SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549

---

### FORM
10-Q

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|[X] | Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended May 31,
2003.                 
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|[ ] | 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17865Exchange
Act filing number
050150

---

CENEX
HARVEST STATES COOPERATIVES
(Exact name of
registrant as specified in its
charter)

Minnesota
(State
or other jurisdictionof incorporation or
organization)
41-0251095
(IRS
EmployerIdentification
No.)


5500
Cenex Drive
Inver Grove Heights, Minnesota
55077
(Address of principal executive offices and zip
code)
(651)
451-5151
(Registrants telephone
number,including area
code)






---

Indicate
by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days.

Yes
[X]   No [ ]

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

Yes
[ ]   No [X]

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

Class
Number
of shares outstanding atMay 31,
2003NONE
NONE




---



INDEX

|PART I.
FINANCIAL
INFORMATION                                                                                      |   
|------------------------------------------------------------------------------------------------------------------ | --
|Item
1. Financial
Statements                                                                                       |   
|Consolidated
Balance Sheets as of May 31, 2003, August 31, 2002
andMay 31, 2002
(unaudited)                        | 2 
|Consolidated
Statements of Operations for the three months and nine months ended May
31, 2003 and 2002
(unaudited) | 3 
|Consolidated
Statements of Cash Flows for the three months and nine months ended May
31, 2003 and 2002
(unaudited) | 4 
|Notes
to Consolidated Financial Statements
(unaudited)                                                             | 5 
|Item
2. Managements Discussion and Analysis of Financial Condition
and Results of
Operations                      | 13
|Item
3. Quantitative and Qualitative Disclosures about Market
Risk                                                 | 22
|Item
4. Controls and
Procedures                                                                                    | 23
|PART
II. OTHER
INFORMATION                                                                                         |   
|Item
6. Exhibits and Reports on Form
8-K                                                                           | 24
|SIGNATURE
PAGE                                                                                                     | 25
|SECTION
302
CERTIFICATIONS                                                                                         | 26



---



PART
I. FINANCIAL INFORMATION

SAFE
HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995

This Quarterly Report on Form
10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements involve risks and uncertainties that may cause the Company's
actual results to differ materially from the results discussed in the
forward-looking statements. These factors include those set forth in
Exhibit 99.1, under the caption Cautionary Statement to
this Quarterly Report on Form 10-Q for the quarterly period ended May
31, 2003.

1

---



ITEM
1. FINANCIAL
STATEMENTS

CENEX
HARVEST STATES COOPERATIVES AND
SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS(Unaudited)

|ASSETS                             | 
|---------------------------------- | 
|
|                                  
|
|CURRENT
ASSETS:                    | 
|Cash
and cash
equivalents          | 
|Receivables                        | 
|Inventories                        | 
|Other
current
assets               | 
|                                  
|Total
current
assets               | 
|INVESTMENTS                        | 
|PROPERTY,
PLANT AND
EQUIPMENT      | 
|OTHER
ASSETS                       | 
|                                  
|Total
assets                       | 
|                                  
|LIABILITIES
AND
EQUITIES           | 
|CURRENT
LIABILITIES:               | 
|Notes
payable                      | 
|Current
portion of long-term
debt  | 
|Customer
credit
balances           | 
|Customer
advance
payments          | 
|Checks
and drafts
outstanding      | 
|Accounts
payable                   | 
|Accrued
expenses                   | 
|Dividends
and equities
payable     | 
|                                  
|Total
current
liabilities          | 
|LONG-TERM
DEBT                     | 
|OTHER
LIABILITIES                  | 
|MINORITY
INTERESTS IN
SUBSIDIARIES | 
|COMMITMENTS
AND
CONTINGENCIES      | 
|EQUITIES                           | 
|                                  
|Total
liabilities and
equities     | 
|                                  

The
accompanying notes are an integral part of the consolidated financial
statements
(unaudited).

2

---



CENEX
HARVEST STATES COOPERATIVES AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)

|                                      |  | For
the Three Months Ended May
31, |   | For the
Nine Months Ended May
31, |  
|------------------------------------- |  | ---------------------------------- | - | --------------------------------- | -
|                                     
|
|                                     
|
|REVENUES:                             |  |                                    |   |                                   |  
|Net
sales                             |  |                                    | $ | 2,287,588                         |  
|Patronage
dividends                   |  |                                    |   | 1,351                             |  
|Other
revenues                        |  |                                    |   | 30,122                            |  
|                                     
|                                      |  |                                    |   | 2,319,061                         |  
|Cost
of goods
sold                    |  |                                    |   | 2,220,473                         |  
|Marketing,
general and
administrative |  |                                    |   | 49,483                            |  
|                                     
|OPERATING
EARNINGS                    |  |                                    |   | 49,105                            |  
|Interest                              |  |                                    |   | 12,284                            |  
|Equity
income from
investments        |  |                                    |   | (30,003                           | )
|Minority
interests                    |  |                                    |   | 5,913                             |  
|                                     
|INCOME
BEFORE INCOME
TAXES            |  |                                    |   | 60,911                            |  
|INCOME
TAXES                          |  |                                    |   | 8,738                             |  
|                                     
|NET
INCOME                            |  |                                    | $ | 52,173                            |  
|                                     

The
accompanying notes are an integral part of the consolidated financial
statements
(unaudited).

3

---



CENEX
HARVEST STATES COOPERATIVES AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

|                                                                                            |  | For
the Three Months Ended May
31, |   | For the
Nine Months Ended May
31, |  
|------------------------------------------------------------------------------------------- |  | ---------------------------------- | - | --------------------------------- | -
|                                                                                           
|
|                                                                                           
|
|CASH
FLOWS FROM OPERATING
ACTIVITIES:                                                       |  |                                    |   |                                   |  
|Net
income                                                                                  |  |                                    | $ | 52,173                            |  
|Adjustments
to reconcile net income to net cash provided by (used in) operating
activities: |  |                                    |   |                                   |  
|Depreciation
and
amortization                                                               |  |                                    |   | 25,498                            |  
|Noncash
net income from equity
investments                                                  |  |                                    |   | (30,003                           | )
|Minority
interests                                                                          |  |                                    |   | 5,913                             |  
|Adjustment
of inventories to market
value                                                   |  |                                    |   |                                  |  
|Noncash
portion of patronage dividends
received                                             |  |                                    |   | (671                              | )
|(Gain)
loss on sale of property, plant and
equipment                                        |  |                                    |   | (466                              | )
|Other,
net                                                                                  |  |                                    |   | 455                               |  
|Changes
in operating assets and
liabilities:                                                |  |                                    |   |                                   |  
|Receivables                                                                                 |  |                                    |   | 24,766                            |  
|Inventories                                                                                 |  |                                    |   | 183,252                           |  
|Other
current assets and other
assets                                                       |  |                                    |   | 56,255                            |  
|Customer
credit
balances                                                                    |  |                                    |   | (31,893                           | )
|Customer
advance
payments                                                                   |  |                                    |   | (58,004                           | )
|Accounts
payable and accrued
expenses                                                       |  |                                    |   | (13,078                           | )
|Other
liabilities                                                                           |  |                                    |   | 6,103                             |  
|                                                                                           
|Net
cash provided by (used in) operating
activities                                         |  |                                    |   | 220,300                           |  
|                                                                                           
|CASH
FLOWS FROM INVESTING
ACTIVITIES:                                                       |  |                                    |   |                                   |  
|Acquisition
of property, plant and
equipment                                                |  |                                    |   | (45,092                           | )
|Proceeds
from disposition of property, plant and
equipment                                  |  |                                    |   | 3,976                             |  
|Investments                                                                                 |  |                                    |   | (36,449                           | )
|Equity
investments
redeemed                                                                 |  |                                    |   | 3,341                             |  
|Investments
redeemed                                                                        |  |                                    |   | 2,532                             |  
|Changes
in notes
receivable                                                                 |  |                                    |   | (2,754                            | )
|Acquisition
of
intangibles                                                                  |  |                                    |   | (333                              | )
|Distribution
to minority
owners                                                             |  |                                    |   |                                  |  
|Other
investing activities,
net                                                             |  |                                    |   | (34                               | )
|                                                                                           
|Net
cash used in investing
activities                                                       |  |                                    |   | (74,813                           | )
|                                                                                           
|CASH
FLOWS FROM FINANCING
ACTIVITIES:                                                       |  |                                    |   |                                   |  
|Changes
in notes
payable                                                                    |  |                                    |   | (49,430                           | )
|Long-term
debt
borrowings                                                                   |  |                                    |   |                                  |  
|Principal
payments on long-term
debt                                                        |  |                                    |   | (48,710                           | )
|Payments
on derivative
instruments                                                          |  |                                    |   |                                  |  
|Changes
in checks and drafts
outstanding                                                    |  |                                    |   | 9,541                             |  
|Proceeds
from sale of preferred stock, net of
expenses                                      |  |                                    |   | (96                               | )
|Redemption
of preferred
stock                                                               |  |                                    |   | (2,002                            | )
|Preferred
stock dividends
paid                                                              |  |                                    |   | (1,327                            | )
|Retirements
of
equities                                                                     |  |                                    |   | (2,042                            | )
|Cash
patronage dividends
paid                                                               |  |                                    |   | (109                              | )
|                                                                                           
|Net
cash (used in) provided by financing
activities                                         |  |                                    |   | (94,175                           | )
|                                                                                           
|NET
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                                        |  |                                    |   | 51,312                            |  
|CASH
AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD                                            |  |                                    |   | 108,886                           |  
|                                                                                           
|CASH
AND CASH EQUIVALENTS AT END OF
PERIOD                                                  |  |                                    | $ | 160,198                           |  
|                                                                                           

The
accompanying notes are an integral part of the consolidated financial
statements
(unaudited).

4

---



CENEX
HARVEST STATES COOPERATIVES AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) (dollars in
thousands)

Note 1.
Accounting Policies

The unaudited consolidated
balance sheets as of May 31, 2003 and 2002, and the statements of
operations and cash flows for the three and nine months ended
May 31, 2003 and 2002 reflect, in the opinion of management of
Cenex Harvest States Cooperatives (CHS or the Company), all normal
recurring adjustments necessary for a fair presentation of the
financial position and results of operations and cash flows for the
interim periods presented. The results of operations and cash flows for
interim periods are not necessarily indicative of results for a full
fiscal year because of, among other things, the seasonal nature of the
Companys businesses. The consolidated balance sheet data as of
August 31, 2002 has been derived from the audited consolidated
financial statements but does not include all disclosures required by
accounting principles generally accepted in the United States of
America.

The consolidated financial statements include the
accounts of the Company and all of its wholly-owned and majority-owned
subsidiaries and limited liability companies. The effects of all
significant intercompany accounts and transactions have been
eliminated.

These statements should be read in conjunction
with the consolidated financial statements and notes thereto for the
year ended August 31, 2002, included in the Company's Annual Report on
Form 10-K and Form 10-K/A filed with the Securities and Exchange
Commission on November 25, 2002 and June 27, 2003,
respectively.

Goodwill and
Other Intangible Assets

The Company had $27.3
million of goodwill as of May 31, 2003. During the three months
and nine months then ended, the Company sold certain businesses in the
Energy segment and therefore reduced goodwill by $0.2 million and
$0.6 million,
respectively.

Intangible assets subject to amortization
primarily include trademarks, tradenames, customer lists and
non-compete agreements, and are amortized on a straight-line basis over
their respective useful lives ranging from 2 to 15 years. The gross
carrying amount of these intangible assets is $43.2 million with total
accumulated amortization of $10.6 million as of May 31, 2003.
Intangible assets of $0.8 million were acquired during the nine months
ended May 31, 2003. Total amortization expense for intangible
assets during the three-month and nine-month periods ended May 31,
2003 was approximately $1.2 million and $3.5 million, respectively. The
Company estimates amortization expense for the next five years will
approximate $4.0 million
annually.

Recent
Accounting Pronouncements

The Financial
Accounting Standards Board (FASB) issued SFAS No. 143,
Accounting for Asset Retirement Obligations which
addresses financial accounting and reporting for obligations associated
with the retirement of tangible long-lived assets and the associated
asset retirement costs. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002. The
Company is in the process of finalizing its analysis of adopting this
standard. The Companys Energy segment operates oil refineries
and related pipelines for which the Company would be subject to Asset
Retirement Obligations (ARO) if such assets were to be dismantled. The
Company, however, expects to operate its refineries and related
pipelines indefinitely. Since the time period to dismantle these assets
is indeterminate, a corresponding ARO is not estimable and therefore
has not been recorded. The Company continues to assess whether any
other AROs exist related to its remaining operations, however,
based on available information to date, no AROs have been
identified. As such, the Company believes that the effects of adopting
this standard do not have a material effect on the
Company.

In January 2003, the FASB issued FASB
Interpretation No. 46, Consolidation of Variable Interest
Entities. The interpretation addresses consolidation of certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk
for the

5

---



entity to finance its activities without
additional subordinated financial support from other parties. The
interpretation applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities
in which an enterprise obtains an interest after that date. It applies
in the first fiscal year or interim period beginning after June 15,
2003 to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. The
Company believes that the effects of adopting this standard will not
have a material effect on the Company.

On April 30, 2003,
the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149
amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. The new guidance amends SFAS No.
133 for decisions made as part of the Derivatives Implementation Group
(DIG) process that effectively required amendments to
SFAS No. 133, and decisions made in connection with other FASB projects
dealing with financial instruments and in connection with
implementation issues raised in relation to the application of the
definition of a derivative and characteristics of a derivative that
contains financing components. In addition, it clarifies when a
derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The Company believes that
the effects of adopting this standard will not have a material effect
on the Company.

In May 2003 the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, which
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in certain
circumstances). Many of those instruments were previously classified as
equity. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at
the beginning of the first interim period beginning after June 15,
2003, except for mandatorily redeemable financial instruments of
nonpublic entities which are subject to the provisions for the first
fiscal period beginning after December 15, 2003. The Statement is to be
implemented by reporting the cumulative effect of a change in an
accounting principle for financial instruments created before the
issuance date of the Statement and still existing at the beginning of
the interim period of adoption. The Company believes that the effects
of adopting this standard will not have a material effect on the
Company.

Note 2.
Receivables

|                                      |  | May 31,
2003 |   | August 31,
2002 |  | May 31,
2002 |        
|------------------------------------- |  | ------------ | - | --------------- |  | ------------ | -------
|                                     
|Trade                                 |  |              | $ | 710,524         |  | $            | 717,888
|Other                                 |  |              |   | 59,743          |  |              | 49,846 
|                                     
|                                      |  |              |   | 770,267         |  |              | 767,734
|Less
allowances for doubtful
accounts |  |              |   | 29,220          |  |              | 26,156 
|                                     
|                                      |  |              | $ | 741,047         |  | $            | 741,578
|                                     

Note
3.
Inventories

|                            |  | May 31,
2003 |   | August 31,
2002 |  | May 31,
2002 |        
|--------------------------- |  | ------------ | - | --------------- |  | ------------ | -------
|                           
|Grain and
oilseed           |  |              | $ | 278,480         |  | $            | 393,095
|Energy                      |  |              |   | 232,877         |  |              | 229,981
|Feed
and farm
supplies      |  |              |   | 115,747         |  |              | 91,138 
|Processed
grain and
oilseed |  |              |   | 50,128          |  |              | 36,264 
|Other                       |  |              |   | 1,269           |  |              | 9,185  
|                           
|                            |  |              | $ | 678,501         |  | $            | 759,663
|                           

6

---



Note
4. Investments

Agriliance, LLC is
owned and governed by Land O'Lakes, Inc. (50%) and United
Country Brands, LLC (50%). United Country Brands, LLC is
owned and governed 50% by the Company and 50%
by Farmland Industries, Inc. (Farmland), and was formed solely to hold
a 50% interest in Agriliance, LLC. Prior to the transaction
described below, the Company's indirect share of earnings (economic
interest) in Agriliance, LLC was 25%, which followed the
Company's ownership interest. Subsequent to the transaction, the
Company's indirect economic interest in Agriliance, LLC does not follow
the Company's ownership interest.

In April,
2003, the Company acquired an additional economic interest in the crop
protection products business of Agriliance, LLC (the CPP
Business), which constitutes only a part of Agriliances
business operations. The Company acquired 13.1% of the CPP
Business for a cash payment of $34.3 million. The economic
interests in Agriliance, LLC are owned 50% by Land
OLakes, Inc., 25% plus an
additional 13.1% of the CPP Business by the Company and
25% less 13.1% of the CPP Business by Farmland.
The governance interests in Agriliance, LLC did not change.

The following provides summarized unaudited financial information
for the Companys unconsolidated significant subsidiaries Ventura
Foods, LLC (50% equity ownership) and Agriliance, LLC, for
the three-month and nine-month periods as indicated
below.

Ventura Foods,
LLC

|             |  | For
the Three Months Ended May
31, |   | For the
Nine Months Ended May
31, | 
|------------ |  | ---------------------------------- | - | --------------------------------- | 
|            
|
|            
|Net
sales    |  |                                    | $ | 296,298                           | 
|Gross
profit |  |                                    |   | 39,779                            | 
|Net
income   |  |                                    |   | 12,018                            | 

Agriliance,
LLC

|             |  | For
the Three Months Ended May
31, |   | For the
Nine Months Ended May
31, | 
|------------ |  | ---------------------------------- | - | --------------------------------- | 
|            
|
|            
|Net
sales    |  |                                    | $ | 1,402,646                         | 
|Gross
profit |  |                                    |   | 157,972                           | 
|Net
income   |  |                                    |   | 81,490                            | 

Note
5. Debt

In October 2002, the Company entered into a
private placement with several insurance companies for long-term debt
in the amount of $175.0 million, which was layered into two series. The
first series of $115.0 million has an interest rate of
4.96% and will be repaid in equal semi-annual installments
of approximately $8.8 million during the years 2007 through 2013. The
second series of $60.0 million has an interest rate of
5.60% and will be repaid in equal semi-annual installments
of approximately $4.6 million during fiscal years 2012 through
2018.

In May 2003, the Company established a new 364-day
credit facility of $600.0 million committed with a syndication of
banks, and on May 31, 2003, the total outstanding on this facility
was $320.0 million. Also in May, the Company established a
three-year revolving credit facility with a syndication of banks, with
$100.0 million committed. There was no outstanding balance on the
three-year facility on May 31,
2003.

Note 6.
Equities

In January 2003, the Board of Directors
authorized the sale and issuance of up to 3,500,000 shares of
8% Cumulative Redeemable Preferred Stock (New Preferred) at
a price of $25.00 per share. The Company filed a registration statement
on Form S-2 with the Securities and Exchange Commission registering
3,000,000 shares of the New Preferred (with an additional
over-allotment option of 450,000

7

---



shares granted to the underwriters), which
was declared effective on January 27, 2003. The shares were
subsequently sold for proceeds of $86.3 million (3,450,000 shares), and
are listed on the Nasdaq National Market. Expenses related to the
issuance of the New Preferred were $3.8 million.

The
Company had previously suspended sales of its 8% Preferred
Stock (Old Preferred) after raising $9.5 million (9,454,874 shares),
and on February 25, 2003 the Company filed a post-effective
amendment to terminate the offering of the Old Preferred shares. On
March 5, 2003, the Companys Board of Directors authorized
the redemption and conversion of the Old Preferred shares. A redemption
notification and a conversion election form were sent to holders of the
Old Preferred shares on March 21, 2003 explaining that on
April 25, 2003 all shares of the Old Preferred would be redeemed
by the Company for $1 per share unless they were converted into shares
of the Companys New Preferred. The conversion did not change the
base liquidation amount or dividend amount of the Old Preferred, since
25 shares of the Old Preferred converted to 1 share of the New
Preferred. The total Old Preferred converted to the New Preferred was
$7.5 million (7,452,439 shares), and the balance of the Old Preferred
(2,002,435 shares) was redeemed in cash at $1 per share. As of
May 31, 2003 the Company had $93.7 million (3,748,099 shares) of
the New Preferred outstanding.

Note 7. Comprehensive
Income

For the three months ended May 31, 2003
and 2002, total comprehensive income amounted to $53.3 million and
$47.0 million, respectively. For the nine months ended May 31,
2003 and 2002, total comprehensive income amounted to $83.0 million and
$91.0 million, respectively. Accumulated other comprehensive loss on
May 31, 2003, August 31, 2002 and May 31, 2002 was $57.4
million, $51.9 million and $1.3 million, respectively. Other
comprehensive loss for the nine months ended May 31, 2003 consisted of
$6.0 million related to interest rate swap derivative instruments,
partially offset by $0.6 million of other minor
comprehensive income
items.

Note 8.
Non-Cash Financing Activities

During the nine months
ended May 31, 2003 and 2002 the Company accrued dividends and
equities payable of $41.0 million and $45.2 million,
respectively.

Note 9.
Segment Reporting

The Company manages five business
segments, which are based upon products and services, including
Agronomy, Energy, Country Operations and Services, Grain Marketing, and
Processed Grains and Foods. The Agronomy segment consists of joint
ventures, from which the Company derives investment income based upon
the profitability of these joint ventures. The Energy Segment derives
its revenue through the refining, wholesaling and retailing of
petroleum products. Country Operations derives its revenue through the
origination and marketing of grain, through the retail sale of
petroleum products, agronomy products, feed and farm supplies. Country
Operations also derives revenue from service activities related to crop
production. Grain Marketing derives its revenue from the sale of grain
and oilseed and from service activities conducted at its export
terminals. Processed Grains and Foods derives its revenues from the
sale of soybean meal and soybean refined oil, from equity income in a
wheat milling joint venture, from equity income in a food manufacturing
and distributing joint venture, and from the sale of Mexican food
products.

The column Reconciling Amounts in the table below
represents the elimination of sales between segments. Such transactions
are conducted at market prices to more accurately evaluate the
profitability of the individual business segments.

The
Company assigns certain corporate general and administrative expenses
to its business segments based on the business segments use of such
services and allocates other services based on factors or
considerations relevant to the costs incurred to the different business
segments.

Expenses that are incurred at the corporate level
for the purpose of the general operation of the Company are allocated
to the segments based upon factors which management considers to be
non-asymmetrical. Nevertheless, due to efficiencies in scale, cost
allocations, and intersegment activity,

8

---



management does not represent that these
segments, if operated independently, would report the income before
taxes and other financial information as presented.

Segment
information for the three months and nine months ended May 31,
2003 and 2002 is as
follows:

|                                        |  | Agronomy |   | Energy  |   | Country
Operations and
Services |         | Grain
Marketing |   | Processed Grains
and
Foods |   | Other |         | Reconciling
Amounts |   | Total   |  
|--------------------------------------- |  | -------- | - | ------- | - | ------------------------------- | ------- | --------------- | - | -------------------------- | - | ----- | ------- | ------------------- | - | ------- | -
|                                       
|For
the Three Months Ended May 31,
2003 |  |          |   |         |   |                                 |         |                 |   |                            |   |       |         |                     |   |         |  
|Net
sales                               |  |          |   |         |   | $                               | 873,187 |                 | $ | 545,082                    |   | $     | 962,244 |                     | $ | 112,925 |  
|Patronage
dividends                     |  |          | $ | (27     | ) |                                 | 334     |                 |   | 800                        |   |       | 136     |                     |   | 84      |  
|Other
revenues                          |  |          |   |         |   |                                 | 3,045   |                 |   | 20,379                     |   |       | 4,559   |                     |   | 970     |  
|                                       
|                                        |  |          |   | (27     | ) |                                 | 876,566 |                 |   | 566,261                    |   |       | 966,939 |                     |   | 113,979 |  
|Cost
of goods
sold                      |  |          |   |         |   |                                 | 825,972 |                 |   | 534,830                    |   |       | 960,283 |                     |   | 105,238 |  
|Marketing,
general and
administrative   |  |          |   | 1,989   |   |                                 | 15,997  |                 |   | 14,064                     |   |       | 5,653   |                     |   | 10,354  |  
|Interest                                |  |          |   | (204    | ) |                                 | 4,297   |                 |   | 3,891                      |   |       | 865     |                     |   | 3,404   |  
|Equity
(income) loss from
investments   |  |          |   | (22,983 | ) |                                 | (386    | )               |   | (72                        | ) |       | 429     |                     |   | (6,990  | )
|Minority
interests                      |  |          |   |         |   |                                 | 5,581   |                 |   | 332                        |   |       |         |                     |   |         |  
|                                       
|Income
(loss) before income
taxes       |  |          | $ | 21,171  |   | $                               | 25,105  |                 | $ | 13,216                     |   | $     | (291    | )                   | $ | 1,973   |  
|                                       
|Capital
expenditures                    |  |          |   |         |   | $                               | 22,677  |                 | $ | 3,498                      |   | $     | 1,062   |                     | $ | 17,698  |  
|                                       
|Depreciation
and
amortization           |  |          | $ | 312     |   | $                               | 14,475  |                 | $ | 4,914                      |   | $     | 1,610   |                     | $ | 3,416   |  
|                                       
|For
the Three Months Ended May 31,
2002 |  |          |   |         |   |                                 |         |                 |   |                            |   |       |         |                     |   |         |  
|Net
sales                               |  |          |   |         |   | $                               | 714,280 |                 | $ | 409,723                    |   | $     | 741,712 |                     | $ | 105,021 |  
|Patronage
dividends                     |  |          | $ | (64     | ) |                                 | 459     |                 |   | 2,185                      |   |       | 176     |                     |   | 252     |  
|Other
revenues                          |  |          |   |         |   |                                 | 449     |                 |   | 23,468                     |   |       | 1,294   |                     |   | 992     |  
|                                       
|                                        |  |          |   | (64     | ) |                                 | 715,188 |                 |   | 435,376                    |   |       | 743,182 |                     |   | 106,265 |  
|Cost
of goods
sold                      |  |          |   |         |   |                                 | 668,075 |                 |   | 408,570                    |   |       | 737,079 |                     |   | 95,459  |  
|Marketing,
general and
administrative   |  |          |   | 3,921   |   |                                 | 18,844  |                 |   | 11,358                     |   |       | 6,179   |                     |   | 9,424   |  
|Interest                                |  |          |   | (330    | ) |                                 | 4,377   |                 |   | 4,202                      |   |       | 871     |                     |   | 2,339   |  
|Equity
(income) loss from
investments   |  |          |   | (17,732 | ) |                                 | (64     | )               |   | (83                        | ) |       | (740    | )                   |   | (13,296 | )
|Minority
interests                      |  |          |   |         |   |                                 | 5,687   |                 |   | 164                        |   |       |         |                     |   |         |  
|                                       
|Income
(loss) before income
taxes       |  |          | $ | 14,077  |   | $                               | 18,269  |                 | $ | 11,165                     |   | $     | (207    | )                   | $ | 12,339  |  
|                                       
|Capital
expenditures                    |  |          |   |         |   | $                               | 11,706  |                 | $ | 5,478                      |   | $     | 7,733   |                     | $ | 7,770   |  
|                                       
|Depreciation
and
amortization           |  |          | $ | 312     |   | $                               | 14,155  |                 | $ | 5,156                      |   | $     | 1,474   |                     | $ | 3,361   |  
|                                       

9

---



|For
the Nine Months Ended May 31,
2003    |  |  |   |         |   |   |           |   |   |           |   |   |           |   |   |         |   |   |         |   |   |          |   |   |           |  
|----------------------------------------- |  |  | - | ------- | - | - | --------- | - | - | --------- | - | - | --------- | - | - | ------- | - | - | ------- | - | - | -------- | - | - | --------- | -
|Net
sales                                 |  |  |   |         |   | $ | 2,684,805 |   | $ | 1,464,980 |   | $ | 3,574,268 |   | $ | 355,049 |   |   |         |   | $ | (715,756 | ) | $ | 7,363,346 |  
|Patronage
dividends                       |  |  | $ | (84     | ) |   | 397       |   |   | 1,646     |   |   | 162       |   |   | 111     |   | $ | 78      |   |   |          |   |   | 2,310     |  
|Other
revenues                            |  |  |   |         |   |   | 7,774     |   |   | 61,364    |   |   | 17,395    |   |   | 2,826   |   |   | 3,642   |   |   |          |   |   | 93,001    |  
|                                         
|                                          |  |  |   | (84     | ) |   | 2,692,976 |   |   | 1,527,990 |   |   | 3,591,825 |   |   | 357,986 |   |   | 3,720   |   |   | (715,756 | ) |   | 7,458,657 |  
|Cost
of goods
sold                        |  |  |   |         |   |   | 2,574,006 |   |   | 1,441,800 |   |   | 3,568,107 |   |   | 331,522 |   |   |         |   |   | (715,756 | ) |   | 7,199,679 |  
|Marketing,
general and
administrative     |  |  |   | 4,707   |   |   | 43,759    |   |   | 41,999    |   |   | 17,636    |   |   | 28,499  |   |   | 4,103   |   |   |          |   |   | 140,703   |  
|Interest                                  |  |  |   | (882    | ) |   | 12,308    |   |   | 11,895    |   |   | 3,747     |   |   | 9,069   |   |   | 396     |   |   |          |   |   | 36,533    |  
|Equity
(income) loss from
investments     |  |  |   | (12,953 | ) |   | (941      | ) |   | (542      | ) |   | 1,325     |   |   | (19,284 | ) |   | (1      | ) |   |          |   |   | (32,396   | )
|Minority
interests                        |  |  |   |         |   |   | 13,786    |   |   | 903       |   |   |           |   |   |         |   |   |         |   |   |          |   |   | 14,689    |  
|                                         
|Income
(loss) before income
taxes         |  |  | $ | 9,044   |   | $ | 50,058    |   | $ | 31,935    |   | $ | 1,010     |   | $ | 8,180   |   | $ | (778    | ) | $ |         |   | $ | 99,449    |  
|                                         
|Goodwill
assets                           |  |  |   |         |   | $ | 3,409     |   | $ | 262       |   |   |           |   | $ | 23,605  |   |   |         |   |   |          |   | $ | 27,276    |  
|                                         
|Capital
expenditures                      |  |  |   |         |   | $ | 56,701    |   | $ | 16,849    |   | $ | 1,978     |   | $ | 45,662  |   | $ | 1,277   |   |   |          |   | $ | 122,467   |  
|                                         
|Depreciation
and
amortization             |  |  | $ | 935     |   | $ | 43,523    |   | $ | 15,668    |   | $ | 4,820     |   | $ | 9,818   |   | $ | 2,368   |   |   |          |   | $ | 77,132    |  
|                                         
|Total
identifiable assets at May 31,
2003 |  |  | $ | 281,597 |   | $ | 1,343,928 |   | $ | 861,220   |   | $ | 395,468   |   | $ | 486,447 |   | $ | 214,639 |   |   |          |   | $ | 3,583,299 |  
|                                         
|For
the Nine Months Ended May 31,
2002    |  |  |   |         |   |   |           |   |   |           |   |   |           |   |   |         |   |   |         |   |   |          |   |   |           |  
|Net
sales                                 |  |  |   |         |   | $ | 1,857,086 |   | $ | 1,096,478 |   | $ | 2,730,289 |   | $ | 394,213 |   |   |         |   | $ | (515,014 | ) | $ | 5,563,052 |  
|Patronage
dividends                       |  |  | $ | (64     | ) |   | 907       |   |   | 3,193     |   |   | 528       |   |   | 252     |   | $ | 121     |   |   |          |   |   | 4,937     |  
|Other
revenues                            |  |  |   |         |   |   | 3,888     |   |   | 59,750    |   |   | 15,584    |   |   | 1,555   |   |   | 1,349   |   |   |          |   |   | 82,126    |  
|                                         
|                                          |  |  |   | (64     | ) |   | 1,861,881 |   |   | 1,159,421 |   |   | 2,746,401 |   |   | 396,020 |   |   | 1,470   |   |   | (515,014 | ) |   | 5,650,115 |  
|Cost
of goods
sold                        |  |  |   |         |   |   | 1,729,198 |   |   | 1,092,377 |   |   | 2,722,757 |   |   | 367,184 |   |   |         |   |   | (515,014 | ) |   | 5,396,502 |  
|Marketing,
general and
administrative     |  |  |   | 6,725   |   |   | 49,511    |   |   | 35,763    |   |   | 17,246    |   |   | 27,397  |   |   | 3,378   |   |   |          |   |   | 140,020   |  
|Interest                                  |  |  |   | (1,063  | ) |   | 12,677    |   |   | 10,006    |   |   | 3,898     |   |   | 7,328   |   |   | (916    | ) |   |          |   |   | 31,930    |  
|Equity
(income) loss from
investments     |  |  |   | (6,126  | ) |   | 1,469     |   |   | 130       |   |   | (2,705    | ) |   | (26,449 | ) |   |         |   |   |          |   |   | (33,681   | )
|Minority
interests                        |  |  |   |         |   |   | 11,044    |   |   | 517       |   |   |           |   |   |         |   |   |         |   |   |          |   |   | 11,561    |  
|                                         
|Income
(loss) before income
taxes         |  |  | $ | 400     |   | $ | 57,982    |   | $ | 20,628    |   | $ | 5,205     |   | $ | 20,560  |   | $ | (992    | ) | $ |         |   | $ | 103,783   |  
|                                         
|Goodwill
assets                           |  |  |   |         |   | $ | 4,809     |   | $ | 325       |   |   |           |   | $ | 23,605  |   |   |         |   |   |          |   | $ | 28,739    |  
|                                         
|Capital
expenditures                      |  |  |   |         |   | $ | 37,356    |   | $ | 16,016    |   | $ | 11,461    |   | $ | 19,255  |   | $ | 657     |   |   |          |   | $ | 84,745    |  
|                                         
|Depreciation
and
amortization             |  |  | $ | 935     |   | $ | 43,829    |   | $ | 15,699    |   | $ | 4,165     |   | $ | 9,790   |   | $ | 2,353   |   |   |          |   | $ | 76,771    |  
|                                         
|Total
identifiable assets at May 31,
2002 |  |  | $ | 235,241 |   | $ | 1,301,003 |   | $ | 750,993   |   | $ | 292,199   |   | $ | 396,376 |   | $ | 202,719 |   |   |          |   | $ | 3,178,531 |  
|                                         

Note
10. Commitments and
Contingencies

Environmental

The
Company, including NCRA, expects to incur capital expenditures related
to the Environmental Protection Agency low sulfur fuel regulations
required by 2006. These expenditures are expected to be approximately
$87.0 million for the Companys Laurel, Montana refinery and
$324.0 million for NCRAs McPherson, Kansas refinery over the
next three years, of which $2.1 million has been spent at the Laurel
refinery and $25.6 million has been spent by NCRA at the McPherson
refinery as of May 31, 2003. The Company expects to fund the
refinery expenditures with a combination of cash, future earnings and
additional borrowings.

10

---



Gain
on Legal Settlements

During the nine months ended
May 31, 2003 the Company received cash proceeds and recorded gains
of $10.9 million, of which $0.2 million was received during the third
quarter ended May 31, 2003, related to legal settlements from
several vitamin product suppliers against whom the Company alleged
certain price-fixing claims. The Company has recorded these gains in
cost of goods sold.

Guarantees

In
November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of
Others. The initial recognition and measurement provisions of
this interpretation are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002, irrespective of the
guarantors fiscal year-end. The disclosure requirements are
effective for financial statements of interim or annual periods ending
after December 15, 2002. The interpretation addresses the disclosures
to be made by a guarantor in its interim and annual financial
statements about its obligations under guarantees. The interpretation
also clarifies the requirements related to the recognition of a
liability by a guarantor at the inception of the guarantee for
obligations the guarantor has undertaken in issuing the
guarantee.

The Company makes seasonal and term loans to
member cooperatives, and its wholly-owned subsidiary, Fin-Ag, Inc.,
makes loans for agricultural purposes to individual producers. Some of
these loans are sold to CoBank, ACB, and the Company guarantees a
portion of the loans sold. In addition, the Company also guarantees
certain debt and obligations under contracts for its subsidiaries and
members.

11

---



The Companys
obligations pursuant to its guarantees as of May 31, 2003 were as
follows:

|                                                                       | (dollars
in
thousands) |         |                                                                                                                                                               |                                                                                                                                                                                |                         
|---------------------------------------------------------------------- | ---------------------- | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------
|
|                                                                      
|The Company's
Financial Services cooperative loans sold to CoBank,
ACB | *                      | $7,489  | 10%
of the obligations of borrowers (agri cultural cooperatives) under
credit agreements for loans sold                                                       | None stated, but may be
terminated by either party upon 60 days prior notice in regard to
future obligations                                                                   | Credit Agreement
Default
|Fin-Ag,
Inc. agricultural loans sold to CoBank,
ACB                    | *                      | 41,773  | 15%
of the obligations of borrowers under credit agreements for some of the
loans sold, and 100% of the obligations of borrowers for
the remaining loans sold | None stated, but may be
terminated by either party upon 90 days prior notice in regard to
future obligations                                                                   | Credit Agreement
Default
|TEMCO,
LLC                                                             | $7,500                 |        | Obligations
by TEMCO, LLC under credit agreement                                                                                                              | None
stated                                                                                                                                                                    | Credit Agreement Default
|North
Valley Petroleum,
LLC                                            | $194                   | 182     | Obligations
by North Valley Petroleum, LLC under credit
agreement                                                                                             | None stated                                                                                                                                                                    | Credit Agreement
Default
|Third
parties                                                          | *                      | 841     | Surety
for, or indemnificaton of surety for sales contracts between affiliates
and sellers of grain under deferred payment
contracts                          | Annual renewal on December 1st in regard to
surety for one third party, otherwise none stated and may be terminated
by the Company at any time in regard to future
obligations | Nonpayment              
|                                                                       |                        |         |                                                                                                                                                               |                                                                                                                                                                                |                         
|                                                                       |                        | $50,285 |                                                                                                                                                               |                                                                                                                                                                                |                         
|                                                                       |                        |         |                                                                                                                                                               |                                                                                                                                                                                |                         

The
Company's bank covenants allow for guarantees of up to $150.0 million,
but the Company is under no obligation to extend these guarantees. The
maximum exposure on any given date is equal to the actual guarantees
extended as of that
date.

12

---



ITEM
2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Cenex Harvest States
Cooperatives (CHS or the Company) is one of the nations leading
integrated agricultural companies. As a cooperative, the Company is
owned by farmers, ranchers and their local cooperatives from the Great
Lakes to the Pacific Northwest and from the Canadian border to Texas.
CHS buys commodities from, and provides products and services to
members and other customers. The Company provides a wide variety of
products and services, from initial agricultural inputs such as fuels,
farm supplies and crop nutrients, to agricultural outputs that include
grains and oilseeds, grain and oilseed processing, and food
products.

The Company has five distinct business segments:
Agronomy, Energy, Country Operations and Services, Grain Marketing, and
Processed Grains and Foods. Summary data for each of these segments for
the three months and nine months ended May 31, 2003 and 2002 is
shown in Note 9 to the Consolidated Financial
Statements.

Many of the Companys businesses are
highly seasonal. As a result, operating income will vary throughout the
year, but overall revenues remain fairly constant, partly because the
Company does not consolidate revenues in the Agronomy segment. Overall,
the Companys income is generally lowest during the second fiscal
quarter and highest during the third fiscal quarter. Certain business
segments are subject to varying seasonal fluctuations. For example,
Agronomy and Country Operations and Services segments experience higher
volumes and income during the spring planting season and in the fall,
which corresponds to harvest. The Grain Marketing segment is subject to
fluctuations in revenue and earnings based on producer harvests, world
grain prices and demand. The Companys Energy segment generally
experiences higher revenues and profitability in certain operating
areas, such as refined products in the summer when gasoline and diesel
usage is highest. Other energy products, such as propane, typically
experience higher revenues and profitability during the winter heating
and crop drying seasons.

While the Companys sales
and operating earnings are derived from businesses and operations which
are wholly-owned and majority-owned, a portion of business operations
are conducted through entities in which the Company holds ownership
interests of 50% or less and does not control the
operations. The Company accounts for these investments primarily using
the equity method of accounting, wherein CHS records as equity income
from investments its proportionate share of income or loss reported by
the entity, without consolidating the revenues and expenses of the
entity in the Companys consolidated statements of operations.
These investments principally include the Companys
25% ownership in Agriliance, LLC (Agriliance), the
50% ownership in TEMCO, LLC, the 50% ownership
in United Harvest, LLC, the 24% ownership in Horizon
Milling, LLC (Horizon) and the 50% ownership in Ventura
Foods, LLC (Ventura).

Recent
Events

Agriliance, LLC is owned and
governed by Land O'Lakes, Inc. (50%) and United Country
Brands, LLC (50%). United Country Brands, LLC is owned and
governed 50% by the Company and 50% by Farmland
Industries, Inc. (Farmland), and was formed solely to hold a
50% interest in Agriliance, LLC. Prior to the transaction
described below, the Company's indirect share of earnings (economic
interest) in Agriliance, LLC was 25%, which followed the
Company's ownership interest. Subsequent to the transaction, the
Company's indirect economic interest in Agriliance, LLC does not follow
the Company's ownership interest.

In April,
2003, the Company acquired an additional economic interest in the crop
protection products business of Agriliance (the CPP
Business), which constitutes only a part of Agriliances
business operations. The Company acquired 13.1% of the CPP
Business for a cash payment of $34.3 million. The economic
interests in Agriliance are owned 50% by Land
OLakes, Inc., 25% plus an
additional 13.1% of the CPP Business by the Company and
25% less 13.1% of the CPP Business by Farmland.
The governance interests in Agriliance did not change.

On
May 22, 2003, the Company gave notice to Farmland
that it will not renew a supply agreement to
purchase Farmlands Coffeyville, Kansas refined fuels production
at prevailing market rates. The

13

---



non-renewal is effective November 30, 2003.
The Company's management is confident that alternative sources of
supply will be available and that the non-renewal will not have a
material adverse affect on the
Company.

Results of
Operations

Comparison of the
three months ended May 31, 2003 and
2002

Net
Income. Consolidated net income for the three
months ended May 31, 2003 was $52.2 million compared to $46.6
million for the three months ended May 31, 2002, which represents
a $5.6 million (12%) increase. Increased income in the
Agronomy, Energy and Country Operations and Services segments were
partially offset by decreased income in the Processed Grains and Foods
segment compared to the three months ended May 31,
2002.

Net
Sales. Consolidated net sales of $2.3 billion for
the three months ended May 31, 2003 increased $456.3 million
(25%) compared to the three months ended May 31,
2002.

Energy net sales of $850.9 million
increased $154.6 million (22%) during the three months
ended May 31, 2003 compared to the three months ended May 31,
2002. Sales for the three months ended May 31, 2003 and 2002 were
$873.2 million and $714.3 million, respectively. The Company eliminated
all intracompany sales from the Energy segment to the Country
Operations and Services segment of $22.3 million and $18.0 million
for the three months ended May 31, 2003 and 2002, respectively.
The net increase in sales was primarily a result of refined fuels
average sales price increase of $0.17 per gallon and a volume increase
of 8% compared to the three months ended May 31, 2002.
In addition, the average sales price of propane increased $0.18 per
gallon, which was offset by a 22% decrease in volume
compared to the three months ended May 31, 2002. Refined fuels
commodity price increases were primarily the result of higher global
crude values. Domestic propane inventories are at extremely low levels
coming out of the heating season, which is supporting a higher product
price.

Country Operations farm supply sales of $279.3
million increased by $51.0 million (22%) during the three
months ended May 31, 2003 compared to the three months ended
May 31, 2002. The increase in farm supply sales is primarily due
to increased volumes from a sunflower plant acquisition and
improved spring planting conditions as well as price increases compared
to the prior three-month period.

Company-wide grain and
oilseed net sales of $1.0 billion increased $242.8 million
(30%) during the three months ended May 31, 2003
compared to the three months ended May 31, 2002. Sales for the
three months ended May 31, 2003 were $962.2 million and $265.8
million from the Grain Marketing and Country Operations and Services
segments, respectively. Sales for the three months ended May 31,
2002 were $741.7 million and
$181.4 million from the
Grain Marketing and Country Operations and Services segments,
respectively. The Company eliminated all intracompany sales from the
Country Operations and Services segment to the Grain Marketing segment,
of $183.5 million and $121.4
million, for the three months ended May 31, 2003 and 2002,
respectively. The net increase in sales was primarily due to an
increase of $0.89 per bushel (26%) in the average sales
price of all grain and oilseed marketed by the Company and an increase
in volume of 4% compared to the three months ended
May 31, 2002.

Processed Grains and Foods net sales of
$112.9 million increased $7.9 million (8%) during the three
months ended May 31, 2003 compared to the three months ended
May 31, 2002. This increase is primarily due to a sales volume
increase of 2% and an average sales price increase of $0.03
per pound on refined soybean
oil.

Patronage
Dividends. Patronage dividends received of $1.4
million decreased $1.7 million (55%) during the three
months ended May 31, 2003 compared to the three months ended
May 31, 2002. Patronage dividends from a cooperative were received
in June 2003 compared to May
2002.

Other
Revenues. Other revenues of $30.1 million increased
$3.7 million (14%) during the three months ended
May 31, 2003 compared to the three months ended May 31, 2002. The
most significant changes were increased other revenues within the
Energy and Grain Marketing segments, which was partially offset by
decreased other revenues in the Country Operations and Services segment
compared to the three months ended May 31,
2002.

14

---



Cost of
Goods Sold. Cost of goods sold of $2.2 billion
increased $450.7 million (25%) during the three months
ended May 31, 2003, compared to the three months ended May 31, 2002.
The Energy segment cost of goods sold increased by $157.9 million
(24%) during the three months ended May 31, 2003 compared
to the three months ended May 31, 2002. Refined fuels average cost
increased by $0.17 per gallon, and volumes increased by
8% compared to the three months ended May 31, 2002,
primarily the result of higher global crude values. The average cost of
propane increased by $0.19, which was partially offset by a
22% decrease in volumes compared to the three months ended
May 31, 2002. The volume decrease was primarily the result of low
inventory levels as previously discussed. The cost of all grains and
oilseed procured by the Company through its Grain Marketing and Country
Operations and Services segments increased $240.4 million
(31%) compared to the three months ended May 31, 2002
primarily due to an $0.89 average cost per bushel increase
(27%) and a 4% increase in volume. Country
Operations and Services segment farm supply cost of goods sold
increased by $48.1 million (25%) during the three months
ended May 31, 2003 compared to the three months ended May 31, 2002,
primarily due to volume increases related to an acquisition of a
sunflower plant, and volume and average cost per unit increases on farm
supply products. Processed Grains and Foods segment cost of goods sold
increased $9.8 million (10%) compared to the three months
ended May 31, 2002, primarily due to increased soybean volumes of
2%, which was partially offset by a decrease in the average
cost of raw materials of $0.02 per pound on
soybeans.

Marketing, General and Administrative. Marketing, general and administrative expenses of
$49.5 million for the three months ended May 31, 2003 decreased by
$1.3 million (2%) compared to the three months ended May
31,
2002.

Interest. Interest
expense of $12.3 million for the three months ended May 31, 2003
increased by $1.4 million (13%) compared to the three
months ended May 31, 2002. The average level of short-term borrowings
increased $83.6 million and the average short-term interest rate
decreased 0.3% during the three months ended May 31, 2003
compared to the three months ended May 31,
2002.

Equity
(Income) Loss from Investments. Equity income from
investments of $30.0 million for the three months ended May 31, 2003
decreased by $1.9 million (6%) compared to the three months
ended May 31, 2002. The decrease in equity income from investments was
primarily attributable to decreased earnings from Ventura, a Processed
Grains and Foods segment investment and losses in Grain Marketing
segment investments due to decreased grain margins compared to May 31,
2002. These decreases were partially offset by increased earnings in
Agriliance, an Agronomy segment investment, compared to the three-month
period ended May 31, 2002. The Companys share of Agriliance
earnings increased primarily due to the April 2003 purchase of an
additional economic interest in Agriliances CPP Business, as
previously
discussed.

Minority
Interests. Minority interests of $5.9 million for
the three months ended May 31, 2003 increased by $0.1 million
(1%) compared to the three months ended May 31, 2002. The
net change in minority interests was primarily a result of slightly
more profitable operations within the Companys majority-owned
subsidiaries during the three months ended May 31, 2003 compared to the
three months ended May 31, 2002. Substantially all minority interests
relate to National Cooperative Refinery Association (NCRA), an
approximately 74.5% owned
subsidiary.

Income
Taxes. Income taxes of $8.7 million for the three
months ended May 31, 2003 were essentially unchanged compared to the
three months ended May 31, 2002. The income taxes and the effective tax
rate vary each period based upon profitability and nonpatronage
business activity during each of the comparable
periods.

Comparison
of the nine months ended May 31, 2003 and
2002

Net
Income. Consolidated net income for the nine months
ended May 31, 2003 was $88.4 million compared to $90.4 million for the
nine months ended May 31, 2002, which represents a $2.0 million
(2%) decrease. Reduced income in the Energy, Grain
Marketing and Processed Grains and Foods segments was partially offset
by increased income in the Agronomy and Country Operations and Services
segments compared to the nine months ended May 31,
2002.

15

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Net
Sales. Consolidated net sales of $7.4 billion for
the nine months ended May 31, 2003 increased $1.8 billion
(32%) compared to the nine months ended May 31,
2002.

Energy net sales of $2.6 billion increased
$806.5 million (45%) during the nine months ended
May 31, 2003 compared to the nine months ended May 31, 2002.
Sales for the nine months ended May 31, 2003 and 2002 were
$2,684.8 million and $1,857.1 million, respectively. The Company
eliminated all intracompany sales from the Energy segment to the
Country Operations and Services segment of $69.2 million and $48.0
million for the nine months ended May 31, 2003 and 2002, respectively.
The increase was primarily the result of increased refined fuels
volumes of 23% and an average sales price increase of $0.20
per gallon compared to the nine months ended May 31, 2002. In addition,
propane sales volumes increased 22% and the average sales
price increased $0.07 per gallon compared to the nine months ended May
31, 2002. Refined fuels and propane increases were primarily a result
of the acquisition of the wholesale energy business of Farmland, as
well as all interest in Country Energy, LLC a joint venture formerly
with Farmland at a purchase price of $39.2 million. In addition,
refined fuels commodity prices increased as a result of higher global
crude values compared to the prior year. Propane volumes increased due
to a colder winter compared to the prior year.

Country
Operations farm supply sales of $553.6 million increased by $98.2
million (22%) during the nine months ended May 31,
2003 compared to the nine months ended May 31, 2002. The increase is
primarily due to increased volumes from a sunflower plant acquisition
and volume and price increases on farm supply
products.

Company-wide grain and oilseed net sales of $3.8
billion increased $934.8 million (32%) during the nine
months ended May 31, 2003 compared to the nine months ended May 31,
2002. Sales for the nine months ended May 31, 2003 were $3,574.3
million and $911.4 million from Grain Marketing and Country Operations
and Services segments, respectively. Sales for the nine months ended
May 31, 2002 were $2,730.3 million and
$641.0 million from the
Grain Marketing and Country Operations and Services segments,
respectively. The Company eliminated all intracompany sales from the
Country Operations and Services segment to the Grain Marketing segment,
of $646.6 million and $467.0
million, for the nine months ended May 31, 2003 and 2002, respectively.
The net increase in sales was primarily due to increases of $1.22 per
bushel (36%) in the average sales price of all grain and
oilseed marketed by the Company, which was partially offset by a
decrease in volume of 2% compared to the nine months ended
May 31, 2002.

Processed Grains and Foods net sales of
$355.0 million decreased $39.2 million (10%) during the
nine months ended May 31, 2003 compared to the nine months ended May
31, 2002. The net decrease in sales is primarily due to the formation
of Horizon, a joint venture that was formed in January 2002. After
that date, the Company has accounted for operating results of Horizon
under the equity method of accounting. The Company has a
24% interest in Horizon, and Cargill, Incorporated
(Cargill) has a 76% interest. The Company is leasing its
five mills and related equipment to Horizon under an operating lease.
This decrease was partially offset by increased refined soybean oil
sales primarily due to volume increases of 1% and an
average price increase of $0.04 per pound on
soybeans.

Patronage
Dividends. Patronage dividends received of $2.3
million decreased $2.6 million (53%) during the nine months
ended May 31, 2003 compared to the nine months ended May 31, 2002.
Patronage dividends from a cooperative were received in June 2003
compared to May
2002.

Other
Revenues. Other revenues of $93.0 million increased
$10.9 million (13%) during the nine months ended May 31,
2003 compared to the nine months ended May 31, 2002. The most
significant changes were due to increased service and other revenues in
the Country Operations and Services segment compared to the nine months
ended May 31,
2002.

Cost of
Goods Sold. Cost of goods sold of $7.2 billion
increased $1.8 billion (33%) during the nine months ended
May 31, 2003, compared to the nine months ended May 31, 2002. Cost of
goods sold in the Energy segment increased by $844.8 million
(49%) during the nine months ended May 31, 2003 compared to
the nine months ended May 31, 2002. Refined fuels volumes increased by
23% and the average cost increased by $0.21 per gallon
compared to the nine months ended May 31, 2002, primarily the result of
the acquisition previously discussed and higher global crude values.
Propane volumes

16

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increased by 22% and the average
cost increased by $0.07 per gallon compared to the nine months ended
May 31, 2002, primarily the result of the acquisition previously
discussed and a colder winter compared to the prior year. The cost of
all grains and oilseeds procured by the Company through its Grain
Marketing and Country Operations and Services segments increased $914.1
million (33%) compared to the nine months ended May 31,
2002 primarily due to $1.21 per bushel (36%) increase,
which was partially offset by a 2% decrease in volume.
Country Operations and Services segment farm supply cost of goods sold
increased by $82.8 million (22%) during the nine months
ended May 31, 2003 compared to the nine months ended May 31, 2002
primarily due to a sunflower plant acquisition and increased average
cost per unit on farm supply products. In addition, during the nine
months ended May 31, 2003 the Country Operations and Services segment
recorded impairments of $3.2 million on its facilities. The increased
cost of goods sold in the Country Operations and Services segment was
partially offset by $10.9 million of cash received from a class action
lawsuit, alleging illegal price fixing against various feed vitamin
product suppliers. Cost of goods sold in the Processed Grains and Foods
segment decreased by $35.7 million (10%) compared to the
nine months ended May 31, 2002, primarily due to the formation of
Horizon, as previously discussed, which was partially offset by refined
soybean oil volume increases of 1% and cost of raw material
increases of $0.02 per pound on
soybeans.

Marketing,
General and Administrative. Marketing, general and
administrative expenses of $140.7 million for the nine months
ended May 31, 2003 increased by $0.7 million compared to the nine
months ended May 31, 2002. Marketing, general and administrative
expenses increased by $1.7 million due to the write-off of the
Companys investment in Farmland primarily in the Country
Operations and Services segment. In addition, marketing, general and
administrative expense changes in the Country Operations and Services
and Energy segments were primarily due to
acquisitions.

Interest. Interest
expense of $36.5 million for the nine months ended May 31, 2003
increased by $4.6 million (14%) compared to the nine months
ended May 31, 2002. The average level of short-term borrowings
increased $122.4 million primarily to finance working capital needs,
and the average short-term interest rate decreased 0.3%
during the nine months ended May 31, 2003 compared to the nine months
ended May 31, 2002. Long-term debt borrowings increased due to an
additional $175.0 million of private placement debt which was issued in
October 2002.

Equity (Income) Loss from
Investments. Equity income from investments of
$32.4 million for the nine months ended May 31, 2003 decreased by $1.3
million (4%) compared to the nine months ended May 31,
2002. The decrease was primarily attributable to investment losses in
the Grain Marketing segment and decreased earnings from Ventura, a
Processed Grains and Foods segment investment. The decrease was
partially offset by increased earnings from Agriliance, an Agronomy
segment investment and Energy segment investments. The Companys
share of Agriliance earnings increased primarily due to the April 2003
purchase of an additional economic interest in Agriliances CPP
Business, as previously discussed.

Minority
Interests. Minority interests of $14.7 million for
the nine months ended May 31, 2003 increased by $3.1 million
(27%) compared to the nine months ended May 31, 2002. The
net change in minority interests was primarily a result of more
profitable operations within the Companys majority-owned
subsidiaries during the nine months ended May 31, 2003 compared to the
nine months ended May 31, 2002. Substantially all minority interests
relate to NCRA, an approximately 74.5% owned
subsidiary.

Income
Taxes. Income tax expense of $11.0 million for the
nine months ended May 31, 2003 decreased $2.4 million (18%)
compared to the nine months ended May 31, 2002, resulting in effective
tax rates of a 11.1% and 12.9%, respectively.
The income taxes and the effective tax rate vary each period based upon
profitability and nonpatronage business activity during each of the
comparable
periods.

Liquidity
and Capital Resources

Cash
Flows from Operations

Operating activities of
the Company provided net cash of $220.3 million and $78.8 million
during the three months ended May 31, 2003 and 2002, respectively. For
the three-month period ended in 2003,

17

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net income of $52.2 million, net non-cash
expenses of $0.7 million and decreased working capital requirements of
$167.4 million provided the cash from operating activities. For the
three-month period ended in 2002, net income of $46.6 million and
decreased working capital requirements of $41.9 million were partially
offset by net non-cash income of $9.7 million.

Operating
activities of the Company provided net cash of $99.9 million and used
net cash of $36.4 million during the nine months ended May 31,
2003 and 2002, respectively. For the nine-month period ended in 2003,
net income of $88.4 million and net non-cash expenses of $60.3 million
were partially offset by increased working capital requirements of
$48.8 million. For the nine-month period ended in 2002, net income of
$90.4 million and net non-cash expenses of $47.9 million were exceeded
by increased working capital requirements of $174.7
million.

Cash Flows from
Investing Activities

For the three months ended
May 31, 2003 and 2002, the net cash flows used in the Company's
investing activities totaled $74.8 million and $22.8 million,
respectively.

The acquisition of property, plant and
equipment comprised the primary use of cash totaling $45.1 million
and $32.8 million for the three months ended May 31, 2003 and 2002,
respectively. For the year ended August 31, 2003 the Company expects to
spend approximately $216.8 million for the acquisition of property,
plant and equipment, which includes $57.0 million of expenditures for
the construction of an oilseed processing facility in Fairmont,
Minnesota. Total expenditures related to the construction of the
facility are projected to be approximately $80.0 million, of which
$60.2 million was used for construction through May 31, 2003. Capital
expenditures primarily related to the Environmental Protection Agency
low sulfur fuel regulations required by 2006, are expected to be
approximately $87.0 million for the Companys Laurel, Montana
refinery and $324.0 million for NCRAs McPherson, Kansas refinery
over the next three years, of which $2.1 million has been spent at the
Laurel refinery and $25.6 million has been spent by NCRA at the
McPherson refinery as of May 31, 2003. The Company expects to fund the
refinery expenditures with a combination of cash, future earnings and
additional borrowings.

Investments made during the three
months ended May 31, 2003 and 2002 totaled $36.4 million and $9
thousand, respectively. During the three-month period in 2003 the
Company paid $34.3 million for the acquisition of an additional
economic interest in the CPP Business of Agriliance, as previously
discussed.

Acquisitions of intangibles were $0.3 million
and $0.4 million for the three months ended May 31, 2003 and 2002,
respectively.

During the three months ended May 31, 2003
the changes in notes receivable resulted in a decrease in cash flows of
$2.8 million, and during the three months ended May 31, 2002 the
changes in notes receivable resulted in an increase in cash flows of
$0.3 million.

Partially offsetting cash outlays in
investing activities were proceeds from the disposition of property,
plant and equipment of $4.0 million and $1.8 million for the three
months ended May 31, 2003 and 2002, respectively. Also partially
offsetting cash outlays were distributions received from joint ventures
and investments totaling $5.9 million and $8.8 million for the three
months ended May 31, 2003 and 2002, respectively.

For the
nine months ended May 31, 2003 and 2002, the net cash flows used in the
Company's investing activities totaled $124.9 million and $77.2
million, respectively.

The acquisition of property, plant
and equipment comprised the primary use of cash totaling
$122.5 million and $84.7 million for the nine months ended May 31,
2003 and 2002, respectively.

Investments made during the
nine months ended May 31, 2003 and 2002 totaled $40.6 million and $6.2
million, respectively. During the nine-month period in 2003 the Company
paid $34.3 million for the acquisition of an additional economic
interest in the CPP Business of Agriliance, as previously discussed.

Acquisitions of intangibles were $0.8 million and $28.0
million for the nine months ended May 31, 2003 and 2002, respectively.
During the nine months ended May 31, 2002, the acquisitions of
intangibles

18

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were primarily related to the purchase of
Farmlands interest in its wholesale energy business, as
previously discussed, and represents trademarks, tradenames and
non-compete agreements.

During the nine months ended May
31, 2003 the changes in notes receivable resulted in a decrease in cash
flows of $14.3 million primarily from additional related party notes
receivable at NCRA from its minority owners, Growmark, Inc. and MFA Oil
Company. During the nine months ended May 31, 2002 the changes in notes
receivable resulted in an increase in cash flows of $2.7
million.

Distributions to minority owners for the nine
months ended May 31, 2003 and 2002 were $0.5 million and $4.8
million, respectively, and were related to NCRA.

Partially
offsetting cash outlays in investing activities were distributions
received from joint ventures and investments totaling $37.3 million and
$32.2 million for the nine months ended May 31, 2003 and 2002,
respectively. Also partially offsetting cash outlays were proceeds from
the disposition of property, plant and equipment of $15.9 million and
$10.5 million for the nine months ended May 31, 2003 and 2002,
respectively.

Cash Flows
from Financing Activities

The Company finances
its working capital needs through short-term lines of credit with a
syndication of banks. In May 2003, the Company established a new
364-day credit facility of $600.0 million committed. In addition to
these lines of credit, the Company has a 364-day credit facility
dedicated to NCRA, with a syndication of banks in the amount of $30.0
million committed. On May 31, 2003, August 31, 2002 and May 31,
2002, the Company had total short-term indebtedness outstanding on
these various facilities and other short-term notes payable totaling
$321.1 million, $332.5 million and $276.0 million, respectively. In
October 2002, $175.0 million received from private placement proceeds
was used to pay down the Companys 364-day credit facility. In
January 2003, $83.0 million of proceeds received from the issuance
of the Companys preferred stock (net of broker commissions of
$3.2 million) was also used to pay down the 364-day credit
facility.

In June 1998, the Company established a five-year
revolving credit facility with a syndication of banks, with $200.0
million committed, which expired in May 2003. The Company had previous
outstanding balances on this facility of $75.0 million on August 31,
2002 and on May 31, 2002. Repayments of $45.00 million and $75.0
million were made on this facility during the three months and nine
months ended May 31, 2003, respectively.

In May 2003, the
Company established a three-year revolving credit facility with a
syndication of banks, with $100.0 million committed. There was no
outstanding balance on this new credit facility on May 31, 2003.

The Company finances its long-term capital needs, primarily for
the acquisition of property, plant and equipment, with long-term
agreements with various insurance companies and cooperative banks. In
June 1998, the Company established a long-term credit agreement through
the cooperative banks. This facility committed $200.0 million of
long-term borrowing capacity to the Company, with repayments through
fiscal year 2009. The amount outstanding on this credit facility was
$139.4 million, $144.3 million and $146.0 million on May 31, 2003,
August 31, 2002 and May 31, 2002, respectively. Repayments of
$1.6 million and $4.9 million were made on this facility during
each of the three months and nine months ended May 31, 2003 and
2002.

Also in June 1998, the Company completed a private
placement with several insurance companies for long-term debt in the
amount of $225.0 million. Repayments will be made in equal annual
installments of $37.5 million each in the years 2008 through
2013.

In January 2001, the Company entered into a note
purchase and private shelf agreement with Prudential Insurance Company.
The long-term note in the amount of $25.0 million will be repaid in
equal annual installments of approximately $3.6 million, in the years
2005 through 2011. A subsequent note for $55.0 million was issued in
March 2001, related to the private shelf facility. The $55.0 million
note will be repaid in equal annual installments of approximately $7.9
million, in the years 2005 through 2011.

19

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In October 2002, the Company completed
a private placement with several insurance companies for long-term debt
in the amount of $175.0 million which was layered into two series. The
first series of $115.0 million has an interest rate of
4.96% and will be repaid in equal semi-annual installments
of approximately $8.8 million during the years 2007 through 2013. The
second series of $60.0 million has an interest rate of
5.60% and will be repaid in equal semi-annual installments
of approximately $4.6 million during fiscal years 2012 through
2018.

The Company, through NCRA, had revolving term loans
outstanding of $15.8 million, $18.0 million and $18.8 million on May
31, 2003, August 31, 2002 and May 31, 2002, respectively. Repayments of
$0.8 million and $2.3 million were made during each of the three
months and nine months ended May 31, 2003 and 2002.

On
May 31, 2003, the Company had total long-term debt outstanding of
$661.1 million, of which $170.4 million was bank financing, $480.0
million was private placement proceeds and $10.7 million was industrial
development revenue bonds and other notes and contracts payable. The
aggregate amount of long-term debt payable presented in
Managements Discussion and Analysis in the Companys
Annual Report on Form 10-K for the year ended August 31, 2002 has not
materially changed during the nine months ended May 31, 2003 other than
for the $75.0 million repayment on the five-year revolver which was
classified as a current payable on August 31, 2002, and the $175.0
million of private placement debt discussed previously, of which
repayments will not start until 2007. The Company is in compliance with
all debt covenants and restrictions as of May 31, 2003.

During the three months ended May 31, 2003 and 2002, the Company
received no proceeds from borrowings on a long-term basis, and repaid
long-term debt of $48.7 million and $4.6 million,
respectively.

During the nine months ended May 31, 2003 and
2002, the Company borrowed on a long-term basis $175.0 million and
$30.0 million, respectively, and during the same periods repaid
long-term debt of $86.0 million and $14.7 million,
respectively.

In accordance with the bylaws and by action
of the Board of Directors, annual net earnings from patronage sources
are distributed to consenting patrons following the close of each
fiscal year. Effective September 1, 2000, patronage refunds are
calculated based on earnings for financial statement purposes rather
than based on amounts reportable for federal income tax purposes as had
been the Companys practice prior to this date. This change was
authorized through a bylaw amendment at the Companys annual
meeting on December 1, 2000. The patronage earnings from the fiscal
year ended August 31, 2002 were primarily distributed during the second
quarter of the current fiscal year. The cash portion of this
distribution, deemed by the Board of Directors to be 30%,
was $26.5 million. During the prior fiscal year the Company distributed
cash patronage of $40.1 million from the patronage earnings of the
fiscal year ended August 31, 2001.

The current equity
redemption policy, as authorized by the Board of Directors, allows for
the redemption of capital equity certificates held by inactive direct
members and patrons and active direct members and patrons at age 72 or
death that were of age 61 or older on June 1, 1998. For active direct
members and patrons who were of age 60 or younger on June 1, 1998, and
member cooperatives, equities that have been outstanding for more than
10 years will be redeemed annually based on a prorata formula where the
numerator is dollars available for such purpose as determined by the
Board of Directors, and the denominator is the sum of the patronage
certificates that have been outstanding for more than 10 years held by
such eligible members and patrons. Total redemptions related to the
year ended August 31, 2002, to be distributed in fiscal year 2003, are
expected to be approximately $30.3 million, of which $26.4 million
was redeemed during the nine months ended May 31, 2003. During the nine
months ended May 31, 2002 the Company redeemed $26.3 million of equity.
Redemptions of equity by the Company during the three-month periods
ended May 31, 2003 and 2002 were $2.0 million and $3.2 million,
respectively.

In January 2003, the Board of Directors
authorized the sale and issuance of up to 3,500,000 shares of
8% Cumulative Redeemable Preferred Stock (New Preferred) at
a price of $25.00 per share. The Company filed a registration statement
on Form S-2 with the Securities and Exchange Commission

20

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registering 3,000,000 shares of the New
Preferred (with an additional over-allotment option of 450,000 shares
granted to the underwriters), which was declared effective on
January 27, 2003. The shares were subsequently sold for proceeds
of $86.3 million (3,450,000 shares), and are listed on the Nasdaq
National Market. Expenses related to the issuance of the New Preferred
were $3.8 million.

The Company had previously suspended
sales of its 8% Preferred Stock (Old Preferred) after
raising $9.5 million (9,454,874 shares), and on February 25, 2003
the Company filed a post-effective amendment to terminate the offering
of the Old Preferred shares. On March 5, 2003, the Companys
Board of Directors authorized the redemption and conversion of the Old
Preferred shares. A redemption notification and a conversion election
form were sent to holders of the Old Preferred shares on March 21,
2003 explaining that on April 25, 2003 all shares of the Old
Preferred would be redeemed by the Company for $1 per share unless they
were converted into shares of the Companys New Preferred. The
conversion did not change the base liquidation amount or dividend
amount of the Old Preferred, since 25 shares of the Old Preferred
converted to 1 share of the New Preferred. The total Old Preferred
converted to the New Preferred was $7.5 million (7,452,439 shares), and
the balance of the Old Preferred (2,002,435 shares) was redeemed in
cash at $1 per share. As of May 31, 2003 the Company had $93.7 million
(3,748,099 shares) of the New Preferred
outstanding.

Off
Balance Sheet Financing
Arrangements

Lease
Commitments

The Companys lease commitments
presented in Managements Discussion and Analysis in the
Companys Annual Report on Form 10-K for the year ended August
31, 2002 have not materially changed during the nine months ended May
31,
2003.

Guarantees

The
Company is a guarantor for lines of credit for related companies of
which $50.3 million was outstanding on May 31, 2003. The
Companys bank covenants allow maximum guarantees of
$150.0 million. In addition, the Companys bank covenants
also allow for guarantees dedicated solely for NCRA in the amount of
$125.0 million. All outstanding loans with respective creditors are
current as of May 31,
2003.

Debt

There
is no material off balance sheet
debt.

Critical
Accounting Policies

The Companys Critical
Accounting Policies are presented in the Companys Annual Report
on Form 10-K for the year ended August 31,
2002.

Effect of
Inflation and Foreign Currency Transactions

The
Company believes that inflation and foreign currency fluctuations have
not had a significant effect on its operations. The Company has
recently opened a grain marketing office in Brazil that will impact its
exposure to foreign currency fluctuations, but to date, there has been
no material effect.

Recent Accounting
Pronouncements

The Financial Accounting Standards
Board (FASB) issued SFAS No. 143, Accounting for Asset
Retirement Obligations which addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. SFAS No.
143 is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The Company is in the process of
finalizing its analysis of adopting this standard. The Companys
Energy segment operates oil refineries and related pipelines for which
the Company would be subject to Asset Retirement Obligations (ARO) if
such assets were to be dismantled. The Company, however, expects to
operate its refineries and related pipelines indefinitely. Since the
time period to dismantle these assets is indeterminate, a corresponding
ARO is not estimable and therefore has not been recorded. The

21

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Company continues to assess whether any
other AROs exist related to its remaining operations, however,
based on available information to date, no AROs have been
identified. As such, the Company believes that the effects of adopting
this standard do not have a material effect on the
Company.

In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others. The initial recognition and initial
measurement provisions of this interpretation are applicable on a
prospective basis to guarantees issued or modified after December 31,
2002, irrespective of the guarantors fiscal year-end. The
disclosure requirements are effective for financial statements of
interim or annual periods ending after December 15, 2002. The
interpretation addresses the disclosures to be made by a guarantor in
its interim and annual financial statements about its obligations under
guarantees. The interpretation also clarifies the requirements related
to the recognition of a liability by a guarantor at the inception of
the guarantee for obligations the guarantor has undertaken in issuing
the guarantee. The Company adopted this interpretation during the
quarter ended February 28, 2003.

In January 2003, the FASB
issued FASB Interpretation No. 46, Consolidation of Variable
Interest Entities. The interpretation addresses consolidation of
certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties.
The interpretation applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities
in which an enterprise obtains an interest after that date. It applies
in the first fiscal year or interim period beginning after June 15,
2003 to variable interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003. The
Company believes that the effects of adopting this standard will not
have a material effect on the Company.

On April 30, 2003,
the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149
amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. The new guidance amends SFAS No.
133 for decisions made as part of the Derivatives Implementation Group
(DIG) process that effectively required amendments to
SFAS No. 133, and decisions made in connection with other FASB projects
dealing with financial instruments and in connection with
implementation issues raised in relation to the application of the
definition of a derivative and characteristics of a derivative that
contains financing components. In addition, it clarifies when a
derivative contains a financing component that warrants special
reporting in the statement of cash flows. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. The Company believes that
the effects of adopting this standard will not have a material effect
on the Company.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, which
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that
is within its scope as a liability (or an asset in certain
circumstances). Many of those instruments were previously classified as
equity. SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003,
except for mandatorily redeemable financial instruments of nonpublic
entities which are subject to the provisions for the first fiscal
period beginning after December 15, 2003. The Statement is to be
implemented by reporting the cumulative effect of a change in an
accounting principle for financial instruments created before the
issuance date of the Statement and still existing at the beginning of
the interim period of adoption. The Company believes that the effects
of adopting this standard will not have a material effect on the
Company.

ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

For the period ended May 31, 2003 the Company
did not experience any adverse changes in market risk exposures that
materially affect the quantitative and qualitative disclosures
presented in the Companys Annual Report on Form 10-K for the
year ended August 31, 2002.

22

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ITEM
4. CONTROLS AND PROCEDURES

The Companys Chief
Executive Officer and Chief Financial Officer have concluded, based on
their evaluation within 90 days of the filing date of this report, that
the Companys disclosure controls and procedures are adequately
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Securities
and Exchange Act of 1934, as amended, is recorded, processed,
summarized and reported, within the time periods specified in
applicable rules and forms. There have not been any significant changes
in the Companys internal controls or in other factors that could
significantly affect those controls, subsequent to the date of such
evaluation, including any corrective actions taken with regard to
significant deficiencies and material
weaknesses.

23

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PART
II. OTHER
INFORMATION

ITEM
6. EXHIBITS AND REPORTS ON FORM
8K

(a)
Exhibits

|Exhibit | Description                                                                                                                                                                                                                  
|------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       
|4.1     | Resolution
amending a previous Preferred Stock Resolution with respect to the
record date for payment of dividends for the Companys
8% Cumulative Redeemable Preferred
Stock                                                
|10.1    | Credit Agreement
(Revolving Loan) dated as of May 21, 2003 among Cenex Harvest States
Cooperatives, CoBank, ACB, SunTrust Bank, Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A., BNP Paribas and the Syndication
Parties
|99.1    | Cautionary
Statement                                                                                                                                                                                                         
|99.2    | Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of
2002                                                                                                       
|99.3    | Certification Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of
2002                                                                                                       

(b)
Reports on Form
8-K

None.

24

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SIGNATURES

Pursuant
to the requirements 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.

CENEX HARVEST
STATES
COOPERATIVES(Registrant)

|July
2, 2003 | /s/ John
Schmitz                                               
|------------ | ---------------------------------------------------------------
|            
|(Date)       | John
SchmitzExecutive Vice President andChief
Financial Officer

25

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SECTION
302 CERTIFICATION

I, John D.
Johnson, certify
that:

1.
I
have reviewed this quarterly report on Form 10-Q of Cenex Harvest
States Cooperatives;2.
Based on my
knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this quarterly report.3.
Based on my
knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
quarterly report;4.
The
registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:


a.
designed
such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;b.
evaluated the effectiveness
of the registrants disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date);
andc.
presented in this quarterly report
our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;


5.
The
registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors
and the audit committee of registrants board of directors (or
persons performing the equivalent
function):


a.
all
significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses
in internal controls; andb.
any fraud,
whether or not material, that involves management or other employees
who have a significant role in the registrants internal
controls;
and


6.
The
registrants other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material
weaknesses.


Date: July 2,
2003

> /s/ John D.
> JohnsonJohn D. JohnsonPresident and
> Chief Executive
> Officer

26

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SECTION
302 CERTIFICATIONS

I, John Schmitz,
certify
that:

1.
I
have reviewed this quarterly report on Form 10-Q of Cenex Harvest
States Cooperatives;2.
Based on my
knowledge, this quarterly report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered
by this quarterly report.3.
Based on my
knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
quarterly report;4.
The
registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:


a.
designed
such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;b.
evaluated the effectiveness
of the registrants disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date);
andc.
presented in this quarterly report
our conclusions about the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;


5.
The
registrants other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrants auditors
and the audit committee of registrants board of directors (or
persons performing the equivalent
function):


a.
all
significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses
in internal controls; andb.
any fraud,
whether or not material, that involves management or other employees
who have a significant role in the registrants internal
controls;
and


6.
The registrants other certifying officers and I
have indicated in this quarterly report whether there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material
weaknesses.


Date: July 2,
2003

> /s/ John
> SchmitzJohn SchmitzExecutive Vice
> President andChief Financial
> Officer

27

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