10-Q

UNITED STATESSECURITIES
AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

                           OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the quarterly period ended November 30, 2001

                                             or

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


               For the transition period from _____________ to _____________.

                              Commission File Number: 001-11629


                                  FARMLAND INDUSTRIES, INC.
                   (Exact name of registrant as specified in its charter)



           Kansas                                                                         44-0209330
(State of incorporation)                                          (I.R.S. Employer Identification No.)

12200 North Ambassador Drive
Kansas City, Missouri                                                                64163-1244
(Address of principal executive offices)                                       (Zip Code)

        Registrant’s telephone number, including area code: 816-713-7000

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 [ ]

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

                                     FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (UNAUDITED)
                                                      ASSETS


                                                                 August 31              November 30
                                                                   2001                    2001
                                                              ----------------      --------------------
                                                                       (Amounts in Thousands)
  Accounts receivable - trade................................ $         550,291       $      530,413
  Inventories (Note 2).......................................           588,807              507,375
  Other current assets.......................................           213,746              204,353
                                                              -------------------     ------------------

        Total Current Assets................................. $       1,352,844       $    1,242,141
                                                              -------------------     ------------------


Investments and Long-Term Receivables (Note 3)............... $         373,119       $      365,369
                                                              -------------------     ------------------


Property, Plant and Equipment:
  Property, plant and equipment, at cost..................... $       1,708,382       $    1,697,533
     Less accumulated depreciation and
     amortization............................................           952,753              956,680
                                                                -----------------       ----------------

  Net Property, Plant and Equipment.......................... $         755,629       $      740,853
                                                              -------------------     ------------------


Other Assets                                                  $         245,952       $      271,055
                                                              -------------------     ------------------

Total Assets                                                  $       2,727,544       $    2,619,418
                                                              ===================     ==================






    See accompanying Notes to Consolidated Financial Statements





                                     FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (UNAUDITED)
                                             LIABILITIES AND EQUITIES

                                                                                        August 31          November 30
                                                                                           2001                2001
                                                                                  --------------------- ------------------
                                                                                             (Amounts in Thousands)
            Current Liabilities:
                Short-term notes payable ........................................ $        341,559       $       325,811
                Current maturities of long-term debt ............................           48,054                65,608
                Accounts payable - trade.........................................          342,312               293,862
                Other current liabilities........................................          383,200               337,376
                                                                                  ------------------     ------------------

                     Total Current Liabilities................................... $      1,115,125       $     1,022,657
                                                                                  ------------------     ------------------

            Long-Term Liabilities:
                Long-term borrowings (excluding current maturities).............. $        710,976       $       677,082
                Other long-term liabilities......................................           38,702                39,493
                                                                                  ------------------     ------------------

                     Total Long-Term Liabilities................................. $        749,678       $       716,575
                                                                                  ------------------     ------------------

            Deferred Income Taxes................................................ $         70,906       $        70,906
                                                                                  ------------------     ------------------

            Minority Owners' Equity in Subsidiaries.............................. $         29,311       $        34,047
                                                                                  ------------------     ------------------

            Net Income (Note 1).................................................. $             -0-      $         3,249
                                                                                  ------------------     ------------------

            Capital Shares and Equities:
                Preferred Shares, Authorized 8,000,000 Shares, 8% Series A
                 cumulative redeemable preferred shares, stated
                 at redemption value, $50 per share.............................. $        100,000       $       100,000
                Common shares, $25 par value--Authorized
                  50,000,000 shares..............................................          527,563               527,365
                Accumulated Other Comprehensive Income (net of
                deferred tax benefit of $3,806 at August 31, 2001 and
                $2,215 at November 30, 2001) (Notes 4 and 5).....................          (21,342)              (12,380)
                Earned surplus and other equities................................          156,303               156,999
                                                                                  ------------------     ------------------

                     Total Capital Shares and Equities........................... $        762,524       $       771,984
                                                                                  ------------------     ------------------


Contingent Liabilities and Commitments (Note 6)



            Total Liabilities and Equities....................................... $      2,727,544       $     2,619,418
                                                                                  ==================     ==================


    See accompanying Notes to Consolidated Financial Statements





                                    FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                       Three Months Ended
                                                            -----------------------------------------
                                                               November 30           November 30
                                                                  2000                  2001
                                                            ------------------   --------------------
                    (Amounts in Thousands)

       Sales......................................................$     2,983,189       $     2,252,483
       Cost of sales...............................................     2,867,440             2,161,181
                                                                  --------------------  -------------------

       Gross income...............................................$       115,749       $        91,302
                                                                  --------------------  -------------------

       Selling, general and administrative expenses...............$       101,885       $        86,161
                                                                  --------------------  -------------------

       Restructuring and other charges (credits) (Note 7).........$            -0-      $        (6,340)
                                                                  --------------------  -------------------

       Other income (expense):
           Interest expense.......................................$       (34,335)              (24,761)
           Interest income.........................................         3,942                 1,317
           Other, net (Notes 5 and 9)..............................         2,641                18,760
                                                                  -------------------- --------------------
      Total other income (expense)................................$       (27,752)     $         (4,684)
                                                                  -------------------  --------------------

      Income (loss) before equity in net income of investees,
             minority owners' interest in net (income) of
             subsidiaries, income tax (expense) benefit and
             cumulative effect of changes in accounting
             principles............................................$      (13,888)    $          6,797

      Equity in net income of investees (Note 3) ..................         5,293               1,957

      Minority owners' interest in net (income)
              of subsidiaries.......................................       (6,214)             (4,737)
                                                                     --------------------  -------------------

      Income (loss) before income tax (expense) benefit
              and cumulative effect of changes in
              accounting principles..................................$    (14,809)              4,017

      Income tax (expense) benefit...................................       1,746                (768)
                                                                     --------------------  -------------------

      Income (loss) before cumulative effect of changes
              in accounting principles...............................$    (13,063)              3,249

      Cumulative effect of changes in accounting for
              derivative financial instruments and planned major
              maintenance costs, net of $3,333 income tax
              expense (Notes 5 and 8)................................      19,776                   -0-
                                                                     --------------------  -------------------

      Net income                                                 $           6,713               3,249
                                                                     ====================  ===================



    See accompanying Notes to Consolidated Financial Statements





                                    FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (UNAUDITED)
                                                                                                Three Months Ended
                                                                                   ---------------------------------------------
                                                                                     November 30                November 30
                                                                                         2000                       2001
                                                                                  ------------------         ------------------
                                                                                               (Amounts in Thousands)
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income................................................................... $        6,713             $         3,249
    Adjustments to reconcile net income to net cash provided by
      (used in) operating activities:
          Depreciation and amortization..........................................         24,028                      29,059
          Equity in net (income) of investees....................................         (5,293)                     (1,957)
          Other..................................................................        (18,428)                    (16,733)
          Changes in assets and liabilities:
           Accounts receivable...................................................         59,980                      20,013
           Inventories...........................................................        (73,734)                     81,432
           Other assets..........................................................        (25,075)                     (5,778)
           Accounts payable......................................................         54,725                     (48,450)
           Other liabilities.....................................................        (45,951)                     20,649
                                                                                  ------------------         ------------------
    Net cash provided by (used in) operating activities.......................... $      (23,035)            $        81,484
                                                                                  ------------------         ------------------

    CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures......................................................... $      (23,750)            $       (10,629)
    Distributions from joint ventures............................................          4,911                       2,062
    Additions to investments and notes receivable................................         (7,183)                     (5,397)
    Acquisition of other long-term assets........................................         (5,535)                     (2,724)
    Proceeds from disposal of investments and
      collection of notes receivable.............................................            895                      30,450
    Proceeds from sale of fixed assets...........................................          1,875                       7,010
                                                                                  ------------------         ------------------
    Net cash provided by (used in) investing activities.......................... $      (28,787)            $        20,772
                                                                                  ------------------         ------------------

    CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments of dividends........................................................ $       (2,000)            $        (2,000)
    Proceeds from bank loans and notes payable...................................      1,348,541                     846,272
    Payments on bank loans and notes payable.....................................     (1,285,949)                   (864,987)
    Proceeds from issuance of subordinated debt certificates.....................         15,328                          -0-
    Payments for redemption of subordinated debt certificates....................        (14,374)                    (12,732)
    Net decrease in checks and drafts outstanding................................         (3,953)                    (68,896)
    Net decrease in demand loan certificates.....................................         (2,845)                       (175)
    Other increase (decrease)....................................................         (2,926)                        262
                                                                                  ------------------         ------------------
    Net cash provided by (used in) financing activities.......................... $       51,822             $      (102,256)
                                                                                  ------------------         ------------------

    Net decrease in cash and cash equivalents.................................... $           -0-            $            -0-
    Cash and cash equivalents at beginning of period.............................             -0-                         -0-
                                                                                  ------------------         ------------------
    Cash and cash equivalents at end of period................................... $           -0-            $            -0-
                                                                                  ==================         ==================

On October 1, 2000, we contributed property, plant and equipment and investments with a carrying value of approximately $43.8 million in return for an equity interest in Land O’Lakes Farmland Feed, LLC.

See accompanying Notes to Consolidated Financial Statements

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) Interim Financial Statements

Unless the context requires otherwise, (i) “Farmland”, “we”, “us” and “our” refer to Farmland Industries, Inc. and its consolidated subsidiaries, (ii) all references to “year” or “years” are to fiscal years ended August 31, and (iii) the term “member” means (a) any voting member, (b) any associate member, or (c) any other person with which Farmland is a party to a currently effective patronage refund agreement (a “patron”). Patronage refund is the term we use to refer to the distribution of income from transactions done on a cooperative basis with or for our patrons.

In view of the seasonality of Farmland’s businesses, it must be emphasized that the results of operations for the periods presented are not necessarily indicative of the results for a full fiscal year.

The information included in these unaudited Condensed Consolidated Financial Statements of Farmland reflects all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair statement of the results for the interim periods presented.

Our sales, margins and net income or loss depend, to a large extent, on conditions in agriculture and may be volatile due to factors beyond our control, such as weather, crop failures, federal agricultural programs, production efficiencies, currency fluctuations, tariffs and other factors affecting United States imports and exports. In addition, various federal and state regulations intended to protect the environment encourage farmers to reduce the use of fertilizers and other chemicals. Global variables which affect supply, demand and price of crude oil, refined fuels, natural gas, livestock, grain and other commodities may impact Farmland’s operations. Also, recent terrorist attacks have disrupted the financial and credit markets and have negatively impacted the United States economy and other economies. Historically, changes in the costs of raw materials used in the manufacture of Farmland’s finished products have not necessarily resulted in corresponding changes in the prices at which such products have been sold. Management cannot determine the extent to which these factors may impact our future operations. Farmland’s cash flow and net income or loss may be volatile as conditions affecting agriculture and markets for our products change.

In accordance with the bylaws of Farmland, we determine annually the members’ portion of income or loss before income taxes. From this amount, patronage refunds are distributed or losses are allocated to our members.

Farmland does not provide for patronage refunds in our interim financial statements as:

• we determine the amount of members' income and the amount of members' loss only after the end of the fiscal year;
• after consideration of member losses (if any), the Board of Directors, in its sole discretion, then determines the amount of patronage refund to be paid in cash and the portion to be paid in Farmland equity (common shares, associate member common shares and capital credits); and
• the amount of income appropriated to earned surplus is dependent on the amount of patronage refunds and the handling of members’ losses (if any).

Therefore, the amount of net income for the interim period presented is reflected as a separate item in the accompanying unaudited Condensed Consolidated Balance Sheet as of November 30, 2001.

(2) Inventories

Major components of inventories are as follows:
                                                     August 31               November 30

                                                        2001                    2001
                                               -------------------     --------------------
                                                         (Amounts in Thousands)

  Finished and in-process products.............. $         431,739      $           379,470
  Materials.....................................            98,167                   77,382
  Supplies......................................            58,901                   50,523
                                                 ------------------     --------------------
                                                 $         588,807      $           507,375
                                                 ==================     ====================

At November 30, 2001, the carrying value of crude oil and refined petroleum inventories, stated at LIFO cost, was $140.8 million, which exceeded the market value of such inventory by approximately $27.7 million. Management recognized a $6.7 million lower of cost or market charge related to certain inventories sold during December which are unlikely to be replenished prior to year-end. Management reasonably expects that the remaining market value decline will be recovered during the remainder of fiscal year 2002 and, accordingly this market value decline has not been recognized in our interim results of operations. However, given the volatility of the crude oil and refined fuels markets, no assurance can be provided that the market value of petroleum inventories will exceed their carrying value at our year-end.

(3) Summarized Financial Information of Investees Accounted for by the Equity Method

Summarized financial information of investees accounted for by the equity method is as follows:

                                                  Three Months Ended
                                        ----------------------------------------
                                           November 30          November 30
                                              2000                 2001
                                        ------------------  --------------------
                                                (Amounts in Thousands)

Net sales...............................$    1,694,257     $    1,391,816
                                        ==================  ====================
Net income (loss).......................$         (516)     $      39,445
                                        ==================  ====================
Farmland's equity in net income.........$        5,293      $       1,957
                                        ==================  ====================

Our investments accounted for by the equity method consist principally of :

• 50% equity interests in three manufacturers of crop nutrient products, Farmland Hydro, L.P., SF Phosphates Limited Company and Farmland MissChem Limited;
• an approximate 50% equity interest in UCB LLC, which in turn holds a 50% equity interest in Agriliance LLC, an agronomy distribution and marketing venture;
• from September 1, 1999 through December 31, 2000, an equity interest in Cooperative Refining, LLC, which operated two refineries; and
• beginning October 1, 2000, an equity interest in Land O'Lakes Farmland Feed, LLC, a manufacturer and marketer of feed products.

At November 30, 2001, our share of the undistributed earnings of all ventures accounted for by the equity method totaled $57.4 million.

(4) Comprehensive Income

Changes in accumulated other comprehensive income (AOCI) during the three months ended November 30, 2001 were as follows:

                                                         Cash Flow             Foreign Currency              Total
                                                           Hedges                Translation                 AOCI
                                                       ---------------      -----------------------     ----------------
                                                                            (Amounts in Thousands)

Balance at August 31, 2001......................       $     (21,436)       $               94         $       (21,342)
Foreign currency translation adjustment.........                  -0-                        6                       6
Net (loss) on cash flow hedges, net of tax......                (202)                       -0-                   (202)
Less reclassification adjustments, net of tax...               9,158                        -0-                  9,158
                                                       -- ------------      ----- -----------------    ---- ------------
Balance at November 30, 2001....................       $     (12,480)       $              100         $       (12,380)
                                                       == ============      ===== =================    ==== ============


Comprehensive income for the three months ended November 30, 2000 and 2001 is as follows:

                                                                              Three Months Ended
                                                                  -------------------------------------------
                                                                     November 30               November 30
                                                                         2000                     2001
                                                                  -------------------        ----------------
                                                                           (Amounts in Thousands)

Net income......................................................   $        6,713            $      3,249
                                                                  --- ---------------        -- -------------
Net gains (losses) arising during the period
    Cash flow hedges:
         Net derivative transition gain.........................   $       30,208                      -0-              $
         Net derivative gains(losses) during period.............           23,002                    (239)
         Reclassification adjustment............................           (1,652)                 10,785
    Foreign currency translation adjustment.....................              (11)                      6
                                                                  --- ---------------        -- -------------
Other comprehensive income before tax...........................   $       51,547            $     10,552
Income tax (expense) related to items of
    other comprehensive income..................................   $       (7,770)           $     (1,590)
                                                                  --- ---------------        -- -------------
Other comprehensive income......................................   $       43,777            $      8,962
                                                                  --- ---------------        -- -------------
Comprehensive income............................................   $       50,490            $     12,211
                                                                  === ===============        == =============

(5) Derivative Financial Instruments

Effective September 1, 2000, we adopted Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended. This standard imposes extensive recordkeeping requirements in order to designate a derivative financial instrument as a hedge. As a result, certain of our segments hold derivative instruments, such as exchange traded grain, crude oil and live hog futures, certain natural gas contracts and foreign currency forward positions that we believe provide an economic hedge of future transactions, but have not been designated as a hedge. Gains or losses related to these derivative instruments are classified as a component of other income. All derivative instruments are recorded in our balance sheet at fair value.

Farmland also uses derivative financial instruments to manage our commodity price risk in the procurement of natural gas, the primary input necessary for the production of the various nitrogen-based crop production products we manufacture. Our objective is to fix the price of a portion of our forecasted purchases of natural gas used to manufacture crop production products.

To meet this objective, we enter into various types of derivative instruments to manage fluctuations in cash flows resulting from commodity price risk. These instruments may include exchange traded futures contracts, over the counter (OTC) swap contracts and OTC option or exchange traded option contracts. The changes in the market value of such contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. The amount of hedge ineffectiveness, which is recognized as a component of other income, was immaterial for the three months ended November 30, 2001 and 2000.

As of November 30, 2001, the maximum length of time over which we are hedging our exposure to the variability in future cash flows associated with natural gas forecasted transactions is approximately one year. Gains and losses recorded in accumulated other comprehensive income (“AOCI”) are reclassified, on a first-in, first-out basis, as a component of cost of sales when the related crop production product is sold. As a result, we anticipate that substantially all gains and losses in AOCI as of November 30, 2001 will be reclassified into earnings within the next twelve months. Gains and losses in AOCI may fluctuate until the related contract is closed. During the three months ended November 30, 2001, after tax net gains of approximately $1.4 million related to derivative instruments included in AOCI as a result of the September 1, 2000 transition adjustment were reclassified into net income. During the three month periods ended November 30, 2000 and 2001, approximately $4.3 million and $0.0 million, respectively, was reclassified into earnings as a result of the discontinuance of cash flow hedges because it became probable that the original forecasted purchases of natural gas would not occur.

(6) Contingencies

Farmland is aware of probable obligations under state and federal environmental laws at a number of properties. At November 30, 2001 and at August 31, 2001, we had an environmental accrual in our Condensed Consolidated Balance Sheet for probable and reasonably estimated costs for remediation of contaminated properties of $16.7 million and $17.2 million, respectively. We periodically review and, as appropriate, revise our environmental accruals. Based on current information and regulatory requirements, we believe that the accruals established for environmental expenditures are adequate.

The ultimate costs of resolving certain environmental matters are not quantifiable because many such matters are in preliminary stages and the timing and extent of actions which governmental authorities may ultimately require are unknown. It is possible that the costs of such resolution may be greater than the liabilities which, in the opinion of management, are probable and reasonably estimatable at November 30, 2001. In the opinion of management, it is reasonably possible for such costs to approximate an additional $14.7 million.

Under the Resource Conservation Recovery Act of 1976 (‘‘RCRA”), Farmland has three closure and four post-closure plans in place for five locations. Closure and post-closure plans also are in place for three landfills and two injection wells as required by state regulations. Such closure and post-closure costs are estimated to be $5.2 million at November 30, 2001 (and are in addition to the $16.7 million accrual and the $14.7 million discussed in the prior paragraphs). These liabilities are accrued when plans for termination of plant operations are made. Operations are being conducted at these locations, and we do not plan to terminate these operations in the foreseeable future. Therefore, these environmental exit costs have not been accrued.

The Environmental Protection Agency has issued new rules limiting sulfur in gasoline to 30 parts per million and has published a proposed rule limiting sulfur in diesel fuel to 15 parts per million. The rules affecting gasoline were effective December 1, 1999 with a January 1, 2004 compliance date. The proposed rules for diesel fuel have a June 1, 2006 compliance date. Based on information currently available, we anticipate that material expenditures, possibly in excess of $100 million, will be required to achieve compliance with these new and pending rules. Farmland has applied for, but has not received, regulatory extension of the deadlines until 2008.

(7) Restructuring and Other Charges

During fiscal year 2001, Farmland recognized a reserve as a result of restructuring activities. As of August 31, 2001, the balance in the restructuring reserve was $7.9 million. During the three months ended November 30, 2001, adjustments to the reserve reduced the balance by $2.8 million. The major component of this adjustment resulted from the sale, during October 2001, of the assets of Heartland Wheat Growers, our wheat gluten plant located in Russell, Kansas. This sale releases us from future plant maintenance, property taxes, and all other obligations associated with maintaining idle plant and property. Deductions to the reserve in the amount of $0.4 million represent severance payments and ongoing maintenance costs associated with the closure of the wheat gluten plant and our Mexico City office.

As part of the restructuring costs incurred in fiscal year 2001, we recorded an asset impairment related to the closure of our wheat gluten plant to its estimated net realizable value. During October 2001, the assets of the plant were sold and a gain on the sale of assets was recorded in the amount of $3.5 million, representing the excess of the net proceeds over the plants estimated net realizable value.

The following table displays the activity and balances of the restructuring reserve account from August 31, 2001 to November 30, 2001: (amounts in thousands)

                            Aug 31, 2001                                                            Nov 30, 2001
       Type of Cost            Balance         Additions       Adjustments        Deductions           Balance
- ------------------------   ----------------    -----------    ---------------    --------------  ----------------

                                                           (Amounts in Thousands)

Employee separations       $         1,602   $         16   $         (228)   $         (324)    $         1,066
Facility closings                    3,830             -0-          (2,598)             (114)              1,118
Other                                2,500             -0-              -0-               -0-              2,500
                           ----------------    -----------    ---------------    --------------  ----------------

Total                      $         7,932   $         16   $       (2,826)    $        (438)    $         4,684
                           ================    ===========    ===============    ==============  ================

(8) Planned Major Maintenance Costs

Effective September 1, 2000, Farmland changed its method of accounting for certain costs expected to be incurred in the next planned major maintenance of its manufacturing and processing facilities from the accrue-in-advance method to the direct expense method. Under the new accounting method, maintenance costs are recognized as expense as maintenance services are performed. We believe the new method is preferable in the circumstances because, prior to the performance of the maintenance services, we do not have a present unavoidable duty or responsibility to perform such services. The effect of this change at September 1, 2000 was a $6.3 million benefit (net of income taxes of $1.1 million) and has been presented as a cumulative effect of an accounting change in the accompanying Condensed Consolidated Statements of Operations for the three months ended November 30, 2000.

(9) Other Income

Other income includes a gain of $18.0 million recognized on the sale of our equity interest in Country Energy to Cenex Harvest States.

(10) Industry Segment Information

Effective September 1, 2001, Truck Operations and Transportation and Warehousing Services are presented in the operating results of the segment they primarily serve rather than as a component of Other Operating Units and Unallocated Corporate Expenses. Segment results for the three months ended November 30, 2000 were reclassified to conform to our current operational structure.

Three months ended November 30, 2000 (Page 1 of 3) (Amounts in Thousands)

                                                                    CONSOLIDATED SEGMENTS
                                          ---------------------------------------------------------------------------
                                                                             Unallocated
                                                     Combined             Corporate Expenses
                                                     Segments                                           Consolidated
                                               ------------------      ----------------------     -----------------------
           Sales & transfers                    $     3,794,070         $                          $        3,794,070
           Transfers between segments                  (810,881)                                             (810,881)
                                               ------------------      ----------------------     -----------------------
           Net sales                           $      2,983,189         $                          $        2,983,189
                                               ==================      ======================     =======================

           Net income (loss)                   $         23,404         $         (16,691)         $            6,713
                                               ==================      ======================     =======================


           Total assets                        $      3,163,664         $         243,192          $        3,406,856
                                               ==================      ======================     =======================




Three months ended
November 30, 2001  (Page 1 of 3)
(Amounts in Thousands)
                                                            CONSOLIDATED SEGMENTS
                                   -------------------------------------------------------------------------
                                                                           Unallocated
                                                    Combined                Corporate
                                                    Segments                 Expenses                  Consolidated
                                               ----------------       --------------------       ---------------------
           Sales & transfers                    $   3,024,512          $                           $       3,024,512
           Transfers between segments                (772,029)                                              (772,029)
                                               ----------------       --------------------       ---------------------
           Net sales                            $   2,252,483          $                           $       2,252,483
                                               ================       ====================       =====================

           Net income (loss)                    $      18,191          $        (14,942)           $           3,249
                                               ================       ====================       =====================


           Total assets                         $   2,330,908          $        288,510            $       2,619,418
                                               ================       ====================       =====================







Three months ended
November 30, 2000 (Page 2 of 3)
(Amounts in Thousands)
                                                                       INPUT AND OTHER SEGMENTS
                                    ------------------------------------------------------------------------------------------------
                                                                                                                    Other            Total Input
                                                         Crop                                                     Operating           and Other
                                                      Production           Petroleum             Feed               Units             Segments
                                                  -- -------------    -- ---------------    -- ----------    --- ------------    -- --------------
              Sales & transfers                   $      165,154      $       422,122       $    50,264      $      496,189      $    1,133,729
              Transfers between segments                  (7,978)              (5,068)           (5,191)           (464,751)           (482,988)
                                                  -- ------------     -- --------------     -- ----------    --- ------------    -- --------------
              Net sales                           $      157,176      $       417,054       $    45,073      $       31,438      $      650,741
                                                  == ============     == ==============     == ==========    === ============    == ==============

              Net income (loss)                   $        1,093      $         3,651       $     1,444      $       (1,571)     $        4,617
                                                  == ============     == ==============     == ==========    === ============    == ==============


              Total assets                        $      749,144      $       403,802       $    77,963      $       77,816      $    1,308,725
                                                  == ============     == ==============     == ==========    === ============    == ==============




Three months ended
November 30, 2001 (Page 2 of 3)
(Amounts in Thousands)
                                                                    INPUT AND OTHER SEGMENTS
                                  ----------------------------------------------------------------------------------------------
                                                                                                                       Other                Total
                                                              Crop                                                   Operating            Input and
                                                           Production           Petroleum            Feed              Units                Other
                                                                                                                                          Segments
                                                       -- -------------     -- ------------    -- -----------     - -------------     -- ------------
                     Sales & transfers                 $      169,623       $    387,591       $        -0-       $     531,949       $    1,089,163
                     Transfers between segments                (2,822)            (5,251)               -0-            (512,702)            (520,775)
                                                          ------------         ------------       -----------       -------------        ------------
                     Net sales                         $      166,801      $     382,340       $        -0-      $       19,247       $      568,388
                                                       == ============     === ============    == ===========    == =============     == ============

                     Net income (loss)                 $      (42,061)      $     35,237       $       614        $       7,227       $        1,017
                                                       == =============     == ============    == ===========     = =============     == ============


                     Total assets                      $      670,025       $    399,064       $    57,066        $      40,187       $    1,166,342
                                                       == =============     == ============    == ===========     = =============     == ============












Three months ended
November 30, 2000 (Page 3 of 3)
(Amounts in Thousands)
                                                          OUTPUT SEGMENTS
                                    ------------------------------------------------------------
                                                                                   Total
                                     Refrigerated          World                  Output
                                        Foods              Grain                 Segments
                                    ---------------    ---------------      --------------------
   Sales & transfers                $   1,395,850       $   1,264,491        $      2,660,341
   Transfers between segments            (227,603)           (100,290)               (327,893)
                                    ---------------    ---------------      --------------------
   Net sales                        $   1,168,247       $   1,164,201        $      2,332,448
                                    ===============    ===============      ====================

   Net income (loss)                $      15,214       $       3,573        $         18,787
                                    ===============    ===============      ====================


   Total assets                     $     809,572       $   1,045,367        $      1,854,939
                                    ===============    ===============      ====================




  Three months ended
  November 30, 2001 (Page 3 of 3)
  (Amounts in Thousands)
                                                         OUTPUT SEGMENTS
                                      -------------------------------------------------------
                                                                                Total
                                  Refrigerated           World                  Output
                                      Foods              Grain                 Segments
                                  --------------     ---------------      -------------------
Sales & transfers                 $  1,528,474       $     406,875        $      1,935,349
Transfers between segments            (251,254)                 -0-               (251,254)
                                  --------------     ---------------      -------------------
Net sales                         $  1,277,220       $     406,875        $      1,684,095
                                  ==============     ===============      ===================

Net income (loss)                 $     21,504       $      (4,330)       $         17,174
                                  ==============     ===============      ===================


Total assets                      $    833,563       $     331,003        $      1,164,566
                                  ==============     ===============      ===================

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

The information contained in this discussion and in the unaudited Condensed Consolidated Financial Statements and Accompanying Notes presented in this Form 10-Q should be read in conjunction with information set forth in Part II, Items 7 and 8, in Farmland’s Annual Report on Form 10-K for the year ended August 31, 2001.

Financial Condition, Liquidity and Capital Resources Farmland has historically maintained two primary sources for debt capital: a substantially continuous public offering of its subordinated debt and demand loan securities (the "continuous debt program ") and bank lines of credit.

Farmland’s debt securities issued under the continuous debt program generally are offered on a best-efforts basis through our wholly owned broker-dealer subsidiary, Farmland Securities Company, and also may be offered by selected unaffiliated broker-dealers. The types of debt securities offered in the continuous debt program include certificates payable on demand and subordinated debenture bonds. The total amount of debt securities outstanding and the flow of funds to, or from, Farmland as a result of the continuous debt program are influenced by the rate of interest which we establish for each type or series of debt security offered, by the option of Farmland to call for redemption certain of its outstanding debt securities, and by the option of holders, under certain circumstances, to request the early redemption of outstanding debt securities. On October 31, 2000, management determined that, given the short term nature of the Credit Facility (as defined below), it was appropriate to suspend sales under our debt program until the Credit Facility had been refinanced on a long term basis. In November, 2001 we filed a registration statement with the Securities and Exchange Commission to offer additional debt securities under our debt program. This registration statement has not yet become effective. This report on Form 10-Q does not constitute an offer of securities; such an offering will only be made through a prospectus. During the three months ended November 30, 2001, the outstanding balance of demand certificates decreased by $0.2 million, and the outstanding balance of subordinated debenture bonds decreased by $12.8 million.

In May 2000, Farmland established a 364 day revolving credit facility (the “Credit Facility”) with a syndicate of banks. During April 2001, Farmland and a syndicate of banks reached an agreement to amend our Credit Facility and extend the term to November 9, 2001, in an amount of $500 million. During November 2001, Farmland and the syndicate of banks reached an agreement to extend the Credit Facility through February 8, 2002, in an amount of $418 million. Also during October 2001, Farmland received a commitment from another syndicate of banks, including Bankers Trust Company, Rabobank, and CoBank, to establish a new five year revolving credit of $350 million and a two year credit of $150 million that will replace the present Credit Facility. The commitment letter contains certain conditions to closing that include, among other things, a clause allowing the banks to terminate the commitment if a certain material adverse change occurs. The material adverse change clause refers to a material adverse change in the business, operations, properties, assets, liabilities, conditions or prospects of Farmland and our subsidiaries, taken as a whole. Although management cannot predict with certainty the outcome of future events, we anticipate the conditions to closing will be met and the financing will be accomplished prior to February 8, 2002 as, through January 14, 2001, we do not believe there has been a material adverse change in our business or results of operations. Concurrent with establishing the new bank facility, we intend to refinance, for approximately $195 million, the nitrogen facility at Coffeyville, Kansas that we currently operate under an operating lease. We anticipate that the new credit facility will be collateralized by a substantial portion of Farmland’s accounts receivable, inventories and property, plant and equipment. The new credit facility will also contain various financial covenants.

At November 30, 2001, Farmland had $230.7 million of short-term borrowings under the Credit Facility. Additionally, $44.4 million of the Credit Facility was utilized to support letters of credit. Farmland currently pays commitment fees equal to 75 basis points under the Credit Facility based on the unused portion of the credit line. Borrowings under the Credit Facility are secured by a substantial portion of our accounts receivable, inventories, fixed assets, and certain investments. Interest rates under the Credit Facility are based on a spread over the base rate (as defined in the related agreement) or a spread over LIBOR (the London Interbank Offering Rate). The Credit Facility contains covenants related to Farmland’s ratio of earnings before interest, taxes, depreciation and amortization to net interest expense, our ratio of total debt to total capitalization, and our ratio of senior debt to total capitalization, all as defined in the related agreement. We are currently in compliance with all covenants under the Credit Facility. In addition to these financial covenants, our ability to borrow under the Credit Facility may be restricted based on our level of receivables and inventories. As calculated at November 30, 2001, availability under the Credit Facility was approximately $151.1 million.

In August 2001, Farmland National Beef Packing Company, L.P. (“FNBPC”) established a five year, $225 million credit facility with a syndicate of banks. This facility provides for a line of credit for up to $100 million, and a term loan of $125 million, both of which are nonrecourse to Farmland. Borrowings under the credit facility are collateralized by substantially all the assets of FNBPC and are subject to certain financial covenants and restrictions. At November 30, 2001 FNBPC had borrowings of $136.4 million, and $17.2 million of the facility was being utilized to support letters of credit. At November 30, 2001, availability under the line of credit was approximately $82.8 million.

At November 30, 2001, Tradigrain had $439.5 million in credit facilities with various international banks. Tradigrain primarily uses these facilities to provide financing and letters of credit to support international grain trading transactions. Obligations of Tradigrain under these facilities are nonrecourse to Farmland and Farmland’s other affiliates. Borrowings under the credit facilities are subject to certain financial covenants and restrictions. At November 30, 2001, Tradigrain had borrowings under the credit facilities of $89.0 million, and $16.9 million of the facilities were being utilized to support letters of credit. Additionally, $42.6 million of checks and drafts outstanding at November 30, 2001 were committed against the credit facilities.

Farmland maintains other borrowing arrangements with banks and financial institutions. Under such arrangements, at November 30, 2001, $5.0 million was borrowed and an additional $1.4 million were being utilized to support letters of credit, which are nonrecourse to Farmland.

Leveraged leasing has been utilized to finance railcars, a significant portion of our crop production equipment, and certain crop production manufacturing facilities.

Farmland has issued and outstanding 2 million shares of 8% Series A Cumulative Redeemable Preferred Shares (the “Preferred Shares”) with an aggregate liquidation preference of $100 million ($50 liquidation preference per share). The Preferred Shares are not redeemable prior to December 15, 2022. On and after December 15, 2022, the Preferred Shares may be redeemed for cash at our option, in whole or in part, at specified redemption prices declining to $50 per share on and after December 15, 2027, plus accumulated and unpaid dividends. The Preferred Shares do not have any stated maturity, are not subject to any sinking fund or mandatory redemption provisions and are not convertible into any other security.

Although our net income for the three months ended November 30, 2001 decreased slightly from the previous year, cash provided by operating activities increased $104.5 million compared to the same period last year primarily as a result of our continuing efforts to reduce working capital employed by our operating segments. The major use of cash was a decrease in notes and loans payable, debt certificates and drafts and checks outstanding.

Results of Operations

General

In view of the seasonality of Farmland’s businesses, it must be emphasized that the results of operations for the periods presented are not necessarily indicative of the results for a full fiscal year.

Farmland’s sales, gross margins and net income depend, to a large extent, on conditions in agriculture and may be volatile due to factors beyond our control, such as weather, crop failures, federal agricultural programs, production efficiencies, currency fluctuations, tariffs and other factors affecting United States imports and exports. In addition, various federal and state regulations intended to protect the environment encourage farmers to reduce the use of fertilizers and other chemicals. Global variables which affect supply, demand and price of crude oil, refined fuels, natural gas, livestock, grain and other commodities may impact Farmland’s operations. Also, recent terrorist attacks have disrupted the financial and credit markets and have negatively impacted the United States economy and other economies. Historically, changes in the costs of raw materials used in the manufacture of Farmland’s finished products have not necessarily resulted in corresponding changes in the prices at which such products have been sold. Management cannot determine the extent to which these factors may impact our future operations. Farmland’s cash flow and net income or loss may be volatile as conditions affecting agriculture and markets for our products change.

The level of operating income in the crop production, petroleum, and refrigerated foods businesses is, to a significant degree, attributable to the spread between selling prices and raw material costs (natural gas in the case of nitrogen-based crop nutrients, crude oil in the case of petroleum products, and live hogs, cattle and catfish in the case of refrigerated foods). We cannot determine the direction or magnitude to which these factors will affect our cash flow and net income or loss.

Results of Operations for Three Months Ended November 30, 2001 compared to Three Months Ended November 30, 2000.

Effective October 1, 2000 Farmland and Land O’Lakes each contributed substantially all their feed business assets to a newly formed venture (Land O’Lakes Farmland Feed). Effective May 4, 2001 we formed a grain marketing relationship with Archer Daniels Midland Company (ADM). ADM/Farmland, Inc., a wholly-owned subsidiary of ADM, purchased our United States grain inventories and Farmland Atwood, our wholly-owned grain commission subsidiary. ADM/Farmland leases and operates our grain elevators throughout the United States. These leases are in an amount adequate to reimburse us for our depreciation and other ownership expenses. We are also entitled to receive, once a year, variable rent equal to a 50% share of the fiscal year earnings or losses of ADM/Farmland as determined by ADM/Farmland at the end of their fiscal year, which is June 30th. As a result, effective from the date of formation, sales, cost of sales, SG&A expenses and other income generated by these ventures are no longer recorded in our Condensed Consolidated Statements of Operations. During the three months ended November 30, 2000, we recognized sales of $568.5 million, cost of sales of $547.0 million, SG&A expenses of $12.3 million and other expenses and interest of $7.8 million for these operations. During the three months ended November 30, 2001 we recognized pre-tax income of investees for these ventures of $2.9 million.

Sales for the three months ended November 30, 2001 decreased approximately $730.7 million, or 24%, compared with the same period last year. This decrease is primarily due to a decrease in sales recorded in Farmland’s financial statements due to the formation our Land O’Lakes Farmland Feed and ADM/Farmland ventures, as well as a decrease in our international grain sales. These decreases are partially offset by increased sales of refrigerated foods products.

For the three months ended November 30, 2001, we had net income of $3.2 million compared with a net income of $6.7 million for the same period last year. This decrease is primarily due to lower margins for our nitrogen-based crop nutrients, partially offset by increased margins for refined fuels and propane. Also, income for the three months ended November 30, 2000 included pre-tax income of $23.1 million from the cumulative effect of changes in accounting for derivative financial instruments and planned major maintenance costs while income for the three months ended November 30, 2001 included a pre-tax gain of $18.0 million from the sale of our interest in Country Energy.

Crop Production

Unit sales volume for the crop production segment increased 21% for the three months ended November 30, 2001 as compared to the same period last year. Unit selling prices for the period decreased by 14%. The net impact was an increase in crop production sales to $166.8 million for the three months ended November 30, 2001 compared with sales of $157.2 million for the same period last year. The price of natural gas, which represents a major cost in the production of nitrogen-based crop nutrients, has fallen during the summer and fall months. The average price of natural gas for the first quarter of fiscal year 2002 was $2.87 per mmbtu as compared to $4.82 per mmbtu for the same period last year, which translates to a decreased cost of producing anhydrous ammonia of approximately $66 per ton.

As a result of high inventory levels during the summer months, Farmland and other crop nutrient companies attempted to lower their inventories through temporary shutdowns of certain plants. Farmland has temporarily curtailed production at two plants during the first quarter of 2002. As the spring season progresses and inventory levels and product demand become more clear, we will assess the need to operate these plants in order to provide an adequate volume of product to Agriliance, which is a crop nutrients and crop protection marketing joint venture in which we own a 25% indirect interest.

Income of the crop production segment decreased $43.2 million for the three months ended November 30, 2001 as compared with the prior year. Margins decreased by $21.0 million primarily as a result of decreasing per unit selling prices for products that were produced when natural gas costs were at higher levels. A one-time gain of $14.6 million was recognized in the prior year as a result of the change in accounting methods for derivative instruments. Derivative income recognized in the first quarter of this fiscal year was a loss of $0.9 million as compared to a gain of $5.8 million in the prior year.

Petroleum

Sales of the petroleum segment in the three months ended November 30, 2001 decreased $34.7 million, or approximately 8%, compared with the same period last year, primarily due to rapidly declining gasoline and distillate prices. The decreased unit prices for refined fuels, especially gasoline, was primarily the result of excess supplies across the country. Excess supplies were, in part, a result of a decrease in travel, especially air travel, subsequent to the September 11, 2001 terrorist attacks.

Income for the petroleum segment for the three month period ended November 30, 2001 increased $31.6 million compared to the same period last year. This increase is partly due to a significant increase in the spread between crude oil costs and refined fuel selling prices in the month of September. These spreads have fallen sharply since the middle of September due to the over supply of refined products that exists in the global market today. Income from the Petroleum segment also reflects an $18.0 million gain on the sale of our equity interest in Country Energy to Cenex Harvest States. This was partly offset by recognition of a $6.7 million lower of cost or market charge related to certain inventories sold during December. See “Notes to Condensed Consolidated Financial Statements – Footnote (2) Inventories.”

Cooperative Refining, LLC, which was 42% owned by Farmland, was dissolved effective December 31, 2000. As a result, income previously recognized as equity in income of investees is now recognized as sales, cost of sales, SG&A expenses and other income in the Condensed Consolidated Statements of Operations.

Feed

As a result of forming Land O’Lakes Farmland Feed (LOLFF), we did not record any sales for our feed business during the three months ended November 30, 2001. During October 2001, LOLFF purchased Purina Mills which resulted in Farmland’s ownership interest being reduced to approximately 8%; however, Farmland’s governance in LOLFF has not been diluted. Income for the feed segment decreased $0.8 million as a result of reduced equity in earnings from LOLFF and writeoffs related to uncollectible receivables.

Refrigerated Foods

During the three months ended November 30, 2001, sales in the refrigerated foods segment increased $109.0 million, or approximately 9%, compared with the same period last year. This increase is primarily due to a 6% increase in unit sales volume and to a 3% increase in unit selling price. The increase in unit sales volume was primarily due to increased slaughter levels resulting from favorable market conditions. The increase in unit selling price is, in part, the result of our continued emphasis on enhancing our customer base, eliminating low-value added products, and providing value added products, such as case ready meats. Case ready refers to meat products which are prepared to the specifications of retailers and which do not require additional preparation work prior to sale by retailer.

Income in the refrigerated foods segment increased $6.3 million, or approximately 41%, during the three months ended November 30, 2001 compared to the same period last year. This increase is partly attributable to increased unit volume of slaughter, partially offset by increased cost of sales resulting from having other packers produce certain products for us as a result of the fire at our Albert Lea, Minnesota facility in July, 2001. We have also temporarily reopened our Carroll, Iowa facility to handle some of the production lost due to the fire. Refrigerated foods’ selling, general and administrative expenses are approximately the same for the three months ended November 30, 2001 compared to the same period last year. Other income increased by $5.4 million in the three months ended November 30, 2001 as compared to the same period last year. This increase is primarily the result of last year’s recognition of $2.0 million in costs related to spoiled product and a plant shut-down, and a loss of $2.3 million related to the change in accounting methods for derivatives. Our case ready operations continue to improve by lowering cost as we continue to improve plant efficiencies and develop the business segment.

World Grain

Sales of the world grain segment decreased $757 million, or approximately 65%, for the three months ended November 30, 2001 compared with the same period last year. The decrease was primarily a result of the formation of a contractual grain marketing relationship between Farmland and Archer Daniels Midland Company (ADM), effective May 4, 2001. As a result, we no longer record sales, cost of sales or operating expenses in our Condensed Consolidated Statements of Operations. With this agreement substantially all domestic grain sales are now recognized by the new entity, ADM/Farmland, Inc. Sales also decreased due to lower international grain sales volume.

World grain income for the three months ended November 30, 2001 declined $7.9 million compared with the same period last year. The decrease is partly due to the formation of ADM/Farmland as described above. ADM/Farmland leases our grain elevators throughout the United States. These leases are in an amount adequate to reimburse us for our depreciation and other ownership expenses. ADM/Farmland obtains its grain from third party sources. Farmland is also entitled to receive, once a year, variable rent equal to a 50% share of the fiscal year earnings or losses of ADM/Farmland as determined by ADM/Farmland at the end of their fiscal year, which is June 30th. Income has decreased in international marketing due to lower gross margins on barley, sugar and freight and an increase in bad debt expense, offset by improved margins in soya complex products.

Other Operating Units

Segment income for other operating units increased $8.8 million for the three months ended November 30, 2001 compared with the prior year. The increase is primarily attributable to Heartland Wheat Growers, our subsidiary which produced wheat gluten at a facility in Russell, Kansas. During May 2001, we closed this facility in anticipation of prolonged depressed wheat gluten prices and recorded an asset impairment and an accrual for shutdown costs. Subsequent to the plant closure, we had an opportunity to sell the assets of the plant. As a result of the sale in October 2001, we recognized a gain on the sale of assets of $3.5 million and reversed part of the shutdown accrual in the amount of $2.7 million.

Selling, General and Administrative Expenses

For the three months ended November 30, 2001, selling, general and administrative (“SG&A”) expenses decreased $15.7 million, or approximately 15%, from the same period last year. SG&A expenses directly associated with business segments decreased approximately $11.9 million, primarily related to formation of our Land O’Lakes Farmland Feed and ADM/Farmland joint ventures as well as decisions by the Board of Directors to close certain facilities and exit non-strategic businesses during last fiscal year. We reduced SG&A expenses not identified to business segments by $3.8 million, primarily as a result of reduced outside services and personnel costs.

Other Income

For the three months ended November 30, 2001, other income increased $16.1 million from the same period last year. The increase is primarily related to the $18.0 million gain recognized on the sale of our equity interest in Country Energy to Cenex Harvest States, partly offset by a reduction of $1.4 million in the amount of income recognized from derivative instruments.

Interest Expense

Interest expense for the three months decreased $9.6 million compared with the same period last year due primarily to a decrease in outstanding borrowings and a decrease in our average borrowing rate.

Recent Accounting Pronouncements

SFAS No. 141 “Business Combinations” is effective for business combinations with non-cooperative enterprises initiated after June 30, 2001. A business combination occurs when an enterprise acquires net assets that constitute a business or equity interests of one or more other enterprises and obtains control over that enterprise or enterprises. For purposes of the final Statement, the formation of a joint venture is not a business combination. Business combinations involving a non-cooperative enterprise which are initiated after June 30, 2001 must use the purchase method of accounting, and the pooling of interest method of accounting is prohibited. Business combinations involving cooperative enterprises are excluded from the scope of SFAS No. 141 pending issuance of interpretative guidance from the FASB. We do not anticipate that adoption of this statement will have a material effect on Farmland’s financial position or our results of operations.

SFAS No. 142 “Goodwill and Other Intangible Assets” was issued during June 2001 by the FASB. On adoption of this standard, goodwill and other intangible assets with an indefinite life will no longer be amortized; however, both goodwill and other intangible assets will need to be tested annually for impairment. For goodwill and intangible assets arising out of business combinations with non-cooperative enterprises, SFAS No. 142, will be effective for fiscal years beginning after December 15, 2001 (our fiscal year 2003). For goodwill and other intangible assets arising out of business combinations with cooperatives, implementation of SFAS No. 142 is delayed pending additional interpretive guidance from the FASB. For the three month period ended November 30, 2001 Farmland recognized goodwill amortization of $0.3 million arising from business combinations with non-cooperatives and $0.6 million from business combinations with cooperatives. Management is currently reviewing what, if any, other impact that the provisions of this statement will have on our financial statements and results of operations.

SFAS No. 143 “Accounting for Asset Retirement Obligations” was issued during June 2001, by the FASB. This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. The standard applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) normal use of the asset.

Statement No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount is depreciated over the life of the asset. The liability is accreted at the end of each period through charges to operating expense. If the obligation is settled for other than the carrying amount of the liability, a gain or loss would be recognized on settlement.

Farmland is required and plans to adopt the provisions of Statement No. 143 for the quarter ending November 30, 2002 (our fiscal year 2003). To accomplish this, Farmland must identify all legal obligations for asset retirement obligations, if any, and determine the fair value of these obligations on the date of adoption. The determination of fair value is complex and will require Farmland to gather market information and develop cash flow models. Additionally, Farmland will be required to develop processes to track and monitor these obligations. Because of the effort necessary to comply with the adoption of Statement No. 143, it is not practicable for management to estimate the impact of adopting this Statement at the date of this report.

SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets” was issued during October 2001, by the FASB. This statement addresses financial accounting and reporting for the impairment or disposal of long-lived assets. While this statement supersedes SFAS No. 121, “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of” it retains many of the fundamental provisions of that statement.

This statement also supersedes the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations – Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for the disposal of a segment of a business. However, it retains the requirement in Opinion No. 30 to report separately discontinued operations and extends that reporting to a component of an entity that either has been disposed of (by sale, abandonment, or in a distribution to owners) or is classified as held for sale.

This statement is effective for fiscal years beginning after December 15, 2001 (our fiscal year 2003). Management is currently reviewing the impact that the provisions of this statement will have on our financial statements and results of operations.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Farmland’s market exposure to derivative transactions, entered into for the purpose of managing commodity price risk, foreign currency risk and interest rate risk, has not materially changed since August 31, 2001. Quantitative and qualitative disclosures about market risk are contained in Item 7A of our Annual Report on Form 10-K for the year ended August 31, 2001.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995

Farmland is including the following cautionary statement in this Form to make applicable and take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statement made by, or on behalf of, Farmland. The factors identified in this cautionary statement are important factors (but are not necessarily all of the potentially important factors) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Farmland. Where any such forward-looking statement includes a statement of the assumptions or basis underlying such forward-looking statement, Farmland cautions that, while it believes such assumptions or basis to be reasonable and makes them in good faith, assumed facts or basis almost always vary from actual results and the differences between the assumed facts or basis and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, Farmland, or its management, expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Such forward looking statements include, without limitation, statements regarding the seasonal effects upon the business, the anticipated expenditures for environmental remediation, the potential capital expenditures required to comply with recently enacted and proposed regulations related to low sulfur gasoline and diesel fuel, our ability to qualify for a delay in implementation of enacted and proposed low sulfur rules, the status of nitrogen plants which have been temporarily closed, and our ability to obtain a new, long-term credit facility. Discussion containing such forward-looking statements is found in the material set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to Condensed Consolidated Financial Statements”.

Taking into account the foregoing, the following are identified as important factors that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of, Farmland:

1. Weather patterns (flood, drought, frost, etc.) or crop failure.
2. Federal or state regulations regarding agricultural programs and production efficiencies.
3. Federal or state regulations regarding the amounts of fertilizer and other chemical applications used by farmers.
4. Factors affecting the export of United States agricultural produce (including foreign trade and monetary policies, laws and regulations, political and governmental changes, inflation and exchange rates, taxes, operating conditions and world demand).
5. Factors affecting supply, demand and price of crude oil, refined fuels, natural gas and other commodities.
6. Regulatory delays and other unforeseeable obstacles beyond our control that may affect growth strategies through unification, acquisitions and investments in ventures.
7. Competitors in various segments which may be larger than Farmland, offer more varied products or possess greater resources.
8. Technological changes that are more difficult or expensive to implement than anticipated.
9. Unusual or unexpected events such as, among other things, litigation settlements, adverse rulings or judgments and environmental remediation costs in excess of amounts accrued.
10. Material adverse changes in financial, banking or capital markets.
11. Federal or state regulations regarding environmental matters.
12. Terrorist attacks which have disrupted the financial and credit markets and have negatively impacted the United States economy and other economies.
13. The factors identified in “Business and Properties - Business - Business Risk Factors” included in our Annual Report on Form 10-K for the year ended August 31, 2001.

PART II - OTHER INFORMATION

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

(a) Exhibits

The exhibit listed below is filed as part of Form 10-Q for quarter ended November 30, 2001.

Exhibit No.     Description of Exhibit
10(ii)              Agreement of Purchase and Sale of Assets By and Between Cenex Harvest States Cooperatives and Farmland                        Industries, Inc., dated November 16, 2001.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended November 30, 2001.

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.

                                                        FARMLAND INDUSTRIES, INC.
                                                              (Registrant)


                                By:                        /s/  JOHN BERARDI
                                                             John Berardi
                                                       Executive Vice President
                                                      and Chief Financial Officer

Date: January 14, 2002

EXHIBIT INDEX

Exhibit No.     Description of Exhibit
10(ii)              Agreement of Purchase and Sale of Assets By and Between Cenex Harvest States Cooperatives and Farmland                        Industries, Inc., dated November 16, 2001.

EX-10

                                  AGREEMENT OF

                           PURCHASE AND SALE OF ASSETS

                                 BY AND BETWEEN


                        CENEX HARVEST STATES COOPERATIVES

                                       and

                            FARMLAND INDUSTRIES, INC.





                             DATED NOVEMBER 16, 2001





                    AGREEMENT OF PURCHASE AND SALE OF ASSETS

         THIS Agreement of Purchase and Sale of Assets (the "Agreement") is
entered into and made effective as of this 16th day of November, 2001, by and
between Cenex Harvest States Cooperatives, a Minnesota cooperative corporation,
with principal offices at 5500 Cenex Drive, Inver Grove Heights, MN, 55077
("CHS") and Farmland Industries, Inc., a Kansas cooperative corporation, with
principal offices at 12200 North Ambassador Drive, Kansas City, MO, 64163
("Farmland").

                                    RECITALS

         WHEREAS, Farmland is the owner of certain assets associated with its
business of wholesale marketing of energy products (the "Business"); and

         WHEREAS, Farmland wishes to sell, and CHS wishes to purchase, certain
of the assets associated with Farmland's operation of the Business, upon terms
and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, undertakings, covenants, promises, and agreements
as set forth herein, which Farmland and CHS each acknowledge are adequate and
sufficient, Farmland and CHS do hereby agree as follows:

                                    AGREEMENT

1. PURCHASE AND SALE OF ASSETS. Subject to all the terms and conditions set
forth in this Agreement, at the Closing (as such term is defined in Section 21.
herein) on the Closing Date (as such term is defined in Section 21. herein),
Farmland agrees to sell, transfer, assign, deliver, and convey to CHS, and CHS
agrees to purchase, assume, and accept from Farmland, all of Farmland's rights,
title, and interest to all the following described assets that are owned by
Farmland and associated with the Business (collectively referred to as the
"Assets"):

         a. Real Property. Certain real estate in Amarillo, Texas owned by
         Farmland and associated with the Business on the Closing Date, as more
         particularly described on Exhibit "A", attached hereto and incorporated
         herein, along with all buildings, fixtures, and other improvements and
         appurtenances owned by Farmland that are located on and constituting a
         part of such real estate on the Closing Date, together with all the
         estates and rights in and to such real estate, and in and to lands
         lying in streets, alleys and roads adjoining such real estate (the
         "Real Property");

          b. Personal Property.  Certain personal property owned by Farmland and
             ------------------
          associated with the Business on the Closing    Date,
          as more  particularly  described on Exhibit "B",  attached  hereto and
          incorporated herein (the "Personal Property");

          c.  Personal  Property  Leases.  To  the  extent  assignable,  all  of
              -------------------------
          Farmland's    rights   and    obligations    in    certain    personal
           property leases associated with the Business
          on the Closing  Date, as more  particularly  described on Exhibit "C",
          attached  hereto  and  incorporated  herein  (the  "Personal  Property
          Leases");

          d.  Contracts  and  Agreements.  To  the  extent  assignable,  all  of
              ------------------------
          Farmland's    rights   and    obligations    in   certain    contracts
            and agreements  associated with the Business
          on the Closing  Date, as more  particularly  described on Exhibit "D",
          attached   hereto  and   incorporated   herein  (the   "Contracts  and
          Agreements");

          e. Intellectual Property. All of Farmland's rights, title and interest
             ----------------------
          in certain trademarks,  service marks,  logos,
          trade names, and commercial  symbols  associated  exclusively with the
          Business  on the  Closing  Date,  as more  particularly  described  on
          Exhibit   "E",   attached   hereto  and   incorporated   herein   (the
          "Intellectual Property");

          f. Business  Records.  Certain  business  records (or copies thereof),
          including  but  not  limited  to a list  of  customers  served  by the
          Business  (the  "Customer   List")  and  all  written  and  electronic
          information,  files,  records, and data relating to the Customer List,
          owned by  Farmland  and  associated  with the  Business on the Closing
          Date, as more  particularly  described on Exhibit "F", attached hereto
          and incorporated herein (the "Business Records");

          g. Country  Energy,  LLC.  All of  Farmland's  membership  interest in
             -------------------
          Country Energy, LLC (the "Investment");

          h. JD Edwards  ERP  System.  All of  Farmland's  investment  in the JD
             ---------------------
          Edwards   ERP   System,    which    investment    was   made   jointly
           with CHS to be used by Country Energy,  LLC, as
          agent for Farmland and CHS (the "ERP System");

          i.  Permits/Licenses.  To  the  extent  assignable,  all  permits  and
              ----------------
          licenses   which   are   held  by   Farmland   and   associated   with
              the   Business   on   the   Closing   Date,   (the
          "Permits/Licenses");

          j. Purchased  Inventory.  Certain inventories of energy products owned
             --------------------
          by Farmland and associated  with the Business on
          the Closing Date, as more particularly  described in Section 7. herein
          (the "Purchased Inventory").

2.       EXCLUDED  ASSETS.  Notwithstanding  anything to the contrary set forth,
         ----------------
or implied,  in this  Agreement,  it is  specifically agreed to by both
Farmland  and CHS that the  Assets,  as such term is  defined  in  Section  1.
herein,  do not  include  any of the following:

          a. Excluded  Inventory.  Any  inventories of energy  products owned by
             -------------------
          Farmland on the Closing Date that are not included
          in Purchased Inventory pursuant to the provisions of Section 7. herein
          (the "Excluded Inventory").

          b. Excluded Energy Facilities. Any interest of Farmland (including its
          subsidiaries) in real and/or personal property at Farmland  facilities
          located at North  Kansas  City,  Missouri,  Coffeyville,  Kansas,  and
          Phillipsburg,  Kansas,  and any  interest of Farmland  (including  its
          subsidiaries,  including  but not limited to  Northeast  Arkansas  Oil
          Company, LLC) in retail petroleum facilities.

          c. Excluded Contracts/Leases.  Any interest of Farmland (including its
          subsidiaries) in contracts and/or leases not included on an Exhibit to
          this Agreement,  including but not limited to, the Petroleum  Products
          Transportation  Agreement  (inclusive  of all exhibits,  tariffs,  and
          division  sheets related  thereto) among Farmland,  Farmland  Pipeline
          Company, and Williams Pipe Line Company, effective May 1, 1997.

          d. Receivables.  Any interest of Farmland (including its subsidiaries)
             -----------
          in trade  accounts  and/or  notes  receivable  as of   the
          Closing Date.

          e.  Farmland  Other  Business  Enterprises.  Any  interest of Farmland
              --------------------------------------
          (including its subsidiaries)
          in any business  enterprises not included in Farmland's  wholesale
          energy business, including but not limited to, Farmland  Pipeline
          Company, GEMM Energy  Partners,  LLC,  Tri-Energy  Limited  Liability
          Company, Northeast Arkansas Oil Company, LLC, Nebraska Energy Limited
          Liability Company, Heartland Grain Fuels, L.P., and Dakota Fuels, Inc.

3. PROMOTION OF CHS. As additional consideration for CHS to purchase the
Business and Assets set forth herein, Farmland agrees that it shall actively
support CHS' purchase of the Business from Farmland to Farmland's member-owners,
and that it shall actively promote CHS as the preferred wholesale energy
products supplier in the agricultural marketplace ("Farmland Promotion");
provided however, that CHS agrees that Farmland shall not be required to expend
funds for the purpose of performing such Farmland Promotion.

4. COVENANT NOT TO COMPETE. As additional consideration for CHS to purchase the
Business and Assets set forth herein, Farmland agrees that, effective as of
Closing, it shall not, directly, or indirectly through any affiliate and/or
joint venture, engage in any business operations that competes, directly or
indirectly, with CHS' operation of its wholesale energy business anywhere in the
United States (the "Cenex Energy Business") for a period of seven (7) years from
and after the Closing Date (the "Non-Compete Period"), pursuant to the terms and
conditions set forth in this Section 4. (the "Covenant Not to Compete"). For all
purposes of this Section 4., each and every reference to Farmland is intended,
and shall be construed, to include Farmland, and every affiliate of Farmland,
and every joint venture in which Farmland is a partner, and/or any successor in
interest to Farmland, any affiliate of Farmland or any joint venture in which
Farmland is a partner. For all purposes of this Section 4., "affiliate" shall be
defined to be any individual or legal business entity which, directly or
indirectly, controls, is controlled by, or is under common control with,
Farmland, where the concept of "control" means the ability, directly or
indirectly, to influence the management and policies of any such individual or
legal business entity.

         a. Manufacturing Activities Not a Violation. Notwithstanding anything
         set forth herein to the contrary, Farmland and CHS agree that the
         provisions of this Section 4. shall not apply to the following
         activities by Farmland: (i) the sale of intermediate products
         historically produced at the Farmland refinery at Coffeyville, KS, and
         the sale of coke, steam, butane, carbon dioxide, nitrogen, argon,
         oxygen, hydrogen, benzene, xylene, and/or toluene produced at the
         manufacturing or processing facilities owned by Farmland (the
         "Manufacturing Byproduct(s)"); and/or (ii) the sale of electricity
         produced by co-generation involving utilization of manufacturing or
         processing facilities owned by Farmland (the "Co-Generation
         Electricity").

         b. Other Energy Products. Farmland specifically acknowledges and agrees
         that, except as specifically provided for in subsections c. through e.
         of this Section 4., any sale of propane, and/or lubricants, and/or
         gasolines and/or distillates (the "Defined Energy Product(s)") to
         persons or legal business entities other than CHS at any time during
         the Non-Compete Period will constitute a violation of the Covenant Not
         to Compete. In the event that a manufacturing or processing facility
         owned by Farmland will produce any energy product other than a Defined
         Energy Product or Manufacturing Byproduct or Co-Generation Electricity
         that is a product marketed by CHS as part of its Cenex Energy Business
         (the "Non-Defined Energy Product"), Farmland shall notify CHS of such
         Non-Defined Energy Product, and allow CHS to purchase such Non-Defined
         Energy Product at a fair market value price (the "CHS Option"). In the
         event that CHS notifies Farmland that it will not purchase any such
         Non-Defined Energy Product, Farmland shall have the right to sell such
         Non-Defined Energy Product to persons and/or legal business entities
         other than CHS (the "Refused Option Sale"), and CHS agrees that
         Farmland shall not be deemed to be in violation of its Covenant Not to
         Compete for making any such Refused Option Sale.

          c. Northeast Arkansas Facilities.  Notwithstanding  anything set forth
             -------------------------------
          herein    to    the     contrary,     Farmland     and    CHS    agree
          that the following  provisions  shall
          apply to activities of Northeast  Arkansas Oil Company,  LLC, a wholly
          owned subsidiary of Farmland ("NEA") during the Non-Compete Period.

                  i. NEA Business at Closing. Farmland and CHS acknowledge and
                  agree that, prior to the Closing Date, although NEA's primary
                  business consists of operating retail petroleum facilities,
                  NEA also markets refined energy products to customers on a
                  wholesale basis (the "NEA Wholesale Sales Business"), which
                  NEA Wholesale Sales Business will constitute a violation of
                  the Covenant Not to Compete as of the Closing Date.

                  ii. Limited Waiver of Covenant Not to Compete. Farmland and
                  CHS acknowledge and agree that it is currently Farmland's
                  intention that the NEA Wholesale Sales Business will be sold
                  within twelve (12) months after the Closing Date. CHS agrees
                  that Farmland shall not be deemed to be in violation of its
                  Covenant Not to Compete for a limited period of time not to
                  exceed twelve (12) months after the Closing Date (the "NEA
                  Non-Violation Period") as a result of the NEA Wholesale Sales
                  Business, provided that, in the event that NEA is owned by
                  Farmland, and in the event that NEA continues to operate the
                  NEA Wholesale Sales Business, NEA's operation of such NEA
                  Wholesale Sales Business during the NEA Non-Violation Period
                  is in full compliance with the provisions of subdivisions iii.
                  and iv. of subsection a. of this Section 4. (the "CHS Limited
                  NEA Waiver"). Farmland specifically acknowledges and agrees
                  that the CHS Limited NEA Waiver shall not be effective at any
                  time beyond the time period that ends twelve (12) months after
                  the Closing Date.

                  iii. No Expansion of NEA Wholesale Sales Business. In the
                  event that Farmland owns NEA, and in the event that NEA
                  continues to operate the NEA Wholesale Sales Business pursuant
                  to the provisions of subdivision ii. of subsection a. of this
                  Section 4., Farmland shall be deemed to be in violation of its
                  Covenant Not to Compete if the NEA Wholesale Sales Business is
                  expanded beyond the size of the geographical area in which NEA
                  conducted such NEA Wholesale Sales Business during the twenty
                  four (24) months prior to the Closing Date., where such
                  expansion occurs in any geographical area in which the Cenex
                  Energy Business markets energy products to customers on or
                  before the Closing Date.

                  iv. No Patronage to New Customers. In the event that Farmland,
                  or any affiliate of Farmland, owns NEA, and NEA continues to
                  operate the NEA Wholesale Sales Business pursuant to the
                  provisions of subdivision ii. of subsection a. of this Section
                  4., Farmland shall be deemed to be in violation of its
                  Covenant Not to Compete if it pays any patronage dividends (or
                  similar distribution), whether in cash, stock, or other
                  instrument, to any person or legal business entity as a result
                  of such person or legal business entity purchasing energy
                  products from the NEA Wholesale Sales Business if such person
                  or legal business entity had not purchased energy products
                  from the NEA Wholesale Sales Business within twenty four (24)
                  months prior to the Closing Date, and if such person or legal
                  business entity is a patron of the Cenex Energy Business on or
                  before the Closing Date.

         d. Acquisition of Competing Business. Notwithstanding anything set
         forth herein to the contrary, Farmland and CHS agree that the following
         provisions shall apply in the event that Farmland becomes the owner of
         a business that competes with the Cenex Energy Business (the "Competing
         Business") during the Non-Compete Period as a result of a merger or
         acquisition of all or substantially all of the assets of a third party
         (the "Triggering Event").

                  i. First Right of Negotiation - Initial Period. If a
                  Triggering Event occurs during a period of time beginning on
                  the Closing Date and ending five (5) years after the Closing
                  Date (the "Initial Period"), Farmland shall negotiate
                  exclusively with CHS to sell such Competing Business to CHS
                  for a period of forty five (45) days beginning on the day
                  after the closing date of the Triggering Event (the "Initial
                  Period Negotiating Time"). If an agreement cannot be reached
                  between Farmland and CHS as to the sale of such Competing
                  Business to CHS on terms acceptable to Farmland and CHS within
                  such Initial Period Negotiating Time, then CHS agrees that
                  Farmland shall not be deemed to be in violation of its
                  Covenant Not to Compete if it operates such Competing Business
                  for a period of time not to exceed twelve (12) months after
                  the last day of the Initial Period Negotiating Time (the
                  "Initial Period Non-Violation Period"), at which time Farmland
                  shall be required to divest itself of such Competing Business,
                  provided that Farmland's operation of such Competing Business
                  during the Initial Period Non-Violation Period is in full
                  compliance with the provisions of subdivisions iii. and iv. of
                  subsection b. of this Section 4..

                  ii. First Right of Negotiation - Subsequent Period. If a
                  Triggering Event occurs during a period of time beginning on
                  the day immediately following the last day of the Initial
                  Period and ending two years after the last day of the Initial
                  Period (the "Subsequent Period"), Farmland shall negotiate
                  exclusively with CHS to sell such Competing Business to CHS
                  for a period of forty five (45) days beginning on the day
                  after the closing date of the Triggering Event (the
                  "Subsequent Period Negotiating Time"). If an agreement cannot
                  be reached between Farmland and CHS as to the sale of such
                  Competing Business to CHS on terms acceptable to Farmland and
                  CHS within such Subsequent Period Negotiating Time, then CHS
                  agrees that Farmland shall not be deemed to be in violation of
                  its Covenant Not to Compete if it operates such Competing
                  Business for a period of time not to exceed twelve (12) months
                  after the last day of the Subsequent Period Negotiating Time
                  (the "Subsequent Period Non-Violation Period"), at which time
                  Farmland shall be required to either divest itself of such
                  Competing Business or pay to CHS the amount of One Million
                  Dollars ($1,000,000) (the "Liquidated Damages Fee", which
                  Farmland and CHS specifically agree represents an amount that
                  is reasonable in light of the anticipated or actual loss and
                  the inconvenience or nonfeasibility of otherwise obtaining an
                  adequate remedy, and is not, and shall not be construed to be,
                  a penalty), at Farmland's option, provided that Farmland's
                  operation of such Competing Business during the Subsequent
                  Period Non-Violation Period is in full compliance with the
                  provisions of subdivisions iii. and iv. of subsection b. of
                  this Section 4.. In the event that Farmland elects to pay to
                  CHS the Liquidated Damages Fee, Farmland shall not be deemed
                  to be in violation of its Covenant Not to Compete if it
                  operates such Competing Business for the remainder of the
                  Non-Compete Period in full compliance with the provisions of
                  subdivisions iii. and iv. of subsection b. of this Section 4..

                    iii.  No  Expansion  of  Competing  Business.  In the  event
                          ----------------------------------- that Farmland
                    operates a Competing Business pursuant to the provisions of
                    subdivision i. and/or  subdivision  ii. of subsection b. of
                    this Section 4.,  Farmland  shall be  deemed  to be in
                    violation  of its
                    Covenant  Not to  Compete  if it  expands  the  size  of the
                    geographical  area that such Competing  Business marketed to
                    customers  during the twenty four (24)  months  prior to the
                    closing date of the applicable  Triggering Event, where such
                    expansion occurs in any geographical area in which the Cenex
                    Energy  Business  markets energy products to customers on or
                    before the closing date of the applicable Triggering Event.

                    iv.  No  Patronage  to  New  Customers.  In the  event  that
                            ------------------------------
                    Farmland operates a
                    Competing Business pursuant to the provisions of
                    subdivision i. and/or
                    subdivision  ii.  of  subsection  b.  of  this  Section  4.,
                    Farmland  shall be deemed to be in violation of its Covenant
                    Not to  Compete  if it  pays  any  patronage  dividends  (or
                    similar  distribution),  whether  in cash,  stock,  or other
                    instrument,  to any  person  or legal  business  entity as a
                    result of such person or legal  business  entity  purchasing
                    energy  products from the Competing  Business while Farmland
                    operates  such  Competing  Business  if such person or legal
                    business entity had not purchased  energy products from such
                    Competing  Business  within twenty four (24) months prior to
                    the closing date of the applicable  Triggering Event, and if
                    such  person  or legal  business  entity  is a patron of the
                    Cenex  Energy  Business on or before the closing date of the
                    applicable Triggering Event.

         e.      Refinery Production of Refined Energy Products. Notwithstanding
                  ----------------------------------------------
                 anything set forth herein to the contrary,  Farmland
                 and CHS agree that the  following  provisions  shall apply to
                 activities  of  Farmland's  Coffeyville,  Kansas  refinery (the
                 "Refinery") during the Non-Compete Period.

                  (i) Refinery Supply Agreement. Farmland and CHS acknowledge
                  and agree that, as of the Closing Date, Farmland shall sell
                  and deliver, and CHS shall purchase and accept the delivery
                  of, certain refined energy products produced at the Refinery
                  (the "Refined Energy Products"), pursuant to provisions of a
                  Refinery Supply Agreement (the "Refinery Supply Agreement").

                  (ii) Termination of Refinery Supply Agreement. In the event
                  that such Refinery Supply Agreement is terminated, for any
                  reason other than a "Manufacturing Shut Down" as such term is
                  defined in the Refinery Supply Agreement, and provided that
                  Farmland continues to own an uninterrupted controlling equity
                  interest in the Refinery, CHS agrees that Farmland shall not
                  be deemed to be in violation of its Covenant Not to Compete if
                  it sells such Refined Energy Products produced at the Refinery
                  to any person or legal business entity after the termination
                  of such Refinery Supply Agreement.

                  (iii) Force Majeure Declared by CHS. In the event that the
                  Refinery Supply Agreement is in effect, and CHS has notified
                  Farmland that it requests to be excused from its obligation to
                  purchase some or all of the Refined Energy Products produced
                  at the Refinery pursuant to the provisions of Paragraph 16. of
                  Exhibit A of the Refinery Supply Agreement (the "Force Majeure
                  Event") (the "Excused Refined Energy Products"), CHS agrees
                  that Farmland shall not be deemed to be in violation of its
                  Covenant Not to Compete if it sells such Excused Refined
                  Energy Products produced at the Refinery to any person or
                  legal business entity during the "continuance" of such Force
                  Majeure Event, which "continuance" shall conclude upon
                  Farmland's receipt of written notice from CHS that the
                  conditions leading to such Force Majeure Event have ended and
                  CHS is no longer requesting to be excused from its obligations
                  to purchase Excused Refined Energy Products (the "Force
                  Majeure Conclusion Notice"). Further, CHS agrees that,
                  provided that Farmland exercises commercially reasonable
                  efforts to promptly discontinue sales of Refined Energy
                  Products produced at the Refinery to persons or legal business
                  entities other than CHS following its receipt of such Force
                  Majeure Conclusion Notice, Farmland shall not be deemed to be
                  in violation of its Covenant Not to Compete if it sells
                  Refined Energy Products produced at the Refinery following
                  Farmland's receipt of such Force Majeure Conclusion Notice to
                  persons or legal business entities who have, prior to
                  Farmland's receipt of such Force Majeure Conclusion Notice,
                  entered into written agreements with Farmland for the sale of
                  such Refined Energy Products produced at the Refinery, for a
                  period of time not to exceed thirty (30) days after Farmland's
                  receipt of such Force Majeure Conclusion Notice. Farmland
                  specifically acknowledges and agrees that sales of Refined
                  Energy Products to persons or legal business entities other
                  than CHS at any time during the Non-Compete Period following
                  the time period that ends thirty (30) days after Farmland's
                  receipt of such Force Majeure Conclusion Notice will
                  constitute a violation of the Covenant Not to Compete.

                  (iv) Limitations On Activity That Is Not a Violation. Except
                  as specifically provided for in subdivision (ii) and
                  subdivision (iii) of this Section 4.c. of this Agreement,
                  Farmland specifically acknowledges and agrees that sales of
                  Refined Energy Products produced at the Refinery to persons or
                  legal business entities other than CHS at any time during the
                  Non-Compete Period will constitute a violation of the Covenant
                  Not to Compete.

         f. Ethanol Joint Ventures. Notwithstanding anything set forth herein to
         the contrary, Farmland and CHS agree that the provisions of this
         Section 4. shall not apply to activities of joint ventures that produce
         ethanol in which Farmland has an equity ownership interest (the
         "Ethanol Joint Ventures"), provided that such Ethanol Joint Ventures
         only sell "raw" unblended ethanol, and never sell ethanol blended with
         gasoline. Farmland specifically acknowledges and agrees that sales of
         ethanol blended with gasoline by any such Ethanol Joint Venture at any
         time during the Non-Compete Period will constitute a violation of the
         Covenant Not to Compete.

         g. Equitable Relief. Farmland specifically acknowledges and agrees that
         any breach or violation of the provisions of this Section 4. by itself,
         or by any of its employees and/or agents, would cause CHS immediate and
         irreparable harm, and the extent of such injury would be difficult to
         measure, and may not be adequately compensated by money damages.
         Accordingly, Farmland specifically agrees that, in the event of any
         such breach or violation of any of the provisions of this Section 4.,
         in addition to all the other remedies that are available at law or in
         equity, CHS shall be entitled to equitable relief, including temporary
         and permanent injunctive relief, to restrain any such breach or
         violation without the necessity of posting bond or showing or proving
         actual damage sustained by CHS, or the lack of an adequate remedy at
         law, as a result of the breach or violation by Farmland.

         h.       Enforceability.  If any provision of this Section 4. shall be
                  --------------
         determined by a court of competent  jurisdiction  to be invalid,
         illegal or incapable of being  enforced by reason of any rule of law or
         public policy:  (i) all other  provisions of this Section 4. shall
         nevertheless  remain in full force and effect and shall be deemed
         separate and divisible from all other provisions herein and none shall
         be deemed to be dependent  upon any other unless so  expressed  herein,
         and (ii) such court may enforce such provision as the court finds to be
         reasonable.

         i. Assignability. Notwithstanding anything to the contrary herein,
         Farmland acknowledges and agrees that, in the event that CHS sells all
         or substantially all of the CHS Energy Business, CHS may assign, in
         part or in whole, its rights and benefits set forth in this Section 4.
         to the person or legal business entity that buys all or substantially
         all of the CHS Energy Business as part of such sale, without the
         consent of Farmland.

5. LICENSED MARKS. As additional consideration for CHS to purchase the Business
and Assets set forth herein, Farmland agrees to grant to CHS, effective as of
the Closing: (i) a non-exclusive royalty-free license to use certain trademarks,
service marks, logos, trade names, and commercial symbols, or any combination
thereof, owned by Farmland that are not associated exclusively with the Business
on the Closing Date (the "Farmland Marks") for CHS' operation of the CHS Energy
Business for a period of six (6) months from and after the Closing Date (the
"License"); and (ii) a non-exclusive royalty-free right to sublicense certain of
the Farmland Marks to customers of the CHS Energy Business for a period of two
(2) years from and after the Closing Date (the "Sublicense"); provided however
that CHS' use of such License and Sublicense is limited to the following
conditions:

         a.       Limited  List of  Farmland  Marks.  The  License  and
                  ---------------------------------
         Sublicense  granted  to CHS herein is  applicable  only to the
         following Farmland Marks:  Farmland(R), Big Country(R), and Double
         Circle(R)(the "Licensed Marks").

         b. Limited Use of Licensed Marks by CHS. CHS' use of the Licensed Marks
         shall be limited to activities associated with the Cenex Energy
         Business as of the Closing Date. CHS agrees that it shall use
         commercially reasonable efforts to discontinue its use of the Licensed
         Marks pursuant to the License as soon as practicable after the Closing.

         c.       Limited Use of Sublicense.         CHS'  Sublicense  of the
                  -------------------------
         Licensed  Marks shall be limited to customers of the CHS Energy
         Business using such Licensed Marks as of the Closing Date.

         d. General Terms and Conditions. CHS agrees that the Farmland Marks are
         the sole property of Farmland and that any goodwill generated from any
         and all uses of the Licensed Marks shall inure to the benefit of
         Farmland. CHS also agrees that the License granted to CHS herein is
         subject to and conditioned upon the agreement by CHS that any products
         or services sold or transferred by CHS using the Licensed Marks will be
         in accordance with, and subject to, commercial reasonable quality
         controls issued by Farmland to CHS in writing. In addition, CHS agrees
         that CHS' use of the Licensed Marks shall be in accordance with
         commercially reasonable written instructions from Farmland, and shall
         be in a manner consistent with the use of such Licensed Marks by
         Country Energy, LLC, during the time that it acted as agent for
         Farmland and CHS. CHS shall not, directly or indirectly, attack or
         assist a third party in attacking the validity of the Licensed Marks.
         CHS and Farmland shall coordinate in good faith with respect to the
         enforcement of CHS' Sublicense of the Licensed Marks to customers of
         the CHS Energy Business.

6. ASSUMPTION OF LIABILITIES. CHS agrees that, effective as of the Closing Date,
it shall assume and perform all obligations, liabilities, and duties of Farmland
under Personal Property Leases and Contracts and Agreements as set forth on
Exhibits "C" and "D", by an assumption instrument in the form set forth on
Exhibit "G", attached hereto and incorporated herein (the "Assumption
Agreement").

7.       PURCHASED INVENTORY.  Inventories of energy products to be purchased by
         ------------------
 CHS as of the Closing Date shall include:


         a.       Propane.  All inventories of propane owned by Farmland and
                  -------
         associated with the Business on the Closing Date


         b.       Lubricants.  All inventories of merchantable base oils,
                  ----------
        additives,  containers,  lubricating oils, and greases owned by Farmland
        and  associated  with the  Business on the Closing  Date  (which
        inventories  exclude all base oils,  additives, containers, and greases
        owned by Farmland located at Farmland's North Kansas City, Missouri
        Grease Plant).

         c.       Refined Products  Additives.  All inventories of additives for
                  ---------------------------
         gasoline and distillate products owned by Farmland and associated with
         the Business on the Closing Date.

         d.       Ethanol.  All inventories of ethanol owned by Farmland and
                  -------
         associated with the Business on the Closing Date.


         e. Refined Products. All inventories of gasoline and distillate
            ----------------
         products owned by Farmland and associated with the Business on the
         Closing Date, except for inventories of gasoline and distillate
         products in certain locations as set forth herein (the "Excluded
         Inventories"). Excluded Inventories shall consist of all inventories of
         gasoline and distillate products: (A) in the pipeline and terminals
         that are part of the Williams Pipeline System, Kaneb Pipeline System,
         Chase Pipeline System, and Cenex Pipeline System, and (B) in terminals
         operated by CHS and located at Chippewa Falls, McFarland, and Green
         Bay, Wisconsin. Excluded Inventory will be purchased by CHS from
         Farmland in the ordinary course of business pursuant to mutual
         agreement of Farmland and CHS as set forth in a "Inventory
         Exchange/Purchase Agreement" to be executed on or before the Closing
         Date.

         f.       Equipment.  All  inventories of petroleum  equipment and
                  ---------
         propane  equipment owned by Farmland and associated with the Business
         on the Closing Date.

8.       PRO-RATIONS.

         a. Property Taxes, Utility Charges, and Lease Rentals. Real property
         taxes, personal property taxes, and utility charges associated with the
         Real Property and Assets at the Real Property that are due and payable
         in the year of Closing and rents for Personal Property Leases shall be
         pro-rated between Farmland and CHS as of the Closing Date. All special
         assessments, if any, levied against the Real Property prior to the
         Closing Date but due after the Closing Date shall be allocated to
         Farmland as of the Closing Date.

         b. Trade Payables. Trade payables associated with the Business while it
         was operated by Country Energy, LLC, as agent for Farmland and CHS,
         prior to the Closing Date that are unpaid as of the Closing Date shall
         be paid by Farmland and CHS on and after the Closing Date, and shall be
         pro-rated between Farmland and CHS effective as of the Closing Date.

         c. Expenses of Country Energy, LLC. Expenses of Country Energy, LLC, as
         agent for Farmland and CHS, that apply to time periods prior to the
         Closing Date that are unpaid as of the Closing Date shall be paid by
         Farmland and CHS on and after the Closing Date, and shall be pro-rated
         between Farmland and CHS effective as of the Closing Date.

         d.       Netting  Against  Payment  of  Purchase  Price.  The net
                  ----------------------------------------------
        amount of the  pro-rated  amounts  calculated  pursuant  to
        subsections a. through c. of this Section 8. (the "Pro-Rations") shall
        increase or decrease,  as appropriate,  the amount paid
         by CHS to Farmland for the Assets to be sold and purchased hereunder.

9.       PURCHASE  PRICE.  The  purchase  price to be paid for all the  Assets
         ---------------
         to be sold and  purchased  under  this  Agreement  (the
         "Purchase Price") shall be an amount equal to the sum of:

         a. Assets Other Than Purchased Inventory (e.g. Real Property, Personal
         Property, Personal Property Leases, Contracts, Intellectual Property,
         Business Records, Investment, ERP System, and Permits/Licenses), plus
         the Farmland Promotion, Covenant Not To Compete, and License and
         Sublicense of Licensed Marks. Twenty nine million dollars ($29,000,000)
         plus the estimated amount of money invested by Farmland for its
         investment in the ERP System prior to Closing (which is an estimated
         amount of approximately two million three hundred thousand dollars
         ($2,300,000), which estimated amount shall be mutually agreed upon by
         Farmland and CHS on or before the Closing Date) (the "Base Price");
         plus

         b.       Purchased  Inventory.  An  amount  equal to the  value of
                  --------------------
         Purchased  Inventory,  as  calculated  pursuant  to mutual
         agreement of Farmland and CHS on or before the Closing Date.

The Base Price shall be allocated among the Assets, exclusive of Purchased
Inventory, as set forth and described on Exhibit "H", attached hereto and
incorporated herein, for all purposes, including but not limited to tax
reporting.

10. PAYMENT OF PURCHASE PRICE. Provided that Farmland has performed all
representations, warranties, undertakings, covenants, promises, and agreements
in favor of CHS that are to be performed by Farmland on or before the Closing
Date, as set forth and described in this Agreement, CHS shall pay the Purchase
Price to Farmland as follows:

         a. Payment on the Closing Date. On the Closing Date, CHS shall pay to
         Farmland, by wire transfer of immediately available funds, an amount
         equal to the Base Price, plus an amount equal to the estimated amount
         of Purchased Inventory as mutually agreed upon by Farmland and CHS on
         the Closing Date, plus or minus an estimated amount of Pro-Rations as
         mutually agreed upon by Farmland and CHS on the Closing Date.

         b. Payment Subsequent to the Closing Date. Farmland and CHS agree to
         cooperate in good faith to complete the calculation of actual money
         invested by Farmland for its investment in the ERP System, actual
         Purchased Inventory and actual Pro-Rations, and compare such actual
         amounts to respective estimated amounts used to calculate the cash
         payment by CHS to Farmland on the Closing Date (with the collective net
         differences between actual and estimated amounts to be the "Settlement
         Amount") not later than thirty (30) days after the Closing Date (the
         "Subsequent Payment Date"). The party owing the Settlement Amount shall
         pay to the other party, by wire transfer of immediately owing funds, an
         amount equal to such Settlement Amount on the Subsequent Payment Date;
         provided however that in the event that Farmland and CHS have not
         agreed on the Settlement Amount by the Subsequent Payment Date, then
         the undisputed portion of the Settlement Amount shall be paid by the
         party owing such undisputed portion of the Settlement Amount, and
         Farmland and CHS shall cooperate in good faith to resolve and complete
         payment of the disputed portion of the Settlement Amount as soon as
         practicable after the Subsequent Payment Date.

11. DUE DILIGENCE. CHS and Farmland acknowledge that the parties have entered
into a letter agreement dated October 17, 2001 setting forth terms and
conditions pertaining to CHS' access upon the Real Property for the purpose of
conducting environmental-related investigation activities (the "Letter
Agreement"). In addition to the agreements set forth in the Letter Agreement,
Farmland agrees that: (i) CHS' agents, servants, contractors, employees, and/or
other representatives shall have the right to enter upon the Real Property
between 9:00 a.m. and 5:00 p.m. CDT on Monday through Friday for the purpose of
inspecting any or all of the Assets located at such Real Property; provided
however that any such inspection pertaining to environmental conditions must be
performed in accordance with provisions of the Letter Agreement; (ii) it shall
provide CHS with copies of all Personal Property Leases, Contracts, Business
Records and such other information as CHS reasonably deems necessary for it to
evaluate the Assets and the Business; and (iii) it shall make available to CHS
appropriate representatives of Farmland to discuss due diligence issues
pertaining to the Assets and the Business. CHS shall have until the Closing Date
to complete its due diligence review and investigation of the Assets and the
Business. Farmland specifically agrees that no inspection or other review of the
Assets and the Business by CHS, on or prior to the Closing Date, shall
constitute a waiver or relinquishment on the part of CHS of its rights to rely
on any of the representations, warranties, undertakings, covenants, promises,
and agreements of Farmland in favor of CHS as are set forth in this Agreement.

12.      ENVIRONMENTAL MATTERS.

         a. Warranty. Farmland represents and warrants to CHS that, to the best
         of its knowledge, except as set forth on Exhibit "I", attached hereto
         and incorporated herein, the Assets associated with the Real Property
         are in substantial compliance with all "Applicable Environmental Laws"
         (as such term is defined in subsection d. below) with respect to its
         operation of the Business on the Real Property, and neither Farmland,
         or any other third party, has received a notice of violation of an
         Applicable Environmental Law with respect to the Real Property,
         pursuant to which any government agency would require soil and/or
         groundwater remediation. Further, Farmland represents and warrants
         that, to the best of its knowledge, except as specifically set forth on
         Exhibit "I", there are not any active, inactive, and/or abandoned
         wells, and/or any underground storage tanks located on the Real
         Property.

         b. Environmental Due Diligence. Farmland agrees that CHS shall have the
         right to perform Phase I and Phase II Environmental Site Assessments on
         the Real Property (the "Environmental Assessments") prior to the
         Closing Date, pursuant to the terms and conditions of the Letter
         Agreement. CHS agrees to notify the environmental consultant hired by
         CHS to perform the Environmental Assessments (the "Environmental
         Consultant") that the Environmental Consultant must treat all the
         information provided by Farmland or CHS pertaining to the Real Property
         (the "Confidential Information") in accordance with the terms of the
         Letter Agreement and in the same manner that the Environmental
         Consultant treats its own proprietary and confidential information, and
         CHS agrees that it shall not allow the Environmental Consultant to
         disclose Confidential Information to any person other than Farmland or
         CHS except in compliance with the terms of the Letter Agreement. CHS
         and Farmland agree that CHS shall provide a copy of the Letter
         Agreement to the Environmental Consultant and require such
         Environmental Consultant to abide by its terms. CHS also agrees to
         provide copies of final Phase I and Phase II Environmental Site
         Assessment Reports pertaining to the Real Property that are issued by
         the Environmental Consultant (the "Environmental Reports") to Farmland
         promptly upon CHS' receipt of such final Environmental Reports.

         c. Reporting Requirements. Farmland specifically agrees that it shall
         be solely responsible for any and all reporting requirements
         established by "Applicable Environmental Laws" (as such term is defined
         in subsection d. below) resulting from final Environmental Reports;
         provided however that nothing in this Section 12.c. shall be
         interpreted as precluding CHS from providing any information in such
         final Environmental Reports to any governmental entities: (i) at any
         time after the Closing Date; or (ii) at any time prior to the Closing
         Date if CHS reasonably believes, after consultation with legal counsel,
         that it is specifically required by law to provide such information to
         governmental entities.

         d.       Applicable  Environmental  Laws. As used herein,  "Applicable
                  -------------------------------
         Environmental  Laws" shall include the:  Comprehensive
         Environmental  Response,  Compensation and Liability Act, 42 U.S.C.
         Section 9601, et seq.; Resource  Conservation and Recovery
         Act, 42 U.S.C.  Section 6901, et seq.;  Federal Water Pollution
         Control Act, 33 U.S.C.  Section 1251, et seq.; Clean Air Act,
         42 U.S.C.  Section 7401, et seq.; Toxic Substances  Control Act, 15
         U.S.C.  Section 2601, et seq.; Safe Drinking Water Act, 42
         U.S.C.  Section 300; the Federal  Insecticide,  Fungicide and
         Rodenticide  Act, 7 U.S.C.  Section 136, et seq.; the Hazardous
         Materials  Transportation  Act,  49 U.S.C.  1801,  et seq.;  and any
         similar  state and local  laws  and/or  ordinances,  and
         regulations  implementing  such statutes  and/or  otherwise  intended
         for the  protection of the  environment  in the state of
         Texas.

13.      INDEMNFICATIONS.

         a. No Other Liabilities Assumed by CHS. Except as provided for in
         Section 6., it is specifically agreed to by Farmland and CHS that (i)
         liabilities, debts and obligations of every character or description,
         known or unknown, of Farmland accruing or arising from transactions or
         occurrences prior to 11:59 p.m. CST on the Closing Date (the
         "Pre-Closing Liabilities"), shall be Farmland's sole obligation and
         responsibility, and (ii) CHS is not assuming, and shall not have any
         responsibility for, any Pre-Closing Liabilities. Notwithstanding
         anything to the contrary herein, it is specifically agreed to by
         Farmland that CHS shall have no responsibility for any costs associated
         with any investigation, remediation and/or corrective action required
         under Applicable Environmental Laws as a result of environmental
         conditions existing on, under, or adjacent to the Real Property as of
         11:59 p.m. CST on the Closing Date.

         b.       Indemnification.  Farmland and CHS agree to indemnify each
                  ---------------
         other as set forth in  subdivisions i. through iv. of this
         subsection b.:

                  i. Farmland's Indemnification Obligations. Farmland agrees to
                  defend, indemnify and hold harmless CHS (including its
                  affiliates, officers, directors, employees, and agents), from
                  and against any and all claims, demands, damages, losses,
                  liabilities, causes of action, judgments, fines, assessments
                  (including penalties and/or interest), costs and expenses of
                  any kind or nature, including attorneys' fees, consultants'
                  fees, and costs and expenses of litigation and/or other form
                  of dispute resolution, without regard to amount, caused by or
                  arising or resulting from, whether directly or indirectly: (A)
                  investigation, remediation, and/or corrective action required
                  under Applicable Environmental Laws as a result of
                  environmental conditions existing at the Real Property, or any
                  adjoining real property, which environmental conditions
                  resulted from a spill and/or release on the Real Property,
                  prior to 11:59 p.m. CST on the Closing Date (provided,
                  however, that if there is not a Closing of this Agreement,
                  then Farmland's indemnification obligations as set forth in
                  this subdivision (A) shall extend to environmental conditions
                  resulting from any spill and/or release on the Real Property
                  at any time); (B) Farmland's ownership of the Assets and/or
                  operation of the Business prior to 11:59 p.m. CST on the
                  Closing Date; and/or (C) Farmland's failure to comply with any
                  applicable federal, state or local laws, ordinances, orders,
                  permits, rules, and regulations; and/or (D) Farmland's breach
                  of any of its representations, warranties, undertakings,
                  covenants, promises and agreements as set forth in this
                  Agreement.

                  ii. CHS' Indemnification Obligations. CHS agrees to defend,
                  indemnify and hold harmless Farmland (including its
                  affiliates, officers, directors, employees, and agents), from
                  and against any and all claims, demands, damages, losses,
                  liabilities, causes of action, judgments, fines, assessments
                  (including penalties and/or interest), costs and expenses of
                  any kind or nature, including attorneys' fees, consultants'
                  fees, and costs and expenses of litigation and/or other form
                  of dispute resolution, without regard to amount, caused by or
                  arising or resulting from, whether directly or indirectly: (A)
                  if there is a Closing of this Agreement, investigation,
                  remediation, and/or corrective action required under
                  Applicable Environmental Laws as a result of environmental
                  conditions existing at the Real Property, or any adjoining
                  real property, which environmental conditions resulted from a
                  spill and/or release on the Real Property, from and after
                  11:59 p.m. CST on the Closing Date; (B) if there is a Closing
                  of this Agreement, CHS' ownership of the Assets and/or
                  operation of the Business from and after 11:59 p.m. CST on the
                  Closing Date; and/or (C) CHS' failure to comply with any
                  applicable federal, state or local laws, ordinances, orders,
                  permits, rules, and regulations; and/or (D) CHS' breach of any
                  of its representations, warranties, undertakings, covenants,
                  promises and agreements as set forth in this Agreement.

                  iii. Notice of Demand for Indemnification. Within ninety (90)
                  days after discovery of, or constructive receipt of notice of
                  the assertion of, any claim as to which CHS or Farmland is, or
                  may be, indemnified by the other party hereto pursuant to
                  provisions of this Section 13.b., the party seeking
                  indemnification shall notify the other party hereto of such
                  claim, and tender to the other party the right to defend
                  against such claim, but reserving the right to participate, at
                  its own cost and expense, in the litigation and/or the
                  settlement of such claim. The party receiving a claim for
                  indemnification shall not be obligated to indemnify the party
                  seeking indemnification if such party seeking indemnification
                  (A) fails to notify the other party hereto as provided herein,
                  or (B) compromises or settles the claim without consent of the
                  other party hereto.

                  iv. Country Energy, LLC. Farmland and CHS acknowledge that,
                  since September 1, 1998 to the Closing, Country Energy, LLC
                  has acted as agent for Farmland and CHS in the marketing, sale
                  and distribution of energy products. Farmland and CHS
                  specifically agree that nothing in this Section 13.b. shall be
                  construed as expanding, limiting, or otherwise modifying, in
                  any way, the respective rights and obligations associated with
                  Farmland's and CHS' respective membership interests in Country
                  Energy, LLC.

                  v.       Survival  of  Indemnification  Obligations.  Farmland
                           ------------------------------------------
                  and  CHS  specifically  agree  that,  notwithstanding
                  anything to the contrary, all of the terms and conditions of
                  this Section 13.b. shall survive the Closing.

14. CHS' USE OF FARMLAND'S LEGACY COMPUTER SYSTEM. Farmland agrees to allow CHS
to use Farmland's "Legacy Computer System" for a transition period after the
Closing Date, in accordance with the provisions set forth in Exhibit "J,
attached hereto and incorporated herein.

15.      RECEIVABLES.  Farmland and CHS mutually agree to cooperate in good
         -----------
faith to resolve all issues  related to  receivables  owned
by Farmland and CHS generated by sales of energy products before and after the
Closing Date.

- -
         a. CREATION OF ACCOUNTS RECEIVABLE PRIOR TO CLOSING. During the time
         period beginning September 1, 1998 through the Closing, Country Energy,
         LLC sold energy products to customers of CHS and Farmland, as agent for
         CHS and Farmland, with each sale being jointly made by CHS and Farmland
         (the "Joint Sales"). Both CHS' and Farmland's accounts receivable
         systems were used to record accounts receivable from customers
         generated by such Joint Sales. Effectively, the accounts receivable
         recorded on CHS' system that resulted from Farmland's share of Joint
         Sales were purchased by CHS from Farmland at the time of recording, and
         the accounts receivable recorded on Farmland's system that resulted
         from CHS' share of Joint Sales were purchased by Farmland from CHS at
         the time of recording (the "Receivable Purchases"). Such Receivable
         Purchases were made with full recourse in the event that any of such
         Receivables Purchases were later determined to be uncollectible. After
         such Receivable Purchases were made, Farmland managed the collection of
         receivables from Joint Sales recorded on Farmland's accounts receivable
         system, and CHS managed the collection of receivables from Joint Sales
         recorded on CHS' accounts receivable system.

         b. POST-CLOSING COLLECTION OF RECEIVABLES RECORDED FROM JOINT SALES.
         CHS and Farmland agree that it is their intent that for a time period
         of six (6) months after Closing, Farmland will continue to manage the
         collection of receivables from Joint Sales prior to Closing that were
         recorded on Farmland account receivables system, and CHS will continue
         to manage the collection of receivables from Joint Sales prior to
         Closing that were recorded on CHS' accounts receivables system (the
         "Post Closing Collection Period"). To facilitate in the timely
         collection of receivables arising from Joint Sales prior to the
         Closing, Farmland and CHS agree to the following:

                  i. Farmland irrevocably constitutes and appoints CHS, with
                  full power of substitution, as its true and lawful
                  attorney-in-fact with full irrevocable power and authority, in
                  the place and stead of Farmland, and in the name of Farmland
                  or in its own name, without notice to or assent by Farmland,
                  to sign, endorse, and negotiate any check, draft, or other
                  instrument received by CHS as payments by customers of
                  accounts receivable balances owned by Farmland as of the
                  Closing Date.

                  ii. CHS irrevocably constitutes and appoints Farmland, with
                  full power of substitution, as its true and lawful
                  attorney-in-fact with full irrevocable power and authority, in
                  the place and stead of CHS, and in the name of CHS or in its
                  own name, without notice to or assent by CHS, to sign,
                  endorse, and negotiate any check, draft, or other instrument
                  received by Farmland as payments by customers of accounts
                  receivable balances owned by CHS as of the Closing Date.

                  iii. Farmland and CHS acknowledge that some of the customers
                  who purchased energy products jointly from Country Energy,
                  LLC, as agent for Farmland and CHS, prior to Closing,
                  erroneously paid Farmland instead of CHS and CHS instead of
                  Farmland. Farmland and CHS expect that these payment errors
                  may continue to occur after Closing, and agree to mutually
                  cooperate to discuss, resolve, and settle such payment errors
                  weekly during the Post Closing Collection Period

         c. SETTLEMENT OF RECEIVABLES FROM JOINT SALES. CHS and Farmland agree
         to mutually cooperate during the Post Closing Receivable Collections
         Period to promptly discuss and resolve issues arising from post-closing
         collection of receivables recorded from Joint Sales prior to Closing.
         At the end of the Post Closing Receivable Collections Period, CHS and
         Farmland representatives shall meet to mutually agree on the proper
         actions to take on open issues related to uncollected receivables from
         Joint Sales prior to Closing.

         d. POST-CLOSING COLLECTION OF RECEIVABLES ARISING FROM POST-CLOSING
         SALES OF ENERGY PRODUCTS BY CHS. Farmland and CHS acknowledge that some
         customers who purchased energy products jointly from Country Energy,
         LLC, as agent for Farmland and CHS, prior to Closing, may erroneously
         pay to Farmland amounts properly due to CHS for its sales of energy
         products after Closing. Farmland agrees to promptly pay to CHS all such
         amounts it receives.

16. GENERAL REPRESENTATIONS AND WARRANTIES OF FARMLAND. In addition to the
specific representations, warranties, undertakings, covenants, promises, and
agreements of Farmland as set forth elsewhere in this Agreement, Farmland hereby
makes the following general representations, warranties, covenants,
undertakings, covenants, promises, and agreements to, and with, CHS with the
intent that CHS may rely upon the same:

         a. Organization and Standing of Farmland. Farmland is a cooperative
         corporation duly organized and validly existing in good standing under
         the laws of the State of Kansas, is duly qualified to do business as a
         foreign corporation and is in good standing in each jurisdiction where
         the conduct of the Business makes such qualification necessary, and has
         the corporate power to own the Assets and to carry on the Business as
         it is currently being conducted.

         b. Corporate Authority of Farmland. Farmland has taken all corporate
         actions required to authorize the execution and delivery of this
         Agreement. Prior to the Closing Date, Farmland shall have taken all
         corporate actions required in order to enable it to consummate the
         transaction contemplated by this Agreement and to make binding upon it
         all the representations, warranties, undertakings, covenants, promises,
         and agreements made, and to be performed by it, under this Agreement.

         c. No Breach of Other Agreements. Neither the execution of this
         Agreement by Farmland, nor the Closing of the transaction contemplated
         by this Agreement by Farmland, will constitute a violation of, or are
         or will be in conflict with, or are or will constitute a breach of, or
         default under, any term or provision of any contract, indenture or
         other agreement or instrument to which Farmland is a party.

         d.       No  Violation  of Law.  Neither the  execution of this
                  ---------------------
         Agreement  by  Farmland,  nor the Closing of the  transaction
         contemplated by this Agreement by Farmland,  will  constitute a
         violation of any applicable law, order,  rule or regulation of
         any governmental or quasi-governmental authority.

         e. Property Taxes/Utilities. Farmland has paid all property taxes and
         special assessments associated with the Real Property which are due and
         payable as of the Closing Date. All utilities for power, gas, electric,
         water, sewer and telephone are available to the Real Property without
         the need for any right of way, easement, or other consent in order to
         access and use said utilities.

         f. Compliance With Laws and Regulations. Exclusive of environmental
         matters, which shall be governed solely by the provisions of Section
         12. herein, the Business is in substantial compliance with all
         applicable federal, state, and/or local laws, ordinances, orders,
         rules, and/or regulations. Farmland's operation of its Business on the
         Real Property is a permitted use of the Real Property under all the
         current applicable zoning ordinances, regulations and restrictions
         thereto , and to the best of Farmland's knowledge, there are no
         conditions which would interfere with, or restrict, CHS' peaceful
         possession of the Real Property, or CHS' intended use of the Assets as
         part of the Cenex Energy Business.

         g. No Legal Proceedings Affecting the Assets. Exclusive of
         environmental matters, which shall be governed solely by the provisions
         of Section 12. herein, to the best of Farmland's knowledge, there are
         no claims, investigations, litigation and/or any other legal
         proceedings, administrative or judicial, present, pending or
         threatened, by any person or entity, whether regulatory or private,
         which will, directly or indirectly, materially affect the use or the
         marketability of any of the Assets.

         h. Ownership of the Assets. On the Closing Date, Seller will own fee
         title to the Real Property, free of any liens, claims, restrictions,
         encumbrances or encroachments except those encumbrances shown on the
         Title Insurance Commitment described in subsection m. of this Section
         16. and accepted by CHS (the "Permitted Encumbrances") . On the Closing
         Date, Seller shall own good and marketable title to all the Personal
         Property, free of any liens, claims, restrictions, or encumbrances.

         i. Condition of Real Property Improvements. Exclusive of environmental
         matters, which shall be governed solely by the provisions of Section
         12. herein, to the best of Farmland's knowledge, there are not, and as
         of the Closing Date there will not be, any defects, structural or
         non-structural, of material significance in any of the improvements to
         the Real Property, including the heating, air conditioning,
         ventilating, electrical, plumbing, water, sewer, or other systems
         installed in such improvements.

         j. Conduct of the Business. Without the prior written consent of CHS,
         Farmland will not sell or otherwise dispose of, or purchase or acquire,
         any assets in a manner inconsistent with any of the provisions of this
         Agreement. Farmland agrees to carry on its Business in the same manner
         as heretofore conducted, and will not take any action other than in
         conformity with prior practice in the ordinary and regular course of
         business as heretofore conducted. Further, Farmland agrees that it will
         use commercially reasonable efforts to maintain all of the Assets in
         the same condition as existed on the effective date of this Agreement
         through the Closing Date (normal wear and tear excepted).

         k.       No Right of Others to Purchase the Assets. Except for the
                  -----------------------------------------
         transactions  contemplated by this Agreement,  no person or
         other entity has an option, or any other right, to purchase all or any
         part of the Assets.

         l.       No Covenants,  Conditions, and/or Restrictions.  None of the
                  ----------------------------------------------
         Assets are subject to any agreement with any third party
         which contain covenants,  conditions,  and/or restrictions which
         affect, directly or indirectly,  the use or the marketability
         of the Assets, except for the Permitted  Encumbrances  described in
         subsection h. of this Section 16., and except as set forth
         on Exhibit E-1 herein .

         m. Status of Real Property. Farmland represents that, at the request of
         CHS, it has ordered a Title Insurance Commitment to be delivered to
         CHS, committing the issuing insurance company to issue title insurance
         insuring marketable title of the Real Property included in the Assets
         to be conveyed hereunder, free and clear of liens, claims,
         restrictions, encumbrances, or encroachments except for the Permitted
         Encumbrances. CHS shall be allowed a reasonable time after receipt of
         the title commitment for the making of any objections to the status of
         the title of the Real Property. If any objections to the status of the
         title of the Real Property are made by CHS, Farmland shall make
         reasonable efforts to resolve such objections as soon as practicable
         after its receipt of any such notice of objections from CHS. All
         expenses incurred by Farmland in resolving any such objection(s) shall
         be Farmland's sole responsibility to pay. In the event that any
         objection as to title has not been resolved prior to the Closing Date,
         either the Closing Date shall be delayed until all such objections have
         been resolved, or upon a mutual agreement of the parties, the Purchase
         Price set forth herein shall be reduced by an amount which is mutually
         acceptable to CHS and Farmland, and CHS shall take such Real Property
         subject to such defect(s) in title.

         n. Status of Tangible Personal Property. All items of Personal Property
         that are included in the Assets, including, but not limited to,
         pollution control equipment, shall be conveyed to CHS on an "AS IS,
         WHERE IS, WITH ALL FAULTS" basis, and except for Farmland's
         representations and warranties specifically set forth in this
         Agreement, including but not limited to the warranty of unencumbered
         title set forth in Section 11.g., ALL WARRANTIES OR REPRESENTATIONS
         CONCERNING THE CONDITION OF PERSONAL PROPERTY, INCLUDING ANY WARRANTY
         OF MERCHANTABILITY OR ANY WARRANTY OF FITNESS FOR ANY PARTICULAR
         PURPOSE, ARE EXPRESSLY DISCLAIMED.

         o. Consents or Approvals for Assignment. In the event that the consent
         or approval of a third party is required in connection with the
         assignment of any of the Leases or Contracts, Farmland agrees to use
         commercially reasonable efforts to obtain consent or approval from such
         third party(ies); provided however, that any failure to obtain such a
         consent or approval shall not constitute a breach of this Agreement, so
         long as Farmland has complied with its obligation to use commercially
         reasonable efforts.

17. GENERAL REPRESENTATIONS AND WARRANTIES OF CHS. In addition to the specific
representations, warranties, undertakings, covenants, promises, and agreements
of CHS as set forth elsewhere in this Agreement, CHS hereby makes the following
general representations, warranties, covenants, undertakings, covenants,
promises, and agreements to, and with, Farmland with the intent that Farmland
may rely upon the same:

         a. Organization and Standing of CHS. CHS is a cooperative corporation
         duly organized and validly existing in good standing under the laws of
         the State of Minnesota, and has the corporate power to own the Assets
         and to carry on the Business as it is currently being conducted. Prior
         to the Closing Date, CHS shall be duly qualified to do business as a
         foreign corporation in good standing in each jurisdiction where the
         conduct of the Business makes such qualification necessary.

         b. Corporate Authority of CHS. CHS has taken all corporate actions
         required to authorize the execution and delivery of this Agreement.
         Prior to the Closing Date, CHS shall have taken all corporate actions
         required in order to enable it to consummate the transaction
         contemplated by this Agreement and to make binding upon it all the
         representations, warranties, undertakings, covenants, promises, and
         agreements made, and to be performed by it, under this Agreement.

         c. No Breach of Other Agreements. Neither the execution of this
         Agreement by CHS, nor the Closing of the transaction contemplated by
         this Agreement by CHS will constitute a violation of, or are or will be
         in conflict with, or are or will constitute a breach of, or default
         under, any term or provision of any contract, indenture or other
         agreement or instrument to which CHS is a party.

         d.       No  Violation  of Law.  Neither  the  execution  of  this
         ---------------------
         Agreement  by CHS,  nor  the  Closing  of the  transaction
         contemplated by this Agreement by CHS, will  constitute a violation of
         any applicable  law,  order,  rule or regulation of any
         governmental or quasi-governmental authority.

18.      FARMLAND'S  CONDITIONS  PRECEDENT TO CLOSING.  Farmland's  obligation
         --------------------------------------------
         to  consummate  the  transaction  contemplated  by this
         Agreement will be subject to satisfaction of the following conditions
         on or before the Closing Date:

         a.       Continuing  Representations  and  Warranties.  All
                  --------------------------------------------
         representations  and  warranties  of CHS as are contained in this
         Agreement  shall be true in all  material  respects  at, or as of, the
         Closing  Date as though all such  representations  and
         warranties were made at, or as of, such date.

         b. CHS' Obligation to Perform. CHS shall have performed or complied
         with all of its undertakings, covenants, promises, and agreements
         required by this Agreement to be performed and/or satisfied by CHS at
         or prior to the Closing Date.

         c.       Material  Discrepancies/  Breaches.  Farmland shall not have
                  ----------------------------------
         discovered  any material  error,  misstatement,  and/or
         omission in any of the  representations  and warranties made by CHS in
         this  Agreement,  or any material breach by CHS of CHS'
         undertakings and agreements as set forth in this Agreement, on or
         before the Closing Date.

         d.       Corporate  Resolution.  Prior to the Closing  Date,  CHS shall
                  ---------------------
         have  delivered to Farmland  for its review  certified
         copies of resolutions  adopted by CHS' Board of Directors,
         authorizing the entry into this Agreement by CHS, and consummation
         of transactions contemplated herein.

         e.       Lender  Approval.  Prior to the Closing Date,  Farmland's
                  ----------------
         lenders shall have given the necessary  approval to enable
         Farmland to execute this Agreement,  and the Additional  Agreements
         described in Section 20.c.  herein, and to consummate the
         Closing of the transaction contemplated by this Agreement.

19.      CHS' CONDITIONS  PRECEDENT TO CLOSING.  CHS'  obligation to consummate
         -------------------------------------
the transaction  contemplated by this Agreement will be
subject to satisfaction of the following conditions on or before the Closing
Date:

         a.       Continuing  Representations  and Warranties.  All
                  -------------------------------------------
         representations and warranties of Farmland as are contained in this
         Agreement  shall be true in all  material  respects  at, or as of, the
         Closing  Date as though all such  representations  and
         warranties were made at, or as of, such date.

         b.       Farmland's  Obligation  to  Perform.  Farmland  shall  have
                  -----------------------------------
         performed  or  complied  with  all of its  undertakings,
         covenants,  promises,  and agreements  required by this Agreement to be
         performed  and/or satisfied by Farmland at or prior to
         the Closing Date.

         c.       Material  Discrepancies/  Breaches. CHS shall not have
                  ----------------------------------
         discovered any material error,  misstatement,  and/or omission
         in any of the  representations  and  warranties  made by Farmland in
         this  Agreement,  or any  material  breach by Farmland of
         Farmland's undertakings and agreements as set forth in this Agreement,
         on or before the Closing Date.

         d.       Corporate  Resolution.  Prior to the Closing  Date,  Farmland
                  ---------------------
         shall have delivered to CHS for its review  certified
         copies of resolutions  adopted by Farmland's  Board of Directors,
         authorizing the entry into this Agreement by Farmland,  and
         consummation of transactions contemplated herein.


         e.       Satisfactory  Due Diligence.  CHS shall have  completed its
                  ---------------------------
         due diligence  investigation  and concluded,  at its sole
         discretion, that it is satisfied with the results of its due diligence
         investigation.

         f.       Release of Security  Interests.  Prior to the Closing Date,
                  ------------------------------
         Farmland shall have obtained  termination  statements and
         release or satisfaction of mortgages from all parties having a security
         interest in any of the Assets to be conveyed to CHS.

         g.       Condition  of Assets.  There shall have been no  material
                  --------------------
         change in the  condition  of all or any part of the Assets
         during the time period passing from the execution of this Agreement to
         the Closing Date.

         h. Contract with OSG. CHS shall have negotiated to its satisfaction, at
         its sole discretion, a contract with One System Group ("OSG")
         pertaining to CHS' transition use of Farmland's Legacy Computer System.

20.      RECIPROCAL  CONDITIONS  PRECEDENT TO CLOSING.  In addition to the
         --------------------------------------------
respective  conditions  precedent to closing as set forth in
Sections 18. and 19. herein,  CHS' and Farmland's  respective  obligation to
consummate the transaction  contemplated by this Agreement
will be subject to satisfaction of the following conditions on or before the
Closing Date:

         a. Completion of Exhibits. CHS and Farmland acknowledge and agree that
         certain of the Exhibits attached to this Agreement have not been
         completed as of execution of this Agreement. CHS and Farmland agree
         that they shall cooperate in good faith to ensure that all such
         Exhibits are completed by the Closing Date, and the completion of all
         such Exhibits shall be a closing condition for each of CHS and
         Farmland.

         b. Mutual Agreements. Farmland and CHS acknowledge and agree that
         certain provisions set forth in this Agreement require mutual agreement
         of both parties hereto. Farmland and CHS agree that they shall
         cooperate in good faith to ensure that all such required mutual
         agreements are achieved by the Closing Date, and the completion of all
         such mutual agreements shall be a closing condition for each of
         Farmland and CHS.

         c. Execution of Additional Agreements. CHS and Farmland shall negotiate
         and execute a Refinery Supply Agreement with respect to the production
         of refined energy products at Farmland's Coffeyville, KS refinery, a
         Grease Supply Agreement with respect to the production of grease
         products at Farmland's North Kansas City, MO grease plant, a Management
         Oversight Agreement with respect to activities of NEA's retail
         petroleum facilities, an Inventory Exchange/Purchase Agreement with
         respect to Excluded Inventory, a Terminal Throughput Agreement with
         respect to Farmland's terminal at Philipsburg, KS, and a Lease
         Agreement with respect to Farmland Transportation's use of space at the
         Real Property (collectively, the "Additional Agreements"). CHS and
         Farmland agree that they shall cooperate in good faith to ensure that
         all of the Additional Agreements are executed by the Closing Date, and
         the completion of all such Additional Agreements shall be a closing
         condition for each of Farmland and CHS.

21.      CLOSING.  Subject to and conditional  upon the  satisfaction  of the
         -------
conditions  precedent set forth in Sections 18., 19., and
20. herein,  consummation  of the purchase and sale of Assets,  pursuant to
terms and  conditions of this  Agreement  (the  "Closing"),
shall be held on November  30,  2001,  or such other date as is  mutually
agreed upon by the parties and shall occur at such place and
time as is mutually agreed upon by the parties (referred to as the
"Closing Date").

         a. Deliveries by Farmland at the Closing. At the Closing, Farmland
         shall sell, transfer, assign, deliver, and convey all of the Assets to
         be sold hereunder, and shall deliver to CHS a General Assignment and
         Bill of Sale in a form set forth on Exhibit "K", attached hereto and
         incorporated herein, effective to vest in CHS good and marketable title
         to all of the Assets other than Real Property, free and clear of any
         liens, claims, restrictions, or encumbrances, and a Special Warranty
         Deed in a form and substance acceptable to CHS, effective to vest in
         CHS good and marketable title to the Real Property, free and clear of
         any liens, claims, restrictions, encumbrances, or encroachments except
         for Permitted Encumbrances. Upon completion of the Closing, Farmland
         shall also instruct the title insurance company which issued a
         commitment for a policy of title insurance (pursuant to Section 16.m.
         herein) to issue and deliver a policy of title insurance consistent
         with the terms of this Section 21.a. to CHS.

         b.       Deliveries  by CHS at the  Closing.  At the  Closing,  CHS
                  ----------------------------------
         shall  deliver to  Farmland a cash  payment as provided in
         Section  10.  herein,  and an  Assumption  Agreement  in the form set
         forth on  Exhibit  "H",  effective  to  assume  all the
         obligations and liabilities of Farmland as set forth in Section 5.
         herein.

         c. Sales/Transfer Taxes/Fees. Farmland shall be responsible to pay any
         and all recording fees, sales taxes, transfer taxes, appraisal costs,
         survey costs, and title insurance policy expenses applicable to, or
         incurred pursuant to, or resulting from, the sale, transfer,
         assignment, delivery, and conveyance of the Assets (the "Transfer
         Fees"). Upon the payment of all Transfer Fees, Farmland shall remit to
         CHS an invoice for one-half of such Transfer Fees, which invoice shall
         be paid by CHS promptly upon its receipt of such invoice and copies of
         invoices for Transfer Fees paid by Farmland.

         d. Delivery of Assets; Risk of Loss. Delivery of possession of Assets
         purchased hereunder shall be deemed to have occurred, for all purposes,
         at 11:59 p.m. CST on the Closing Date, and all the risks of loss,
         whether or not covered by insurance, shall be on Farmland until such
         time, and on CHS from and after such time.

22. DISPUTE RESOLUTION PROCESS. Farmland and CHS each agree to act in good faith
to resolve any dispute which may arise out of or relate to the obligations
and/or rights of the parties hereto pertaining to the terms and conditions of
this Agreement. If any such dispute arises, Farmland and CHS each agree to
attempt to resolve such dispute through the following procedures.

         a.       Negotiating  Person.  Representatives  of each party shall
                  -------------------
         meet within ten (10) days after a request by either party.
         The meeting shall be held at the offices of the party receiving the
         request to meet at a mutually agreed upon time.

         b. Senior Executives. In the event that such dispute has not been
         resolved by the procedures as set forth in subsection a. of this
         Section 22. within twenty (20) days after the first meeting of the
         parties, then the dispute shall be referred to senior executives for
         both parties, and such executives shall meet for negotiations on the
         dispute not later than fifteen (15) days after the end of the twenty
         (20) day period set forth herein. The meeting shall be held at the
         offices of the party receiving the request to meet at a mutually agreed
         upon time.

         c.       Additional  Meetings.  In the event that more than one meeting
                  --------------------
         is scheduled by the parties  pursuant to subsection a.
         or  subsection  b. of this  Section  22.,  the  location of such
         meetings  shall  alternate  between the offices of the party
         receiving the request to meet and the party making the request to meet.

         d. Binding Arbitration. In the event that the dispute has not been
         resolved within thirty (30) days after the initial meeting of the
         senior executives described in subsection b. of this Section 22.,
         unless the parties mutually agree to change the procedures, the parties
         will then attempt in good faith to resolve the dispute in accordance
         with the Center for Public Resources ("CPR") applicable binding
         arbitration procedures then in effect. Any such binding arbitration
         procedure shall be governed by the Federal Arbitration Act 9 U.S.C.
         ss.ss.1-16, and judgment upon the arbitration award rendered by the
         arbitrator may be entered by any court having jurisdiction thereof. The
         place of arbitration shall be the principal place of business of the
         party who received the original request to meet, unless the parties
         mutually agree to another location. Each of Farmland and CHS shall be
         responsible for one-half (1/2) of the fees charged by CPR and the
         arbitrator for such binding arbitration. Each of Farmland and CHS shall
         bear its own attorney's fees and costs associated with prosecuting or
         defending the claim brought pursuant to the dispute resolution process
         procedures set forth in this Section 22. of the Agreement.

23. NOTICES. All notices, requests, demands, or other communications provided
for in this Agreement shall be in writing and delivered in person, or by
facsimile transmission, or deposited in the United States mail, postage prepaid,
for mailing by certified mail, return receipt requested, addressed as follows:

     a.       If to CHS:                         CHS Cooperatives
              ---------
                                                 5500 Cenex Drive
                                                 St. Paul, MN  55077
                                                 Attention:  Leon Westbrock
                                                 Telephone Number:  651-451-5284
                                                 Facsimile Number:  651-451-4905
              with a copy to:           CHS Cooperatives
                                                 5500 Cenex Drive
                                                 St. Paul, MN  55077
                                                 Attention:  Scott T. Beiswenger
                                                 Telephone Number:  651-306-3751
                                                 Facsimile Number:  651-451-4554

         b.       If to Farmland:           Farmland Industries, Inc.
                  --------------
                          12200 North Ambassador Drive
                                                     Kansas City, MO  64163
                             Attention: Robert Honse
                         Telephone Number: 816-713-6415
         Facsimile Number:  816-713-5933

              with a copy to:           Farmland Industries, Inc.
                                                12200 North Ambassador Drive
                                                Kansas City, MO  64163
                                                Attention:  Robert Terry
                                                Telephone Number:   816-713-8263
                                                Facsimile Number:  816-713-5902

or to such other address as either party shall designate by written notice to
the other party hereto. All such notices, requests, demands or other
communications shall be effective when actually delivered, if in person, or when
actually received, in the case of a facsimile transmission, or on the third
business day after being deposited in the mail.

24. ADDITIONAL INSTRUMENTS AND FURTHER ASSURANCES. Farmland agrees that it will,
upon receiving a request from CHS, on and/or after the Closing Date, execute and
promptly deliver to CHS such other instruments of sale, transfer, assignment,
and conveyance, and/or take such other actions, as CHS reasonably believes are
necessary or proper, to more effectively vest ownership of the Assets in CHS
and/or to put CHS in possession of all the Assets. CHS agrees that it will, upon
receiving a request from Farmland, on and/or after the Closing Date, execute and
promptly deliver to Farmland such additional instruments and to take such other
actions as Farmland reasonably believes are necessary or proper to evidence the
assumptions, covenants and agreements of CHS under this Agreement. In addition,
Farmland and CHS each agree to the following terms and conditions in respect of
business records, including written and electronic information, files, records,
and associated data, related to their respective wholesale energy businesses,
including business records (or copies thereof) related to their joint wholesale
energy business managed by Country Energy, LLC (the "Wholesale Energy Business
Records"):

         (a) Business Records Retention. Farmland and CHS each agree to retain
         all their respective Wholesale Energy Business Records after the
         Closing Date in accordance with their respective record retention
         policies, which record retention policies shall require retention of
         records for a period of time at least as long as the time required by
         applicable law.

         (b) Response to Reasonable Request. Farmland and CHS each agree that,
         upon receiving a request from the other party after the Closing Date,
         provide reasonable access to the other party to their respective
         Wholesale Energy Business Records, or deliver to the other party copies
         of such Wholesale Energy Business Records, and/or take such other
         actions (including, but not limited to, providing reasonable access to
         employees), as the other party reasonably believes are necessary to
         resolve employee claims and/or third party claims, and/or necessary to
         comply with legal and/or regulatory matters.

CHS and Farmland each agree that to perform all of their respective obligations
set forth in this Section 24. without further consideration from the other party
hereto, other than reimbursement of out of pocket expenses incurred in
performing such obligations.

25. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that all the
representations, warranties, undertakings, covenants, promises, and agreements
contained herein or made pursuant to this Agreement shall survive the Closing
Date for a period of the statute of limitations that is applicable thereto, and
shall not be merged into the Closing. Each party hereto shall be, and shall
remain, liable to the other party hereto for the amount of all damages or losses
to such party resulting from any breach of, or inaccuracy in, such
representations and warranties, or failure to observe or comply with any such
undertakings, covenants, promises, and agreements.

26.      EXHIBITS.  All Exhibits  attached  hereto are expressly made a part of
         --------
this Agreement as fully as though  completely set forth
herein.  All  statements  contained in any Exhibit are an integral part of this
Agreement,  and shall be deemed to be  representations
and warranties of the party making such statement.

27. ENTIRE AGREEMENT. This Agreement, including the Exhibits attached hereto,
contains the entire understanding between the parties hereto relating to the
subject matter hereof, and shall supersede all prior negotiations,
representations, agreements, and understandings, whether oral or written,
between these parties with respect to the subject matter herein, and neither
party shall be liable or bound to the other in any manner by any warranties or
representations (whether oral, implied, or otherwise) not set forth herein.

28.      COUNTERPARTS.  This Agreement may be executed in one or more
         ------------
counterparts,  each of which shall for all purposes be deemed to
be an original, and all of which shall constitute one and the same Agreement.

29.      HEADINGS.  The  headings  of  sections  in this  Agreement  are
         --------
inserted  for  convenience  only and  shall  not be deemed to
constitute a part of this Agreement, or to affect interpretation of provisions
hereof.

30. MODIFICATION AND WAIVER. The failure of either party to exercise any right,
power, or option given it hereunder, or to insist on strict compliance with all
terms and conditions hereof, shall not constitute a waiver of any term,
condition, or right under this Agreement, unless and until that party shall have
confirmed any such action or inaction to be a waiver in writing. Any such waiver
shall not act as a waiver of any other terms, conditions, or rights under this
Agreement, or the same term, condition or right on any other occasion not
specifically waived in writing by such party. This Agreement may be modified,
altered or amended only by a writing signed by each party with the same
formality as the Agreement.

31. SUCCESSORS AND ASSIGNS. Except as provided in Section 4.d., this Agreement
may not be assigned by either party hereto, in full or in part, without prior
written consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that such consent need not be obtained in the case
of assignment through a merger, consolidation or any form of joint venture
involving one of the parties. The terms and conditions of this Agreement shall
inure to the benefit of, and shall be binding upon, respective successors and
permitted assigns of the parties hereto.

32. SEVERABILITY. Wherever possible, each provision of this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable law,
but in the event that a term or provision of this Agreement shall be determined
by a court of competent jurisdiction to be invalid or unenforceable under
applicable law, such term or provision shall be ineffective to the extent of
such a term or provision, but the remainder of this Agreement shall not be
affected thereby, and all the other terms and provisions of this Agreement shall
be valid and enforced to the fullest extent permitted by law. Upon a
determination that a term or provision is invalid, illegal, or incapable of
being enforced, the parties agree to negotiate in good faith to modify this
Agreement so as to effect their original intent as closely as possible.

33. BROKERS. Farmland and CHS represent to each other that no broker or other
party claiming a commission or finder's fee has been engaged in respect of the
transactions described in this Agreement. It is specifically agreed to by both
Farmland and CHS that the other party hereto shall not be liable for costs or
expenses of any real estate broker's commission, agent's commission, or finder's
fee of the other party, in connection with or arising out of the transactions
described in this Agreement, and each party hereto agrees to defend, indemnify
and hold harmless the other party hereto from and against all costs and expenses
of any kind or nature, including attorneys' fees and costs and expenses of
litigation and/or other form of dispute resolution, incurred or suffered by the
other party hereto, as a result of any real estate broker's commission, agent's
commission, or finder's fee for which the indemnifying party is responsible.
Each party hereto agrees that it shall be liable for its own legal, accounting
and administrative expenses in connection with the transaction described in this
Agreement.

34. BULK TRANSFER LAWS. CHS hereby waives compliance by Farmland with any
applicable bulk transfer laws (including the bulk transfer provisions of the
Uniform Commercial Code as adopted in Minnesota, Kansas, Missouri, and/or Texas,
and/or any similar applicable statute relating to sales in bulk or sales not in
the ordinary course of business) relating to the transactions contemplated by
this Agreement. Farmland agrees to defend, indemnify and hold harmless CHS from
and against all costs and expenses of any kind or nature, including attorneys'
fees and costs and expenses of litigation and/or other form of dispute
resolution, incurred or suffered by CHS which are in any way associated with
Farmland's failure to comply with any bulk transfer laws.

35. CONFIDENTIALITY UPON TERMINATION. In the event this Agreement is terminated
or rescinded for whatever reason Farmland and CHS shall keep confidential, and
shall cause their respective affiliates, officers, directors, employees, agents,
and representatives (including but not limited to each party's lenders and third
party professionals) to keep confidential, all the contents of this Agreement,
and all the documents or materials related thereto, except as may be required by
law or administrative process.

36.      NO THIRD PARTY  BENEFICIARY.  Nothing  contained in this Agreement
         ---------------------------
shall be considered or construed as conferring any right or
benefit on any person or entity other than Farmland and CHS, and their
respective permitted successors and assigns.

37. SECURITY INTERESTS PERMITTED. CHS and Farmland agree that no provision of
this Agreement shall be construed as limiting, in any way, the respective rights
of CHS and Farmland (each, a "Granting Party") to grant to a lender(s) a
security interest in the respective Granting Party's rights as set forth in this
Agreement (a "Security Interest"); provided however, that nothing set forth in
this Section 37. is intended to, or shall be construed as, creating any conflict
with any other provision of this Agreement, or relieving either CHS or Farmland
of any of its obligations set forth in this Agreement. Upon receiving a request
from the Granting Party, on and/or after the Closing Date, the other party
hereto (the "Non-Granting Party") shall make efforts that the Non-Granting Party
believes are commercially reasonable to cooperate with reasonable requests from
the Granting Party and the Granting Party's lender(s) to execute documents that
are not inconsistent with the provisions of this Agreement and the intent of the
parties in executing this Agreement.

38.      CHOICE OF LAW. This Agreement,  and all rights,  obligations,  and
          -------------
duties arising hereunder,  and all disputes which may arise
hereunder, shall be construed in accordance with, and governed by, laws of the \
State of Minnesota.

THIS  AGREEMENT OF PURCHASE AND SALE SHALL NOT  CONSTITUTE A CONTRACT  BETWEEN
THE PARTIES  UNLESS AND UNTIL IT HAS BEEN FULLY EXECUTED
BY BOTH PARTIES

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the day and year first above written.


CENEX HARVEST STATES COOPERATIVES

By: ________________________________________
         John Johnson

Its: President and Chief Executive Officer

FARMLAND INDUSTRIES, INC.

By: ________________________________________
         Robert Honse

Its: President and Chief Executive Officer






                                   EXHIBIT "A"

                            REAL PROPERTY - Page 1/2

                       LEGAL DESCRIPTION OF REAL PROPERTY

                                   TRACT ONE:

A 0.527 acre tract of land in  Section  No.  183,  Block No. 2, A.B.  & M.
Survey,  Randall  County,  Texas,  being more  particularly
described by metes and bounds as follows:

BEGINNING at a point located N 0(0)08'14" W a distance of 1582.32 feet and S
89(0)53'30" W a distance of 850.80 feet from the Southeast corner of said
Section No. 183, and said point being located on the Southeasterly property line
of the Atchison, Topeka and Santa Fe Railway Company;

THENCE N 16(0)57' E a distance of 56.4 feet to a1/2" iron rod set for corner;

THENCE N 89(0)53'30" E a distance of 418.01 feet to a1/2" iron rod set for
corner;

THENCE S 0(0)06'30" E a distance of 53.9 feet to a point;

THENCE S 89(0)53'30" W a distance of 434.55 feet to the POINT OF BEGINNING.


                                   TRACT TWO:

A 5.000 acre tract of land in Section 183, Block 2, A.B. & M. Survey, Randall
County, Texas, being more particularly described by metes and bounds as follows:

BEGINNING  at a point  located N 0(0)08'14"  W. a distance  of  1582.32  feet
and S.  89(0)53'30"  W. a  distance  of 850.80  feet from the
Southeast  corner of said Section 183, and said point being located in the
 Southeasterly  property  line of the  Atchison,  Topeka and
Santa Fe Railway Company;

THENCE N. 89(0)53'30" E. a distance of 434.55 feet to a point;

THENCE S. 0(0)06'30" E. a distance of 434.55 feet to a point;

THENCE S. 89(0)53'30" W. a distance of 567.89 feet to a point;

THENCE N. 16(0)57' E. along the Southeasterly  property line of the Atchison,
 Topeka and Santa Fe Railway Company,  a distance of 454.55
feet to the POINT OF BEGINNING.

                                   EXHIBIT "A"

                            REAL PROPERTY - Page 2/2

                       LEGAL DESCRIPTION OF REAL PROPERTY

                                  TRACT THREE:

A 10 acre tract of land out of Section 183, Block 2, A.B. & M. Survey, Randall
County, Texas, lying between Washington Street and the Santa Fe Railroad, and
being further described by metes and bounds as follows:

BEGINNING from a point whence the Southeast 183 bears South 2,273.1 feet and
East 50 feet, said point being in the West right of way of Washington;

THENCE West 587.2 feet to a point in the East right of way line of the Santa Fe
Railroad;

THENCE South 16(0)57'8" West along said Santa Fe Railroad right of way a
distance of 665.6 feet to a point;

THENCE East 781.2 feet to a point in the West right of way line of Washington
Street;

THENCE North along the West right of way line of Washington Street 636.7 feet to
the PLACE OF BEGINNING.







                                   EXHIBIT "B"

                                PERSONAL PROPERTY

         Any and all personal property owned by Farmland and associated with the
Business as of the Closing Date including, but not limited to, the following:

1.       Those specific items of personal property listed in Exhibit B-1
         (consisting of 15 pages), attached hereto and incorporated herein, that
         are located on, or otherwise used in connection with, the Real
         Property.

2.       Any and all additive equipment and/or additive systems owned by
         Farmland and used at terminals to inject additives into gasolines
         and/or distillates or propane, except for the red dye additive system
         owned by Farmland and located at Farmland's refinery at Coffeyville,
         Kansas.

         3. Any and all computer equipment, copiers, facsimile, printers, office
         furniture and other office equipment owned by Farmland as of the
         Closing Date that have been utilized by employees of Country Energy,
         LLC, as agent for Farmland and CHS, prior to the Closing Date.



[NOTE:  EXHIBIT B-1 IS THE 15 PAGE LISTING OF PERSONAL PROPERTY AT AMARILLO
PROVIDED BY FARMLAND.]






                                   EXHIBIT "C"

                            PERSONAL PROPERTY LEASES

         Any and all personal property leases to which Farmland is a party that
are associated with the Business as of the Closing Date including, but not
limited to, the following:

1.       Farmland's  interest in any and all written  and/or oral leases in
         connection  with the Business  operated by Farmland at the
         Real Property.

2.       Farmland's interest in any and all written and/or oral leases of
         computer equipment, copiers, facsimile equipment, printers, office
         furniture and other office equipment existing as of the Closing Date
         that have been utilized by employees of Country Energy, LLC, as agent
         for Farmland and CHS, prior to the Closing Date.

3.       Farmland's  interest in any and all written and/or oral leases  entered
         into by Farmland for the purpose of storing  gasolines
         and/or distillates or propane.








                                   EXHIBIT "D"

                            CONTRACTS and AGREEMENTS

         Any and all contracts and agreements to which Farmland is a party that
areassociated with the Business as of the Closing Date including, but not
limited to, the following:

1.       Farmland's interest in written and oral contracts and agreements with
         customers, vendors, suppliers and other parties including, but not
         limited to, contracts and agreements in connection with the Business
         operated by Farmland at the Real Property, and contracts and agreements
         in connection with the Business managed by Country Energy, LLC, as
         agent for Farmland and CHS.

2.       Farmland's interest in that certain Asset Purchase Agreement entered
         into as of May 1, 2000, by and between Williams Energy Marketing &
         Trading Company and The Williams Companies, as Seller, and CHS and
         Farmland acting through Country Energy, LLC, as Buyer.

3.       Farmland's interest in that certain Propane Supply Agreement entered
         into as of May 1, 2000 by and between Williams Energy Marketing &
         Trading Company and The Williams Companies, as Supplier, and CHS and
         Farmland acting through Country Energy, LLC, as Customer.

4.       Farmland's  interest in that certain  Agreement  for the Sale of Base
         Oils entered into as of December 15, 2000 by and between
         Conoco, Inc., as Seller, and CHS and Farmland acting through Country
         Energy, LLC, as Buyer.

5.       Farmland's interest in that certain Contract of Sale entered into as of
         December, 2000 by and between ExxonMobil Lubricants and Petroleum
         Specialties Company, a division of ExxonMobil Corporation, as Seller,
         and Country Energy, LLC, as Buyer.







                                   EXHIBIT "E"

                              INTELLECTUAL PROPERTY

         All of Farmland's rights, title, and interest in intellectual property
associated exclusively with the Business on the Closing Date, including, but not
limited to, those specific trademarks, service marks, logos, trade names and
commercial symbols listed in Exhibit E-1 (consisting of 5 pages), attached
hereto and incorporated herein.








                                                                  EXHIBIT E-1
                                                                                           
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TRADEMARK                       REG. NO.                    OWNER             STATUS                    OUTSIDE COUNSEL

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
RUBY FIELDMASTER                                                              Licenses from Farmland
                                                                              and Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
AMPRIDE (Class 4)               1,832,572                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
AMPRIDE (Class 37, 42)          1,498,043                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
AMPLUS                          1,538,999                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
BULL'S EYE & DESIGN             1,923,168                   Farmland          Mark not renewed.         Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CIRCLE THREE                    1,089,532                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CLEANGUARD                      1,618,344                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
DOUBLE CIRCLE                   0,826,728                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
IRRIFLEX                        1,509,833                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TRADEMARK                       REG. NO.                    OWNER             STATUS                    OUTSIDE COUNSEL

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
LITH-GARD                       0,826,729                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
LUBE SCAN                       2,408,655                   Farmland          Registered.               Outside Counsel:
                                                                                                        Spencer Fane Britt & Browne
                                                                                                        1000 Walnut St., Suite 1400
                                                                                                        Kansas City, MO 64106
                                                                                                        Contact:  Ed Marquette

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
MARKSMAN                        1,917,564                   Farmland          Mark not renewed.         Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
MAXTRON                         2,097,768                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
PROPANE LOGO                    2,174,860                   Farmland          Registered                Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
RUBY                            1,522,334                   Farmland          Registered.               Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SHARPSHOOTER                    1,923,169                   Farmland          Mark not renewed.         Outside counsel:
                                                                                                        Hovey Williams
                                                                                                        2450 Grand
                                                                                                        Kansas City, MO 64111
                                                                                                        Contact:  Bob Hovey

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SUPER TMS PLUS                  1,717,403                   Farmland          Registered.               Outside Counsel:
                                                                                                        Shook, Hardy & Bacon
                                                                                                        1200 Main Street, Suite 2700
                                                                                                        Kansas City, MO 64105
                                                                                                        Contact:  Bill Kircher

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CENEX (Class 37, 42)            1,591,300                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CENEX (Class 37, 42)            1,590,170                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CENEX (Class 4)                 1,070,076                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TRADEMARK                       REG. NO.                    OWNER             STATUS                    OUTSIDE COUNSEL

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CENEX (Class 4)                 0,652,618                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CENEX (Class 3)                 1,053,822                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CENEX ROADMASTER XL             2,080,468                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
Cenex Xpress 24                 75/839,190                  Farmland          Registration pending.     Outside Counsel:
                                                                                                        Spencer Fane, Britt & Browne
                                                                                                        1000 Walnut St., Suite 1400
                                                                                                        Kansas City, MO 64106
                                                                                                        Contact:  Ed Marquette

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
COME TO THE ISLANDS             1,975,692                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
FIELDMASTER XL                  1,600,264                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
ML 365                          0,797,694                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
PUMP 24                         1,345,817                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
QWIKLIFT                        0,678,328                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
PLATINUM D                      1,977,240                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SNOW MAX                        2,364,965                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
STAY CLEAN                      1,616,368                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TC BIO PLUS                     1,829,155                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TOWNMART                        1,444,612                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TRI-BAND/TRI-COLOR DESIGN       1,862,003                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
VIKING                          1,635,924                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
WINTER MASTER                   2,300,725                   Cenex

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
CF ROADMASTER                   N/A                         N/A               Mark not                  N/A
                                                                              registered.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
DRIP SOYL                       N/A                         N/A               Mark not registered.      N/A

                                                                              Country
                                                                              Energy
                                                                              using
                                                                              the
                                                                              mark
                                                                              with
                                                                              the
                                                                              (TM)
                                                                              symbol.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TRADEMARK                       REG. NO.                    OWNER             STATUS                    OUTSIDE COUNSEL

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
HTB                             76/225,106 (Serial No.)     Country Energy    Mark filed by Farmland    Farmland Legal
                                                                              on behalf of Country      12200 N. Ambassador Drive
                                                                              Energy.  Pending          Kansas City, MO 64163
                                                                              registration.             Contact: Ami Wisdom

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
INDOL ISO                       N/A                         N/A               Mark not registered.      N/A

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
KLEANSWEEP                      76/274,819 (Serial No.)     Farmland          Mark filed by             Farmland Legal
                                                                              Farmland.  Pending        12200 N. Ambassador Drive
                                                                              registration.             Kansas City, MO 64163
                                                                                                        Contact: Ami Wisdom

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
MOLYPLEX 500+                   N/A                         N/A               Mark not registered.      N/A

                                                                              Country
                                                                              Energy
                                                                              using
                                                                              the
                                                                              mark
                                                                              with
                                                                              the
                                                                              (TM)
                                                                              symbol.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TC-501                          N/A                         N/A               Mark not registered.      N/A

                                                                              Country
                                                                              Energy
                                                                              using
                                                                              the
                                                                              mark
                                                                              with
                                                                              the
                                                                              (TM)
                                                                              symbol.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TC-502                          N/A                         N/A               Mark not registered.      N/A

                                                                              Country
                                                                              Energy
                                                                              using
                                                                              the
                                                                              mark
                                                                              with
                                                                              the
                                                                              (TM)
                                                                              symbol.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
License of:                     2,233,978                   Automotive        No file.  Country         N/A
AUTO GOLD                                                   Gold, Inc.        Energy employees
                                                                              believe the mark has
                                                                              been licensed to CE for
                                                                              use.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
License of:                     1,410,407                   Beverly Hills     No file.  Country         N/A
BLUEGARD 500+                                               Motoring          Energy employees
                                                            Accessories
                                                                              believe
                                                                              the
                                                                              mark
                                                                              has
                                                                              been
                                                                              licensed
                                                                              to
                                                                              CE
                                                                              for
                                                                              use.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SOYMASTER                       N/A                         N/A               Mark not registered.      N/A

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SUPERLUBE 518                   N/A                         N/A               Mark not registered.      N/A

                                                                              Country
                                                                              Energy
                                                                              using
                                                                              the
                                                                              mark
                                                                              with
                                                                              the
                                                                              (TM)
                                                                              symbol.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TRADEMARK                       REG. NO.                    OWNER             STATUS                    OUTSIDE COUNSEL

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TC-W3                           1,847,512                   National Marine   No file.  TC-W3 is a      N/A
                                                            Manufacturers     certification mark that
                                                            Association,
                                                                              Inc
                                                                              certifies
                                                                              that
                                                                              engine
                                                                              lubricants
                                                                              tested
                                                                              meet
                                                                              the
                                                                              standards
                                                                              set
                                                                              forth
                                                                              in
                                                                              the
                                                                              Certificate
                                                                              Test
                                                                              Booklet.
                                                                              Used
                                                                              by
                                                                              the
                                                                              industry.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
TOTAL PROTECTION PLAN           N/A                         N/A               Mark not registered.      N/A

                                                                              Country
                                                                              Energy
                                                                              using
                                                                              the
                                                                              mark
                                                                              with
                                                                              the
                                                                              (TM)
                                                                              symbol.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
LUBESCAN                        2,408,655                   Farmland          Registered.               Outside Counsel:
                                                                                                        Spencer Fane Britt & Browne
                                                                                                        1000 Walnut St., Suite 1400
                                                                                                        Kansas City, MO 64106
                                                                                                        Contact:  Ed Marquette

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
VALUE ASSURANCE                 75/877957 (Serial No.)      Farmland          Mark filed by             Farmland Legal
                                                                              Farmland.  Pending        12200 N. Ambassador Drive
                                                                              registration.             Kansas City, MO 64163
                                                                                                        Contact: Ami Wisdom

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
BIOMAX                          Other registrations:        Other owners      Mark not registered by    N/A
                                78023910; 74077994;                           Farmland.
                                78035194; 75692626;
                                75511202;75510705;
                                75337633;75171746;
                                75014184;74497847;
                                74514418;74380579;
                                73254753

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SECURE COMFORT (WORD)           75/877956 (Serial No.)      Farmland          Mark filed by             Farmland Legal
                                                                              Farmland.  Pending        12200 N. Ambassador Drive
                                                                              registration.             Kansas City, MO 64163
                                                                                                        Contact: Ami Wisdom

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
SECURE COMFORT DESIGN           75/877955 (Serial No.)      Farmland          Mark filed by             Farmland Legal
                                                                              Farmland.  Pending        12200 N. Ambassador Drive
                                                                              registration.             Kansas City, MO 64163
                                                                                                        Contact: Ami Wisdom

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
AUTOPLUS                        Other registrations:        Other owners      Mark not registered by    N/A
                                75788525;                                     Farmland.
                                75490406; 75490408;
                                75623886; 74454386;
                                73737387

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------
QWIKLIFT HTB                    N/A                         N/A               Mark not registered.      N/A
                                                                              HTB is pending
                                                                              registration.

- ------------------------------- --------------------------- ----------------- ------------------------- ----------------------------







                                   EXHIBIT "F"

                                BUSINESS RECORDS


         Any and all business records(or copies thereof) owned by Farmland and
associated with the Business as of the Closing Date including, but not limited
to, the following:

1.       Farmland's interest in the Customer List.

2.       Farmland's interest in any and all credit files and records relating to
         customers identified on the Customer List including, but not limited
         to, credit files and records that predate the formation of Country
         Energy, LLC, as agent for Farmland and CHS; provided however, that CHS
         agrees that Farmland shall have the right to retain such credit files
         for as long a period of time as Farmland believes is reasonably
         necessary to collect accounts receivable existing as of the Closing
         Date.








                                   EXHIBIT "G"

                              ASSUMPTION AGREEMENT

         IN CONSIDERATION of the assignment by FARMLAND INDUSTRIES, INC., a
Kansas cooperative corporation ("Farmland") to CENEX HARVEST STATES
COOPERATIVES, a Minnesota cooperative corporation ("CHS") of all of Farmland's
rights, title and interest in Personal Property Leases and Contracts (as such
terms are defined in that certain Agreement of Purchase and Sale of Assets
effective as of November __, 2001, by and between Farmland and CHS), CHS does
hereby assume, and agree to be bound by, and to perform, observe and comply
with, all of the terms, covenants, conditions, undertakings, and other
provisions of all such Personal Property Leases and Contracts from and after
November __, 2001, in the same manner and with the same force and effect as if
CHS had originally executed all such Personal Property Leases and Contracts.

         IN WITNESS  WHEREOF,  CHS has caused this  Assumption  Agreement to be
 executed and made  effective  this ___ day of November,
2001.

CENEX HARVEST STATES COOPERATIVES






                                   EXHIBIT "H"

                            ALLOCATION OF BASE PRICE

                  To Be Completed By CHS Accounting Department




                                   EXHIBIT "I"

                              ENVIRONMENTAL ISSUES

                   Material Compliance and Related Proceedings


Except as stated below, to the best of Farmland's knowledge, the Assets
associated with the Real Property, are in substantial compliance with all
"Applicable Environmental Laws" with respect to its operation of the Business on
the Real Property.

1.   None.

Except as stated below, neither Farmland, or any other third party, has received
a notice of violation of an Applicable Environmental Law with respect to the
Real Property, as pursuant to which any government agency would require future
soil or groundwater remediation at the Real Property.

1.       None.

                                 Wells and Tanks

Except as stated below, to the best of Farmland's knowledge, there are no
active, inactive, and/or abandoned wells, and/or any underground storage tanks
located on the Real Property.

1.       One 10,000-gallon underground storage tank for diesel on the Amarillo
property

(TNRCC Facility Number 0001454)







                                   EXHIBIT "J"

                    TRANSITION USE OF LEGACY COMPUTER SYSTEM

The following provisions apply to CHS' use of the Farmland Legacy Computer
Systems for a transition period on and after the Closing Date.

1.       Farmland and CHS agree to the following background statements:

         a. Country Energy, LLC ("Country Energy") was formed by Farmland and
         CHS to act as their agent for the marketing, sale and distribution of
         certain energy products, effective on September 1, 1998, and has acted
         in such agency role to the Closing Date (the "Agency Period").

         b. During the Agency Period, Farmland and Country Energy engaged in a
         course of dealing pertaining to certain Farmland computer systems and
         mainframe processing (the "Legacy Computer Systems", as such term is
         specifically defined in paragraph 5. below of this Exhibit "J"),
         whereby Farmland and Country Energy shared resources and exchanged data
         using the Legacy Computer Systems, and in which both Farmland and
         Country Energy utilized the services of One System Group LLC ("OSG") to
         provide support with regard to such use of the Legacy Computer Systems
         (the "Prior Activities").

         c. CHS has notified Farmland that it is imperative to CHS that it be
         allowed to use the Legacy Computer Systems for its management of the
         Cenex Energy Business in a manner that is consistent with the Prior
         Activities during a transition period on and after the Closing Date.

         d. CHS' use of the Legacy Computer Systems on and after the Closing
         Date will unavoidably result in CHS gaining access to certain
         proprietary information of Farmland that CHS does not reasonably need
         for it to manage its Cenex Energy Business, as for example, information
         related to Farmland's consolidated financial data or business
         enterprises not included in Farmland's wholesale energy business (the
         "Farmland Proprietary Information").

2. Subject to all of the paragraphs as set forth in this Exhibit "J", including
but not limited to paragraph 4. herein, Farmland shall make the Legacy Computer
Systems available to CHS for its use, where such use will be similar in scope to
Prior Activities engaged in by Farmland, Country Energy, and OSG during the
Agency Period, for a limited time period beginning on December 1, 2001 and
ending on February 28, 2002 (the "Transition Period").

3. Subject to all of the paragraphs as set forth in this Exhibit "J", including
but not limited to paragraph 4. herein, during the Transition Period, Farmland
shall provide the following services with respect to the Legacy Computer
Systems: system monitoring, system processing functions (such as the closing
process), security maintenance, and user support on how to use the systems. CHS
personnel, not Farmland personnel, shall perform all other functions necessary
for CHS to use the Legacy Computer Systems during the Transition Period.

4. Notwithstanding anything to the contrary in this Exhibit "J", CHS and
Farmland agree that Farmland shall be required to perform its obligations set
forth in paragraphs 2. and 3. of this Exhibit "J" in accordance with a "good
faith, commercially reasonable" standard, which shall be interpreted and
construed to mean the same manner that a reasonable commercial entity would
utilize if it was performing the functions that are set forth in paragraphs 2.
and 3. of this Exhibit "J" for itself, and not for another party; provided,
further, that Farmland shall be compensated as set forth in paragraph 7. of this
Exhibit "J" for its exercise of "good faith, commercially reasonable" efforts to
perform its obligations set forth in paragraphs 2. and 3. of this Exhibit "J".
Except for Farmland's representation that it shall perform its obligations in
accordance with such "good faith, commercially reasonable" standard, FARMLAND
DOES NOT MAKE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING
THE LEGACY COMPUTER SYSTEMS, INCLUDING BUT NOT LIMITED TO ANY REPRESENTATIONS OR
WARRANTIES REGARDING CONTINUED OPERATION OF THE LEGACY COMPUTER SYSTEMS OR THE
AVAILABILITY OF STAFFING OR OTHER NECESSARY SUPPORT FOR SUCH LEGACY COMPUTER
SYSTEMS, AND/OR CHS' USE OF THE LEGACY COMPUTER SYSTEMS DURING THE TRANSITION
PERIOD, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
USE OR PURPOSE.

5.       The Legacy Computer Systems are defined as consisting of the following:

         a. The financial legacy systems, which includes the following systems:
         M&D, SIS, and CARMS, including the closing process, table and security
         maintenance and user support, and associated utilities (for example,
         interfaces, data transformation, data transmission and direct connect
         utilities) (the "Financial Legacy Systems"); and

         b. The petroleum legacy systems, which includes the following systems:
         Consolidated Sales, PIBS, COMS, PTLS, Petroex, Direct Ship, Commodity
         Rates Management, TBA, TOPS, WNAD, Fieldman and Refined Fuels Tax, and
         associated utilities (for example, interfaces, data transformation,
         data transmission and direct connect utilities) (the "Petroleum Legacy
         Systems"); and

         c. The transportation legacy system, which includes the following
         systems: TOES, and associated utilities (for example, interfaces, data
         transformation, data transmission and direct connect utilities) (the
         "Transportation Legacy System").

6. CHS shall not make, or cause to be made, any programming enhancements or
changes to the Financial Legacy Systems or the Transportation Legacy System
without prior written approval from Farmland, which approval shall not be
unreasonably withheld, regardless of whether CHS pays for, or offers to pay for,
such enhancements or changes.

7.       In consideration  of Farmland  performing its obligations set forth in
paragraphs 2. and 3. of this Exhibit "J", CHS shall pay
the following amounts (the "Compensation").

         a. As base compensation for its use of the Legacy Computer Systems
         during the Transition Period, a fee of One Hundred Thousand ($100,000)
         for each of the months of December, 2001, January, 2002, and February,
         2002, with each such fee due to Farmland on the first day of each such
         month (the "Base Fee").

         b. As compensation for computer hardware processing services to be
         provided by OSG to Farmland, in accordance with the IT Services
         Agreement in effect between Farmland and OSG, which services are
         measured in a quantity of millions of instructions per second ("MIPS"),
         in connection with CHS' use of the Legacy Computer Systems during the
         Transition Period, a fee that is equal to Farmland's obligation to OSG,
         which fee shall be calculated to be the greater of the two amounts set
         forth in subsections i. and ii. immediately below, with such fee due to
         OSG monthly, without setoff (the "MIPS Fee"):

                  i. A minimum amount of Sixty Eight Thousand, Five Hundred
                  Seventy Two Dollars and Sixty Eight Cents ($68,572.68), OSG's
                  fee for 12 MIPS.

                  ii.      A calculated fee for actual usage of MIPS, which
                  shall be the sum of the following two items:

                           A.       One hundred percent (100%) of the MIPS
                                    usage that is directly  associated with the
                                    Petroleum Legacy
                                    Systems, the Financial Legacy Systems, and
                                    the Transportation Legacy System; and

                           B.       An overhead usage factor, calculated as a
                                    proportion of the overhead MIPS not
                                    specifically allocated to any application
                                    equal to the greater of: (i) thirty percent
                                    (30%) of the overhead MIPS; or (ii) a
                                    fraction equal to the total MIPS other than
                                    overhead MIPS allocable to CHS as set forth
                                    in subdivision A. immediately above divided
                                    by total MIPS other than overhead MIPS.

         c. As compensation for direct access storage device services ("DASD")
         to be provided by OSG to Farmland, in accordance with the IT Services
         Agreement in effect between Farmland and OSG, in connection with CHS'
         use of the Legacy Computer Systems during the Transition Period, a fee
         that is equal to Farmland's obligation to OSG, which fee shall be
         calculated the same as the MIPS Fee set forth in subsection b.
         immediately above, except that the minimum amount set forth in
         subsection i. of subsection b. shall be Thirteen Thousand Dollars, Nine
         Hundred and Three Dollars and Twenty Eight Cents ($13,903.28), OSG's
         fee for 34 Gigabytes of DASD, with such fee due to OSG monthly, without
         setoff (the "DASD Fee"). . d. As compensation for maintenance, support
         and enhancement services to be provided by OSG to Farmland, in
         accordance with the IT Services Agreement in effect between Farmland
         and OSG, in connection with CHS' use of the Legacy Computer Systems
         during the Transition Period, a fee that is equal to Farmland's
         obligation to OSG, which fee shall be calculated to be the sum of the
         two amounts set forth in subsections i. and ii. immediately below, with
         such fee due to OSG monthly, without setoff:

                  i.       One hundred  percent (100%) of the  maintenance  and
                  support hours actually  provided by OSG with respect to
                  the Financial Legacy Systems, the Petroleum Legacy Systems,
                  and the Transportation Legacy System; and

                  ii.      One  hundred  percent  (100%) of the costs  that are
                  associated  with any  enhancements  made to the Legacy
                  Computer Systems with consent of Farmland as provided for in
                  paragraph 6. of this Exhibit "J".

8. Notwithstanding the fact that CHS' use of the Legacy Computer Systems during
the Transition Period will result in CHS gaining access to Farmland Proprietary
Information (as defined in paragraph 1. of this Exhibit "J"), CHS acknowledges
and agrees that Farmland is not transferring to CHS any ownership of, or any
license or right to use, or any other interest in, Farmland Proprietary
Information. CHS shall not use any Farmland Proprietary Information to which it
has gained access through its use of the Legacy Computer Systems during the
Transition Period, and shall treat Farmland Proprietary Information confidential
with the same degree of care that CHS treats its own proprietary and
confidential information.

9. Provided that Farmland fulfills its obligations that are set forth in this
Exhibit "J", in accordance with the provisions of paragraph 4. herein, CHS
hereby releases Farmland (and its officers, agents, employees and affiliates)
from any claims that CHS may have arising out of, or in any way related to, CHS'
use of the Legacy Computer System during the Transition Period.

10. In no event shall either Farmland or CHS be liable to the other party hereto
for any consequential, incidental, punitive, special, or similar damages,
regardless of whether such liability is based on breach of contract, tort,
strict liability, breach of warranties, the failure of essential purpose or
otherwise, in any way arising out of, or in any way related to, the provisions
of this Exhibit "J", even if such party was advised of the likelihood of such
damages.
                                   EXHIBIT "K"

                       GENERAL ASSIGNMENT AND BILL OF SALE

         IN CONSIDERATION of the sum of one dollar and other good and valuable
consideration given by CENEX HARVEST STATES COOPERATIVES, a Minnesota
cooperative corporation ("CHS"), as the transferee, to the undersigned FARMLAND
INDUSTRIES, INC., a Kansas cooperative corporation ("Farmland"), as the
transferor, the receipt and sufficiency of which is acknowledged by Farmland,
Farmland does hereby ll, transfer, assign, deliver, and convey to CHS all of its
right, title, and interest in the following assets (the "Assets") owned by
Farmland, pursuant to terms and conditions of that certain Agreement of Purchase
and Sale of Assets effective as of November __, 2001, by and between Farmland
and CHS (the "Asset Purchase Agreement").

         (a)      All Personal Property as defined in the Asset Purchase
                  Agreement;

         (b)      All Personal Property Leases as defined in the Asset Purchase
                  Agreement;

         (c)      All Contracts as defined in the Asset Purchase Agreement;

         (d)      All Intellectual Property as defined in the Asset Purchase
                  Agreement;

         (e)      All Business Records as defined in the Asset Purchase
                  Agreement;

         (f)      Farmland's Investment as defined in the Asset Purchase
                  Agreement;

         (g)      Farmland's ERP System as defined in the Asset Purchase
                  Agreement;

         (h)      All Permits/Licenses as defined in the Asset Purchase
                  Agreement; and

         (i)      All Purchased Inventory as defined in the Asset Purchase
                  Agreement.

Farmland represents and warrants that it has good and marketable title to all of
the Assets free and clear of all liens, claims, restrictions, or encumbrances.

Capitalized terms not otherwise defined herein shall have the meaning given them
in the Asset Purchase Agreement.

         IN WITNESS WHEREOF, Farmland has caused this Assignment and Bill of
Sale to be executed effective this _____ day of November, 2001.

FARMLAND INDUSTRIES, INC.