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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q/A-1

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|          
|           |  | for the quarterly period ended
    November 30, 2003.                                       
|          
|o          |  | 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 333-17865

Exchange Act Filing Number 0-50150


CHS Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                                         
|------------------------------------------------------------------ |  | --------------------------------------------------------
|Minnesota                                                          |  | 41-0251095                                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification Number)             
|                                                                  
|5500 Cenex Drive
    Inver Grove Heights, MN 55077                 |  | (651) 355-6000                                          
|(Address of principal executive offices,
    including zip code)   |  | (Registrants telephone 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 þ          NO o

Indicate by check mark whether the Registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     YES o          NO þ

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

|      |  |                             
|----- |  | ----------------------------
|      |  | Number of Shares Outstanding
|Class |  | at November 30, 2003        
|      |  |                             
|NONE  |  | NONE                        



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TABLE OF CONTENTS



|                                      |  |  |  |  |  |  |  | 
|------------------------------------- |  |  |  |  |  |  |  | 
|PART II. OTHER INFORMATION           
|SIGNATURES                           
|Certification Pursuant to Section 302
|Certification Pursuant to Section 302
|Certification Pursuant to Section 906
|Certification Pursuant to Section 906



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INDEX

|                              |  |                                                                                           |    |      |    | 
|----------------------------- |  | ----------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                              |  |                                                                                           |    | Page
|                              |  |                                                                                           |    |     
|PART I. FINANCIAL INFORMATION
|Item 2.                       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |    |      | 2  | 
|                             
|PART II. OTHER INFORMATION   
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                          |    |      | 15 | 
|                             
|SIGNATURE PAGE                |  |                                                                                           | 16 |     

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This Form 10-Q/ A-1 amends Items 2 and
6(a) to the Registrants Quarterly Report on Form 10-Q
for the fiscal quarter ended November 30, 2003. In
addition, in connection with the filing of this Form 10-Q/
A-1 and pursuant to the rules of the Securities and Exchange
Commission, the Registrant is including with this
Form 10-Q/ A-1 certain currently dated certifications.
Item 2 has been amended solely to incorporate the text of
prior Exhibit 99.1 (with certain changes to that text) in
Item 2. No other changes have been made to the
Form 10-Q for the fiscal quarter ended November 30,
2003 and this Form 10-Q/ A-1 does not modify or update the
disclosure contained in the Form 10-Q in any way other than
as required to reflect the amendments discussed above and
reflected below.

PART I. FINANCIAL INFORMATION



|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Cautionary Statement Regarding Forward-Looking
Statements

The information in this Quarterly Report on
Form 10-Q/ A-1 for the quarterly period ended
November 30, 2003, includes forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the Company. In
addition, the Company and its representatives and agents may
from time to time make other written or oral forward-looking
statements, including statements contained in the Companys
filings with the Securities and Exchange Commission and its
reports to its members and securityholders. Words and phrases
such as will likely result, are expected
to, is anticipated, estimate,
project and similar expressions identify
forward-looking statements. The Company wishes to caution
readers not to place undue reliance on any forward-looking
statements, which speak only as of the date made.

The Companys forward-looking statements
are subject to risks and uncertainties that could cause actual
results to differ materially from those discussed in the
forward-looking statements. This Cautionary Statement is for the
purpose of qualifying for the safe harbor provisions
of the Act and is intended to be a readily available written
document that contains factors which could cause results to
differ materially from those projected in the forward-looking
statements. The following matters, among others, may have a
material adverse effect on the business, financial condition,
liquidity, results of operations or prospects, financial or
otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement shall be
deemed to be a statement that any one or more of the following
factors may cause actual results to differ materially from those
which might be projected, forecasted, estimated or budgeted by
the Company in the forward-looking statement or
statements.

The following factors are in addition to any
other cautionary statements, written or oral, which may be made
or referred to in connection with any particular forward-looking
statement. The following review of factors pursuant to the Act
should not be construed as exhaustive.

The Company undertakes no obligation to
publicly revise any forward-looking statements to reflect future
events or circumstances.

Changes in commodity prices.Our revenues and earnings are affected
by market prices for commodities such as crude oil, natural gas,
grain, oilseeds, and flour. Commodity prices generally are
affected by a wide range of factors beyond our control,
including the weather, disease, insect damage, drought, the
availability and adequacy of supply, government regulation and
policies, and general political and economic conditions. We are
also exposed to fluctuating commodity prices as the result of
our inventories of commodities, typically grain and petroleum
products, and purchase and sale contracts at fixed or partially
fixed prices. At any time, our inventory levels and unfulfilled
fixed or partially fixed price contract obligations may be
substantial. Increases in market prices for commodities that we
purchase without a corresponding increase in the prices of our
products or our sales volume or a decrease in our other
operating expenses could reduce our revenues and net income.

In our energy operations, profitability depends
largely on the margin between the cost of crude oil that we
refine and the selling prices that we obtain for our refined
products. Prices for both crude oil and for

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gasoline, diesel fuel and other refined petroleum
products fluctuate widely. Factors influencing these prices,
many of which are beyond our control, include:




| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | levels of worldwide and domestic supplies;                                                                                                                  
|
| |  | capacities of domestic and foreign refineries;                                                                                                              
|
| |  | the ability of the members of OPEC to agree to
    and maintain oil price and production controls, and the price
    and level of foreign imports generally;
|
| |  | political instability or armed conflict in
    oil-producing regions;                                                                                       
|
| |  | the level of consumer demand;                                                                                                                               
|
| |  | the price and availability of alternative fuels;                                                                                                            
|
| |  | the availability of pipeline capacity; and                                                                                                                  
|
| |  | domestic and foreign governmental regulations and
    taxes.                                                                                                

The long-term effects of these and other
conditions on the prices of crude oil and refined petroleum
products are uncertain and ever-changing. Accordingly, we expect
our margins on and the profitability of our energy business to
fluctuate, possibly significantly, over time.

Our operating results could be adversely
affected if our members were to do business with others rather
than with us.We do not have an
exclusive relationship with our members and our members are not
obligated to supply us with their products or purchase products
from us. Our members often have a variety of distribution
outlets and product sources available to them. If our members
were to sell their products to other purchasers or purchase
products from other sellers, our revenues would decline and our
results of operations could be adversely affected.

We participate in highly competitive business
markets in which we may not be able to continue to compete
successfully.We operate in several
highly competitive business segments and our competitors may
succeed in developing new or enhanced products that are better
than ours, and may be more successful in marketing and selling
their products than we are with ours. Competitive factors
include price, service level, proximity to markets, product
quality and marketing. In some of our business segments, such as
Energy, we compete with companies that are larger, better known
and have greater marketing, financial, personnel and other
resources. As a result, we may not be able to continue to
compete successfully with our competitors.

Changes in federal income tax laws or in our
tax status could increase our tax liability and reduce our net
income.Current federal income tax
laws, regulations and interpretations regarding the taxation of
cooperatives, which allow us to exclude income generated through
business with or for a member (patronage income) from our
taxable income, could be changed. If this occurred, or if in the
future we were not eligible to be taxed as a cooperative, our
tax liability would significantly increase and our net income
significantly decrease.

We incur significant costs in complying with
applicable laws and regulations. Any failure to make the capital
investments necessary to comply with these laws and regulations
could expose us to financial
liability.We are subject to numerous
federal, state and local provisions regulating our business and
operations and we incur and expect to incur significant capital
and operating expenses to comply with these laws and
regulations. We may be unable to pass on those expenses to
customers without experiencing volume and margin losses. For
example, capital expenditures for upgrading our refineries,
largely to comply with regulations requiring the reduction of
sulfur levels in refined petroleum products, are expected to be
approximately $87.0 million for our Laurel, Montana
refinery and $324.0 million for NCRAs McPherson,
Kansas refinery, of which $13.4 million had been spent at
the Laurel refinery and $53.7 million had been spent by
NCRA at the McPherson refinery as of November 30, 2003. The
Company expects all of these compliance capital expenditures at
the refineries to be complete by

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December 31, 2005, and anticipates funding
these projects with a combination of cash flows from operations
and debt proceeds.


We establish reserves for the future cost of
meeting known compliance obligations, such as remediation of
identified environmental issues. However, these reserves may
prove inadequate to meet our actual liability. Moreover,
amended, new or more stringent requirements, stricter
interpretations of existing requirements or the future discovery
of currently unknown compliance issues may require us to make
material expenditures or subject us to liabilities that we
currently do not anticipate. Furthermore, our failure to comply
with applicable laws and regulations could subject us to
administrative penalties and injunctive relief, civil remedies
including fines and injunctions, and recalls of our products.

Environmental liabilities could adversely
affect our results and financial
condition.Many of our current and
former facilities have been in operation for many years and,
over that time, we and other operators of those facilities have
generated, used, stored and disposed of substances or wastes
that are or might be considered hazardous under applicable
environmental laws, including chemicals and fuels stored in
underground and above-ground tanks. Any past or future actions
in violation of applicable environmental laws could subject us
to administrative penalties, fines and injunctions. Moreover,
future or unknown past releases of hazardous substances could
subject us to private lawsuits claiming damages and to adverse
publicity.

Actual or perceived quality, safety or health
risks associated with our products could subject us to liability
and damage our business and
reputation.If any of our food or feed
products became adulterated or misbranded, we would need to
recall those items and could experience product liability claims
if consumers were injured as a result. A widespread product
recall or a significant product liability judgment could cause
our products to be unavailable for a period of time or a loss of
consumer confidence in our products. Even if a product liability
claim is unsuccessful or is not fully pursued, the negative
publicity surrounding any assertion that our products caused
illness or injury could adversely affect our reputation with
existing and potential customers and our corporate and brand
image. Moreover, claims or liabilities of this sort might not be
covered by our insurance or by any rights of indemnity or
contribution that we may have against others. In addition,
general public perceptions regarding the quality, safety or
health risks associated with particular food or feed products,
such as the concern in some quarters regarding genetically
modified crops, could reduce demand and prices for some of the
products associated with our businesses. To the extent that
consumer preferences evolve away from products that our members
or we produce for health or other reasons, such as the growing
demand for organic food products, and we are unable to develop
products that satisfy new consumer preferences, there will be a
decreased demand for our products.

Our operations are subject to business
interruptions and casualty losses; we do not insure against all
potential losses and could be seriously harmed by unexpected
liabilities.Our operations are
subject to business interruptions due to unanticipated events
such as explosions, fires, pipeline interruptions,
transportation delays, equipment failures, crude oil or refined
product spills, inclement weather and labor disputes. For
example:



| |   |                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our oil refineries and other facilities are
    potential targets for terrorist attacks that could halt or
    discontinue production;              
|
| |  | our inability to negotiate acceptable contracts
    with unionized workers in our operations could result in strikes
    or work stoppages; and     
|
| |  | the significant inventories that we carry could
    be damaged or destroyed by catastrophic events, extreme weather
    conditions or contamination.

We maintain insurance against many, but not all,
potential losses or liabilities arising from these operating
hazards, but uninsured losses or losses above our coverage
limits are possible. Uninsured losses and liabilities arising
from operating hazards could have a material adverse effect on
our financial position or results of operations.

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Our cooperative structure limits our ability
to access equity capital.As a
cooperative, we may not sell common equity in our company. In
addition, existing laws and our articles of incorporation and
bylaws contain limitations on dividends of 8% of any preferred
stock that we may issue. These limitations restrict our ability
to raise equity capital and may adversely affect our ability to
compete with enterprises that do not face similar restrictions.

Consolidation among the producers of products
we purchase and customers for products we sell could adversely
affect our revenues and operating
results.Consolidation has occurred
among the producers of products we purchase, including crude oil
and grain, and it is likely to continue in the future.
Consolidation could increase the price of these products and
allow suppliers to negotiate pricing and other contract terms
that are less favorable to us. Consolidation also may increase
the competition among consumers of these products to enter into
supply relationships with a smaller number of producers
resulting in potentially higher prices for the products we
purchase.

Consolidation among purchasers of our products
and in wholesale and retail distribution channels has resulted
in a smaller customer base for our products and intensified the
competition for these customers. For example, ongoing
consolidation among distributors and brokers of food products
and food retailers has altered the buying patterns of these
businesses, as they have increasingly elected to work with
product suppliers who can meet their needs nationwide rather
than just regionally or locally. If these distributors, brokers,
and retailers elect not to purchase our products, our sales
volumes, revenues, and profitability could be significantly
reduced.

If our customers chose alternatives to our
refined petroleum products our revenues and profits may
decline.Numerous alternative energy
sources currently under development could serve as alternatives
to our gasoline, diesel fuel and other refined petroleum
products. If any of these alternative products become more
economically viable or preferable to our products for
environmental or other reasons, demand for our energy products
would decline. Demand for our gasoline, diesel fuel and other
refined petroleum products also could be adversely affected by
increased fuel efficiencies.

Our agronomy business is depressed and could
continue to underperform in the
future.Demand for agronomy products
in general has been adversely affected in recent years by
drought and poor weather conditions, idle acreage and
development of insect and disease-resistant crops. These factors
could cause Agriliance, LLC, an agronomy marketing and
distribution venture in which we own a minority interest, to be
unable to operate at profitable margins. In addition, these and
other factors, including fluctuations in the price of natural
gas and other raw materials, an increase in recent years in
domestic and foreign production of fertilizer, and intense
competition within the industry, in particular from lower-cost
foreign producers, have created particular pressure on producers
of fertilizers. As a result, CF Industries, Inc., a fertilizer
manufacturer in which we hold a minority cooperative interest,
has suffered significant losses in recent years as it has
incurred increased prices for raw materials but has been unable
to pass those increased costs on to its customers.

Technological improvements in agriculture
could decrease the demand for our agronomy
products.Technological advances in
agriculture could decrease the demand for crop nutrients, and
other crop input products and services that we provide.
Genetically engineered seeds that resist disease and insects or
that meet certain nutritional requirements could affect the
demand for our crop nutrients and crop protection products, as
well as the demand for fuel that we sell and which is used to
operate application equipment relating to these products.

We operate some of our business through joint
ventures in which our rights to control business decisions are
limited.Several parts of our
business, including in particular, our agronomy business segment
and portions of our grain marketing, wheat milling and foods
businesses, are operated through joint ventures with
unaffiliated third parties. By operating a business through a
joint venture, we have less control over business decisions than
we have in our wholly owned businesses. In particular, we
generally cannot act on major business initiatives in our joint
ventures without the consent of the other party or parties in
that venture.

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General

CHS Inc. (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 ended November 30,
2003 and 2002 is shown in Note 8 to the Consolidated
Financial Statements.

Many of the Companys business activities
are highly seasonal, and as a result, operating results will
vary throughout the year. 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, the
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 volume and earnings based
on producer harvests, world grain prices and demand. The
Companys Energy segment generally experiences higher
volumes 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, experience
higher volumes and profitability during the winter heating and
crop drying seasons.

The Companys revenue can be significantly
affected by global market prices for commodities such as
petroleum products, natural gas, grain, oilseeds and flour.
Changes in market prices for commodities that the Company
purchases without a corresponding change in the selling prices
of those products can affect revenues and operating earnings.
Commodity prices are affected by a wide range of factors beyond
the Companys control, including the weather, crop damage
due to disease or insects, drought, the availability and
adequacy of supply, government regulation and policies, world
events, and general political and economic conditions.

While the Companys sales and operating
results are derived from businesses and operations which are
wholly-owned and majority-owned, a portion of business
operations are conducted through companies 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).

Agriliance 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. Prior to the
transaction described below, the Companys indirect share
of earnings (economic interest) in Agriliance was 25%, which was
the same as the Companys ownership or governance interest.
Subsequent to the transaction, the Companys indirect
economic interest in Agriliance is no longer the same as the
Companys ownership or governance interest.

In April 2003, the Company acquired an additional
economic interest in the Agriliance wholesale crop protection
business (the CPP Business), which constitutes only
a part of the Agriliance 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, 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 ownership or governance interests in
Agriliance did not change with the purchase of this additional
economic interest.

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Agriliances earnings are split among the
members based upon the respective economic interests of each
member.


Results of Operations



| |                                                                    
| | -------------------------------------------------------------------
| | Comparison of the Three Months Ended
    November 30, 2003 and 2002

Net Income.Consolidated net income for the three months ended November 30,
2003 was $50.7 million compared to $40.4 million for
the three months ended November 30, 2002, which represents
a $10.3 million (26%) increase. The most significant
increases in earnings, when comparing the three months ended
November 30, 2003 with the same period of a year ago, were
generated with the Companys Energy and Processed Grains
and Foods segments. The Energy segment generated increased
earnings of $6.2 million, primarily as the result of strong
refining margins. The Processed Grains and Foods segment
earnings increased $4.3 million, primarily the result of
improved margins within the soybean crushing and oil packaging
complex. Stronger soymeal margins resulted in the geographical
area of the Companys plants primarily because a
competitors facility was inoperative during much of the
period. Refined soybean oil-based products generated improved
margins primarily due to increased volumes.

Net Sales.Consolidated net sales of $2.5 billion for the three months
ended November 30, 2003 increased $88.7 million (4%)
compared to the three months ended November 30, 2002.

Company-wide grain and oilseed net sales of
$1.3 billion increased $31.9 million (3%) during the
three months ended November 30, 2003 compared with that
sales activity during the three months ended November 30,
2002. Sales consummated by the Grain Marketing segment totaled
$1,205.1 million and $1,161.6 million during the
periods ended November 30, 2003 and 2002, respectively.
Grain sales for the Country Operations and Services segment to
outside customers during these same periods were
$71.4 million and $83.0 million, respectively. Sales
of grain between the Country Operations and Services segment and
the Grain Marketing segment during those periods were
$258.3 million and $251.4 million, respectively. These
intersegment sales are included for segment reporting purposes,
but the Company eliminates all intersegment sales on a
consolidated basis. The net sales increase of $31.9 million
is attributable to higher grain prices during the three month
period ended November 30, 2003 compared to those prevailing
during the same period a year earlier. In an analysis of this
increase in net sales, the weighted average sale price of all
grain and oilseed commodities sold reflected an increase of
$0.22 per bushel (5%) which contributed $63.0 million to
the increase. Volume decreased about 2% during the three month
period ended November 30, 2003 compared with the same three
month period of a year ago, and had the affect of reducing sales
by $31.1 million. Soybeans reflected the largest price
increase, and corn reflected the largest volume decrease.

Energy net sales of $888.9 million increased
$1.3 million (less than 1%) during the three months ended
November 30, 2003 compared with that sales activity during
the three months ended November 30, 2002. During the three
months ended November 30, 2003 and 2002, respectively, the
Energy segment had sales to the Country Operations and Services
segment of $27.1 million and $24.0 million,
respectively. Those intersegment sales are eliminated in
deriving consolidated sales but are included for segment
reporting purposes. The net sales increase of $1.3 million
is comprised of an increase of $72.5 million related to
price appreciation and a decrease in sales of $71.2 million
because of lower sales volume. On a more product-specific basis,
refined fuels prices increased $0.05 per gallon and volumes
decreased 2% comparing the three months ended November 30,
2003 with the same period a year ago. Propane prices increased
$0.15 per gallon and sales volume decreased 19% in
comparison of the same two periods. Refined fuel prices are
generally reflective of crude oil prices. The higher propane
prices reflect lower industry stocks in 2003 as the result of a
cold winter earlier in the calendar year. The lower sales volume
for propane during the three months ended November 30, 2003
is primarily reflective of a dry autumn which offered minimal
opportunity for corn drying (propane is used as the fuel for
corn dryers at grain elevators) and a relatively warm fall
season which reduces its demand for home heating.

Country operations non-grain net sales of
$173.3 million increased by $18.8 million (12%) during
the three months ended November 30, 2003 compared to the
three months ended November 30, 2002,

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primarily in agronomy and energy products
compared to November 30, 2002. Fertilizer volume and the
net average sales price increased compared to the previous year.
Energy product sales increased primarily as the result of an
increase in the average selling price of propane compared to the
previous year.


Processed Grains and Foods segment net sales of
$150.6 million increased $36.8 million (32%) during
the three months ended November 30, 2003 compared to the
three months ended November 30, 2002. Oilseed processing
net sales increased $37.6 million primarily due to
additional volumes at a new crushing plant in Fairmont,
Minnesota that began operations during the first quarter of
fiscal year 2004 and an average selling price increase of
$0.04 per bushel in refined oilseed products.

Patronage Dividends.Patronage dividends received of $0.3 million increased
$0.2 million during the three months ended
November 30, 2003 compared to the three months ended
November 30, 2002.

Other Revenues.Other revenues of $32.7 million decreased $2.4 million
(7%) during the three months ended November 30, 2003
compared to the three months ended November 30, 2002. The
most significant decrease was in the Country Operations and
Services segment compared to the prior year.

Cost of Goods Sold.Cost of goods sold of $2.4 billion increased $76.0 million
(3%) during the three months ended November 30, 2003
compared to the three months ended November 30, 2002. The
cost of all grains and oilseed procured by the Company through
its Grain Marketing and Country Operations and Services segments
increased 2% compared to the three months ended
November 30, 2002 primarily due to a $0.21 (5%) average
cost per bushel increase, which was partially offset by a 2%
decrease in volumes compared to the prior year. This increase in
cost of goods sold was primarily the result of higher commodity
prices. The Energy segment cost of goods sold decreased by
$0.4 million during the three months ended
November 30, 2003 compared to the same period of the prior
year, primarily due to reduced volumes, which was partially
offset by increased average costs. On a more product-specific
basis, refined fuels volumes decreased by 2%, which was
partially offset by an average cost increase of $0.05 per gallon
compared to the three months ended November 30, 2002. The
average cost increase on refined fuels is reflective of crude
oil prices. Propane volumes decreased 19%, which was partially
offset by an increased average cost of $0.15 per gallon compared
to the three months ended November 30, 2002. Volumes of
propane products were reduced due to a dry autumn, which was
partially offset by an average cost increase due to higher input
costs compared to the three months ended November 30, 2002.
Country operations non-grain cost of goods sold increased by 12%
during the three months ended November 30, 2003 compared to
the three months ended November 30, 2002 due to an
increased average cost per unit on fertilizer and propane
products. The Processed Grains and Foods segment cost of goods
sold increased by $33.9 million (32%) compared to the three
months ended November 30, 2002, which was primarily due to
increased volumes at the new crushing plant in Fairmont,
Minnesota and increased cost of raw materials in oilseed
processing.

Marketing, General and
Administrative.Marketing, general and
administrative expenses of $47.7 million for the three
months ended November 30, 2003 increased by
$4.6 million (11%) compared to the three months ended
November 30, 2002. The net increase is primarily due to
additional expenses within the Country Operations and Services
segment related to acquisitions during 2003.

Gain on Legal
Settlements.The Country Operations
and Services segment received cash of $1.8 million during
the three months ended November 30, 2002 from a class
action lawsuit alleging illegal price fixing against various
feed vitamin product suppliers.

Interest.Interest
expense of $11.5 million for the three months ended
November 30, 2003 decreased by $1.3 million (10%)
compared to the three months ended November 30, 2002. The
average level of short-term borrowings decreased
$76.5 million primarily due to financing lower average
working capital needs and an average short-term interest rate
decrease of 0.7% during the three months ended November 30,
2003 compared to the three months ended November 30, 2002.

Equity income from investments.Equity income from investments of
$13.7 million for the three months ended November 30, 2003
increased $5.5 million (68%) compared to the three months
ended November 30, 2002. This increase is primarily
attributable to improved earnings within the Grain

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Marketing segments two exporting joint
ventures, improved earnings by Horizon Milling and improved
earnings by Ventura.


A weaker U.S. dollar and poor weather conditions
in certain competing grain exporting countries contributed to a
$0.8 million increase in equity income from the
Companys investment in TEMCO, LLC, a joint venture which
exports corn and soybeans. These same conditions contributed to
a $0.4 million improvement in equity income from the
Companys investment in United Harvest, LLC, a joint
venture which exports wheat. Improved margins resulting
primarily from a reduction in industry supply contributed to a
$2.3 million improvement in equity income derived from the
Companys investment in Horizon Milling. The Companys
equity income from its investment in Ventura improved $1.4
million in comparison to the prior year, primarily due to
increased volumes.

Minority Interests.Minority interests of $3.9 million for the three months
ended November 30, 2003 decreased by $1.5 million
(28%) compared to the three months ended November 30, 2002.
The net change in minority interests during the three months
ended November 30, 2003 compared to the prior year was
primarily a result of more profitable operations within the
Companys majority-owned subsidiaries. Substantially all
minority interests relate to National Cooperative Refinery
Association (NCRA) an approximately 74.5% owned subsidiary.

Income Taxes.Income
tax expense of $7.6 million for the three months ended
November 30, 2003 compares to $5.5 million for the
three months ended November 30, 2002, resulting in
effective tax rates of 13.1% and 12.0%, respectively. The
federal and state statutory rate applied to nonpatronage
business activity was 38.9% for the periods ended
November 30, 2003 and 2002. The income taxes and effective
tax rate vary each period based upon profitability and
nonpatronage business activity during each of the comparable
periods.

Liquidity and Capital Resources

On November 30, 2003 the Company had working
capital, defined as current assets less current liabilities, of
$489.3 million and a current ratio, defined as current
assets divided by current liabilities, of 1.3 to 1.0
compared to working capital of $458.7 million and a current
ratio of 1.3 to 1.0 on August 31, 2003. On
November 30, 2002, the Company had working capital of
$431.8 million and a current ratio of 1.3 to 1.0,
compared to working capital of $249.1 million and a current
ratio of 1.2 to 1.0 on August 31, 2002. In
October 2002, the Company borrowed $175.0 million from a
group of insurance companies on a long-term basis and in January
2003 received net proceeds of $82.5 million from the sale
of preferred stock to the general public. This financing was
initiated in part to fund capital expenditures related to the
low sulfur fuel regulations discussed below in Cash Flows from
Investing Activities. The Company has committed lines of
revolving credit totaling $730.0 million, of which
$376.0 million was drawn on November 30, 2003,
primarily for the purpose of financing receivables and
inventories. These receivables and inventories are highly
liquid. The Company believes that its liquidity is adequate to
cover any increase in net operating assets and liabilities.



| |                           
| | --------------------------
| | Cash Flows from Operations

Cash flows from operations are generally affected
by commodity prices. These commodity prices are affected by a
wide range of factors beyond our control, including weather,
crop conditions, drought, the availability and the adequacy of
supply and transportation, government regulations and policies,
world events, and general political and economic conditions.
These factors are described in Exhibit 99.1 Cautionary
Statement and may affect net operating assets and liabilities
and liquidity.

Cash flows provided by (used in) operating
activities were $(160.5) million and $15.1 million for
the three months ended November 30, 2003 and 2002,
respectively. Volatility in cash flows from operations for these
periods is primarily the result of changing grain prices. On
November 30, 2003, the market price per bushel of spring
wheat, soybeans and corn, were $0.30 (8%), $1.85 (31%), and $.01
(0%) greater than their respective values on August 31,
2003. These increases in grain prices, in combination with
larger inventory quantities due to fall harvest, had the affect
of contributing significantly to an increase in net

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operating assets and liabilities values compared
with those on August 31, 2003, thus using cash resources.
In contrast, on November 30, 2002, the market price per
bushel of spring wheat, soybeans and corn were $1.35 (26%),
$0.35 (6%) and $0.28 (11%) lower than their respective values on
August 31, 2002. While inventory quantities increased
somewhat due to fall harvest, these declining commodity prices
partially mitigated that factor and net operating assets and
liabilities increased only moderately when compared with those
on August 31, 2002.


Operating activities of the Company used net cash
of $160.5 million during the three months ended
November 30, 2003. Net income of $50.7 million and net
non-cash expenses of $16.9 million were offset by an
increase in net operating assets and liabilities of
$228.1 million. The primary components of net non-cash
expenses included depreciation and amortization of
$26.8 million and a partial offset of net income from
equity investments of $13.7 million. The increase in net
operating assets and liabilities was caused primarily by
increases in the prices of the three primary grain commodities
handled by the Company, as explained in the preceding paragraph.
Factors contributing to this price appreciation included a
shortage of transportation and a perceived future shortage of
soybeans due to poor late season growing conditions for that
crop. These and other less significant factors increased net
operating assets and liabilities $228.1 million and was the
largest use of cash from operations. A major part of this
increase in net operating assets and liabilities was financed
with short-term notes payable. Because the change in short-term
notes payable is shown in cash flows from financing activities,
this source of cash does not offset the corresponding use of
cash as part of the cash flows from operating activities in the
Consolidated Statements of Cash Flows.

Operating activities of the Company provided net
cash of $15.1 million during the three months ended
November 30, 2002. Net income of $40.4 million and net
non-cash expenses of $23.8 million were partially offset by
an increase in net operating assets and liabilities
$49.1 million. The primary components of net non-cash
expenses included depreciation and amortization of
$25.9 million and a partial offset of net income from
equity investments of $8.2 million. The increase in net
operating assets and liabilities was primarily due to the
seasonality of grain harvest, with the affect of greater volume
partially offset by lower grain prices. This increase in net
operating assets and liabilities of $49.1 million
represented the largest use of cash generated through operations.

The Company expects that railcars will continue
to be in short supply during the next quarter to transport grain
from its country elevator locations to sale destinations.
Inventories at most of the Companys country operations
elevators are already at near maximum capacity; consequently
this situation is likely not to contribute to an increase in net
operating assets and liabilities, but rather these inventories
will not be reduced at the pace normally experienced. The
Company also expects to increase crop nutrient and crop
protection product inventories and prepayments to suppliers of
these products at its country operations locations during the
next fiscal quarter. At the same time the Company expects this
increase in net operating assets and liabilities to be partially
offset by the collection of prepayments from its own customers
for these products. Prepayments are used frequently for agronomy
products to assure supply, and at times to guarantee price. The
Company believes that it has adequate capacity through its
committed credit facility to meet any likely increase in net
operating assets and liabilities.



| |                                         
| | ----------------------------------------
| | Cash Flows from Investing
    Activities

For the three months ended November 30, 2003
and 2002, the net cash flows used in the Companys
investing activities totaled $4.6 million and
$44.9 million, respectively.

The acquisition of property, plant and equipment
comprised the primary use of cash totaling $52.2 million
and $40.6 million for the three months ended
November 30, 2003 and 2002, respectively. For the three
months ended November 30, 2002, the acquisitions of
property, plant and equipment included $8.5 million
acquired as part of a business. Capital expenditures during the
three months ended November 30, 2003 included
$7.7 million for the construction of an oilseed processing
facility in Fairmont, Minnesota, with total expenditures for the
project at $76.6 million through November 30, 2003.
The Fairmont facility was essentially complete and operational
during the three months ended November 30,

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2003, and during the same quarter, the Company
entered into a sale leaseback transaction for the facility
equipment and received cash proceeds of $19.8 million from
the sale. For the year ended August 31, 2004 the Company
expects to spend approximately $252.7 million for the
acquisition of property, plant and equipment. Capital
expenditures started in fiscal 2002, primarily related to the
U.S. Environmental Protection Agency (EPA) 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, of which $13.4 million has been
spent at the Laurel refinery and $53.7 million has been
spent by NCRA at the McPherson refinery as of November 30,
2003. The Company expects all of these compliance capital
expenditures at the refineries to be completed by
December 31, 2005, and anticipates funding these projects
with a combination of cash flows from operations and debt
proceeds.


Investments made during the three months ended
November 30, 2003 and 2002 totaled $10 thousand and
$1.4 million, respectively.

Acquisitions of intangibles were
$0.4 million for the three months ended November 30,
2002, and net working capital acquired in business acquisitions
was $13.0 million during the same period.

During the three months ended November 30,
2003 and 2002 the changes in notes receivable resulted in
decreases in cash flows of $6.1 million and
$11.2 million, respectively, primarily from related party
notes receivables at NCRA with its minority owners, Growmark,
Inc. and MFA Oil Company.

Distributions to minority owners for the three
months ended November 30, 2003 and 2002 were
$1.3 million and $0.5 million, respectively, and were
primarily related to NCRA. Cash distributions NCRA has made to
its members decreased in 2003 and 2002, due to the funding
requirements for environmental capital expenditures previously
discussed.

Partially offsetting cash outlays in investing
activities were proceeds from the disposition of property, plant
and equipment of $21.7 million and $4.7 million for
the three months ended November 30, 2003 and 2002,
respectively. During the three months ended November 30,
2003, proceeds of $19.8 million were from a sale leaseback
transaction previously discussed. Also partially offsetting cash
usages were distributions received from joint ventures and
investments totaling $31.0 million and $17.0 million
for the three months ended November 30, 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 entered into a 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 November 30, 2003,
August 31, 2003 and November 30, 2002, the Company had
total short-term indebtedness outstanding on these various
facilities and other short-term notes payable totaling
$376.8 million, $251.1 million and
$246.1 million, respectively. The increase in short-term
notes payable on November 30, 2003 was primarily due to
increased grain prices on November 30, 2003 as compared to
August 31, 2003. The increase in grain prices is related to
a decrease in supply related to poor late summer growing
conditions, as well as increased inventories at country elevator
facilities due to harvest and a shortage of railcars available
to transport the grain to sale destinations. In October 2002,
$175.0 million received from private placement proceeds was
used to pay down the Companys 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 a previous outstanding balance on this facility of
$75.0 million on November 30, 2002.

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 November 30, 2003 or
August 31, 2003.

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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
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 $136.1 million,
$137.8 million and $142.7 million on November 30,
2003, August 31, 2003 and November 30, 2002,
respectively. Interest rates on November 30, 2003 ranged
from 2.04% to 13.0%. Repayments of approximately
$1.6 million were made on this facility during each of the
three months ended November 30, 2003 and 2002.

Also in June 1998, the Company completed a
private placement offering with several insurance companies for
long-term debt in the amount of $225.0 million with an
interest rate of 6.81%. 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
has an interest rate of 7.9% and 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 has an interest rate of 7.43% and will
be repaid in equal annual installments of approximately
$7.9 million, in the years 2005 through 2011.

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 $14.3 million, $15.0 million and
$17.3 million on November 30, 2003, August 31,
2003 and November 30, 2002, respectively. Interest rates on
November 30, 2003 ranged from 6.48% to 6.99%. Repayments of
approximately $0.8 million were made during each of the
three months ended November 30, 2003 and 2002.

On November 30, 2003, the Company had total
long-term debt outstanding of $659.6 million, of which
$164.3 million was bank financing, $480.0 million was
private placement proceeds and $15.3 million was industrial
development revenue bonds and other notes and contracts payable.
The aggregate amount of long-term debt payable presented in the
Managements Discussion and Analysis in the Companys
Annual Report on Form 10-K for the year ended
August 31, 2003 has not materially changed during the three
months ended November 30, 2003. The Companys
long-term debt is unsecured except for industrial revenue bonds
and other notes and contracts in the amount of
$7.0 million, however restrictive covenants under various
agreements have requirements for maintenance of minimum working
capital levels and other financial ratios. The Company is in
compliance with all debt covenants and restrictions as of
November 30, 2003.

During the three months ended November 30,
2003 and 2002, the Company borrowed on a long-term basis no
dollars and $175.0 million, respectively, and during the
same periods repaid long-term debt of $3.8 million and
$3.9 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. Patronage refunds are calculated
based on amounts using financial statement earnings. The cash
portion of the patronage distribution is determined annually by
the Board of Directors, with the balance issued in the form of
capital equity certificates. The patronage earnings from the
fiscal year ended August 31, 2003 are expected to be
distributed during the second quarter of the fiscal year 2004.
The cash portion of this distribution, deemed by the Board of
Directors to be 30% is expected to be approximately
$27.0 million, and is classified as a current liability on
the November 30, 2003 and the August 31, 2003
consolidated balance sheets.

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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.
Such redemptions are at the discretion of the Board of
Directors. For active direct members and patrons who were of
age 60 or younger on June 1, 1998, and member
cooperatives, equities older than 10 years may 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 older than 10 years held by such eligible
members and patrons. Total cash redemptions related to the year
ended August 31, 2003, to be distributed in fiscal year
2004, are expected to be approximately $10.8 million, of
which $1.3 million was redeemed during the three months
ended November 30, 2003 compared to $2.4 million
during the three months ended November 30, 2002. An
additional $13 million of capital equity certificates are
expected to be redeemed in fiscal year 2004 in exchange for
shares of the Companys 8% Cumulative Redeemable Preferred
Stock.

In 2001 and 2002 the Company issued approximately
$9.5 million (9,454,874 shares) of 8% Preferred Stock
(Old Preferred). In late 2002, the Company suspended sales of
the Old Preferred, and on February 25, 2003 the Company
filed a post-effective amendment to terminate the offering of
the Old Preferred shares. 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 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. The Board of Directors intent is to
pay quarterly dividends. Expenses related to the issuance of the
New Preferred were $3.8 million.

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 $1.00 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 $1.00 per
share. As of November 30, 2003 the Company had
$93.7 million (3,748,099 shares) of the New Preferred
outstanding.

The Companys Board of Directors authorized
the issuance of up to $13.0 million of the New Preferred in
exchange for capital equity certificates. On November 26,
2003 the Company filed a registration statement on Form S-2
with the Securities and Exchange Commission registering the
additional New Preferred, however, the registration statement is
pending review and approval by the Securities and Exchange
Commission and is not yet effective.

Off Balance Sheet Financing
Arrangements



| |                  
| | -----------------
| | Lease Commitments

The Companys lease commitments presented in
Managements Discussion and Analysis in the Companies
Annual Report on Form 10-K for the year ended
August 31, 2003 have not materially changed during the
three months ended November 30, 2003.



| |           
| | ----------
| | Guarantees

The Company is a guarantor for lines of credit
for related companies of which $56.7 million was
outstanding on November 30, 2003. The Companys bank
covenants allow maximum guarantees of $150.0 million. In
addition, the Companys bank covenants allow for guarantees
dedicated solely for

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NCRA in the amount of $125.0 million. All
outstanding loans with respective creditors are current as of
November 30, 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, 2003. There
have been no changes to these policies during the three months
ended November 30, 2003.

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. During fiscal 2003, the Company 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

In December 2003, the FASB revised 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. It also requires consolidation by
the primary beneficiary. For public entities the interpretation
applies to interests in variable interest entities for periods
ending after December 15, 2003. The Company has not yet
determined what the effects of adopting this standard will have
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. 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. Adoption of this standard did not
have any effect on the Company.

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PART II. OTHER INFORMATION



|        |                                     
|------- | ------------------------------------
|Item 6. | Exhibits and Reports on
    Form 8-K

(a) Exhibits

|        |    |             |  |                                                                                                                               
|------- | -- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description
|        |    |            
|        | 31 | .1          |  | Certification Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                   
|        | 31 | .2          |  | Certification Pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002                                                   
|        | 32 | .1          |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002
|        | 32 | .2          |  | Certification Pursuant to 18 U.S.C.
    Section 1350, as Adopted Pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

None.

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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.



| |                             
| | ----------------------------
| | CHS INC.                    
| | (Registrant)                
|
| | /s/ JOHN SCHMITZ            
| |                             
| | John Schmitz                
| | Executive Vice President and
| | Chief Financial Officer     

February 13, 2004

(Date)


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