SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           FORM 10-Q TRANSITION REPORT

(Mark One)

[ ]      Quarterly Report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the quarterly period ended

[X]      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period from June 1, 1998 to
         August 31, 1998.


   Commission File Number   333-17865


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

              MINNESOTA                              41-0251095
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

5500 CENEX DRIVE, INVER GROVE HEIGHTS, MN 55077      (651) 451-5151
(Address of principal executive offices and          (Registrant's telephone
 zip code)                                           number including area code)

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

                NONE                                NONE
               (Class)                 (Number of shares outstanding at
                                       August 31, 1998)

<PAGE>


                                     INDEX
                                                                        PAGE
                                                                         NO.
                                                                        ----
PART I. FINANCIAL INFORMATION

               CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES

  Item 1. Financial Statements

  Consolidated Balance Sheets as of May 31, 1998 and August 31, 1997
  and 1998 (unaudited)

  Consolidated Statements of Earnings for the three months ended
  August 31, 1997 and 1998 (unaudited)

  Consolidated Statements of Cash Flows for the three months
  ended August 31, 1997 and 1998 (unaudited)

  Notes to Consolidated Financial Statements (unaudited)

  Item 2. Management's Discussion and Analysis of Financial
  Condition and Results of Operations

              OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

  Item 1. Financial Statements

  Balance Sheets as of May 31, 1998 and August 31, 1997 and 1998
  (unaudited)

  Statements of Earnings for the three months ended August 31,
  1997 and 1998 (unaudited)

  Statements of Cash Flows for the three months ended August 31,
  1997 and 1998 (unaudited)

  Notes to Financial Statements (unaudited)

  Item 2. Management's Discussion and Analysis of Financial Condition
  and Results of Operations

                       WHEAT MILLING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)

  Item 1. Financial Statements

  Balance Sheets as of May 31, 1998 and August 31, 1997 and 1998
  (unaudited)

  Statements of Earnings for the three months ended August 31,
  1997 and 1998 (unaudited)

  Statements of Cash Flows for the three months ended August 31,
  1997 and 1998 (unaudited)

  Notes to Financial Statements (unaudited)

  Item 2. Management's Discussion and Analysis of Financial
  Condition and Results of Operations

PART II. OTHER INFORMATION

  Items 1 through 5 have been omitted since all items are
  inapplicable or answers are negative

  Item 6. Exhibits and Reports on Form 8-K

SIGNATURE PAGE

<PAGE>


                          PART I. FINANCIAL INFORMATION

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

This Form 10-Q Transition Report may contain 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. Factors that might cause such differences include,
but are not limited to:

  SUPPLY AND DEMAND FORCES. The Company may be adversely affected by supply and
  demand relationships, both domestic and international. Supply is affected by
  weather conditions, disease, insect damage, acreage planted, government
  regulation and policies and commodity price levels. Demand may be affected by
  foreign governments and their programs, relationships of foreign countries
  with the United States, the affluence of foreign countries, acts of war,
  currency exchange fluctuations, and substitution of commodities. The current
  monetary crisis's in Asia has impacted, and is expected to continue to impact
  exports of U.S. agricultural products. Reduced demand for U.S. agricultural
  products may also adversely effect the demand for fertilizer, chemicals, and
  petroleum products sold by the Company and used to produce the crop. Demand
  may also be affected by changes in eating habits, by population growth and
  increased or decreased per capita consumption of some products.

  PRICE RISKS. Upon purchase, the Company has risks of carrying grain and
  petroleum, including price changes and performance risks (including delivery,
  quality, quantity and shipment period), depending upon the type of purchase
  contract. The Company is exposed to risk of loss in the market value of
  positions held, consisting of grain and petroleum inventory and purchase
  contracts at a fixed or partially fixed price, in the event market prices
  decrease. The Company is also exposed to risk of loss on its fixed price or
  partially fixed price sales contracts in the event market prices increase. To
  reduce the price change risks associated with holding fixed priced positions,
  the Company generally takes opposite and offsetting positions by entering into
  commodity futures contracts (either a straight futures contract or an option
  futures contract) on regulated commodity futures exchanges.

  PROCESSING AND REFINING BUSINESS COMPETITION. The industry is highly
  competitive. Competitors are adding new plants and expanding capacity of
  existing plants. Unless exports increase or existing refineries are closed,
  this extra capacity is likely to put additional pressure on prices and erode
  margins, adversely affecting the profitability of the Processing and Refining
  Defined Business Unit.

  MILLING BUSINESS COMPETITIVE TRENDS. Certain major competitors of the Wheat
  Milling Defined Business Unit have developed long-term relationships with
  customers by locating plants adjacent to pasta manufacturing plants. This
  trend could potentially decrease the future demand for semolina from
  nonintegrated millers.

  Commencing in June 1998, the Wheat Milling Defined Business Unit began
  conversion of a semolina line to bakery flour at the Huron mill. This project
  is anticipated to be completed in late October 1998 and until then, will
  negatively impact profitability.

The forward-looking statements herein are qualified in their entirety by the
cautions and risk factors set forth in Exhibit 99, under the caption "Cautionary
Statement" to the Form 10-Q Transition Report for the period June 1, 1998 to
August 31, 1998.

<PAGE>


CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS


               CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                     ASSETS

                                                      May 31,         August 31,        August 31,
                                                       1998              1997              1998
                                                  --------------    --------------------------------
<S>                                               <C>               <C>               <C>           
CURRENT ASSETS:
   Cash and cash equivalents                      $   76,740,575    $   25,226,328    $  112,485,699
   Receivables                                       555,197,542       543,692,013       453,559,492
   Inventories                                       523,019,559       477,519,865       478,997,710
   Other current assets                               36,996,360        57,393,212        51,477,895
                                                  --------------    --------------------------------
       Total current assets                        1,191,954,036     1,103,831,418     1,096,520,796

OTHER ASSETS:
   Investments                                       356,546,154       327,213,415       358,081,678
   Other                                              96,116,277        91,880,809        96,674,735
                                                  --------------    --------------------------------
      Total other assets                             452,662,431       419,094,224       454,756,413

PROPERTY PLANT AND EQUIPMENT                         893,426,710       847,131,007       915,675,439
                                                  --------------    --------------------------------
                                                  $2,538,043,177    $2,370,056,649    $2,466,952,648
                                                  ==============    ================================


                            LIABILITIES AND CAPITAL


CURRENT LIABILITIES:
   Notes payable                                  $   53,500,000    $   35,030,548    $      475,200
   Patrons credit balances                            42,876,236        39,935,763        41,324,189
   Patrons advance payments                          107,935,453       154,007,555       147,009,462
   Drafts outstanding                                 33,568,876        26,403,934        26,366,742
   Accounts payable and accrued expenses             636,518,268       554,147,504       530,099,592
   Patronage dividends and retirements payable        60,019,000        69,300,000        62,262,331
   Current portion of long-term debt                  39,548,281        27,691,588        13,855,262
                                                  --------------    --------------------------------
        Total current liabilities                    973,966,114       906,516,892       821,392,778

LONG-TERM DEBT                                       374,869,784       314,527,611       442,655,640

OTHER LIABILITIES                                     72,113,175        81,901,538        75,800,972

MINORITY INTERESTS IN SUBSIDIARIES                    58,603,489        60,550,789        59,926,302

COMMITMENTS AND CONTINGENCIES

CAPITAL                                            1,058,490,615     1,006,559,819     1,067,176,956
                                                  --------------    --------------------------------
                                                  $2,538,043,177    $2,370,056,649    $2,466,952,648
                                                  ==============    ================================
</TABLE>


           See notes to consolidated financial statements (unaudited)

<PAGE>


               CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                    Three Months Ended
                                                        August 31,
                                            --------------------------------
                                                  1997               1998
                                                  ----               ----
<S>                                         <C>               <C>           
REVENUES:
   Sales:
      Grain and oilseed                     $1,030,047,706    $  810,722,850
      Petroleum products                       414,947,841       343,747,507
      Agronomy                                 138,672,929        91,231,145
      Processed grain and oilseed              130,769,655       145,644,623
      Feed and farm supplies                   126,568,160       126,906,519
                                            --------------------------------
                                             1,841,006,291     1,518,252,644

   Patronage dividends                           7,419,761        14,042,100
   Other revenues                               19,067,081        18,518,541
                                            --------------------------------
                                             1,867,493,133     1,550,813,285
                                            --------------------------------
COSTS AND EXPENSES:
   Cost of good sold                         1,780,171,256     1,485,322,219
   Marketing, general and administrative        29,586,496        31,105,355
   Interest                                      8,197,413        12,303,315
   Minority Interests                            5,461,750         3,251,022
                                            --------------------------------
                                             1,823,416,915     1,531,981,911
                                            --------------------------------

EARNINGS BEFORE INCOME TAXES                    44,076,218        18,831,374

INCOME TAXES                                     8,865,000         2,895,000
                                            --------------------------------

NET EARNINGS                                $   35,211,218    $   15,936,374
                                            ================================
</TABLE>


           See notes to consolidated financial statements (unaudited)

<PAGE>


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

<TABLE>
<CAPTION>
                                                              Three Months Ended
                                                                  August 31,
                                                        -------------------------------
                                                              1997              1998
                                                              ----              ----
<S>                                                     <C>               <C>          
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings                                          $  35,211,218     $  15,936,374
  Adjustments to reconcile net earnings to
   net cash provided by operating activities:
    Depreciation and amortization                          18,313,845        20,551,534
    Noncash net (income) loss from joint ventures          (4,571,338)        8,502,146
    Noncash portion of patronage dividends received        (5,183,080)       (9,305,325)
    Gain on sale of property, plant and
     equipment                                             (1,010,392)         (458,176)
    Changes in operating assets and liabilities:
      Receivables                                          60,703,797       102,666,975
      Inventories                                          59,467,737        44,021,849
      Prepaid expenses, deposits and other                     76,209       (17,211,995)
      Patrons credit balances                              15,404,252        (1,552,047)
      Patrons advance payments                              3,015,614        39,074,009
      Accounts payable, accrued expenses,
       drafts outstanding and other                       (55,390,055)     (109,933,013)
                                                        -------------------------------
           Total adjustments                               90,826,589        76,355,957
                                                        -------------------------------
           Net cash provided by operating
            activities                                    126,037,807        92,292,331

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from disposition of property, plant and
   equipment                                                2,379,486           824,495
  Investments redeemed                                      2,162,281           390,890
  Acquisition of property, plant and equipment            (32,764,509)      (41,152,399)
  Changes in notes receivable                                (975,634)          272,313
  Investments                                               3,956,318        (1,591,953)
  Other                                                       734,755           327,127
                                                        -------------------------------
          Net cash used in investing activities           (24,507,303)      (40,929,527)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net repayments of notes payable                        (113,347,307)      (53,024,800)
  Long-term debt borrowings                                                 359,077,740
  Principal payments on long-term debt                     (9,876,230)     (317,219,868)
  Principal payments under capital lease obligations       (4,874,956)           (8,970)
  Redemptions of equity                                    (2,152,613)       (4,441,782)
                                                        -------------------------------
            Net cash used in financing
             activities                                  (130,251,106)      (15,617,680)
                                                        -------------------------------

(DECREASE) INCREASE IN CASH                               (28,720,602)       35,745,124

CASH, BEGINNING OF PERIOD                                  53,946,930        76,740,575
                                                        -------------------------------

CASH, END OF PERIOD                                     $  25,226,328     $ 112,485,699
                                                        ===============================
</TABLE>


           See notes to consolidated financial statements (unaudited)

<PAGE>


CENEX HARVEST STATES COOPERATIVES AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1. ACCOUNTING POLICIES

The unaudited consolidated statements of earnings for the three-month period
ended August 31, 1998 and 1997, reflect, in the opinion of management of Cenex
Harvest States Cooperatives (the Company), all normal, recurring adjustments
necessary for a fair statement of the results of operations for the interim
periods. The results of operations for any interim period are not necessarily
indicative of results for the full year. The consolidated balance sheet data as
of May 31, 1998 was derived from audited consolidated financial statements but
does not include all disclosures required by generally accepted accounting
principles.

The unaudited consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.

Reclassifications have been made to the prior year's financial statements to
conform to the current year presentation.


NOTE 2. RECEIVABLES

<TABLE>
<CAPTION>
                                              May 31,         August 31,        August 31,
                                               1998              1997              1998
                                          -------------     -------------------------------
<S>                                       <C>               <C>               <C>          
Trade ................................    $ 540,215,491     $ 513,481,922     $ 436,869,609
Elevator accounts ....................       23,478,016        45,072,095        36,390,250
Other ................................       15,691,171        10,219,285         3,614,191
                                          -------------     -------------------------------
                                            579,384,678       568,773,302       476,874,050
  Less allowance for losses ..........      (24,187,136)      (25,081,289)      (23,314,558)
                                          -------------     -------------------------------
                                          $ 555,197,542     $ 543,692,013     $ 453,559,492
                                          =============     ===============================
</TABLE>


NOTE 3. INVENTORIES

<TABLE>
<CAPTION>
                                              May 31,         August 31,        August 31,
                                               1998              1997              1998
                                          -------------     -------------------------------
<S>                                       <C>               <C>               <C>          
Petroleum products ...................    $ 208,055,542     $ 223,637,957     $ 178,792,039
Grain and oilseed ....................      148,381,119       134,345,410       152,874,078
Agronomy .............................       82,167,871        69,422,844        80,029,854
Processed grain and oilseed products .       37,543,688        22,147,222        37,463,894
Feed and Farm supplies ...............       46,871,339        27,966,432        29,837,845
                                          -------------     -------------------------------
                                          $ 523,019,559     $ 477,519,865     $ 478,997,710
                                          =============     ===============================
</TABLE>


NOTE 4. COMPREHENSIVE INCOME

As of June 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting of Comprehensive Income" (SFAS 130). SFAS 130
establishes new rules for the reporting of comprehensive income and its
components. The adoption of SFAS 130 had no impact on the Company's net income.
SFAS 130 requires unrealized gains and losses on the Company's
available-for-sale securities as well as the Company's charge to equity related
to its pension liability to be included as components of other comprehensive
income.

During the three months ended August 31, 1998 and 1997, total comprehensive
income amounted to $14,641,974 and $35,211,218, respectively. Accumulated other
comprehensive income (loss) at August 31, 1998 and 1997 and May 31, 1998 was
$(99,465), $1,281,207 and $1,194,935, respectively.

<PAGE>


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


    Pursuant to a Plan of Combination dated May 29, 1998 (the Plan of
Combination), CENEX, Inc. (Cenex) and Harvest States Cooperatives combined
through merger on June 1, 1998 (the Combination) with Harvest States the
surviving corporation. In accordance with the Plan of Combination, the Articles
of Incorporation and bylaws of Harvest States Cooperatives were restated and the
name Harvest States Cooperatives was changed to "Cenex Harvest States
Cooperatives" (the Company).

    As a result of the Combination, the Company has changed its fiscal year to
August 31, and is filing this Form 10-Q Transition Report under Rule 15
(d)(10)(c) for the three-month period ended August 31, 1998.

    As a result of the Combination, each holder of common stock of Cenex became
a member of Cenex Harvest States Cooperatives, to the extent eligible for
membership, and all equity interests of Cenex were determined and exchanged for
equal equity interests in Cenex Harvest States Cooperatives at its stated dollar
amount on a dollar for dollar basis as more thoroughly set forth in the Plan of
Combination, a copy of which was filed as part of the Company's Form 8-K dated
June 10, 1998.

    This Combination has been accounted for as a pooling of interest and as a
result all comparative financial information has been restated to include the
financial statements of Cenex and Harvest States.

    Effective June 1, 1998 the Company adopted Statement of Financial Accounting
Standards (SFAS) 130, which establishes standards for reporting and display of
comprehensive income and its components in a full set of general financial
statements. See notes to the consolidated financial statements for disclosures
relative to this Standard.

    In June, 1997, the Financial Accounting Standards Board (FASB) issued SFAS
131, Disclosures about Segments of an Enterprise and Related Information, which
relates to financial reporting of operating or business segments of a company.
The new standard is effective for fiscal years beginning after December 15,
1997. Disclosures relative to SFAS 131 are not required for interim periods in
the initial year of application. Management is currently evaluating this new
standard and has not yet determined its applicability or impact on the
presentation of the Company's financial statements.

<PAGE>


    In June 1998, the FASB issued SFAS 133, Accounting for Derivative
Instruments and Hedging Activities, which relates to the accounting for
derivative transactions and hedging activities. This new standard is effective
for years beginning after June 15, 1999. While management does not believe this
standard will materially impact financial results of the Company, it is
currently evaluating the reporting requirements under this new standard.

    The Year 2000 issue is the result of computer systems being written using
two digits rather than four to define the applicable year. Any of the computer
programs used by the Company that have date-sensitive software may recognize a
date using "00" for the year 1900 rather than as the year 2000. This could
result in a system failure or miscalculations causing disruptions of operations
including an inability to process transactions or engage in similar normal
business activities. Furthermore, should other companies or entities with whom
the Company has a supplier or a customer relationship encounter business
disruption because of the year 2000 issue, the Company in turn could experience
disruption of normal business processes and as a result incur additional costs
or loss of revenue.

    In preparation for the Year 2000, the Company has reviewed the primary
internally-developed software programs used within the divisions and defined
business units comprising the Company before the June 1, 1998 merger with Cenex.
Appropriate changes were made to that software to accommodate the Year 2000. In
addition, the Company has engaged an information technology consulting firm for
the purpose of appraising the Company's Year 2000 readiness, identifying
critical software applications which are not Year 2000 compliant, remediating
such applications, testing corrections to software, developing contingency plans
in the event that all software problems are not corrected by the year 2000, and
assisting with certifications of key supplier's Year 2000 readiness. This Year
2000 plan and action program encompasses all areas of the Company. The Company
will also assess, to the extent practical, embedded technology in its processing
equipment. It is expected that the assessment phase of the project will be
completed by December 31, 1998, and that the remedial portion of the project
will be completed by June 30, 1999. Management believes that the total cost to
the Company to review and correct its own computer systems will not exceed $1
million, of which approximately $300,000 was expended through August 31, 1998.

    Based on its assessment, the Company's management presently believes that
problems related to the Year 2000 computer issue will not have a material effect
on operations and financial results. The Company continues to bear some risk
related to the Year 2000 issue if other entities not affiliated with the Company
do not appropriately address their own Year 2000 compliance issues. The Company
has not yet evaluated the full impact of the Year 2000 issue if third-party
vendors and/or customers do not resolve this issue on a timely basis.
Furthermore, a contingency plan has not been completed as of this time, and will
be

<PAGE>


developed after the Company, through its Year 2000 project, identifies the
software applications requiring remediation.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED AUGUST 31, 1998 AND 1997

    The Company's consolidated net earnings for the three months ended August
31, 1998 and 1997 were $16,000,000 and $35,200,000, respectively, which
represents a $19,200,000 (55%) decrease for the period ended in 1998. Relatively
low commodity prices had a direct impact on volume at the Company's country
elevator and grain exporting facilities, and influenced demand for crop
protection and plant food products. With reduced volumes in most of the
Company's business operations, gross margins were eroded considerably by fixed
costs.

    Consolidated net sales of $1,518,000,000 decreased $323,000,000 (18%) during
the three-month period ended August 31, 1998 compared to the same period in
1997. Grain volume of approximately 230,000,000 bushels during the three months
ended August 31, 1998 declined 27,000,000 bushels compared to 1997. In addition
to decreased volumes, the average weighted sales price for all grains and
oilseeds marketed by the Company declined by 41 cents a bushel. Total grain and
oilseed sales decreased approximately $220,000,000 as a result of these two
factors.

    While the gallon sales of refined fuels increased slightly during the
three-month period ended August 31, 1998 compared with the same period in 1997,
a reduced average sales price of 18 cents a gallon resulted in a decline in
sales of approximately $71,000,000 for petroleum products during the 1998 period
compared with 1997.

    Wholesale agronomy product sales declined approximately $48,000,000 during
the three months ended August 31, 1998 compared to the same period in 1997, the
result of a 12% decrease in fertilizer volumes, and 10% decrease in the average
per ton sales price of such product.

    Processed grain and oilseed sales increased approximately $15,000,000 during
the three months ended August 31, 1998 compared to the same period in 1997. This
change is primarily attributable to increased volume within the Company's
Oilseed Processing and Refining Defined Business Unit, where soymeal sales
volume increased from approximately 105,000 tons during the three months ended
August 31, 1997 to approximately 215,000 tons in 1998. During the three months
ended August 31, 1997, the crushing plant was closed for 41 days to allow for
the installation of new equipment. During the 1998 period, the crushing plant
operated at its normal capacity.

    Retail feed and farm supply sales remained essentially unchanged between the
two periods, although sales during the 1998 period represented a decline in
sales relationship to actual retail capacity due to the addition of several
retail locations since the end of the 1997 period.

    Cost of goods sold of $1,485,000,000 decreased approximately

<PAGE>


$295,000,000 (17%) during the three months ended August 31, 1998 compared to the
same period in 1997. Reduced volumes and raw material costs in most of the
Company's business activities, as discussed in the sales section of this
analysis, produced most of this reduction in costs. Although the commodity and
other raw material costs which are a component of costs of goods sold changed in
relative proportion to sales dollars, fixed operating costs remain constant
regardless of volume and price activity. This factor contributed to an erosion
in total gross margin of approximately $28,000,000 (46%) during the three months
ended August 31, 1998 compared with the same period in 1997.

    Patronage dividends increased approximately $6,600,000 (89%) during the
three months ended August 31, 1998 compared to the same period in 1997 resulting
from higher patronage earnings distributed by cooperative customers and
suppliers.

    Other revenue of $18,500,000 decreased $500,000 (3%) for the three months
ended August 31, 1998 compared to the same period in 1997. Earnings from the
Company's nonconsolidated consumer products packaging joint venture decreased
approximately $1,100,000 for the three months ended August 31, 1998 compared to
the same period in 1997. Earnings from the Company's share of a grain exporting
joint venture declined approximately $900,000 during the 1998 period compared to
1997. In addition, the Company experienced a decline in service income at its
export terminals due to reduced bushel volume activity at these locations. These
reductions in other revenues were partially offset by a $2,900,000 increase in
interest income. Because of the relatively low cost of grain during the period
ended August 31, 1998, the Company had no short term borrowing requirements. In
addition, the Company's refinancing program in anticipation of long term capital
requirements, completed in June of 1998, produced temporary cash available for
short term investment.

    Marketing, general, and administrative expenses of $31,100,000 for the three
months ended August 31, 1998 increased $1,500,000 (5%) compared to the same
three months ended in 1997. Costs related to the relocation of staff and
consolidation of the business units, and a warranty claim for the re-roofing of
a building which had been part of the Company's capital contribution to the
consumer products packaging joint venture comprised the majority of this
increase.

    Interest expense of $12,300,000 for the three months ended August 31, 1998
represents a increase of $4,100,000 (50%) compared to the same period in 1997.
Long-term borrowing to finance the acquisition of property, plant and equipment
generated most of this additional expense. Long-term debt proceeds not yet
expended for fixed assets generated interest income as discussed in the Other
Revenue discussion above, and should be considered as an offset to a portion of
the increase in interest expense.

    Minority interest in operations for the three-month periods ended August 31,
1998 and 1997 were $3,250,000 and $5,450,000, respectively. Substantially all of
the minority interest is in National Cooperative

<PAGE>


Refinery Association (NCRA), which operates a refinery near McPherson, Kansas.
The Company owns approximately 75% of that operation.

    Income tax expense of $2,900,000 and $8,900,000 for the three-month periods
ended August 31, 1998 and 1997, respectively, resulted in effective tax rates of
15.4% and 20.1%.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS FROM OPERATIONS

    Operating activities of the Company used net cash of $92,300,000 and
$126,000,000 for the three months ended August 31, 1998 and 1997,
respectively. Net cash from operating activities during both periods is
primarily attributable to earnings and the reduction of working capital
requirements. Working capital requirements decreased $57,100,00 and $83,300,000
for the three months ended August 31, 1998 and 1997, respectively, thereby
contributing to cash provided by operating activities.

CASH FLOWS FROM INVESTING

    Investing activities of the Company used net cash of $40,900,000 during the
three-month period ended August 31, 1998. Expenditures for the acquisition of
property, plant and equipment of $41,200,000 and additional investments in joint
ventures of $1,600,000 were partially offset by proceeds from the disposition of
property, plant and equipment and the redemption of prior investments. Capital
expenditures for the fiscal year beginning on September 1, 1998 are projected to
be approximately $196,000,000.

    During the three months ended August 31, 1997, the Company used net cash of
$24,500,000 in its investing activities. Cash used for the acquisition of
property, plant and equipment of $32,800,000 was partially offset by proceeds
received for the disposition of fixed assets of $2,400,000, and cash from
cooperative and joint venture investments of approximately $6,100,000.

CASH FLOWS FROM FINANCING

    The Company finances its working capital needs through short-term lines of
credit with the banks for cooperatives and commercial banks. In June, 1998 the
Company established a 364-day credit facility of $400,000,000 and a five-year
revolving facility of $200,000,000, all of which is committed. In addition to
these credit lines, the Company has a 364-day credit facility dedicated to NCRA,
with the St. Paul Bank for Cooperatives in the amount of $52,000,000, all of
which is committed, and a 364-day credit facility dedicated to Swiss Valley
Cooperative, a subsidiary of which the Company owns 60%, with CoBank in the
amount of $750,000, all of which is committed. On August 31, 1998 the Company
had total short-term indebtedness on these various facilities totaling $475,000.
On May 31, 1998, the Company had $53,500,000

<PAGE>


outstanding on its short-term lines of credit. This decrease in short-term
borrowing is primarily attributable to a decrease in grain volume and prices, as
well as to the seasonality of petroleum and agronomy activity.

    The Company has in the past financed its long-term capital needs, primarily
for the acquisition of property, plant, and equipment, with long-term loan
agreements through the banks for cooperatives. On May 31, 1998, the Company had
total indebtedness related to these long-term lines of credit of $373,800,000,
of which approximately $36,000,000 represented long-term borrowings by NCRA. In
June, 1998, the Company established a new long-term credit agreement through the
banks for cooperatives whereby the Company repaid $280,200,000 of the loan
balance, and borrowed $134,000,000 on the new long-term facility with the banks
for cooperatives. This new facility commits $200,000,000 of long-term borrowing
capacity to the Company, with repayments through the year 2009. The amount
outstanding on this credit agreement on August 31, 1998 was $134,000,000 with
$66,000,000 remaining available. Regarding the $94,200,000 of long-term
indebtedness not included as part of the refinancing, $36,200,000 was repaid
during the three months ended August 31, 1998, leaving an outstanding balance on
separate facilities of $58,000,000, with payments due through the year 2008.

    Also in June 1998, as part of the refinancing program for the merged
operations, the Company issued a private placement with several insurance
companies for long-term debt in the amount of $225,000,000. Repayments will be
made in equal installments of $37,500,000 each in the years 2008 through 2013.

    In addition, the Company had long-term indebtedness on May 31, 1998 and
August 31, 1998 of $40,600,000 and $39,500,000, respectively, in the form of
Industrial Revenue Bonds, capitalized leases, and miscellaneous notes payable.

    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 year and are based on amounts reportable for federal
income tax purposes as adjusted in accordance with the bylaws. In September,
1998, the Company distributed patronage dividends to patrons based upon the
operating results of the former Harvest States portion of the business for its
year ended May 31, 1998. The cash portion of this distribution, deemed by the
Board of Directors to be 80% for Equity Participation Units and 30% for regular
patronage was approximately $15,100,000. The patronage earnings of the former
Cenex portion of the business for the period ended May 31, 1998, and the
patronage earnings resulting from the combined operations for the three months
ended August 31, 1998 will be distributed in early calendar year 1999, and is
expected to be approximately $29,000,000. The cash portion of that distribution,
as authorized by the Board of Directors, will be 80% for Equity Participation
Units and 30% for regular patronage.

<PAGE>


    Beginning June 1, 1998, inactive direct members and patrons and active
direct members and patrons age 61 and older on that date continue to be eligible
for patronage certificate redemptions at the age of 72 or death. For active
direct members and patrons who were age 60 or younger on June 1, 1998, and
member cooperatives, equities 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 held by such eligible members and patrons. Total equity
redemptions, related to the May 31, 1998 fiscal year end of the former Harvest
States operating units, the eight-month reporting period of the former Cenex
operating units ended on May 31, 1998, and the three-month period ended August
31, 1998 for the combined operations of Cenex Harvest States Cooperatives, is
expected to be approximately $24,000,000, of which approximately $4,400,000 was
redeemed during the three months ended August 31, 1998. Total equity redemptions
during the three months ended August 31, 1997 were approximately $2,200,000.

<PAGE>


OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
ITEM 1. FINANCIAL STATEMENTS


              OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                   MAY 31,      AUGUST 31,     AUGUST 31,
                                                    1998          1997           1998
                                                -----------    --------------------------
                                                               (Unaudited)    (Unaudited)
<S>                                             <C>            <C>            <C>        
CURRENT ASSETS:
  Receivables                                   $32,585,292    $27,236,349    $28,703,118
  Inventories                                    23,758,625      8,597,711     18,569,191
  Prepaid expenses and deposits                     185,399      2,689,345
                                                -----------    --------------------------
    Total current assets                         56,529,316     38,523,405     47,272,309

PROPERTY, PLANT AND EQUIPMENT                    34,952,626     40,840,799     35,596,082

                                                -----------    --------------------------
                                                $91,481,942    $79,364,204    $82,868,391
                                                ===========    ===========    ===========


                  LIABILITIES AND DEFINED BUSINESS UNIT EQUITY

CURRENT LIABILITIES:
  Due to Cenex Harvest States Cooperatives      $22,890,878    $15,315,742    $15,071,383
  Accounts payable and accrued expenses          10,527,468     10,657,464      9,319,963
                                                -----------    --------------------------
      Total current liabilities                 $33,418,346    $25,973,206    $24,391,346


COMMITMENTS AND CONTINGENCIES


DEFINED BUSINESS UNIT EQUITY                     58,063,596     53,390,998     58,477,045
                                                -----------    --------------------------
                                                $91,481,942    $79,364,204    $82,868,391
                                                ===========    ==========================
</TABLE>


                  See notes to financial statements (unaudited)

<PAGE>



              OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
                             STATEMENTS OF EARNINGS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                  AUGUST 31,
                                                                  ----------

                                                             1997            1998
                                                             ----            ----
<S>                                                      <C>            <C>         
REVENUES:
 Processed oilseed sales                                 $ 86,349,147   $ 98,919,540
 Other revenue                                              1,204,155        979,807

                                                         ---------------------------
                                                           87,553,302     99,899,347
COSTS AND EXPENSES:
  Cost of goods sold                                       82,461,185     95,169,378
  Marketing, general and administrative                     1,247,279      1,256,805
  Interest                                                      9,451        250,776
                                                         ---------------------------

                                                           83,717,915     96,676,959

                                                         ---------------------------
EARNINGS BEFORE INCOME TAXES                                3,835,387      3,222,388

INCOME TAXES                                                  675,000        525,000

                                                         ---------------------------
NET EARNINGS                                             $  3,160,387   $  2,697,388
                                                         ===========================
</TABLE>


                  See notes to financial statements (unaudited)

<PAGE>


              OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
                            STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED
                                                            AUGUST 31,
                                                            ----------

                                                      1997               1998
                                                      -----              ----
<S>                                              <C>                <C>          
CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net earnings                                   $   3,160,387      $   2,697,388
  Adjustments to reconcile net earnings
  to net cash provided by operating activities:
    Depreciation and amortization                      471,819            551,360
    Gain on disposal of property,
      plant and equipment                             (456,102)
    Changes in operating assets and liabilities:
      Receivables                                    6,933,327          3,882,174
      Inventories                                   14,252,988          5,189,434
      Prepaid expenses and deposits                   (379,182)           185,399
      Accounts payable and accrued
        expenses                                    (2,783,458)        (1,207,505)

                                                 --------------------------------
      Total adjustments                             18,039,392          8,600,862

      Net cash provided by                       --------------------------------
       operating activities                         21,199,779         11,298,250
                                                 --------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from disposition of property,
    plant and equipment                                456,102
  Acquisition of property, plant and
    equipment                                       (8,227,058)        (1,194,816)

                                                 --------------------------------
       Net cash used in investing activities        (7,770,956)        (1,194,816)
                                                 --------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings from Cenex Harvest
   States Cooperatives                             (10,268,436)        (7,819,495)
  Defined business unit equity distributed          (3,160,387)        (2,283,939)

      Net cash used in                           --------------------------------
       financing activities                        (13,428,823)       (10,103,434)
                                                 --------------------------------

INCREASE (DECREASE) IN CASH                                 --                 --

CASH, BEGINNING OF PERIOD                                   --                 --

                                                 --------------------------------
CASH, END OF PERIOD                                         --                 --
                                                 ================================
</TABLE>


                  See notes to financial statements (unaudited)

<PAGE>


OILSEED PROCESSING AND REFINING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 1. ACCOUNTING POLICIES

The unaudited statements of earnings for the three-month period ended August 31,
1998 and 1997, reflect, in the opinion of management of Cenex Harvest States
Cooperatives (the Company), all normal, recurring adjustments necessary for a
fair statement of the results of operations for the interim periods. The results
of operations for any interim period are not necessarily indicative of results
for the full year. The balance sheet data as of May 31, 1998 was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles.

These statements should be read in conjunction with the financial statements and
footnotes included in the Defined Business Unit financial statements for the
year ended May 31, 1998 which is included in the Cenex Harvest States
Cooperatives' Report on Form 10-K dated August 27, 1998, previously filed with
the Commission.


NOTE 2. INVENTORIES

                                    May 31,       August 31,      August 31,
                                     1998            1997           1998
                                 -----------     ---------------------------
                                                 (unaudited)     (unaudited)

Oilseed ....................     $ 6,925,703     $ 1,682,570     $   712,466
Processed Oilseed Products .      16,832,922       6,915,141      17,856,725
                                 -----------     ---------------------------
                                 $23,758,625     $ 8,597,711     $18,569,191
                                 ===========     ===========================

<PAGE>


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

    Pursuant to a Plan of Combination dated May 29,1998 (the Plan of
Combination), CENEX, Inc. and Harvest States Cooperatives combined through
merger on June 1, 1998 (the Combination) with Harvest States the surviving
corporation. In accordance with the Plan of Combination, the Articles of
Incorporation and bylaws of Harvest States Cooperatives were restated and the
name of Harvest States Cooperatives was changed to "Cenex Harvest States
Cooperatives" (the Company).

    As a result of the Combination, the Company has changed its fiscal year to
August 31, and is filing this Form 10-Q Transition Report under Rule 15
(d)(10)(c) for the three-month period ended August 31, 1998.

RESULTS OF OPERATIONS

    Patronage refunds to the Oilseed Processing and Refining Defined Business
Unit holders are calculated on the basis of tax earnings per bushel. Because of
this, the Company believes that the calculation below is an important measure of
the Defined Business Unit's performance.

                                           THREE MONTHS ENDED
                                                AUGUST 31,

                                      ----------------------------
                                          1997             1998
                                          -----            ----

Pretax Earnings                       $ 3,835,387      $ 3,222,388
Earnings from purchased oil            (1,928,819)         (57,794)
Nonpatronage joint venture income        (737,836)        (975,957)
Book to tax differences                                   (121,409)
                                      ----------------------------
Tax basis earnings                    $ 1,168,732      $ 2,067,228
                                      ============================

Bushels Processed                       4,607,366        9,467,186
Earnings per Bushel                   $     0.254      $     0.218
                                      ============================



    Certain operating information pertaining to the Oilseed Processing and
Refining Defined Business Unit is set forth below, as a percentage of sales.

                                           THREE MONTHS ENDED
                                                AUGUST 31,

                                          ---------------------
                                          1997            1998
                                          -----           ----
Gross Margin percentage                   4.50%           3.79%
Marketing, General and Administrative     1.44%           1.27%
Interest                                  0.01%           0.25%


COMPARISON OF THREE MONTHS ENDED AUGUST 31, 1998 AND 1997

    The Oilseed Processing and Refining Defined Business Unit's net earnings of
$2,700,000 for the three months ended August 31, 1998 represents a $500,000
decrease (15%) compared to the same period in 1997. This decrease is primarily
attributable to lower gross margins for refined oil. The average gross margin
per pound on refined oil generated by the Oilseed Processing and Refining
Defined Business Unit during the three months ended August 31, 1998 declined 33%
compared to that margin for the same three-month period of a year ago. The
impact of that reduction in profitability was partially offset by increased
sales volume of soymeal, at an average gross margin per ton 40% higher than that
of a year ago.

    Net sales of $98,900,000 for the three-month period ended August 31, 1998
increased by $12,600,000 (15%) compared to the same period in 1997. During the
three months ended August 31, 1997, the crushing portion of the

<PAGE>


plant was shutdown for 41 days to allow for the installation of new equipment.
As a result, soymeal and soyflour sales activity was reduced to approximately
110,000 tons during the 1997 period, compared with almost 230,000 tons during
the current three-month period. While increased processing volume increased
sales dollars, a significant decline of approximately $110 a ton in the sales
price partially offset the volume variance. Together, these factors increased
sales approximately $6,000,000. For the refined oil portion of the business,
volumes were approximately the same in each of the three-month periods, while an
increase in the per pound price of refined soybean oil increased sales
approximately $6,600,000.

    Other revenues of $980,000 during the three months ended August 31, 1998
decreased approximately $225,000 (19%) compared to the same period in 1997.
During the 1997 period, the Oilseed Processing and Refining Defined Business
Unit recognized gains on disposal of replaced equipment sold at salvage value of
approximately $450,000. Also included in other revenues for both of the
three-month periods is income from an oilseed joint venture. Income from this
source during the 1998 period exceeded that recognized in the 1997 period by
approximately $240,000.

    Cost of goods sold of $95,200,000 for the three months ended August 31, 1998
increased $12,700,000 (15%) compared to the same period ended in 1997. This
change is primarily attributable to the increase in soymeal volume discussed
above in the sales analysis, partially offset by a decline of approximately $2
per bushel in cost of soybeans.

    Marketing, general and administrative expenses of $1,250,000 for the three
months ended August 31, 1998 was essentially unchanged from the same period in
1997.

    Interest expense for the three months ended August 31, 1998 was $250,000,
compared with $10,000 of a year ago. This $240,000 increase is primarily
attributable to increased average inventory levels during the current period.
During the 1997 period, soybean and processed product inventories were minimal
during the shutdown period discussed above, as were receivables related to the
sale of processed soybean products.

LIQUIDITY AND CAPITAL RESOURCES

    The Oilseed Processing and Refining Defined Business Unit's cash
requirements result from capital improvements and from a need to finance
additional inventories and receivables based on increased raw material costs or
levels. These cash needs are expected to be fulfilled by the Company.

CASH FLOWS FROM OPERATIONS

    Operating activities for the three months ended August 31, 1998 and 1997,
respectively, provided net cash of $11,300,000 and $21,200,000 due to net
earnings of $2,700,000 and $3,200,000 and decreased working capital requirements
of $8,000,000 and $17,400,000, respectively.

CASH FLOWS FROM INVESTING

    The Oilseed Processing and Refining Defined Business Unit used cash of
$1,200,000 and $8,200,000 during the three months ended August 31, 1998 and
1997, respectively, for the purchase of property, plant and equipment. During
the 1997 period, the Oilseed Processing and Refining Defined Business Unit
received cash of approximately $450,000 as proceeds for replaced equipment sold
at salvage value.

    During the second quarter of the fiscal year ended May 31, 1998 the Oilseed
Processing and Refining Defined Business Unit received cash of approximately
$10,267,000 for the sale of soybean processing equipment. Most of the equipment
was purchased during the three months ended August 31, 1997, then entered into a
leaseback transaction.

CASH FLOWS FROM FINANCING

    The Defined Business Unit's financing activities are coordinated

<PAGE>


through the Company's cash management department. Cash from all of the Company's
operations is deposited with the Company's cash management department and
disbursements are made centrally. As a result, the Defined Business Unit has a
zero cash position. Financing is available from the Company to the extent of the
Company's working capital position and corporate loan agreements with various
banks, and cash requirements of all other Company operations.

    Working capital requirements for each division and Defined Business Unit of
the Company are reviewed on a periodic basis, and could potentially be
restricted based upon management's evaluation of the prevailing business
conditions and availability of funds.

    The Oilseed Processing and Refining Defined Business Unit had debt
outstanding to the Company of $15,100,000 on August 31, 1998 compared with
$22,900,000 on May 31, 1998. These interest bearing balances reflect working
capital and fixed asset financing requirements.

    In July 1998 the Company announced its site selection for the construction
of a new soybean processing and refining plant in southwestern Minnesota. The
facility, to be constructed near the city of Fairmont, Minnesota, is expected to
cost between $60 million and $90 million. The precise configuration and size of
the facility has yet to be determined. The new facility may be financed with
debt, open membership equity, additional equity participation units, or a
combination of these financing alternatives.

    As a result of the year end change (from May 31 to August 31) as noted at
the beginning of this discussion, the total net income from the Defined Business
Unit will be withdrawn by the Company from the Defined Business Unit except to
the extent that patronage dividends are not paid in cash and are retained in the
Business Unit as equity. Such dividends retained as equity from Equity
Participation Unit share of earnings are expected to be approximately $4,000 and
will be matched with equity on behalf of the Company's open membership in
proportion to Non-Equity Participation Unit bushels processed of approximately
$410,000.

<PAGE>


WHEAT MILLING DEFINED BUSINESS UNIT
ITEM 1. FINANCIAL STATEMENTS


                       WHEAT MILLING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                     ASSETS

                                                                MAY 31,        AUGUST 31,      AUGUST 31,
                                                                 1998            1997            1998
                                                             ------------    ----------------------------
                                                                              (Unaudited)     (Unaudited)
<S>                                                          <C>             <C>             <C>         
CURRENT ASSETS:
  Receivables                                                $ 35,757,497    $ 38,279,324    $ 35,227,643
  Due from Cenex Harvest States Cooperatives                                    8,838,871
  Inventories                                                  13,785,062      13,549,511      18,894,703
  Prepaid expenses and deposits                                   393,085         303,555         429,771
                                                             ------------    ----------------------------

    Total current assets                                       49,935,644      60,971,261      54,552,117

OTHER ASSETS                                                   10,747,876      11,547,885      10,481,206

PROPERTY, PLANT AND EQUIPMENT                                  85,627,365      70,472,298      97,428,174
                                                             ------------    ----------------------------
                                                             $146,310,885    $142,991,444    $162,461,497
                                                             ============    ============================


                  LIABILITIES AND DEFINED BUSINESS UNIT EQUITY


CURRENT LIABILITIES:
  Due to Cenex Harvest States Cooperatives                   $ 16,738,969                    $ 33,238,251
  Accounts payable and accrued expenses                        10,404,665    $ 17,868,851      12,669,809
  Current portion of long-term debt                            10,005,000      10,005,000      10,005,000
                                                             ------------    ----------------------------

      Total current liabilities                                37,148,634      27,873,851      55,913,060

LONG-TERM DEBT                                                 41,204,270      48,520,521      38,515,520

COMMITMENTS AND CONTINGENCIES


DEFINED BUSINESS UNIT EQUITY                                   67,957,981      66,597,072      68,032,917
                                                             ------------    ----------------------------
                                                             $146,310,885    $142,991,444    $162,461,497
                                                             ============    ============================
</TABLE>


                  See notes to financial statements (unaudited)

<PAGE>


                       WHEAT MILLING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
                             STATEMENTS OF EARNINGS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED
                                                                   AUGUST 31,
                                                                   ----------
                                                              1997              1998
                                                              ----              ----
<S>                                                       <C>              <C>         
REVENUES:
 Processed grain sales                                    $ 44,420,508     $ 46,914,301
 Other income                                                  286,767
                                                          -----------------------------

                                                            44,707,275       46,914,301
COSTS AND EXPENSES:
  Cost of goods sold                                        40,570,296       43,738,152
  Marketing, general and administrative                      1,641,583        2,065,806
  Interest                                                   1,079,412          843,564
                                                          -----------------------------

                                                            43,291,291       46,647,522
                                                          -----------------------------

EARNINGS BEFORE INCOME TAXES                                 1,415,984          266,779

INCOME TAXES                                                   125,000           25,000

                                                          -----------------------------
NET EARNINGS                                              $  1,290,984     $    241,779
                                                          =============================
</TABLE>


                  See notes to financial statements (unaudited)

<PAGE>


                       WHEAT MILLING DEFINED BUSINESS UNIT
         (A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
                            STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                             AUGUST 31,
                                                             ----------
                                                         1997            1998
                                                         ----            ----
<S>                                                 <C>              <C>         
CASH FLOWS FROM OPERATING
 ACTIVITIES:
  Net earnings                                      $  1,290,984     $    241,779
  Adjustments to reconcile net earnings
  to net cash used in operating activities:
    Depreciation and amortization                      1,218,342        1,257,050
    Changes in operating assets and liabilities:
      Receivables                                    (11,418,552)         529,854
      Inventories                                     (1,277,896)      (5,109,641)
      Prepaid expenses and deposits                      537,175          (36,686)
      Accounts payable and accrued
        expenses                                       8,375,446        2,265,144

                                                    -----------------------------
       Total adjustments                              (2,565,485)      (1,094,279)

       Net cash used in operating                   -----------------------------
        activities                                    (1,274,501)        (852,500)
                                                    -----------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property, plant and
    equipment                                         (2,293,449)     (12,791,189)

                                                    -----------------------------
       Net cash used in investing activities          (2,293,449)     (12,791,189)
                                                    -----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net (repayments to) borrowings from
   Cenex Harvest States Cooperatives                 (31,252,316)      16,499,282
  Capital from Cenex Harvest States Cooperatives      38,800,000
  Principal payments on long-term debt                (2,688,750)      (2,688,750)
  Defined business unit equity distributed            (1,290,984)        (166,843)

      Net cash provided by financing                -----------------------------
       activities                                      3,567,950       13,643,689
                                                    -----------------------------

INCREASE (DECREASE) IN CASH                                   --               --

CASH, BEGINNING OF PERIOD                                     --               --

                                                    -----------------------------
CASH, END OF PERIOD                                           --               --
                                                    =============================
</TABLE>


                  See notes to financial statements (unaudited)

<PAGE>


WHEAT MILLING DEFINED BUSINESS UNIT
(A DEFINED BUSINESS UNIT OF CENEX HARVEST STATES COOPERATIVES)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)


NOTE 1. ACCOUNTING POLICIES

The unaudited statements of earnings for the three-month period ended August 31,
1998 and 1997, reflect, in the opinion of management of Cenex Harvest States
Cooperatives (the Company), all normal, recurring adjustments necessary for a
fair statement of the results of operations for the interim periods. The results
of operations for any interim period are not necessarily indicative of results
for the full year. The balance sheet data as of May 31, 1998 was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles.

These statements should be read in conjunction with the financial statements and
footnotes included in the Defined Business Unit's financial statements for the
year ended May 31, 1998 which is included in the Cenex Harvest States
Cooperatives' Report on Form 10-K dated August 27, 1998, previously filed with
the Commission.

<PAGE>


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

    Pursuant to a Plan of Combination dated May 29, 1998 (the Plan of
Combination), CENEX, Inc. and Harvest States Cooperatives combined through
merger on June 1, 1998 (the Combination) with Harvest States the surviving
corporation. In accordance with the Plan of Combination, the Articles of
Incorporation and bylaws of Harvest States Cooperatives were restated and the
name of Harvest States Cooperatives was changed to "Cenex Harvest States
Cooperatives" (the Company).

    As a result of the Combination, the Company has changed its fiscal year to
August 31, and is filing this Form 10-Q Transition Report under Rule 15
(d)(10)(c) for the three-month period ended August 31, 1998.

RESULTS OF OPERATIONS

    Patronage refunds to the Wheat Milling Defined Business Unit holders are
calculated on the basis of tax earnings per bushel. Because of this, the Company
believes that the calculation below is an important measure of the Defined
Business Unit's performance.

                                         THREE MONTHS ENDED
                                              AUGUST 31,

                                      ---------------------------
                                          1997             1998
                                          ----             ----

Pretax Earnings                       $ 1,415,984     $   266,779
Book to tax differences                                   103,694
                                      ---------------------------
Tax basis earnings                    $ 1,415,984     $   370,473
                                      ===========================

Bushels Milled                          7,099,685       8,156,304
Earnings per Bushel                   $     0.199     $     0.045
                                      ===========================

    Certain operating information pertaining to the Wheat Milling Defined
Business Unit is set forth below, as a percentage of sales.

                                          THREE MONTHS ENDED
                                               AUGUST 31,

                                      --------------------------
                                        1997              1998
                                        -----             ----

Gross Margin percentage                 8.67%             6.77%
Marketing and Administrative            3.70%             4.40%
Interest                                2.43%             1.80%


COMPARISON OF THREE MONTHS ENDED FEBRUARY 28, 1998 AND 1997

    The Wheat Milling Defined Business Unit's net earnings of $242,000 for the
three-month period ended August 31, 1998 decreased $1,049,000 (81%) compared to
the same period in 1997. Commencing in June and continuing throughout the
period, the Defined Business Unit began conversion of a semolina line at the
Huron mill to hard wheat bakery flour. This disruption of production resulted in
a 35% decline in volume, compared to the same period in 1997. While fixed costs
at the facility remained relatively constant with the prior period, revenues net
of raw material costs declined significantly. This situation caused operating
earnings to decline approximately $1,400,000. This decline in profit
contribution from the Huron mill was partially offset by increased

<PAGE>


volume from the other mills. The Huron conversion project is anticipated to be
completed in late October 1998 and until then, will negatively impact
profitability.

    Net sales for the three months ended August 31, 1998 of $46,900,000
increased $2,500,000 (6%) compared to the same period in 1997. Increased sales
volume for all products of approximately 600,000 hundred weights, offset by a 76
cent per hundred weight average reduction in sales price produced this increase
in sales dollars. The increased sales volume was primarily through the Houston
and Rush City mills, offset by a decline in production at the Huron mill. The
Houston mill was in its early startup period last year at this time, while the
Rush City mill was not operating in June and early July of last year due to a
shortage of business. The Huron mill operated at approximately 65% of its normal
volume during the three months ended August 31, 1998 as one of the Semolina
milling lines at that facility was in the process of being converted to hard
wheat bakery flour milling capacity.

    Cost of goods sold of $43,700,000 for the three months ended August 31,
1998, increased $3,200,000 (8%) compared to the same period in 1997. The raw
material component of cost of goods sold increased $3,000,000 for the 1998
period compared with 1997. Increased volume contributed $5,400,000 to this
increase, partially offset by $2,400,000 in lower per bushel costs. Mill
expenses were essentially the same between the two periods.

    Marketing, general and administrative expenses were $2,100,000 during the
three months ended August 31, 1998, an increase of $425,000 (26%) compared to
1997. This increase is primarily attributable to additional staffing and system
expansion costs related to the Houston mill, and in anticipation of future
volumes from the Mt. Pocono mill.

    During the three months ended August 31, 1998, the Wheat Milling Defined
Business Unit incurred interest expense of $840,000. During the same period of a
year ago, the Wheat Milling Defined Business Unit generated interest income of
approximately $300,000 on its working capital account with Cenex Harvest States,
which is attributable to the capital contribution of $38,800,000 made by the
Company on June 1, 1997 for the purpose of constructing the Mt. Pocono,
Pennsylvania mill. During the three months ended August 31, 1997, the Wheat
Milling Defined Business Unit incurred interest expense on its long-term debt of
$1,100,000, for a net interest expense during the period of approximately
$800,000. While the working capital credit balance which generated last year's
interest income has been depleted as construction costs for Mt. Pocono mill were
paid, resulting interest costs have been capitalized as part of the new mill
fixed asset. Consequently, net interest expense for the two periods are
essentially unchanged.

LIQUIDITY AND CAPITAL RESOURCES

    The Wheat Milling Defined Business Unit's cash requirements result from
capital improvements and from a need to finance additional inventories and
receivables based on increased raw material cost and levels.

    In September 1997, the Wheat Milling Defined Business Unit began
construction of a mill at Mt. Pocono, Pennsylvania. As discussed in the
registration statement for the original equity participation unit offering, this
mill is to be financed with equity from the Company. Anticipated cost is
$41,350,000, of which approximately $26,200,000 was expended through August 31,
1998. Projected completion of the mill is in the spring of 1999.

    In June of 1998, the Wheat Milling Defined Business Unit began conversion of
a semolina line at the Huron Mill to hard wheat bakery flour production.
Anticipated cost of this project is $2,400,000, with completion anticipated

<PAGE>


in late October of 1998.

    The Cenex Harvest States Board of Directors has authorized the purchase of
land near Orlando, Florida as the site for a new mill. The Board has authorized
expenditures up to $1,755,000 for the cost of the land and an access road. Plans
for this mill are subject to due diligence, routine regulatory review and cost
verification. Anticipated costs for this mill are approximately $35,000,000, and
may be financed with debt, open member equity, additional equity participation
units, or a combination of these financing alternatives.

    Commencement of operations at a particular facility involves increased
working capital to fund required inventories and receivables related to
increased sales. New facilities may not be immediately profitable, which would
then have a negative impact on cash flows and may require additional financing
as a result. In addition, increased carrying value of inventories and
receivables because of higher prices, increased receivables because of slow
collections or increased inventories above historical levels requires additional
financing.

CASH FLOWS FROM OPERATIONS

    Operating activities for the three months ended August 31, 1998 and 1997,
respectively, used net cash of $850,000 and $1,300,000. For the three-month
period ended in 1998, net cash was provided by earnings of $240,000 and noncash
depreciation and amortization of $1,250,000 were offset by increased working
capital requirements of $2,400,000. For the same period ended in 1997, net cash
was provided by earnings of $1,300,000 and noncash depreciation and amortization
of $1,200,000, offset by increased working capital requirements of $3,800,000.

CASH FLOWS USED FOR INVESTING

    Cash expended for the acquisition of property, plant and equipment during
the three-month periods ended August 31, 1998 and 1997 totaled $12,800,000 and
$2,300,000, respectively. The 1998 increase is related to the construction of
Mt. Pocono, Pennsylvania discussed above.

CASH FLOWS FROM FINANCING

    The Wheat Milling Defined Business Unit's financing activities are
coordinated through the Company's cash management department. Cash from all of
the Company's operations is deposited with the Company's cash management
department and disbursements are made centrally. As a result, the Wheat Milling
Defined Business Unit has a zero cash position. Financing is available from the
Company to the extent of the Company's working capital position and corporate
loan agreements with various banks and cash requirements of all other Company
operations.

    Working capital requirements for each division and Defined Business Unit of
the Company are reviewed on a periodic basis, and could potentially be
restricted based upon management's evaluation of the prevailing business
conditions and availability of funds.

    Short term debt outstanding and payable to the Company on August 31, 1998
was $33,200,000 compared to $16,700,000 on May 31, 1998. This increase is
primarily due to payments for Mount Pocono capital expenditures, for which the
Company had contributed $38,800,000 of capital to this account on June 1, 1997.

    On May 31, 1998 the Wheat Milling Defined Business Unit had long-term

<PAGE>


debt of $51,200,000 which was incurred for the acquisition, expansion and
construction of its various plants since 1990. During the three months ended
August 31, 1998 and 1997, respectively, this balance was reduced by repayments
of $2,700,000.

    As a result of the year end change (from May 31 to August 31) as noted at
the beginning of this discussion, the total net income from the Wheat Milling
Defined Business Unit will be withdrawn by the Company from the Wheat Milling
Defined Business Unit except to the extent that patronage dividends are not paid
in cash and are retained in the Business Unit as equity. Such dividends retained
as equity from Equity Participation Unit share of earnings are expected to be
approximately $2,300 and will be matched with equity on behalf of the Company's
open membership in proportion to Non-Equity Participation Unit bushels milled of
approximately $72,600.

<PAGE>


                           PART II. OTHER INFORMATION

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


(a) Exhibits

          EXHIBIT   DESCRIPTION
          -------   -----------

          10.20     Limited Liability Company Agreement of Country Energy, LLC
                    dated June 29, 1998 between Cenex Harvest States
                    Cooperatives and Farmland Industries, Inc.

          10.21     Addendum to Limited Liability Company Agreement of Country
                    Energy, LLC dated July 23, 1998 by Cenex Harvest States
                    Cooperatives and Farmland Industries, Inc.

          10.22     $225,000,000 Note Agreement (Private Placement Agreement)
                    dated as of June 19, 1998 among Cenex Harvest States
                    Cooperatives and each of the Purchasers of the Notes.

          10.23     $400 Million 364-Day and $200 Million 5-Year Revolving Loan
                    Credit Agreement dated as of June 1, 1998 among Cenex
                    Harvest States Cooperatives, CoBank, ACB, St. Paul Bank for
                    Cooperatives, et al., including Exhibit 2.4 (form of 364-Day
                    Facility Note) and Exhibit 3.4 (form of 5-Year Note).

          10.24     $200 Million Term Loan Credit Agreement dated as of June 1,
                    1998 among Cenex Harvest States Cooperatives, CoBank, ACB,
                    and St. Paul Bank for Cooperatives, including Exhibit 2.4
                    (form of $200 Million Promissory Note).

          10.25     Employment Agreement dated June 1, 1998 between John D.
                    Johnson and Cenex Harvest States Cooperatives.

          10.26     Employment Agreement dated June 1, 1998 between Noel K.
                    Estenson and Cenex Harvest States Cooperatives.

          99        Cautionary Statement

          27        Financial Data Schedule (EDGAR filing only)


(b) Reports on Form 8-K

    Form 8-K filed June 10, 1998 regarding the merger of Harvest States
        Cooperatives and Cenex, Inc.

    Form 8-K/A filed August 13, 1998 to amend Item 7 of Form 8-K filed June 10,
        1998. The filing includes financial information of Cenex, Inc. and
        pro-forma financial information of Cenex Harvest States Cooperatives.

<PAGE>


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)



       October 14, 1998                       /s/ T. F. Baker
       ----------------                       ---------------
            (Date)                              T. F. Baker
                             Executive Vice-President - Finance & Administration