrease) in cash overdrafts ........................................      34,657     (30,551)
   Distribution of earnings to members ...........................................          --     (40,000)
                                                                                     ---------   ---------
   Net cash provided by financing activities .....................................     110,754      39,449
                                                                                     ---------   ---------
Net change in cash and cash equivalents ..........................................     (31,854)     23,679
Cash and cash equivalents at beginning of period .................................      31,854          --
                                                                                     ---------   ---------
Cash and cash equivalents at end of period .......................................   $      --   $  23,679
                                                                                     =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       126
<PAGE>

                                 AGRILIANCE LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The unaudited consolidated financial statements reflect, in the opinion of
the management of Agriliance LLC (the "Company"), all normal recurring
adjustments necessary for a fair statement of the financial position and results
of operations and cash flows for the interim periods. The statements are
condensed and, therefore do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements. These statements should be read in
conjunction with the audited consolidated financial statements and footnotes for
the year ended August 31, 2005. The results of operations and cash flows for
interim periods are not indicative of results for a full year. Certain
reclassifications have been made to the 2004 amounts to conform with the 2005
presentation.

2.   BORROWING ARRANGEMENTS

     At November 30, 2005, $74 million of short term debt was outstanding under
the Company's $270 million syndicated revolving credit agreement. The facility
is secured by the Company's inventory and the accounts receivable of its wholly
owned subsidiary, Agro Distribution, LLC. Interest on borrowings under the
facility was charged at 5.834% (LIBOR + 1.5%) as of November 30, 2005.

     The company's consolidated joint-venture, AFC-Agriliance, LLC, has a $30
million revolving credit agreement with CoBank which expires March 1, 2006 and
is secured by AFC-Agriliance, LLC's accounts receivable and inventory. There was
$25.7 million outstanding at November 30, 2005. Interest on borrowings was
charged at LIBOR + 2.5%.

     In December 2005, the company renegotiated the revolving credit agreement,
extending the facility for an additional five years and increasing the available
borrowing capacity to $325 million. The amendment also has allowed for the
issuance of letters of credit up to $75 million, and adjusted certain covenant
restrictions.

     Agriliance also has $100 million of senior secured notes in a private
placement. The private placement consists of four notes, two with fixed-rate
interest rates and two notes with floating rates. The fixed-rate notes are for
$42 million and $47 million, bearing interest at 5.66% and 6.31%, respectively,
and maturing in December 2008 and 2010. The floating rate notes are for $6
million, maturing in December 2008 and for $5 million, maturing in December
2010. Both of these notes bear interest at variable rates based on LIBOR plus
applicable margins. All of the notes are secured by the same assets which secure
the revolving credit facility, on a pari passu basis.

     In November 2005, Agriliance renegotiated its revolving receivables
securitization program allowing for borrowings of up to $225 million in advances
against eligible receivables. Under this program, Agriliance sells trade
receivables to Agriliance SPV, LLC, a wholly-owned subsidiary of Agriliance,
LLC. This subsidiary is a qualifying special purpose entity (QSPE) under
applicable accounting rules, and was established for the limited purpose of
purchasing and obtaining financing for these receivables. The transfers of the
receivables to the QSPE are structured as sales and, in accordance with
applicable accounting rules, these receivables are not reflected in the
consolidated balance sheets of Agriliance. The QSPE purchases the receivables
with a combination of cash and notes. CoBank and other banks lend funds to the
SPV based upon the value of the receivables pool, at an agreed advance rate. As
of November 30, 2005, $162 million was drawn under this securitization. The
facility is currently scheduled to terminate in November 2010.


                                      127

<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Managers
Agriliance, LLC:

     We have audited the accompanying consolidated balance sheets of Agriliance,
LLC and subsidiaries as of August 31, 2005 and 2004, and the related
consolidated statements of operations, cash flows, and members' equity for each
of the years in the three-year period ended August 31, 2005. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes 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 Agriliance,
LLC and subsidiaries as of August 31, 2005 and 2004, and the results of their
operations and their cash flows for each of the years in the three-year period
ended August 31, 2005 in conformity with U.S. generally accepted accounting
principles.

                                        /s/ KPMG LLP

October 28, 2005


                                      128

<PAGE>

                                 AGRILIANCE, LLC

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         AUGUST 31,
                                                                  -----------------------
                                                                     2005         2004
                                                                  ----------   ----------
                                                                      ($ IN THOUSANDS)
<S>                                                               <C>          <C>
                                     ASSETS

Current assets:
   Cash .......................................................   $   31,854   $       --
   Trade receivables, net of allowance for doubtful accounts
      of $17,440 and $12,384 in 2005 and 2004, respectively ...      318,238      304,028
   Rebates receivable .........................................      134,132      146,910
   Other receivables ..........................................        8,149        9,717
   Receivable from Land O' Lakes, Inc. ........................        4,243           --
   Inventories ................................................      659,213      520,496
   Vendor prepayments .........................................      171,119      130,790
   Prepaid expenses ...........................................       10,960        3,603
                                                                  ----------   ----------
      Total current assets ....................................    1,337,908    1,115,544

Property, plant and equipment:
   Land and land improvements .................................       19,117       19,714
   Buildings ..................................................       70,773       65,997
   Machinery and equipment ....................................      136,899      115,285
   Construction in progress ...................................       20,451       16,931
                                                                  ----------   ----------
      Total property, plant and equipment .....................      247,240      217,927
   Less accumulated depreciation ..............................     (122,264)    (105,676)
                                                                  ----------   ----------
      Net property, plant and equipment .......................      124,976      112,251
Other assets ..................................................       23,635       10,865
                                                                  ----------   ----------
      Total assets ............................................   $1,486,519   $1,238,660
                                                                  ==========   ==========
                         LIABILITIES AND MEMBERS' EQUITY

Current liabilities:
   Cash overdraft .............................................   $       --   $   30,551
   Short-term debt ............................................       23,650           --
   Accounts payable ...........................................      718,774      543,501
   Customer prepayments .......................................      171,518      108,030
   Accrued expenses ...........................................      140,363      124,979
   Payable to Land O'Lakes, Inc. ..............................           --       12,581
   Payable to CHS, Inc. .......................................        3,253        4,047
   Distributions payable to members ...........................           --       40,000
   Other current liabilities ..................................        6,865        7,029
                                                                  ----------   ----------
      Total current liabilities ...............................    1,064,423      870,718
Long-term debt ................................................      100,000      100,000
Other non-current liabilities .................................       14,850       25,992
Minority interest in subsidiary ...............................        4,944        2,767

Members' equity:
   Contributed capital ........................................      159,089      159,089
   Retained earnings ..........................................      144,636       91,673
   Accumulated other comprehensive income .....................       (1,423)     (11,579)
                                                                  ----------   ----------
      Total members' equity ...................................      302,302      239,183
                                                                  ----------   ----------
      Total liabilities and members' equity ...................   $1,486,519   $1,238,660
                                                                  ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      129

<PAGE>

                                 AGRILIANCE, LLC

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                        YEARS ENDED AUGUST 31,
                                                 ------------------------------------
                                                    2005         2004         2003
                                                 ----------   ----------   ----------
                                                           ($ IN THOUSANDS)
<S>                                              <C>          <C>          <C>
Net sales ....................................   $3,735,125   $3,471,514   $3,485,623
Cost of sales ................................    3,361,682    3,121,558    3,119,287
                                                 ----------   ----------   ----------
   Gross margin ..............................      373,443      349,956      366,336
Selling, general and administrative expense ..      282,631      267,735      299,097
Gain on sale of assets .......................       (1,538)        (901)      (2,787)
                                                 ----------   ----------   ----------
   Earnings from operations ..................       92,350       83,122       70,026
Minority interests ...........................        2,177        2,762           --
Interest expense, net ........................       13,060        9,082        9,285
                                                 ----------   ----------   ----------
   Net earnings ..............................   $   77,113   $   71,278   $   60,741
                                                 ==========   ==========   ==========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      130
<PAGE>

                                 AGRILIANCE, LLC

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                    YEARS ENDED AUGUST 31,
                                                              ---------------------------------
                                                                 2005        2004        2003
                                                              ---------   ---------   ---------
                                                                       ($ IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net earnings ...........................................   $  77,113   $  71,278   $  60,741
   Adjustments to reconcile net earnings to net cash
      provided by operating activities:
      Depreciation and amortization .......................      18,922      17,767      23,517
      Bad debt expense ....................................       5,599       2,780      16,832
      Minority interests ..................................       2,177       2,762          --
      Gain on disposal of property, plant and equipment ...      (1,538)       (901)     (2,787)
      Change in other non-current assets and liabilities ..     (13,833)      9,794       6,461
   Changes in current assets and liabilities:
      Trade receivables ...................................     (19,809)    143,930     (64,841)
      Receivables/payables from related parties ...........     (17,618)      2,057     (26,205)
      Rebates receivable ..................................      12,778      (4,533)    (27,833)
      Other receivables ...................................       1,568       3,392      11,966
      Inventories .........................................    (138,717)     39,147    (182,449)
      Vendor prepayments ..................................     (40,329)    (65,622)    (59,032)
      Accounts payable and customer prepayments ...........     238,761    (202,439)    344,069
      Accrued expenses ....................................      15,384      23,674      16,646
      Other current assets and liabilities ................      (7,521)        521        (906)
                                                              ---------   ---------   ---------
   Net cash provided by operating activities ..............     132,937      43,607     116,179

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property, plant and equipment .............     (35,119)    (29,887)    (16,785)
   Proceeds from sale of property, plant and equipment ....       5,087       2,446       7,970
                                                              ---------   ---------   ---------
   Net cash used by investing activities ..................     (30,032)    (27,441)     (8,815)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds / (payments) on short-term debt ...............      23,650     (15,000)    (51,500)
   Increase (decrease) in cash overdraft ..................     (30,551)     30,551          --
   Distribution of earnings to members ....................     (64,150)    (54,599)    (35,000)
                                                              ---------   ---------   ---------
   Net cash used by financing activities ..................     (71,051)    (39,048)    (86,500)
                                                              ---------   ---------   ---------
Net change in cash ........................................      31,854     (22,882)     20,864
Cash at beginning of period ...............................          --     (22,882)      2,018
                                                              ---------   ---------   ---------
Cash at end of period .....................................   $  31,854   $      --   $  22,882
                                                              =========   =========   =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       131

<PAGE>

                                 AGRILIANCE, LLC

                   CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

<TABLE>
<CAPTION>
                                                                    ACCUMULATED
                                                                       OTHER         TOTAL
                                          CONTRIBUTED   RETAINED   COMPREHENSIVE   MEMBERS'   COMPREHENSIVE
                                            CAPITAL     EARNINGS       (LOSS)       EQUITY        INCOME
                                          -----------   --------   -------------   --------   -------------
                                                                   ($ IN THOUSANDS)
<S>                                       <C>           <C>        <C>             <C>        <C>
Balance at August 31,2002 .............     $159,089    $ 89,253            --     $248,342
Net earnings ..........................           --      60,741            --       60,741      $ 60,741
Minimum pension liability adjustment ..           --          --      $(15,331)     (15,331)      (15,331)
                                                                                                 --------
Comprehensive income ..................           --          --            --           --      $ 45,410
                                                                                                 ========
Distributions paid to members .........           --     (35,000)           --      (35,000)
                                            --------    --------      --------     --------
Balance at August 31, 2003 ............      159,089     114,994       (15,331)     258,752
Net earnings ..........................           --      71,278            --       71,278      $ 71,278
Minimum pension liability adjustment ..           --          --         3,752        3,752         3,752
                                                                                                 --------
Comprehensive income ..................                                                          $ 75,030
                                                                                                 ========
Distributions payable to members ......           --     (40,000)           --      (40,000)
Distributions paid to members .........           --     (54,599)           --      (54,599)
                                            --------    --------      --------     --------
Balance at August 31, 2004 ............      159,089      91,673       (11,579)     239,183
Net earnings ..........................           --      77,113            --       77,113      $ 77,113
Minimum pension liability adjustment ..           --          --        10,156       10,156        10,156
                                                                                                 --------
Comprehensive income ..................                                                          $ 87,269
                                                                                                 ========
Distributions paid to members .........           --     (24,150)           --      (24,150)
                                            --------    --------      --------     --------
Balance at August 31, 2005 ............     $159,089    $144,636      $ (1,423)    $302,302
                                            ========    ========      ========     ========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                       132
<PAGE>

                                 AGRILIANCE, LLC

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     (A) ORGANIZATION

     Agriliance LLC, (Agriliance or the Company) is a distributor of
agricultural inputs and is owned by: Land O'Lakes, Inc. (50% voting interest)
and CHS, Inc. (50% voting interest) (the members). Prior to May 1, 2004,
Agriliance was owned by Land O'Lakes (50% voting interest), CHS, Inc (25% voting
interest) and Farmland Industries, Inc. (25% voting interest). Farmland
Industries, Inc. filed for Chapter 11 bankruptcy court protection on May 31,
2002 and subsequently sold its ownership interest to CHS, Inc. effective April
30, 2004.

     Prior to May 1, 2004, the economic interest in profits and losses of the
Company was allocated to members for wholesale crop protection business
operation as follows: 50.0%, 38.1%, and 11.9% for Land O'Lakes, Inc., CHS, Inc
and Farmland Industries, Inc., respectively. After April 30, 2004, the
allocation for wholesale crop protection business operations became 50.0% for
Land O'Lakes, Inc. and 50.0% for CHS, Inc.

     Prior to May 1, 2004, the economic interest in profits and losses of the
Company was generally allocated to members for all other business operation as
follows: 50.0%, 25.0%, and 25.0% for Land O'Lakes, Inc., CHS, Inc. and Farmland
Industries, Inc., respectively. After April 30, 2004, the allocation for all
other business operations became 50.0% for Land O'Lakes, Inc. and 50.0% for CHS,
Inc.

     The liability of each member is limited to each member's respective capital
account balance.

     (B) STATEMENT PRESENTATION

     The consolidated financial statements include the accounts of the Company
and its wholly and majority owned subsidiaries, with intercompany transactions
eliminated.

     (C) REVENUE RECOGNITION

     Revenue is recognized as it is earned, which generally occurs when
fertilizer, chemical, and agricultural products are shipped.

     (D) INCOME TAXES

     The Company's taxable operations pass directly to the joint venture owners
under the LLC organization. As a result, no provision for income taxes is
recorded in the accompanying consolidated statement of operations.

     (E) INVENTORIES

     Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out or average-cost basis.

     (F) REBATES RECEIVABLE

     Rebates receivable have been estimated based on contractual agreements
combined with current sales and market data, in accordance with EITF Issue No.
02-16, "Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor."


                                       133

<PAGE>

                                 AGRILIANCE, LLC

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     (G) PROPERTY, PLANT, AND EQUIPMENT

     Property, plant, and equipment are stated at cost. Depreciation is provided
over the estimated useful lives (10 to 20 years for land improvements and
buildings, and 3 to 5 years for machinery and equipment) of the respective
assets in accordance with the straight-line method. The Company assesses the
recoverability of long-lived assets whenever events or changes in circumstances
indicate that expected future undiscounted cash flows may not be sufficient to
support the carrying amount of an asset. The Company deems an asset to be
impaired if a forecast of undiscounted future operating cash flows is less than
its carrying amount. If an asset is determined to be impaired, the loss is
measured as the amount by which the carrying value of the asset exceeds its fair
value.

     (H) DERIVATIVE COMMODITY INSTRUMENTS

     The Company uses derivative commodity instruments, primarily futures
contracts, to reduce the exposure to changes in commodity fertilizer prices.
These contracts are not designated as hedges under Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The futures contracts are marked to market each month
and gains and losses are recognized in earnings.

     (I) FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of the fair value of all financial instruments to which the
Company is a party. All financial instruments are carried at amounts that
approximate estimated fair value.

     (J) ACCOUNTING ESTIMATES

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

     (K) RECLASSIFICATIONS

     Certain 2004 and 2003 amounts have been reclassified to conform with the
current year presentation.

(2)  SHORT-TERM DEBT

     The Company has a $225 million revolving credit agreement with CoBank,
which expires December 4, 2006. Short-term debt is secured by the Company's
inventory and the accounts receivable of its wholly owned subsidiary, Agro
Distribution, LLC. There was no debt outstanding at August 31, 2005 or August
31, 2004 under this facility. Interest on borrowings under this revolving credit
agreement was charged at an average rate of 4.475% (LIBOR + 2.00%) and 3.17%
(LIBOR + 1.75%) for the fiscal years ended August 31, 2005 and 2004,
respectively.

     On October 6, 2005, the Company entered into a $270 million revolving
credit agreement with CoBank, which expires October 6, 2010. The short-term debt
is secured by the Company's inventory and the accounts receivable of its wholly
owned subsidiary, Argo Distribution, LLC. The loan agreement includes certain
restrictive covenants.

     The Company's consolidated joint-venture, AFC-Agriliance, LLC, has a $30
million revolving credit agreement with CoBank which expires March 1, 2006 and
is secured by AFC-Agriliance, LLC's accounts receivable and inventory. There was
$23,650,000 outstanding at August 31, 2005. Interest on borrowings under this
revolving credit agreement was charged at LIBOR + 2.5% at August 31, 2005.


                                       134

<PAGE>

                                 AGRILIANCE, LLC

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(3)  LONG-TERM DEBT

     On December 4, 2003, the Company entered into a long-term credit agreement
comprised of private placements with six institutions. The individual loans have
terms with expiration dates ranging from December 4, 2008 to December 4, 2010.
The long-term debt is secured by the Company's inventory and the accounts
receivable of its wholly owned subsidiary, Agro Distribution, LLC. At August 31,
2005 and 2004, the total long-term debt outstanding was $100 million of which
$89 million was charged at fixed interest rates averaging 6.0%. The remaining
$11 million of long-term debt outstanding was charged at floating interest rates
averaging 4.45% (LIBOR + 1.86%) and 3.14% (LIBOR + 1.86%) at August 31, 2005 and
2004, respectively.

Future maturities of long-term debt are as follows:

<TABLE>
<CAPTION>
Year ending August, 31:   (In thousands)
-----------------------   --------------
<S>                       <C>
2006 ..................      $     --
2007 ..................            --
2008 ..................            --
2009 ..................        48,000
2010 ..................            --
2011 and thereafter ...        52,000
                             --------
Total .................      $100,000
                             ========
</TABLE>

     The loan agreement includes certain restrictive financial covenants. At
August 31, 2005 and 2004, the Company was in compliance with these covenants.

     Interest paid on short-term and long-term debt for the years ended August
31, 2005, 2004 and 2003 totaled $9.1 million, $4.9 million and $9.6 million,
respectively.

(4)  RECEIVABLES PURCHASE FACILITY

     The Company has a $200 million receivables purchase facility with CoBank. A
wholly owned subsidiary, Agriliance SPV, LLC, purchases the receivables from
Agriliance and transfers them to CoBank. Such transactions are structured as
sales and, accordingly, the receivables transferred to CoBank without recourse
to Agriliance are not reflected in the consolidated balance sheet. At August 31,
2005 and 2004, $105 million and $120 million, respectively, were outstanding
under this facility. The total accounts receivable sold during the years ended
August 31, 2005, 2004, and 2003 were $2,990 million, $2,739 million and $2,885
million respectively.

(5)  PENSION AND OTHER POSTRETIREMENT PLANS

     The Company sponsors a defined benefit pension plan. The plan is
noncontributory and covers all employees. The benefits are based upon years of
service, age at retirement, and the employee's highest five year period of
compensation during the last ten years before retirement.

     The Company recognized additional minimum pension liability adjustments of
$10,156,000 and $3,752,000 for the fiscal years ended August 31, 2005 and 2004,
respectively. In accordance with SFAS No. 87, these adjustments were made to
other comprehensive income of the Company and did not impact current year net
earnings.


                                       135

<PAGE>

                                 AGRILIANCE, LLC

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company also sponsors a defined benefit health care plan that provides
postretirement medical benefits to full-time employees who met minimum age and
service requirements at the time Agriliance was formed in 2000. The plan is
contributory with retiree contributions adjusted annually and contains other
cost-sharing features such as deductibles and coinsurance. Any other Agriliance
employees not meeting the original health plan qualifications are still eligible
to participate in the plan at their own expense without any Company
contributions.

     The Company uses a May 31 measurement date for its plans. The following
table sets forth the plans' benefit obligations, fair value of plan assets, and
funded status at August 31, 2005 and 2004:

<TABLE>
<CAPTION>
                                                         YEAR ENDED AUGUST 31 (IN THOUSANDS)
                                                   ----------------------------------------------
                                                     PENSION BENEFITS     POSTRETIREMENT BENEFITS
                                                   --------------------   -----------------------
                                                      2005       2004          2005      2004
                                                   ---------   --------      -------   -------
<S>                                                <C>         <C>        <C>          <C>
Benefit obligation .............................   $(108,164)  $(88,010)     $(4,984)  $(6,299)
Fair value of plan assets ......................      99,100     59,574           --        --
                                                   ---------   --------      -------   -------
Funded status ..................................   $  (9,064)  $(28,436)     $(4,984)  $(6,299)
                                                   =========   ========      =======   =======

Prepaid (accrued) benefit cost recognized in the
   consolidated balance sheets .................   $  21,148   $ (6,876)     $(5,655)  $(5,769)
</TABLE>

     The accumulated benefit obligation for the pension plan was $98,189,000 and
$77,457,000 at August 31, 2005 and 2004, respectively.

     Weighted-average assumptions used to determine benefit obligations at
August 31, 2005 and 2004 were as follows:

<TABLE>
<CAPTION>
                                                                        POSTRETIREMENT
                                                     PENSION BENEFITS      BENEFITS
                                                     ----------------   --------------
                                                        2005   2004       2005   2004
                                                        ----   ----       ----   ----
<S>                                                  <C>       <C>      <C>      <C>
Discount rate.....................................      5.50%  6.50%      5.50%  6.50%
Expected long-term rate of return on plan assets..      8.50%  8.50%       N/A    N/A
Rate of compensation increase.....................      2.50%  3.50%       N/A    N/A
</TABLE>

     Weighted-average assumptions used to determine net cost for the years ended
August 31, 2005, 2004, and 2003 were as follows:

<TABLE>
<CAPTION>
                                                                             POSTRETIREMENT
                                                       PENSION BENEFITS         BENEFITS
                                                      ------------------   ------------------
                                                      2005   2004   2003   2005   2004   2003
                                                      ----   ----   ----   ----   ----   ----
<S>                                                   <C>    <C>    <C>    <C>    <C>    <C>
Discount rate .....................................   6.50%  6.00%  7.25%  6.50%  6.00%  7.25%
Expected long-term rate of return on plan assets ..   8.50%  8.50%  9.00%   N/A    N/A    N/A
Rate of compensation increase .....................   3.50%  3.00%  4.00%   N/A    N/A    N/A
</TABLE>

     The expected long-term rate of return is based on the portfolio as a whole
and not on the sum of the returns on individual asset categories. The return is
based exclusively on historical returns, without adjustments.

     For measurement purposes, a 9.0% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 2005. The rate was assumed
to decrease gradually to 6.0% through 2008 and remain at that level thereafter.


                                       136
<PAGE>

                                 AGRILIANCE, LLC

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                             YEAR ENDED AUGUST 31 (IN THOUSANDS)
                                      ------------------------------------------------
                                                                     POSTRETIREMENT
                                           PENSION BENEFITS             BENEFITS
                                      -------------------------   --------------------
                                        2005     2004     2003    2005    2004    2003
                                      -------   ------   ------   ----   ------   ----
<S>                                   <C>       <C>      <C>      <C>    <C>      <C>
Benefit cost ......................   $ 7,887   $6,309   $4,210   $288   $1,214   $933
Employer contribution .............    35,910    2,461    1,668    402      300    212
Plan participants' contributions ..        --       --       --     --       --     --
Benefits paid .....................     3,010    2,111    1,835    402      300    212
</TABLE>

     PLAN ASSETS

     The weighted-average asset allocations of the Company's pension plan at
August 31, 2005 and 2004 were as follows:

<TABLE>
<CAPTION>
                        PLAN ASSETS
                        AT AUGUST 31
                       -------------
ASSET CATEGORY          2005    2004
--------------         -----   -----
<S>                    <C>     <C>
Equity securities ..    41.4%   54.0%
Debt securities ....    51.1%   35.3%
Real Estate ........     6.5%    9.4%
Other ..............     1.0%    1.3%
                       -----   -----
Total ..............   100.0%  100.0%
                       =====   =====
</TABLE>

     The Company's investment practices and strategies for the pension plans use
target allocations as guidelines for the individual asset categories. The
Company's investment goals are to maximize returns subject to specific risk
management policies. Its risk management policies permit investments in mutual
funds, direct investments in debt and equity securities, and derivative
financial instruments. The Company addresses diversification by the use of
mutual fund investments whose underlying investments are in domestic and
international fixed income securities and domestic and international equity
securities. These mutual funds are readily marketable and can be sold to fund
benefit payment obligations as they become payable.

     CASH FLOWS

     The Company expects to contribute $0 to its pension plan and $477,000 to
its postretirement medical plan for the year ended August 31, 2006.

     Benefits expected to be paid for the pension plan in fiscal years ended
2006-2010 are $2,652,000, $2,863,000, $3,098,000, $3,340,000 and $3,605,000,
respectively. Aggregate benefits expected to be paid in the five years from
2011-2015 are $23,283,000. Expected benefits are based on the same assumptions
used to measure the Company's benefit obligation at August 31 and include
estimated future employee service.

     The postretirement medical plan is an unfunded plan. Expected benefits are
based on the same assumptions used to measure the Company's benefit obligation
at August 31. The following table sets forth the expected medical plan benefit
payments and medicare subsidy receipts:


                                      137

<PAGE>

                                 AGRILIANCE, LLC

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
               EXPECTED BENEFIT   EXPECTED MEDICARE
                    PAYMENT         SUBSIDYPAYMENT
               ----------------   -----------------
               ($ IN THOUSANDS)    ($ IN THOUSANDS)
<S>            <C>                <C>
2006........        $   477            $  (29)
2007........            468               (50)
2008........            468               (58)
2009........            473               (64)
2010........            479               (69)
2011-2015...          2,430              (444)
                    -------            ------
Total.......        $ 4,795            $ (714)
                    =======            ======
</TABLE>

     OTHER PLANS

     The Company has a defined contribution plan in which the Company matches
50% of the first 6% of employee contributions. The Company contributed
$2,420,000, $2,120,000, and $2,293,000 to the plan for the fiscal years ended
August 31, 2005, 2004 and 2003, respectively.

     In addition to the defined benefit and defined contribution retirement
plans, the Company has a supplemental executive retirement plan, which is an
unfunded defined benefit plan. The actuarial present value of the projected
benefit obligation totaled $2,736,000 and $1,894,000 at August 31, 2005 and
2004, respectively.

(6)  RELATED PARTY TRANSACTIONS

     Land O'Lakes, Inc. and CHS, Inc. charged the Company for accounting, legal,
risk management, building, advertising, and certain employee benefit and other
employee-related expenses. Total purchased services were:

<TABLE>
<CAPTION>
                         YEAR ENDED AUGUST 31,
                       -------------------------
                         2005     2004     2003
                       -------   ------   ------
                            ($ IN THOUSANDS)
<S>                    <C>       <C>      <C>
Land O'Lakes, Inc...   $12,887   $9,693   $8,400
CHS, Inc............     5,070    4,579    3,536
</TABLE>

     The Company made the following sales to related parties:

<TABLE>
<CAPTION>
                                   YEAR ENDED AUGUST 31,
                              ------------------------------
                                2005       2004       2003
                              --------   --------   --------
                                     ($ IN THOUSANDS)
<S>                           <C>        <C>        <C>
Land O'Lakes, Inc..........   $  9,254   $  5,219   $  1,576
CHS, Inc...................    199,852    196,175    208,706
Farmland Industries, Inc...         --        187      1,262
</TABLE>


                                      138

<PAGE>

                                 AGRILIANCE, LLC

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     During the year ended August 31, 2004, the Company made product purchases
from Farmland Industries, Inc. totaling $37,516,000.

     During the years ended August 31, 2005, 2004 and 2003, the Company made
product purchases from Land O'Lakes, Inc. totaling $17,815,000, $14,256,000 and
$12,278,000 respectively.

     In addition, during the years ended August 31, 2005, 2004 and 2003, the
Company made product purchases from CF Industries, Inc. (Land O'Lakes, Inc. and
CHS, Inc. held a combined 58.2% interest in CF Industries, Inc. through August
16, 2005, at which time the interests were divested) totaling $571,144,048,
$532,394,000 and $565,153,000 respectively.

(7)  LEASE COMMITMENTS

     The company has entered into noncancelable operating leases of certain real
estate, vehicles and equipment.

     Future minimum lease commitments under noncancelable operating leases are
as follows:

<TABLE>
<CAPTION>
YEAR ENDING AUGUST 31,   ($ IN THOUSANDS)
----------------------   ----------------
<S>                      <C>
2006..................        $12,946
2007..................          9,010
2008..................          4,761
2009..................          2,566
2010..................          1,424
2011 and thereafter...          2,545
</TABLE>

     Rent expense for the years ended August 31, 2005, 2004 and 2003 was
$24,470,000, $21,720,000 and $18,740,000, respectively.

(8)  CONTINGENCIES

(A)  ENVIRONMENTAL

     The Company is required to comply with various environmental laws and
regulations incident to its normal business operations. The Company is also a
party to environmental issues related to operations contributed to Agriliance by
Farmland Industries, Inc. To the extent these environmental costs are not paid
by the Farmland Bankruptcy Trustee, the Company may have future obligations due.
The Company has accrued for future costs of remediation of identified issues.
Additional costs for losses which may be identified in the future cannot be
presently determined; however, management does not believe any such issues would
materially affect the results of operations or the financial position of the
Company.

(B)  GUARANTEES

     The Company is contingently liable for guarantees on customer loans with
terms generally ending prior to March, 2006, totaling $10.5 million at August
31, 2005. The Company has recorded reserves for the estimated fair value of such
guarantees.

(C)  GENERAL

     Certain claims and lawsuits have been filed in the ordinary course of
business. It is management's opinion that settlement of all litigation would not
require payment of an amount which would be material to the results of
operations or to the financial position of the Company.


                                      139