SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON, D.C. 20549


                                FORM 10-Q/A


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


               For the three months ended September 30, 1997


                     Commission File Number 0-17039


                            American Rice, Inc.
           (Exact Name of Registrant as Specified in its Charter)



            Texas                                76-0231626
(State or other Jurisdiction of      (I.R.S. Employer Identification No.)
  Incorporation or Organization)



    411 North Sam Houston Parkway East
             Houston, Texas                              77060
 (Address of Principal Executive Offices)             (Zip Code)


                            (281) 272-8800
                     Registrant's Telephone Number,
                          Including Area Code


Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares outstanding of the registrant's common stock, $1 par 
value, as of November 13, 1997 is 2,443,859 shares
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1.  Financial Statements


                     AMERICAN RICE, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                           (Thousands of Dollars)
                                 (Unaudited)

                                    Three Months         Six Months
                                Ended September 30,  Ended September 30,
                                   1997      1996      1997      1996
                                ----------------------------------------
                               (As Restated)      (As Restated)

Net sales                         $73,324  $121,513  $186,709  $218,920

Cost of sales                      64,183   106,346   166,112   197,210
                                ----------------------------------------
    Gross profit                    9,141    15,167    20,597    21,710

Selling, general and
  administrative expenses           9,430     8,442    18,309    14,867
                                ----------------------------------------
    Operating income                (289)     6,725     2,288     6,843

Interest expense                    6,571     5,569    12,692    10,188
Interest income                      (604)     (600)   (1,278)   (1,166)
Other (income) and expense             82       231       141       352
                                ----------------------------------------
Earnings (loss) before
  income taxes                     (6,338)    1,525    (9,267)   (2,531)

Provision for 
  income taxes (benefit)           (2,436)      549    (3,578)     (911)
                                ----------------------------------------
    Net earnings (loss)           ($3,902)     $976   ($5,689)  ($1,620)
                                ========================================
Preferred stock dividend
  requirements                      1,483     1,483     2,965     2,965
                                ----------------------------------------
Net loss applicable
  to common stock                 ($5,385)    ($507)  ($8,654)  ($4,585)
                                ========================================
Loss per applicable
  common and common equivalent
  share:

  Primary                          ($2.20)    ($.21)   ($3.54)   ($1.88)
                                ========================================
  Fully diluted                    ($2.20)    ($.21)   ($3.54)   ($1.88)
                                ========================================

See Notes to Consolidated Financial Statements
<PAGE>


			AMERICAN RICE, INC. AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS
                          (Thousands of Dollars)

                                                 September 30, March 31,
                                                     1997         1997
                                                  ----------------------
                                                 (As Restated)
ASSETS                                            (Unaudited)

Current assets:
  Cash                                                $2,923     $3,235
  Accounts receivable, net                            42,960     64,062
  Inventories
    Finished goods                                    83,907     75,969
    Raw materials                                     46,633     46,289
  Prepaid expenses                                     4,554      2,441
  Deferred income taxes                                2,791      2,791
                                                  ----------------------
    Total current assets                             183,768    194,787


Other assets                                          21,313     21,216
Receivable from ERLY                                  24,755     24,166
Property, plant and equipment, net                    58,429     57,959
                                                  ----------------------
  Total assets                                      $288,265   $298,128
                                                  ======================

Continued on next page

See Notes to Consolidated Financial Statement
<PAGE>



                  AMERICAN RICE, INC. AND SUBSIDIARIES
                  CONSOLIDATED BALANCE SHEETS (CONTINUED)
               (Thousands of Dollars, except share amounts)

                                                 September 30, March 31,
                                                     1997        1997
                                                  ----------------------
								 (As Restated)
                                                  (Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable                                     $ 73,387   $ 77,616
  Accounts payable                                    53,649     57,845
  Accrued expenses                                    17,881     18,733
  Current portion of long-term debt                    1,454        438
                                                  ----------------------
    Total current liabilities                        146,371    154,632

Long-term debt                                       103,971     96,144

Deferred income taxes                                  2,291      5,905

Commitments and contingencies (Note 5)                     -          -

Stockholders' equity:
  Preferred stock, $1.00 par value; 4,000,000
    shares authorized;
    Series A- 777,777 convertible shares issued
      and outstanding, liquidation preference
      of $19,989                                         778        778
    Series B- 2,800,000 convertible shares issued
      and outstanding, liquidation preference
      of $14,000                                       2,800      2,800
    Series C- 300,000 shares issued
      and outstanding, liquidation preference
      of $1,500                                          300        300
  Common stock, $1.00 par value; 10,000,000
    shares authorized; 2,443,892 shares
    issued and outstanding                             2,444      2,444
  Paid-in capital                                     25,286     25,286
  Retained earnings                                    5,544     11,233
  Cumulative foreign currency translation
    adjustments                                       (1,520)    (1,394)
                                                  ----------------------
  Total stockholders' equity                          35,632     41,447
                                                  ----------------------
    Total liabilities and stockholders' equity      $288,265   $298,128
                                                  ======================

See Notes to Consolidated Financial Statement
<PAGE>

                  AMERICAN RICE, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Thousands of Dollars)
                              (Unaudited)
                                                        Six Months
                                                    Ended September 30,
                                                     1997       1996
                                                  ----------------------
                                                  (As Restated)
OPERATING ACTIVITIES:
  Net earnings                                       ($5,689)   ($1,620)
  Adjustments to reconcile net earnings to net cash
    provided by (used in) in operating activities:
    Depreciation and amortization                      3,755      3,237
    Mortgage note discount accretion                     328        284
    (Gain) loss on sales of property                    (150)       138
    Deferred income taxes, net                        (3,614)    (1,141)
    Changes in assets and liabilities that
      provided (used) cash:
      Accounts receivable                             21,102    (12,410)
      Inventories                                     (8,282)      9,266
      Prepaid expenses                                (2,113)      (643)
      Other assets                                      (949)    (1,537)
      Receivable from ERLY                              (589)       374
      Accounts payable                                (4,196)    (1,548)
      Accrued expenses                                  (852)     4,414
                                                  ----------------------
  Net cash used in
    operating activities                              (1,249)    (1,186)

INVESTING ACTIVITIES:
  Property, plant and equipment additions             (3,373)    (1,998)
  Campbell olive acquisition					     -    (33,952)
  Proceeds from sales of assets                          150      2,299
                                                  ----------------------
  Net cash used in
    investing activities                              (3,223)   (33,651)

FINANCING ACTIVITIES:
  Increase (decrease) in notes payable                (4,229)    34,646
  Proceeds from issuance of long-term debt             9,080        233
  Repayment of long-term debt                           (565)      (137)
  Other, net                                            (126)         3
                                                  ----------------------
  Net cash provided by
    financing activities                               4,160     34,745
                                                  ----------------------
NET DECREASE IN CASH                                    (312)       (92)

CASH:
  Beginning of the period                              3,235      2,803
                                                  ----------------------
  End of the period                                   $2,923     $2,711
                                                  ======================
See Notes to Consolidated Financial Statement
<PAGE>

<TABLE>

                         AMERICAN RICE, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                          Six Months Ended September 30, 1997
                               (Thousands of Dollars)
                                     (Unaudited)
<CAPTION>


                                                                      Foreign     Total
                                              Additional             Currency   Stock -
                         Preferred   Common     Paid-in  Retained   Translation Holders'
                           Stock      Stock     Capital  Earnings   Adjustments  Equity
                         ---------  ---------  ---------  ---------  ---------  ---------
<S>                      <C>        <C>        <C>        <C>        <C>        <C>
Balance April 1, 1997       $3,878     $2,444    $25,286    $11,233    ($1,394)   $41,447

Net loss (as restated)        -          -          -        (5,689)       -       (5,689)

Foreign currency 
  translation                 -          -          -          -          (126)      (126)
                         ---------  ---------  ---------  ---------  ---------  ---------

Balance September 30, 1997  $3,878     $2,444    $25,286     $5,544    ($1,520)   $35,632
    (as restated)        =========  =========  =========  =========  =========  =========

<FN>
See Notes to Consolidated Financial Statements
</TABLE>
<PAGE>

AMERICAN RICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.  Basis of Presentation

The consolidated financial statements presented herein at September 30, 1997 
and for each of the three and six month periods ended September 30, 1997 and 
1996 are unaudited; however, all adjustments which are, in the opinion of 
management necessary for a fair presentation of the financial position, 
results of operations and cash flows for the periods covered have been made 
and are of a normal, recurring nature.  The results of the interim periods are 
not necessarily indicative of results for the full year.  The consolidated 
balance sheet at March 31, 1997 is derived from the March 31, 1997 audited 
consolidated financial statements but does not include all disclosures 
required by generally accepted accounting principles. Although management 
believes the disclosures are adequate, certain information and disclosures 
normally included in the notes to the financial statements has been condensed 
or omitted as permitted by the rules and regulations of the Securities and 
Exchange Commission.  These financial statements should be read in conjunction 
with the audited financial statements and notes thereto included in American 
Rice, Inc.'s ("ARI" or the "Company") Annual Report on Form 10-K for the 
fiscal year ended March 31, 1997.

2. Restatement

In August 1997 ARI reached an agreement with Aqaba Packaging Company ("APC") 
whereby APC purchases and processes rice shipped in bulk to APC's facility at 
Aqaba, Jordan. The Company has experienced continued problems with the 
implementation of the provisions of this agreement. These problems include 
APC's inability to meet its contractual commitments to purchase sufficient 
rice from the Company to maintain adequate inventory levels in Jordan. The 
Company is currently negotiating with APC for alternative arrangements for 
this facility so that adequate inventory levels may be maintained. As a result 
of these events, the Company has concluded that the facts supporting the 
original sales to APC have changed to such an extent as to warrant reversing 
the sales in the second quarter. Accordingly, the Company has reversed the 
sales and recorded the rice in the APC facility as inventory. The following 
table analyzes the impact of this event(in thousands of dollars, except per 
share amounts):
 
                            Three Months                Six Months
                      Ended September 30, 1997    Ended September 30, 1997
                      ------------------------    ------------------------
                      Previously        As        Previously        As
                       Reported       Restated     Reported      Restated
                      ----------    ----------    ----------    ----------

   Net Sales            $93,196       $73,324      $206,581      $186,709
   Gross Profit          12,692         9,141        24,148        20,597
   Net Loss              (1,736)       (3,902)       (3,523)       (5,689)
   Loss per common share:
     Primary              (1.32)        (2.20)        (2.65)        (3.54)      
     Fully Diluted        (1.32)        (2.20)        (2.65)        (3.54)

                                     

                                       September 30, 1997
                                    ------------------------ 
                                    Previously        As
                                     Reported      Restated
                                    ----------    ----------

   Accounts receivable, net           $62,832       $42,960
   Inventories                        115,056       130,540
   Total assets                       292,653       288,265
   Current liabilities                147,208       146,371
   Stockholders' equity                37,798        35,632

3. Olive Business Acquisition

On July 5, 1996, the Company acquired the domestic and foreign olive business 
from Campbell Soup Company ("CSC Olives") for approximately $38 million (the 
"Olive Acquisition"). Assets acquired include domestic inventories and fixed 
assets, all of the outstanding common stock of Compania Envasadora Loreto, 
S.A., a Spanish company that comprises the foreign olive business and fifty-
one percent of the stock of Sadrym California, a marketer of olive processing 
machinery. The purchase was funded primarily from ARI's credit facilities. The 
Olive Acquisition was accounted for as a purchase, and the results of 
operations of the acquired business are included in ARI's consolidated 
financial statements after July 5, 1996.

Operating results reflected in the accompanying financial statements do not 
include CSC Olives operating activities before July 5, 1996.  The following 
summarized unaudited pro forma information assumes the Olive Acquisition 
occurred on the first day of the operating period presented (thousands of 
dollars, except per share amounts):

						Three Months           Six Months
                                  Ended September 30,   Ended September 30,
                                        1996                   1996
                                      --------               --------
      Net Sales                       $122,314               $237,943
      Net Earnings (loss)                  865                 (4,254)
      Earnings (loss) per share:
        Primary                          $(.25)                $(2.95)
        Fully diluted                     (.25)                 (2.95)

4. Notes Payable 

ARI has an $85 million revolving credit line with Harris Trust and Savings 
Bank ("Harris"). Funds available for borrowing (including letters of credit of 
up to $20.0 million) under this revolving credit loan at any time may not 
exceed 85% of eligible accounts receivable (or 90% of accounts receivable 
backed by acceptable letters of credit from customers), 75% of eligible rough 
rice inventory, and 70% of eligible finished goods inventory. The line is 
collateralized by substantially all of ARI's accounts receivable and 
inventory. In addition, this facility contains restrictive covenants which, 
among other things, require the attainment of certain financial ratios and 
provide limitations on capital expenditures, lease obligations, and prohibit 
dividend payments. As of September 30, 1997, ARI was not in compliance with 
certain of the covenants related to interest coverage, adjusted funded debt 
and adjusted tangible net worth. Subsequently, the company obtained waivers 
from compliance with these covenants from Harris covering the period up to and 
including December 30, 1997 and amendments effective December 31, 1997. As of 
December 31, 1997, ARI was not in compliance with the amended covenants 
related to interest coverage, adjusted funded debt and adjusted tangible net 
worth. The Company has requested waivers from compliance with these amended 
covenants. The line also contains certain cross default provisions with the 
indenture for the 13.0% Mortgage Notes due 2002 (the "Mortgage Notes"). The 
Harris credit line bears interest at the prime rate, with outstanding 
principal and interest due upon termination of the agreement, which continues 
in full force and effect until May 31, 1999 or until terminated with five days 
written notice from ARI subsequent to May 31, 1997. On December 19, 1997, ARI 
received a 90 day $10 million increase to the revolving credit line from 
Harris. At September 30, 1997 and March 31, 1997 respectively, the outstanding 
balances on this loan were $69.1 million and $71.5 million, bearing interest 
at the prime rate of 8.5%.

5.  Statement of Cash Flows
   
Borrowings under the revolving credit line in the six months ended September 
30, 1997 and 1996 totaled $96.7 million and $166.3 million, respectively, and 
repayments during the same periods totaled $100.9 million and $131.7 million, 
respectively.  ARI made cash payments for interest and financing fees of 
approximately $10.9 million and $9.3 million during the six months ended 
September 30, 1997 and 1996, respectively.  ARI did not pay any federal or 
state income taxes during the six months ended September 30, 1997 and paid 
$230 thousand during the six months ended September 30, 1996.

6.  Commitments and Contingencies

In April 1995, a lawsuit was filed in the district court of Harris County, 
Texas by Kingwood Lakes South, L.P. and Tenzer Company, Inc., as plaintiffs 
against Gerald D. Murphy and Douglas A. Murphy. The Company and ERLY were also 
named as defendants in the lawsuit by amendment to the original petition in 
September 1995. This lawsuit arises from a dispute between the general partner 
of a proposed real estate development and Gerald D. Murphy and Douglas A. 
Murphy over their contractual obligations, if any, to the partnership. The 
Company and ERLY were named as defendants in the lawsuit allegedly because of 
their efforts to first obtain restraining orders to prevent threatened 
foreclosures on the ERLY Common Stock pledged as collateral by Gerald D. 
Murphy, which threatened ARI's Mortgage Note financing. The lawsuit also 
alleges certain other activities by the Company and ERLY, including knowing 
participation in breaches of fiduciary duties, fraud, and civil conspiracy 
with Gerald D. Murphy and Douglas A. Murphy. A restraining order was issued 
preventing foreclosure on the shares pledged by Mr. Murphy but such 
restraining order was subsequently terminated. The plaintiffs then obtained 
333,333 shares of the pledged stock which was thereafter sold. In order to 
minimize legal expenses, the Company, ERLY, and Douglas A. Murphy are using 
common legal counsel in this matter. Gerald D. Murphy retained separate legal 
counsel in February 1997. He has agreed to pay up to 50% of legal expenses 
after any insurance recoveries as determined by the members of the board of 
directors not a party to the lawsuit. On September 9, 1997, the jury in this 
litigation returned two alternative verdicts in favor of the plaintiffs and 
the plaintiffs were required to elect between those verdicts. The plaintiffs 
elected the jury's tort claim verdict in the aggregate amount of $9,657,000, 
rendered jointly and severally against Gerald D. Murphy, Douglas A. Murphy, 
the Company, and ERLY, along with separate awards of punitive damages against 
Gerald D. Murphy of $3,000,000, Douglas A. Murphy of $500,000, the Company of 
$100,000, and ERLY of $100,000. The defendants subsequently filed motions 
before the trial court for judgment in defendants' favor notwithstanding the 
verdict and for a reduction of the amounts awarded by the jury based, in part, 
on the absence of evidence to support those awards. On January 13, 1998 a 
final judgment was rendered in which the tort claim verdict was reduced to 
$5.3 million plus prejudgment interest of $1.0 million. The punitive damages 
against all defendants remained unchanged in the final judgment. The Company 
filed a motion for a new trial on February 12, 1998. If a new trial is not 
granted, the Company and ERLY intend to appeal this judgment and believe they 
will be successful on appeal, however, there can be no assurance that the 
Company will be successful in its appeal. At this time, the Company does not 
have resources to post the bond and there is no assurance that they will do 
so. The Company is attempting to arrange for the posting of a bond in order to 
avoid execution of this judgment pending appeal. These efforts include 
discussions with its insurors and other actions such as the sale of assets. 
Without posting a bond or otherwise superseding the judgment by mid-April, the 
Company would be at risk for execution of the judgment against it. If the bond 
can not be posted or if the judgment can not be paid, the outcome of this 
litigation will have a material adverse impact on its and ERLY's financial 
condition.

The Company was named as a co-defendant with Messrs. John M. Howland and 
George E. Prchal in a lawsuit filed in February 1997 in the U.S. District 
Court for the Southern District of Texas by Rice Milling & Trading 
Investments, LTD., an Isle of Man Company ("RMTI"). In 1994, ARI entered into 
an agreement with RMTI for processing the Company's rice through RMTI's 
facility in Jeddah, Saudi Arabia. Messrs. Howland and Prchal were officers of 
RMTI through January 1997, and prior to October 1993 they were officers of 
ARI. Messrs. Howland and Prchal were directors of ARI from October 1993 
through October 1997. In January 1997, RMTI ceased shipping ARI's rice through 
its Jeddah facility and terminated the employment of Messrs. Howland and 
Prchal. The lawsuit alleges among other things ARI failed to perform under the 
terms of the agreement and Messrs. Howland and Prchal breached their fiduciary 
duties to RMTI. On April 21, 1997, ARI obtained a preliminary injunction from 
the U.S. District Court for the Southern District of Texas ordering RMTI to 
desist and refrain from purchasing rice of U.S. or Vietnam origin from any 
supplier other than ARI and from introducing and/or marketing rice of U.S. and 
Vietnam origin in Saudi Arabia targeted against ARI's U.S. origin and Vietnam 
origin rice. In October 1997, ARI voluntarily terminated this injunction. RMTI 
has added claims of fraud, participation in breach of duty, and tortuous 
interference against ARI. The date for the trial is set for December 1, 1998.

On July 24, 1997, The Powell Group, a diversified holding company based in 
Baton Rouge, Louisiana (the "Powell Group"), through its wholly owned 
subsidiary, Farmers Rice Milling Company, Inc., a Louisiana corporation 
("Farmers Rice") filed a shareholder derivative complaint purportedly on 
behalf of the Company and ERLY against Gerald D. Murphy, Douglas A. Murphy, 
the Company, and ERLY in the United States District Court, Central District of 
California. On November 3, 1997, the Court dismissed the complaint without 
prejudice.

The Company is considering a number of alternatives for paying the fixed 
interest due on the Mortgage Notes on February 28, 1998, but due to the 
current impairment of the liquidity of the Company and pending resolution of 
the Company's ability to satisfy or appeal the final judgment in the Kingwood 
Lakes South litigation, the Company will not be able to make such payment by 
the due date. The Company anticipates that such payment will be made before 
the end of the thirty day grace period, however, no assurances can be given 
that such interest payment can be made by the end of the grace period. 

Item 2. Management's Discussion and Analysis of Financial Condition and 
Results Of Operations (as Restated)

Restatement

In August 1997 ARI reached an agreement with Aqaba Packaging Company ("APC") 
whereby APC purchases and processes rice shipped in bulk to APC's facility at 
Aqaba, Jordan. The Company has experienced continued problems with the 
implementation of the provisions of this agreement. These problems include 
APC's inability to meet its contractual commitments to purchase sufficient 
rice from the Company to maintain adequate inventory levels in Jordan. The 
Company is currently negotiating with APC for alternative arrangements for 
this facility so that adequate inventory levels may be maintained. As a result 
of these events, the Company has concluded that the facts supporting the 
original sales to APC have changed to such an extent as to warrant reversing 
the sales in the second quarter. Accordingly, the Company has reversed the 
sales and recorded the rice in the APC facility as inventory. Adjustments are 
detailed in note 2 of Notes to Consolidated Financial Statements. The 
following discussion and analysis reflects all such adjustments. 

Overview

The Company purchases and processes rough rice into branded and commodity rice 
for sale in both international and domestic markets. Demand for branded rice 
products is relatively constant and margins are typically higher than those 
for commodity rice products. Demand for commodity rice products is relatively 
constant globally, but demand for U.S. grown commodity rice is dependent upon 
supply and cost relative to other sources of supply. Supply and costs for both 
branded and commodity products depend on many factors including governmental 
actions, crop yields and weather, and such factors can persist through one or 
more fiscal years. 

On July 5, 1996, the Company acquired the domestic and foreign olive business 
of Campbell Soup Company for approximately $38 million. Assets acquired 
include domestic inventories and fixed assets, all of the outstanding common 
stock of Compania Envasadora Loreto, S.A., a Spanish company which comprises 
the foreign olive business, and fifty-one percent of the stock of Sadrym 
California, a marketer of olive processing machinery. The purchase was funded 
primarily from ARI's credit facilities. The Olive Acquisition is accounted for 
as a purchase, and the results of operations of the acquired business are 
included in the Company's consolidated financial statements after July 5, 
1996. 

Historically, sales of olives have pronounced seasonal elements, with higher 
sales occurring in conjunction with holiday consumption. Accordingly, because 
the quarterly period ending December 31 contains both the Thanksgiving and 
Christmas holidays, the two holidays of highest consumption, it will have 
significantly higher sales than the other three quarters of the fiscal year. 
Margins normally follow the seasonal pattern of sales.

Three Months Ended September 30, 1997 Compared to 
Three Months Ended September 30, 1996

Net Sales. Net sales decreased $48.2 million, or 39.7%, from $121.5 million in 
the September quarter of fiscal 1997 to $73.3 million in the September quarter 
of fiscal 1998. The sales decrease was composed of $53.2 million and $3.1 
million in declines in export and U.S. rice sales, respectively, partially 
offset by $8.1 million in increases in sales of olives. Export sales declines 
were experienced in four Middle East markets and in Africa.

Gross Profit. Gross profit was 12.5% of sales in the fiscal 1998 quarter and 
12.5% for the same period in 1997. Gross profit declined $6.1 million from 
$15.2 million in the fiscal 1997 quarter to $9.1 million in fiscal 1998 due 
primarily to lower sales.

Selling, general and administrative expense. Selling, general and 
administrative expense increased $1.0 million to $9.4 million in the fiscal 
1998 quarter due primarily to higher advertising and promotional expenses.

Interest. Interest expense increased $1.0 million from $5.6 million in the 
fiscal 1997 period to $6.6 million in fiscal 1998 due primarily to higher 
average balances outstanding. Interest expense in both periods includes 
amortization of capitalized debt issuance costs and accretion of the $6 
million original issue discount on the $100 million in principal amount of 
13.0% mortgage notes due 2002.

Six Months Ended September 30, 1997 Compared to 
Six Months Ended September 30, 1996

Net Sales. Net sales decreased $32.2 million, or 14.7%, from $218.9 million in 
fiscal 1997 to $186.7 million in fiscal 1998. The sales decrease was composed 
of $52.5 million and $4.0 million in declines in export and U.S. rice sales, 
respectively, partially offset by and $24.3 million in increases in sales of 
olives. Export sales declines were experienced primarily in Middle East 
markets and in Africa.

Gross Profit. Gross profit was 11.0% of sales in fiscal 1998 and 
9.9% for the same period in 1997. Gross profit declined $1.1 million from 
$21.7 million in fiscal 1997 to $20.6 million in fiscal 1998, due primarily to 
the Olive Acquisition. 

Selling, general and administrative expense. Selling, general and 
administrative expense increased $3.4 million to $18.3 million in fiscal 1998 
due primarily to higher advertising and promotional expenses associated with 
the Olive Acquisition.

Interest. Interest expense increased $2.5 million to $12.7 million in fiscal 
1998 due primarily to higher average balances outstanding.

Liquidity and Capital Resources

ARI requires liquidity and capital primarily for the purchase of raw materials 
and to invest in property, plant and equipment necessary to support 
operations. Historically, ARI has financed both working capital and capital 
expenditures through internally generated funds and by funds provided by 
credit lines.

ARI has an $85 million revolving credit line with Harris Trust and Savings 
Bank ("Harris"). Funds available for borrowing (including letters of credit of 
up to $20.0 million) under this revolving credit loan at any time may not 
exceed 85% of eligible accounts receivable (or 90% of accounts receivable 
backed by acceptable letters of credit from customers), 75% of eligible rough 
rice inventory, and 70% of eligible finished goods inventory. The line is 
collateralized by substantially all of ARI's accounts receivable and 
inventory. In addition, this facility contains restrictive covenants which, 
among other things, require the attainment of certain financial ratios and 
provide limitations on capital expenditures, lease obligations, and prohibit 
dividend payments. As of September 30, 1997, ARI was not in compliance with 
certain of the covenants related to interest coverage, adjusted funded debt 
and adjusted tangible net worth. Subsequently, the company obtained waivers 
from compliance with these covenants from Harris covering the period up to and 
including December 30, 1997 and amendments effective December 31, 1997. As of 
December 31, 1997, ARI was not in compliance with the amended covenants 
related to interest coverage, adjusted funded debt and adjusted tangible net 
worth. The Company has requested waivers from compliance with these amended 
covenants. The line also contains certain cross default provisions with the 
indenture for the 13.0% Mortgage Notes due 2002 (the "Mortgage Notes"). The 
Harris credit line bears interest at the prime rate, with outstanding 
principal and interest due upon termination of the agreement, which continues 
in full force and effect until May 31, 1999 or until terminated with five days 
written notice from ARI subsequent to May 31, 1997. On December 19, 1997, ARI 
received a 90 day $10 million increase to the revolving credit line from 
Harris. At September 30, 1997 and March 31, 1997 respectively, the outstanding 
balances on this loan were $69.1 million and $71.5 million, bearing interest 
at the prime rate of 8.5%. The borrowing base under this line of credit at 
September 30, 1997 was $79.6 million and the maximum borrowing during the six 
months ended September 30, 1997 was $84.7 million.

In July 1997 ARI completed a sale and leaseback transaction for substantially 
all of its olive processing machinery and equipment located in Visalia, 
California (the "Visalia Lease"). ARI realized proceeds from the sale of 
approximately $8.9 million which were used for operating purposes. ARI has 
leased these assets from for a seven year term with a two year extension 
option. The transaction is accounted for as a capital lease with the proceeds 
recorded as a liability that is reduced by lease payments over the lease term.

In August 1997 ARI reached an agreement with Aqaba Packaging Company ("APC") 
whereby APC purchases and processes rice shipped in bulk to APC's facility at 
Aqaba, Jordan. Additionally, the agreement provides that ARI purchase rice 
from this facility for delivery to ARI's customers in the Middle East, 
primarily Saudi Arabia. The Company has experienced continued problems with 
the implementation of the provisions of this agreement. These problems include 
APC's inability to meet its contractual commitments to purchase sufficient 
rice from the Company to maintain adequate inventory levels in Jordan, and 
delays in shipments to ARI's customers in Saudi Arabia. The Company is 
negotiating with APC for alternative arrangements for this facility so that 
adequate inventory levels may be maintained.  

Beginning in the quarter ending June 30, 1997, the liquidity of the Company 
has been significantly impaired in part as a result of the loss of financing 
associated with the RMTI agreement (see Part II - Legal Proceedings). Without 
the RMTI agreement, the general corporate financing required for the Company's 
sales and marketing in Saudi Arabia is significantly greater. The Company has 
had to utilize its credit lines to maintain the inventory position for its 
Saudi Arabia sales and has thus reduced the availability for its domestic 
activities. In addition to increasing the use of the Company's credit lines, 
the Company has also experienced an increase in its accounts payable. 
Management believes that its rice raw material costs have increased to the 
extent the impairment of liquidity has precluded it from bidding on a 
competitive basis. In addition to the Visalia Lease and the financing under 
the APC agreement discussed above, management is exploring several other 
opportunities to improve liquidity. However, no assurances can be given that 
the Company can conclude the other arrangements being considered.

The Mortgage Notes provide for interest payments semiannually on February 28th 
and August 31st, accruing fixed interest at an annual rate of 13.0%, an 
effective yield rate of 14.4%.  In addition to fixed interest, the Mortgage 
Notes bear contingent interest of 4.0% of consolidated cash flow (as defined) 
up to a limit of $40.0 million of consolidated cash flow during the fiscal 
year in which such interest accrues. Contingent interest accrues in each 
semiannual period (as defined) in which consolidated cash flow in such period 
and the immediately preceding semiannual period is equal to or greater than 
$20.0 million.  Contingent interest is payable semiannually, but ARI may elect 
to defer all or a portion of any such payment to the extent that (a) the 
payment of such portion of contingent interest will cause ARI's adjusted fixed 
charge coverage ratio (as defined) for the two consecutive applicable 
semiannual periods to be less than 2.0:1 and (b) the principal of the Mortgage 
Notes corresponding to such contingent interest has not then matured and 
become due and payable. The consolidated cash flow for the quarter ended 
September 30, 1997 was $1.5 million as restated (see Note 2 of Notes to 
Consolidated Financial Statements). Contingent interest of $376.5 thousand was 
accrued during the quarter. The total contingent interest accrued and unpaid 
at September 30, 1997 was $1.4 million. Additional contingent interest of 
$445.5 thousand will accrue over the period from October 1, 1997 to February 
28, 1998. To date, no contingent interest has been paid because the applicable 
fixed cost coverage ratio permits deferral of payment. The Company is 
considering a number of alternatives for paying the fixed interest due on the 
Mortgage Notes on February 28, 1998, but due to the current impairment of the 
liquidity of the Company and pending resolution of the Company's ability to 
satisfy or appeal the final judgment in the Kingwood Lakes South litigation 
(see Legal Proceedings), the Company will not be able to make such payment by 
the due date. The Company anticipates that such payment will be made before 
the end of the thirty day grace period, however, no assurances can be given 
that such interest payment can be made by the end of the grace period. 

ARI's Preferred B and C stock carries annual cumulative, non-participating 
dividends of $5.2 million and $750 thousand respectively.  No dividends have 
been declared or paid as of September 30, 1997.  As of September 30, 1997, the 
Preferred B dividends accumulated but not declared are $22.5 million and the 
Preferred C dividends accumulated but not declared are $3.3 million.

PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

In April 1995, a lawsuit was filed in the district court of Harris County, 
Texas by Kingwood Lakes South, L.P. and Tenzer Company, Inc., as plaintiffs 
against Gerald D. Murphy and Douglas A. Murphy. The Company and ERLY were also 
named as defendants in the lawsuit by amendment to the original petition in 
September 1995. This lawsuit arises from a dispute between the general partner 
of a proposed real estate development and Gerald D. Murphy and Douglas A. 
Murphy over their contractual obligations, if any, to the partnership. The 
Company and ERLY were named as defendants in the lawsuit allegedly because of 
their efforts to first obtain restraining orders to prevent threatened 
foreclosures on the ERLY Common Stock pledged as collateral by Gerald D. 
Murphy, which threatened ARI's Mortgage Note financing. The lawsuit also 
alleges certain other activities by the Company and ERLY, including knowing 
participation in breaches of fiduciary duties, fraud, and civil conspiracy 
with Gerald D. Murphy and Douglas A. Murphy. A restraining order was issued 
preventing foreclosure on the shares pledged by Mr. Murphy but such 
restraining order was subsequently terminated. The plaintiffs then obtained 
333,333 shares of the pledged stock which was thereafter sold. In order to 
minimize legal expenses, the Company, ERLY, and Douglas A. Murphy are using 
common legal counsel in this matter. Gerald D. Murphy retained separate legal 
counsel in February 1997. He has agreed to pay up to 50% of legal expenses 
after any insurance recoveries as determined by the members of the board of 
directors not a party to the lawsuit. On September 9, 1997, the jury in this 
litigation returned two alternative verdicts in favor of the plaintiffs and 
the plaintiffs were required to elect between those verdicts. The plaintiffs 
elected the jury's tort claim verdict in the aggregate amount of $9,657,000, 
rendered jointly and severally against Gerald D. Murphy, Douglas A. Murphy, 
the Company, and ERLY, along with separate awards of punitive damages against 
Gerald D. Murphy of $3,000,000, Douglas A. Murphy of $500,000, the Company of 
$100,000, and ERLY of $100,000. The defendants subsequently filed motions 
before the trial court for judgment in defendants' favor notwithstanding the 
verdict and for a reduction of the amounts awarded by the jury based, in part, 
on the absence of evidence to support those awards. On January 13, 1998 a 
final judgment was rendered in which the tort claim verdict was reduced to 
$5.3 million plus prejudgment interest of $1.0 million. The punitive damages 
against all defendants remained unchanged in the final judgment. The Company 
filed a motion for a new trial on February 12, 1998. If a new trial is not 
granted, the Company and ERLY intend to appeal this judgment and believe they 
will be successful on appeal, however, there can be no assurance that the 
Company will be successful in its appeal. At this time, the Company does not 
have resources to post the bond and there is no assurance that they will do 
so. The Company is attempting to arrange for the posting of a bond in order to 
avoid execution of this judgment pending appeal. These efforts include 
discussions with its insurors and other actions such as the sale of assets. 
Without posting a bond or otherwise superseding the judgment by mid-April, the 
Company would be at risk for execution of the judgment against it. If the bond 
can not be posted or if the judgment can not be paid, the outcome of this 
litigation will have a material adverse impact on its and ERLY's financial 
condition.

The Company was named as a co-defendant with Messrs. John M. Howland and 
George E. Prchal in a lawsuit filed in February 1997 in the U.S. District 
Court for the Southern District of Texas by Rice Milling & Trading 
Investments, LTD., an Isle of Man Company ("RMTI"). In 1994, ARI entered into 
an agreement with RMTI for processing the Company's rice through RMTI's 
facility in Jeddah, Saudi Arabia. Messrs. Howland and Prchal were officers of 
RMTI through January 1997, and prior to October 1993 they were officers of 
ARI. Messrs. Howland and Prchal were directors of ARI from October 1993 
through October 1997. In January 1997, RMTI ceased shipping ARI's rice through 
its Jeddah facility and terminated the employment of Messrs. Howland and 
Prchal. The lawsuit alleges among other things ARI failed to perform under the 
terms of the agreement and Messrs. Howland and Prchal breached their fiduciary 
duties to RMTI. On April 21, 1997, ARI obtained a preliminary injunction from 
the U.S. District Court for the Southern District of Texas ordering RMTI to 
desist and refrain from purchasing rice of U.S. or Vietnam origin from any 
supplier other than ARI and from introducing and/or marketing rice of U.S. and 
Vietnam origin in Saudi Arabia targeted against ARI's U.S. origin and Vietnam 
origin rice. In October 1997, ARI voluntarily terminated this injunction. RMTI 
has added claims of fraud, participation in breach of duty, and tortuous 
interference against ARI. The date for the trial is set for December 1, 1998.

On July 24, 1997, The Powell Group, a diversified holding company based in 
Baton Rouge, Louisiana (the "Powell Group"), through its wholly owned 
subsidiary, Farmers Rice Milling Company, Inc., a Louisiana corporation 
("Farmers Rice") filed a shareholder derivative complaint purportedly on 
behalf of the Company and ERLY against Gerald D. Murphy, Douglas A. Murphy, 
the Company, and ERLY in the United States District Court, Central District of 
California. On November 3, 1997, the Court dismissed the complaint without 
prejudice.


Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits

11.1  Computation of Earnings Per Share

27    Financial Data Schedule

(b)  During the quarter ended September 30, 1997, Registrant did not file any 
Form 8-K Reports.

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.



                                           American Rice, Inc.
                                           -------------------
                                               Registrant

                                       By: /S/ Joseph E. Westover
                                       ---------------------------
				                    Joseph E. Westover			
                                       Vice-President / Controlle


Exhibit 11.1

                   AMERICAN RICE, INC. AND SUBSIDIARIES
                    COMPUTATION OF EARNINGS PER SHARE
               (Thousands of Dollars Except Per Share Data)


					  Three Months          Six Months
                             Ended September 30,   Ended September 30,
                                1997       1996       1997       1996
                           --------------------------------------------

PRIMARY EARNINGS (LOSS) PER SHARE

  Net earnings (loss)         ($3,902)      $976    ($5,689)   ($1,620)



  Less dividends on preferred stock:
    Series B                   (1,295)    (1,295)    (2,590)    (2,590)
    Series C                     (188)      (188)      (375)      (375)
                           --------------------------------------------
                               (1,483)    (1,483)    (2,965)    (2,965)
                           --------------------------------------------
  Loss applicable to
    common stock              ($5,385)     ($507)   ($8,654)   ($4,585)
                           ============================================
  Average common and common
    equivalent shares outstanding:
    Common                      2,444      2,444      2,444      2,444
    Preferred Series A              -          -          -          -
                           --------------------------------------------
                                2,444      2,444      2,444      2,444
                           ============================================

  Loss per share
   applicable to common stock  ($2.20)     ($.21)    ($3.54)    ($1.88)
                           ============================================

Continued on next pag



Exhibit 11.1 (Continued)

                   AMERICAN RICE, INC. AND SUBSIDIARIES
                    COMPUTATION OF EARNINGS PER SHARE
               (Thousands of Dollars Except Per Share Data)

                                 Three Months            Six Months
                               Ended September 30,   Ended September 30,
                                1997       1996       1997       1996 
                           --------------------------------------------

FULLY DILUTED EARNINGS PER SHARE *


  Net earnings (loss)         ($3,902)      $976    ($5,689)   ($1,620)


  Less dividends on preferred stock:
    Series C                     (188)      (188)      (375)      (375)
                           --------------------------------------------
  Earnings (loss) applicable to
    common stock              ($4,090)      $788    ($6,064)   ($1,995)
                           ============================================
  Average common and common
    equivalent shares outstanding:
    Common                      2,444      2,444      2,444      2,444
    Preferred Series A            778        778        778        778
    Preferred Series B          5,600      5,600      5,600      5,600
                           --------------------------------------------
                                8,822      8,822      8,822      8,822
                           ============================================

    Earnings (loss) per share
     applicable to common stock ($.46)      $.09      ($.69)     ($.23)
                           ============================================



    * This calculation is presented in accordance with Regulation
    S-K item 601(b)(11) although it is contrary to paragraphs 14, 30,
    and 40 of APB Opinion No. 15 because it produces an antidilutive
    result. The Opinion provides that a computation on a fully
    diluted basis which results in an improvement in earnings
    per share when compared to primary earnings per share
    (antidilution) not be taken into account. Therefore fully diluted
    earnings per share reported on the income statement are the same
    as primary earnings per share.