10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended November 30, 2008

Commission file number:  33-83868

AMERICAN CRYSTAL SUGAR COMPANY

(Exact name of registrant as specified in its charter)

Minnesota	84-0004720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

101 North Third Street

Moorhead, Minnesota  56560

(Address of principal executive offices)

Telephone Number (218) 236-4400

(Registrant’s telephone number, including area code)

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

YES   x NO  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company o
		(Do not check if a smaller
		reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the Act).

YES   o NO  x

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

	Outstanding at
Class of Common Stock	January 7, 2009
$10 Par Value	2,839

AMERICAN CRYSTAL SUGAR COMPANY

FORM 10-Q

INDEX

		PAGE NO.
PART I	FINANCIAL INFORMATION
ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS
	CONSOLIDATED BALANCE SHEETS	1
	CONSOLIDATED STATEMENTS OF OPERATIONS	3
	CONSOLIDATED STATEMENTS OF CASH FLOWS	4
	NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS	5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION	12
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 4.	CONTROLS AND PROCEDURES	18
PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	18
ITEM 1A.	RISK FACTORS	18
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	18
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	18
ITEM 4.	SUBMISSION OF MATTERS TO A VOTEOF SECURITY HOLDERS	19
ITEM 5.	OTHER INFORMATION	19
ITEM 6.	EXHIBITS	20
SIGNATURES		23

American Crystal Sugar Company

Consolidated Balance Sheets

(Unaudited)

(In Thousands)

Assets

	November 30						August 31
	2008			2007			2008*
Current Assets:
Cash and Cash Equivalents	$	121		$	254		$	128
Receivables:
Trade	66,740			58,290			66,149
Members	3,917			3,199			2,535
Other	2,471			9,704			2,767
Advances to Related Parties	8,538			2,582			20,391
Inventories	556,775			587,973			188,328
Prepaid Expenses	1,875			2,306			1,163
Total Current Assets	640,437			664,308			281,461
Property and Equipment:
Land and Land Improvements	60,099			58,137			60,110
Buildings	113,913			110,457			112,170
Equipment	878,555			851,085			877,113
Construction in Progress	5,798			26,182			5,322
Less Accumulated Depreciation	(716,749		)	(687,317		)	(703,134		)
Net Property and Equipment	341,616			358,544			351,581
Net Property and Equipment Held for Lease	117,957			127,666			120,001
Other Assets:
Investments in CoBank, ACB	9,946			11,627			9,946
Investments in Marketing Cooperatives	4,184			5,722			4,152
Pension Asset	34,758			37,428			35,101
Other Assets	10,664			16,996			11,057
Total Other Assets	59,552			71,773			60,256
Total Assets	$	1,159,562		$	1,222,291		$	813,299

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

* Derived from audited financial statements

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American Crystal Sugar Company

Consolidated Balance Sheets

(Unaudited)

(In Thousands)

Liabilities and Members’ Investments

	November 30						August 31
	2008			2007			2008*
Current Liabilities:
Short-Term Debt	$	225,516		$	250,612		$	15,297
Current Maturities of Long-Term Debt	20,991			25,627			20,991
Accounts Payable	27,692			26,358			35,836
Advances Due to Related Parties	2,784			3,741			3,343
Accrued Continuing Costs	42,366			42,094			—
Other Current Liabilities	26,966			26,575			27,286
Amounts Due Growers	225,241			237,576			120,933
Total Current Liabilities	571,556			612,583			223,686
Long-Term Debt, Net of Current Maturities	157,087			160,321			157,801
Accrued Employee Benefits	33,550			41,896			33,805
Other Liabilities	7,769			7,673			6,892
Total Liabilities	769,962			822,473			422,184
Commitments and Contingencies
Minority Interest in ProGold Limited Liability Company	58,389			64,235			59,839
Members’ Investments:
Preferred Stock	38,275			38,275			38,275
Common Stock	28			29			28
Additional Paid-In Capital	152,261			152,261			152,261
Unit Retains	174,416			170,363			174,506
Equity Retention	1,153			2,687			1,155
Accumulated Other Comprehensive Income (Loss)	(9,010		)	(8,539		)	(8,984		)
Retained Earnings (Accumulated Deficit)	(25,912		)	(19,493		)	(25,965		)
Total Members’ Investments	331,211			335,583			331,276
Total Liabilities and Members’ Investments	$	1,159,562		$	1,222,291		$	813,299

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

* Derived from audited financial statements

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American Crystal Sugar Company

Consolidated Statements of Operations

(Unaudited)

(In Thousands)

	For the Three Months Ended November 30
	2008			2007
Net Revenue	$	323,088		$	304,334
Cost of Sales	61,012			8,826
Gross Proceeds	262,076			295,508
Selling, General and Administrative Expenses	68,406			63,032
Accrued Continuing Costs	42,366			42,094
Operating Proceeds	151,304			190,382
Other Income (Expense):
Interest Income	99			314
Interest Expense, Net	(2,417		)	(2,653		)
Other, Net	4,807			513
Total Other Income (Expense)	2,489			(1,826		)
Proceeds Before Minority Interest and Income Tax Expense	153,793			188,556
Minority Interest	(1,671		)	(2,500		)
Income Tax Expense	(194		)	(1,171		)
Net Proceeds Resulting from Member and Non-Member Business	$	151,928		$	184,885
Distributions of Net Proceeds:
Credited/(Charged) to Members’ Investments:
Non-Member Business Income	$	279		$	1,685
Unit Retains Declared to Members	—			—
Net Credit to Members’ Investments	279			1,685
Payments To/Due Members for Sugarbeets,
Net of Unit Retains Declared	151,649			183,200
Total	$	151,928		$	184,885

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

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American Crystal Sugar Company

Consolidated Statements of Cash Flows

(Unaudited)

(In Thousands)

	For the Three Months Ended November 30
	2008			2007
Cash Provided By (Used In) Operating Activities:
Net Proceeds Resulting from Member and Non-Member Business	$	151,928		$	184,885
Payments To/Due Members for Sugarbeets, Net of Unit Retains Declared	(151,649		)	(183,200		)
Add (Deduct) Non-Cash Items:
Depreciation and Amortization	17,752			17,958
Income from Equity Method Investees	(5		)	(14		)
(Gain)/Loss on the Disposition of Property and Equipment	267			(6		)
Deferred Gain Recognition	(27		)	(49		)
Minority Interest Gain	1,671			2,500
Changes in Assets and Liabilities:
Receivables	(1,677		)	14,095
Inventories	(368,447		)	(371,410		)
Prepaid Expenses	(712		)	(1,089		)
Non Current Pension Asset	185			(28		)
Advances To/Due to Related Parties	11,294			6,081
Accounts Payable	(8,144		)	(12,640		)
Accrued Continuing Costs	42,366			42,094
Other Liabilities	210			(4,238		)
Amounts Due Growers	104,308			94,316
Net Cash Used In Operating Activities	(200,680		)	(210,745		)
Cash Provided By (Used In) Investing Activities:
Purchases of Property and Equipment	(4,869		)	(9,110		)
Purchases of Property and Equipment Held for Lease	(750		)	(650		)
Proceeds from the Sale of Property and Equipment	3			16
Changes in Other Assets	(3		)	(1,858		)
Net Cash Used In Investing Activities	(5,619		)	(11,602		)
Cash Provided By (Used In) Financing Activities:
Net Proceeds from Short-Term Debt	210,219			225,632
Proceeds from Issuance of Long-Term Debt	—			3,061
Long-Term Debt Repayment	(714		)	(6,314		)
Distributions to Minority Interest	(3,121		)	—
Payment of Unit Retains and Equity Retention	(92		)	—
Net Cash Provided By Financing Activities	206,292			222,379
Increase/(Decrease) In Cash and Cash Equivalents	(7		)	32
Cash and Cash Equivalents, Beginning of Year	128			222
Cash and Cash Equivalents, End of Period	$	121		$	254

The Accompanying Notes are an Integral Part of These Consolidated Financial Statements.

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AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

November 30, 2008 and 2007

(Unaudited)

Note 1: Basis of Presentation

The unaudited consolidated financial statements of American Crystal Sugar Company (the Company) contained herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.  Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America.  However, in the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.  These financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended August 31, 2008.

The Company’s consolidated financial statements are comprised of: American Crystal Sugar Company; its wholly-owned subsidiaries Sidney Sugars Incorporated (Sidney Sugars) and Crab Creek Sugar Company (Crab Creek); and ProGold Limited Liability Company (ProGold), a limited liability company in which the Company holds a 51 percent ownership interest.  All material inter-company transactions have been eliminated.

The operating results for the three months ended November 30, 2008, are not necessarily indicative of the results that may be expected for the year ended August 31, 2009.  The amount paid to shareholders for sugarbeets (member beet payment) depends on the future selling prices of sugar and agri-products as well as processing and other costs incurred during the remainder of the fiscal year associated with the 2008 Red River Valley sugarbeet crop (RRV crop).  The amount paid to non-member growers for sugarbeets (non-member beet payment) depends on the future selling prices of sugar and the related selling expenses associated with the 2008 Sidney Sugars sugarbeet crop (Sidney crop).  For the purposes of this report, the amount of the beet payments, future revenues and costs have been estimated.  Therefore, adjustments with respect to these estimates may be necessary in the future, as additional information becomes available.

Note 2: Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (FASB) has issued Statement No. 157, Fair Value Measurements (SFAS 157).  This statement defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements.  This statement became effective for the Company in the first quarter of fiscal 2009.  Relative to SFAS 157, the FASB issued FASB Staff Positions (FSP) 157-1, 157-2 and 157-3. FSP 157-1 amends SFAS 157 to exclude SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, while FSP 157-2 delays the effective date of the application of SFAS 157 for the Company to the first quarter of fiscal 2010 for all non-financial assets and non-financial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis.  FSP 157-3 became effective October 10, 2008 for determining the fair value of a financial asset when the market for that asset is not active.  The Company does not expect that the adoption of this statement will have a material effect on the Company’s financial statements.

The FASB has issued Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R).  This statement requires the Company to recognize the over-funded or under-funded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income.  This requirement became effective and was adopted by the Company as of August 31, 2007.  This statement

5

also requires the Company in this fiscal year to change the annual measurement date of the funded status of the plans from May 31 to August 31, the date of its year-end statement of financial position.

The FASB has issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB  No. 51.  This statement requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements.  Its intention is to eliminate the diversity in practice regarding the accounting for transactions between an entity and noncontrolling interests.  This statement becomes effective for the Company in the first quarter of fiscal 2010.  At that time, the Company will be required to report the minority interest in ProGold as a component of equity.

The FASB has issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.  This statement enhances the disclosure requirements for derivatives and hedging activities.  This statement becomes effective for the Company in the second quarter of fiscal 2009.  The Company does not expect that the adoption of this statement will have a material effect on the Company’s financial statements.

The FASB has issued statement No. 162, The Hierarchy of Generally Accepted Accounting Principles.  This statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy).  This statement became effective and was adopted by the Company on November 15, 2008.

The FASB has issued statement No. 141R, Business Combinations.  This statement replaces FASB Statement No. 141, Business Combinations.  This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination.  This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control.  This statement becomes effective for the Company in fiscal 2010.  The Company does not expect that the adoption of this statement will have a material effect on the Company’s financial statements.

The FASB has issued FASB Staff Position (FSP) FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.  This FSP amends FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, to require disclosures by sellers of credit derivatives, including credit derivatives embedded in a hybrid instrument.  This FSP also amends FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to require an additional disclosure about the current status of the payment/performance risk of a guarantee.  Further, this FSP clarifies the Board’s intent about the effective date of FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities.  This FSP became effective and was adopted by the Company on November 30, 2008.

The FASB has issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets.  This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible Assets.  The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under Statement 142 and the period of expected cash flows used to measure the fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and other U.S. generally accepted accounting principles (GAAP).  This FSP becomes effective for the Company in Fiscal 2010.  The Company does not expect that the adoption of this FSP will have a material effect on the Company’s financial statements.

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The FASB has issued FSP FAS 140-4 and FIN 46(R)-8 Disclosures by Public Entities (Enterprises) about Transfers of Financial Assets and Interests in Variable Interest Entities.  This FSP amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, to require public entities to provide additional disclosures about transfers of financial assets.  It also amends FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, to require public enterprises, including sponsors that have a variable interest in a variable interest entity, to provide additional disclosures about their involvement with variable interest entities.  This FSP becomes effective for the Company in the second quarter of Fiscal 2009.  The Company does not expect that the adoption of this FSP will have a material effect on the Company’s financial statements.

The FASB has issued FSP FAS 132(R)-1 Employers’ Disclosures about Postretirement Benefit Plan Assets.  This FSP amends FASB Statement No. 132 (revised 2003), Employers’ Disclosures about Pensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosure about plan assets of a defined benefit pension plan or other postretirement plan.  This FSP becomes effective for the Company in Fiscal 2010.  The Company does not expect that the adoption of this FSP will have a material effect on the Company’s financial statements.

Note 3: Inventories

The major components of inventories are as follows (In Thousands):

	November 30 2008		November 30 2007		August 31 2008
Refined Sugar, Pulp, Molasses, Other Agri-Products and Sugarbeet Seed	$	211,344	$	247,284	$	151,741
Unprocessed Sugarbeets	308,823		312,221		—
Maintenance Parts and Supplies	36,608		28,468		36,587
Total Inventories	$	556,775	$	587,973	$	188,328

Sugar, pulp, molasses and other agri-products inventories are valued at estimated net realizable value.  Unprocessed sugarbeets are valued at the estimated gross beet payment.  Maintenance parts and supplies and sugarbeet seed inventories are valued at the lower of average cost or market.

Note 4: Net Property and Equipment

In fiscal 2008, an impairment loss of $11.9 million related to property and equipment at the Sidney, Montana facility was recognized.  Based on further analysis as of November 30, 2008, which indicates better than previously expected operating results for fiscal 2009 and 2010 due to increased sugar production and sugar prices in fiscal 2009 and increased contracted sugarbeet acreage for fiscal 2010, no additional impairment was indicated.

Note 5: Short-Term Debt

The Company has a seasonal line of credit with a consortium of lenders led by CoBank, ACB of $345.0 million and a line of credit with Wells Fargo Bank for $1 million.  The Company’s commercial paper program provides short-term borrowings of up to $325 million.  Any borrowings under the commercial paper program along with outstanding short-term letters of credit will act to reduce the available credit under the CoBank, ACB seasonal line of credit by a commensurate amount.  The Company also utilizes the Commodity Credit Corporation (CCC) to meet its short-term borrowing needs.

As of November 30, 2008, the Company had outstanding commercial paper of $30.5 million at an average interest rate of 3.35% and maturity dates between December 1, 2008 and December 5, 2008.  In addition, the Company had an outstanding non-recourse loan with the CCC of $51.0 million, against which 2.2 million hundredweight of sugar was pledged as collateral.  The CCC loan carried an interest rate of 2.5% and a maturity date of August 31, 2009.  The Company also had outstanding short-term debt with CoBank, ACB as of November 30, 2008 of $144.0 million at an average interest rate of 2.88% and

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maturity dates between December 24, 2008 and February 19, 2009.  The Company had $2.1 million of short-term letters of credit outstanding as of November 30, 2008.  The unused seasonal line of credit as of November 30, 2008 was $169.4 million.

As of November 30, 2007, the Company had outstanding commercial paper of $200.6 million at an average interest rate of 5.98% and maturity dates between December 1, 2007 and February 29, 2008.  The Company also had $50.0 million of outstanding short-term debt with CoBank, ACB as of November 30, 2007, at an interest rate of 5.75% and a maturity date of January 22, 2008.  The Company had no outstanding short-term debt with the CCC as of November 30, 2007.  The Company had $2.1 million of short-term letters of credit outstanding as of November 30, 2007.  The unused seasonal line of credit as of November 30, 2007 was $138.3 million.

Note 6: Long-Term Debt

As of November 30, 2008, the Company had long-term debt availability with CoBank, ACB of $184.8 million, of which $53.3 million in loans and $70.3 million in long-term letters of credit were outstanding.  The unused long-term line of credit as of November 30, 2008, was $61.2 million.  In addition, the Company had long-term debt outstanding, as of November 30, 2008, of $50 million from a private placement of Senior Notes that occurred in September of 1998; $3.6 million from a private placement of Senior Notes that occurred in January of 2003; $70.4 million from seven separate issuances of Pollution Control and Industrial Development Revenue Bonds; and a term loan with Bank of North Dakota of $ .8 million.

As of November 30, 2007, the Company had $76.9 million in loans outstanding with CoBank, ACB and $69.3 million in long-term letters of credit outstanding.  In addition, the Company had long-term debt outstanding, as of November 30, 2007, of $50 million from a private placement of Senior Notes that occurred in September of 1998; $6.4 million from a private placement of Senior Notes that occurred in January of 2003; $51.0 million from ten separate issuances of Pollution Control and Industrial Development Revenue Bonds; and a term loan with Bank of North Dakota of $1.6 million.

Note 7: Interest Paid and Interest Capitalized

Interest paid, net of amounts capitalized, was $1.1 million and $1.0 million for the three months ended November 30, 2008 and 2007, respectively.  Interest capitalized was $ .2 million and $ ..4 million for the three months ended November 30, 2008 and 2007, respectively.

Note 8: Accrued Continuing Costs

For interim reporting, the net proceeds from member business is based on the forecasted gross beet payment and the percentage of the tons of sugarbeets processed to the total estimated tons of sugarbeets to process for a given crop year.  The net proceeds from the operations of Sidney Sugars is based on the forecasted net income for the fiscal year and the percentage of the tons of non-member sugarbeets processed to the total estimated tons of non-member sugarbeets to process for a given fiscal year.

Accrued continuing costs represent the difference between the net proceeds as determined above and actual member business crop year and Sidney Sugars fiscal year revenues realized and expenses incurred through the end of the reporting period.  Accrued continuing costs are reflected in the Consolidated Financial Statements as a cost on the Consolidated Statements of Operations and as a current liability on the Consolidated Balance Sheets.

8

Note 9: Net Periodic Pension and Post-Retirement Costs

The following schedules provide the components of the Net Periodic Pension and Post-Retirement Costs for the three months ended November 30, 2008 and 2007:

Components of Net Periodic Pension Cost

(In Thousands)

	For the Three Months Ended November 30
	2008			2007
Service Cost	$	1,049		$	941
Interest Cost	2,668			2,038
Expected Return on Plan Assets	(3,864		)	(3,241		)
Amortization of Prior Service Costs	411			329
Amortization of Net Actuarial Loss	18			15
FAS 158 Measurement Date Adjustment	(56		)	—
Net Periodic Pension Cost	$	226		$	82

Components of Net Periodic Post-Retirement Cost

(In Thousands)

	For the Three Months Ended November 30
	2008			2007
Service Cost	$	242		$	269
Interest Cost	472			466
Amortization of Net Actuarial Gain	(169		)	(56		)
Net Periodic Post-Retirement Cost	$	545		$	679

In accordance with Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R) which requires the Company in fiscal 2009 to change the annual measurement date of the funded status of the pension plans from May 31 to August 31, the Company has recorded a direct charge of approximately $225,000 to retained earnings representing a measurement date adjustment of 3/15ths of the pension cost for the period of June 1, 2008 to August 31, 2009.  The remaining 12/15ths of this pension cost will be expensed and recognized during fiscal 2009.

The Company does not believe it will be required to make contributions to the pension plans during this fiscal year.  The Company has contributed and made benefit payments of approximately $17,000 related to the Supplemental Executive Retirement Plans during the three months ended November 30, 2008.  The Company expects to contribute and make benefit payments of approximately $77,000 this fiscal year related to the Supplemental Executive Retirement Plans.

The Company has contributed and made benefit payments of approximately $200,000 related to the post-retirement plans during the three months ended November 30, 2008.  The Company expects to contribute and make benefit payments of approximately $1.0 million related to the post-retirement plans during the current fiscal year.

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Note 10: Members’ Investments

			Shares	Shares Issued
	Par Value		Authorized	& Outstanding
Preferred Stock:
January 7, 2009	$	76.77	600,000	498,570
November 30, 2008	$	76.77	600,000	498,570
August 31, 2008	$	76.77	600,000	498,570
November 30, 2007	$	76.77	600,000	498,570
Common Stock:
January 7, 2009	$	10.00	4,000	2,839
November 30, 2008	$	10.00	4,000	2,839
August 31, 2008	$	10.00	4,000	2,839
November 30, 2007	$	10.00	4,000	2,878

Note 11: Shipping and Handling Costs

The costs incurred for the shipping and handling of products sold are classified in the financial statements as a selling expense on the Statements of Operations.  Shipping and handling costs were $47.5 million and $43.3 million for the three months ended November 30, 2008 and 2007, respectively.

Note 12: Segment Reporting

The Company has identified two reportable segments: Sugar and Leasing.  The sugar segment is engaged primarily in the production and marketing of sugar from sugarbeets.  It also sells agri-products and sugarbeet seed.  The leasing segment is engaged in the leasing of a corn wet-milling plant used in the production of high-fructose corn syrup sweetener.  The segments are managed separately.  There are no inter-segment sales.  The leasing segment has a major customer that accounts for all of that segment’s revenue.

Summarized financial information concerning the Company’s reportable segments for the three months ended November 30, 2008 and 2007, is shown below:

	For the Three Months Ended November 30, 2008
	(Dollars In Thousands)
	Sugar		Leasing		Consolidated
Net Revenue from External Customers	$	316,863	$	6,225	$	323,088
Gross Proceeds	$	258,645	$	3,431	$	262,076
Depreciation and Amortization	$	14,958	$	2,794	$	17,752
Interest Income	$	98	$	1	$	99
Interest Expense	$	2,417	$	—	$	2,417
Income from Equity Method Investees	$	5	$	—	$	5
Other Income, Net	$	4,802	$	—	$	4,802
Net Proceeds	$	150,189	$	1,739	$	151,928
Capital Expenditures	$	4,869	$	750	$	5,619

10

	For the Three Months Ended November 30, 2007
	(Dollars In Thousands)
	Sugar		Leasing		Consolidated
Net Revenue from External Customers	$	297,505	$	6,829	$	304,334
Gross Proceeds	$	290,196	$	5,312	$	295,508
Depreciation and Amortization	$	15,179	$	2,779	$	17,958
Interest Income	$	308	$	6	$	314
Interest Expense	$	2,479	$	174	$	2,653
Income from Equity Method Investees	$	14	$	—	$	14
Other Income, Net	$	499	$	—	$	499
Net Proceeds	$	182,283	$	2,602	$	184,885
Capital Expenditures	$	9,110	$	650	$	9,760

	As of November 30, 2008
	(Dollars In Thousands)
	Sugar		Leasing		Consolidated
Property and Equipment, Net	$	341,616	$	—	$	341,616
Assets Held for Lease, Net	$	—	$	117,957	$	117,957
Segment Assets	$	1,037,101	$	122,461	$	1,159,562

	As of November 30, 2007
	(Dollars In Thousands)
	Sugar		Leasing		Consolidated
Property and Equipment, Net	$	358,544	$	—	$	358,544
Assets Held for Lease, Net	$	—	$	127,666	$	127,666
Segment Assets	$	1,086,500	$	135,791	$	1,222,291

Note 13: Environmental Matters

The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control.  The Company conducts an ongoing compliance program designed to meet these environmental laws and regulations.  The Company believes that it is in substantial compliance with applicable environmental laws and regulations.  From time to time, however, the Company may be involved in investigations or determinations regarding non-material matters that may arise.

On November 25, 2008, the Company entered into a stipulation agreement with the Minnesota Pollution Control Agency (MPCA) related to hydrogen sulfide emissions from its Crookston, East Grand Forks and Moorhead, Minnesota factories.  This agreement requires the Company, among other conditions, to pay a penalty of $185,000 and to develop and implement Hydrogen Sulfide Management Strategies at each of the Minnesota factories.  As part of the Hydrogen Sulfide Management Strategies, the Company has agreed to make certain capital expenditures over the next three years and implement specified changes in operating procedures to contain hydrogen sulfide emissions at the Minnesota factories.  The required capital expenditures are currently estimated to be approximately $12 million.  The costs associated with operational changes are not currently known.

The Company works closely with all affected government agencies to resolve environmental issues that arise and believes they will be resolved without any adverse effect on the Company.

The Company has identified capital expenditures for environmental related projects at the Company’s factory locations of $29.0 million.

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Note 14: Legal Matters

Another sugar company has appealed to the Ninth Circuit Court of Appeals a decision of the United States District Court relative to the determination and transfer of sugar marketing allocations made by the USDA.  If this case is overturned, it could result in the Company experiencing a reduction in marketing allocations equal to the loss of approximately 15,000 acres in future crop years assuming no other related factors were to change.

Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition for the Three Months Ended November 30, 2008 and 2007

This report contains forward-looking statements that involve risks and uncertainties.  Such forward-looking statements include, among others, those statements including the words “expect”, “anticipate”, “believe”, “may” and similar expressions.  The Company’s actual results could differ materially from those indicated.  Risk factors that could cause or contribute to such differences include, without limitation, market factors, weather and general economic conditions, farm and trade policy, and available quantity and quality of sugarbeets.  For a more complete discussion of “Risk Factors”, please refer to the Company’s 2008 Form 10-K.

Overview

The harvest of the Red River Valley and Sidney sugarbeet crops grown during 2008 and to be processed during fiscal 2009 produced a total of 10.7 million tons of sugarbeets, or approximately 25.4 tons of sugarbeets per acre from approximately 422,000 acres.  This represents a decrease in total tons harvested of approximately 14.1 percent compared to the 2007 crop.  The sugar content of the 2008 crop is 17.6 percent as compared to the 18.1 percent sugar content of the 2007 crop.  The Company expects to produce a total of approximately 31.3 million hundredweight of sugar from the 2008 crop, a decrease of approximately 14.5 percent compared to the 2007 crop.

Net Proceeds from Member and Non-Member Business for fiscal 2009 are expected to be approximately 13 percent lower than in fiscal 2008.  This decrease is primarily due to fewer tons harvested and a decline in the sugar content of the sugarbeets resulting in the decreased production of sugar and agri-products. This decrease is partially offset by anticipated higher net selling prices for sugar and agri-products.

Comparison of the Three Months Ended November 30, 2008 and 2007

Revenue for the three months ended November 30, 2008, was $323.1 million, an increase of $18.8 million from the three months ended November 30, 2007.  The table below reflects the percentage changes in product revenues, prices and volumes for the three months ended November 30, 2008, as compared to the three months ended November 30, 2007.

Product	Revenue		Selling Price		Volume
Sugar	10.5	%	7.5	%	2.8	%
Pulp	-12.8	%	40.5	%	-37.9	%
Molasses	-40.8	%	6.7	%	-44.5	%
CSB	26.2	%	26.1	%	0.1	%
Betaine	4.5	%	16.1	%	-10.0	%

The increases in selling prices for our products reflect strong markets due to supply and demand factors. The decreases in the volumes of pulp and molasses sold were due in part to lower product availability resulting from a 22.6% decrease in pulp produced and a 12.8 % decrease in molasses produced in the first three months of this fiscal year as compared to same time period last fiscal year. Lower beginning inventory levels for both pulp and molasses this year as compared to last year also contributed to the reduction in the availability of products for sale.

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Rental revenue on the ProGold operating lease was $6.2 million and $6.8 million for the three months ended November 30, 2008 and 2007, respectively.

Cost of sales for the three months ended November 30, 2008, exclusive of payments to members for sugarbeets, increased $52.2 million as compared to the three months ended November 30, 2007.  This increase was primarily related to the following:

·At the end of each reporting period, product inventories are recorded at their net realizable value.  The change in the net realizable value of the product inventories from the beginning of the reporting period is recorded on the balance sheet as either an increase or decrease to inventories with a corresponding dollar for dollar adjustment to cost of sales on the statement of operations.  The increase in the net realizable value of product inventories for the three months ended November 30, 2008 was $58.0 million as compared to an increase of $88.9 million for the previous year’s three month period ended November 30, 2007 resulting in a $30.9 million unfavorable change in the cost of sales between the two years as shown in the table below:

Change in the Net Realizable Value of Product Inventories

	For the Three Months Ended November 30
(In Millions)	2008			2007			Change
Beginning Product Inventories at Net Realizable Value	$	(150.6	)	$	(156.4	)	$	5.8	(1)
Ending Product Inventories at Net Realizable Value	208.6			245.3			(36.7		)(2)
Increase in the Net Realizable Value of Product Inventories	$	58.0		$	88.9		$	(30.9	)

(1) The change is primarily due to lower quantities of products as of August 31, 2008 as compared to August 31, 2007.

(2) The change is primarily due to a 27.8 percent decrease in the hundredweight of sugar inventory as of November 30, 2008 as compared to November 30, 2007 partially offset by an 11.5 percent increase in the per hundredweight net realizable value of sugar inventory along with higher quantities and per ton net realizable value of pulp inventory as of November 30, 2008 as compared to November 30, 2007.

·Due to lower than anticipated sugar production and inventory levels during the first quarter of this year, the Company’s sugar marketing agent, United Sugars Corporation, purchased and sold additional sugar to meet our customers’ needs.  As a result, the costs associated with purchased sugar increased $16.4 million for the three months ended November 30, 2008, as compared to the three months ended November 30, 2007.

·Factory operating costs increased $3.8 million for the three months ended November 30, 2008, as compared to the three months ended November 30, 2007, primarily due to higher costs associated with coke, limerock and chemicals.

Selling, general and administrative expenses increased $5.4 million for the three months ended November 30, 2008, as compared to the three months ended November 30, 2007.  Selling expenses increased $6.3 million primarily due to the increased freight and packaging costs for sugar partially offset by lower freight costs for pulp and molasses resulting from lower sales volumes.  General and administrative expenses decreased $ .9 million due to general cost decreases.

Total Other Income increased $4.3 million for the three months ended November 30, 2008, as compared to the three months ended November 30, 2007.  This was due primarily to the receipt of $4.8 million in November 2008 related to a legal settlement.

Non-member business activities resulted in a gain of $ .3 million for the three months ended November 30, 2008 as compared to a gain of $1.7 million for the three months ended November 30, 2007.  The decrease was primarily related to the reduced earnings of Sidney Sugars and reduced income from the activities of ProGold.

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Food, Conservation and Energy Act of 2008

The Food, Conservation and Energy Act of 2008 (the Farm Bill) enacted in May, 2008, contains several provisions related to the domestic sugar industry, aimed at achieving balance and stability in the U.S. sugar market while minimizing the cost to the Federal government.  The Farm Bill applies to the 2008 through 2012 crop years.  Generally, the Farm Bill:

·maintains a non-recourse loan program,

·sets a minimum overall allotment quantity for U.S. producers at no less than 85% of domestic consumption,

·maintains a system of marketing allocations for sugarbeet and sugar cane producers,

·restricts imports of foreign sugar and

·provides a new market balancing mechanism to divert any oversupply of sugar from sugar producers to ethanol producers.

Under the Farm Bill, sugar processors can borrow funds on a non-recourse basis from the Commodity Credit Corporation (CCC), with repayment of such funds secured by sugar.  If the price of sugar drops below the forfeiture price, the processors can forfeit the sugar securing the loans to the CCC in lieu of repayment.  Processors may also obtain CCC loans for “in-process” sugar or syrups at 80 percent of the loan rate.

The Farm Bill incorporates gradual loan rate increases for raw and refined sugar.  For raw sugar, the loan rate will increase three-quarters of a cent per pound, raw value, phased-in in quarter-cent increments over crop years 2009-2011.  Raw cane loan rates will remain at 18.00 cents/lb in 2008 then rise gradually to 18.75 cents by 2011, and they will remain at 18.75 cents/lb for the 2012 crop year.  Refined beet sugar loan rates are set at 22.90 cents/lb for the 2008 crop and thereafter are set at a rate equal to 128.5 percent of the loan rate per pound for raw cane sugar for each of the 2009 through 2012 crop years.

The United States Department of Agriculture (USDA) has historically maintained raw and refined sugar prices above the forfeiture price without cost to the U.S. Treasury by regulating the supply of sugar in the U.S. market through management of a tariff rate quota system.  Currently, forty exporting countries retain guaranteed preferential access to the U.S. market under World Trade Organization (WTO) and Free Trade Agreement (FTA) rules.  Mexico’s access has been unlimited since January 1, 2008.  This Farm Bill sets a minimum overall allotment quantity for U.S. producers at no less than 85% of domestic consumption and provides a market balancing mechanism if there is an oversupply in the domestic sugar market.  If the Secretary of Agriculture determines there is an oversupply of sugar, the new market balancing mechanism requires the Secretary to divert the excess sugar from sugar producers to ethanol producers while minimizing the cost to the U.S Treasury.  Although the market balancing mechanism will provide sustainability to the sugar industry in the short term, there is no assurance that the sugar-to-ethanol program will be in place after the Farm Bill expires.

The marketing allotments and allocations set forth under the Farm Bill affect the sugar produced from the 2008 crop through the 2012 crop.  On an annual basis, the marketing allotments and the corresponding allocation to the Company will dictate the amount of sugar the Company can sell into the domestic market.  The Company’s marketing allocation for the 2008 crop is currently set at approximately 35 million hundredweight.  The Company’s allocation may reduce or increase the amount of sugar the Company can market for a given year, thus affecting the number of acres of sugarbeets required for processing to produce that amount of sugar.

North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA) governs sweetener trade between the United States and Mexico.  Under the NAFTA, tariffs on over-quota imports of sugar from and exports of sugar to Mexico expired on January 1, 2008.  Imports of Mexican sugar could cause material harm to the United States sugar market.  The Company has no way to predict the extent to which Mexico will take advantage of its export opportunities.

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Regional and Bilateral Free Trade Agreements

Under the current administration, the United States government is pursuing an aggressive agenda on international trade.  It is seeking to negotiate new free trade agreements with a number of countries and regions that are major producers of sugar.  The primary agreements affecting sugar that are completed or are being negotiated, to the Company’s knowledge, include the Peru Free Trade Agreement, Colombian Free Trade Agreement, Panama Free Trade Agreement, as well as, agreements with the Free Trade Area of the Americas, the Association of Southeast Asian Nations, South Africa, Thailand, and others.  The Company believes these agreements, if they reach fruition, could negatively impact the Company’s profitability.  If increases in guaranteed access or reductions in sugar tariffs are included in these agreements, excess sugar from these regions could enter the U.S. market and put pressure on domestic sugar prices.

The Peru Free Trade Agreement has been ratified by the U.S. Congress.  Negotiations have been completed on the U.S.-Colombian Free Trade Agreement and the U.S.-Panama Free Trade Agreement but they have not been ratified by the U.S. Congress.  The Company does not know when these trade agreements will be brought before Congress for a vote.

The Doha Round negotiations of the WTO continue to be pursued by the U.S. Administration and some of its international counterparts.  It is unclear at this time whether negotiations will be completed.  If the negotiations are completed, the outcome of any negotiated arrangement could have significant adverse consequences for the Company.

The U.S. sugar industry and the Company, as an influential member of such industry, recognize the potential negative impact that could result if these agreements are entered into by the United States and are taking steps to attempt to positively influence the outcome.  The Company and the sugar industry intend to continue to focus significant attention on trade issues in the future.

The impact of the various trade agreements on the Company cannot be assessed at this time due to the uncertainty concerning the terms of the agreements and whether they will ultimately be implemented.  It is possible, however, that the passage of various trade agreements could have a material adverse effect on the Company through a reduction in acreage that can be planted by the Company’s shareholders and by the growers for Sidney Sugars Incorporated, and/or a reduction in sugar selling prices, and a corresponding reduction in the beet payment to the shareholders and the Company earnings.

Environmental

The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor and noise control.  The Company conducts an ongoing compliance program designed to meet these environmental laws and regulations.  The Company believes that it is in substantial compliance with applicable environmental laws and regulations.  From time to time, however, the Company may be involved in investigations or determinations regarding non-material matters that may arise.

On November 25, 2008, the Company entered into a stipulation agreement with the Minnesota Pollution Control Agency (MPCA) related to hydrogen sulfide emissions from its Crookston, East Grand Forks and Moorhead, Minnesota factories.  This agreement requires the Company, among other conditions, to pay a penalty of $185,000 and to develop and implement Hydrogen Sulfide Management Strategies at each of the Minnesota factories.  As part of the Hydrogen Sulfide Management Strategies, the Company has agreed to make certain capital expenditures over the next three years and implement specified changes in operating procedures to contain hydrogen sulfide emissions at the Minnesota factories.  The required capital expenditures are currently estimated to be approximately $12 million.  The costs associated with operational changes are not currently known.

The Company works closely with all affected government agencies to resolve environmental issues that arise and believes they will be resolved without any adverse effect on the Company.

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The Company has identified capital expenditures for environmental related projects at the Company’s factory locations of $29.0 million.

Liquidity and Capital Resources

Under the Company’s Bylaws and Member Grower Contracts, payments for member-delivered sugarbeets, the principal raw material used in producing the sugar and agri-products it sells, are subordinated to all member business expenses.  In addition, the beet payments made to member growers and non-member growers are paid in three payments over the course of a year, and the member payments are made net of any anticipated unit retain for the crop.  These procedures have the effect of providing the Company with an additional source of short-term financing.  This financing arrangement may result in an additional source of liquidity and reduced need for outside financing in comparison to a similar business operated on a non-cooperative basis.

Because sugar is sold throughout the year (while sugarbeets are processed primarily in the fall, winter and spring) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund its operations.  The majority of such financing has been provided by a consortium of lenders led by CoBank, ACB.

The Company has long-term debt availability with CoBank, ACB of $184.8 million, of which $53.3 million in loans and $70.3 million in long-term letters of credit were outstanding as of November 30, 2008.  The unused long-term line of credit as of November 30, 2008, was $61.2 million.  In addition, the Company had long-term debt outstanding, as of November 30, 2008, of $50 million from a private placement of Senior Notes that occurred in September of 1998; $3.6 million from a private placement of Senior Notes that occurred in January of 2003; $70.4 million from seven separate issuances of Pollution Control and Industrial Development Revenue Bonds; and a term loan with Bank of North Dakota of $ .8 million.

The Company also has a seasonal line of credit with a consortium of lenders led by CoBank, ACB of $345.0 million, against which there was a $144.0 million outstanding balance as of November 30, 2008 and a line of credit with Wells Fargo Bank for $1 million, against which there was no outstanding balance as of November 30, 2008.  The Company’s commercial paper program provides short-term borrowings of up to $325 million of which approximately $30.5 million was outstanding as of November 30, 2008.  The Company had $2.1 million of short-term letters of credit outstanding as of November 30, 2008.  Any borrowings under the commercial paper program along with outstanding short-term letters of credit will act to reduce the available credit under the CoBank, ACB seasonal line of credit by a commensurate amount.  The unused short-term line of credit as of November 30, 2008, was $169.4 million.  In addition, the Company had an outstanding non-recourse loan with the CCC, as of November 30, 2008, of approximately $51.0 million, against which 2.2 million hundredweight of sugar was pledged as collateral.

The Company had outstanding purchase commitments totaling $3.3 million as of November 30, 2008, for equipment and construction contracts related to various capital and maintenance projects.

The liquidity changes that have occurred in the Company’s financial statements from August 31, 2008, to November 30, 2008, were primarily due to normal business seasonality.  The first three months of the Company’s fiscal year includes: the completion of the sugarbeet harvest; the startup of the processing campaign; the final payments to growers for sugarbeets delivered from the previous year’s crop; and the initial payments to growers for sugarbeets delivered from the current year’s crop.

The net cash used by operations was $200.7 million for the three months ended November 30, 2008, as compared to $210.7 million for the three months ended November 30, 2007.  This decrease in the use of cash of $10.0 million was primarily the result of the following:

·Changes in the Amount Due Growers of $10.0 million were due to a higher final total grower payment last year and a higher estimated per ton member grower payment this year as compared

16

to last year at this time. These were partially offset by a reduction in the current year’s total estimated grower payment due to a reduction in tons harvested.

·Changes in Advances to Related Parties of $5.2 million were due primarily to the timing of the cash requirements of our marketing agents.

·Changes in Accounts Payable of $4.5 million and changes in Other Liabilities of $4.4 million were due to a higher beginning of the year balance last year resulting from an early campaign start-up in August.

·Changes in inventories of $3.0 million were primarily due to a smaller increase in finished products of $9.6 million partially offset by an increased value of unprocessed sugarbeets of $5.9 million along with an increase of $ .7 million of supplies and parts inventory.

·Changes in Other liabilities of $4.0 million were due primarily to normal accruals and the timing of payments against those accruals.

·The above changes were partially offset by the change in Accounts Receivable of $15.8 million due to increased collections last year on a larger beginning of the year receivable balance resulting from increased sales.

The net cash used in investing activities was $5.6 million for the three months ended November 30, 2008, as compared to $11.6 million for the three months ended November 30, 2007.  The decrease of $6.0 million was primarily related to decreased purchases of property and equipment of $4.2 million.

The net cash provided by financing activities was $206.3 million for the three months ended November 30, 2008, as compared to $222.4 million for the three months ended November 30, 2007.  This decrease of $16.1 million was primarily due to decreased proceeds from short-term debt of $15.4 million, decreased proceeds from long-term debt of $3.1 million, distributions to Minority Interest of $3.1 million partially offset by decreased payments on long term debt of $5.6 million.

The Company anticipates that the funds necessary for working capital requirements and future capital expenditures will be derived from operations and unit retains along with short-term and long-term borrowings.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument.  The value of a financial instrument may change as a result of changes in the interest rates, exchange rates, commodity prices, equity prices and other market changes.  Market risk is attributed to all market-risk sensitive financial instruments, including long term debt.

The Company does not believe that there is any material market risk exposure with respect to interest rates, exchange rates, commodity prices, equity prices and other market changes that would require disclosure under this item.

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Item 4.  Controls and Procedures

The Company’s chief executive officer and chief financial officer have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934) as of November 30, 2008.  Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the chief executive officer and chief financial officer have concluded that the Company’s current disclosure controls and procedures, as designed and implemented, are effective in ensuring that information relating to the Company required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management, including the chief executive officer and the chief financial officer, as appropriate to allow timely decisions regarding required disclosure.  There were no changes in the Company’s internal controls over financial reporting that occurred during the Company’s most recent fiscal quarter that may have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time and in the ordinary course of its business, the Company is named as a defendant in legal proceedings related to various issues, including worker’s compensation claims, tort claims and contractual disputes.  The Company is currently involved in certain legal proceedings, which have arisen in the ordinary course of the Company’s business.  The Company is also aware of certain other potential claims, which could result in the commencement of legal proceedings.  The Company carries insurance, which provides protection against certain types of claims.  With respect to current litigation and potential claims of which the Company is aware, the Company’s management believes that (i) the Company has insurance protection to cover all or a portion of any judgments which may be rendered against the Company with respect to certain claims or actions and (ii) any judgments which may be entered against the Company and which may exceed such insurance coverage or which may arise in actions involving potential liabilities not covered by insurance policies are not likely to have a material adverse effect upon the Company, or its assets or operations.

Another sugar company has appealed to the Ninth Circuit Court of Appeals a decision of the United States District Court relative to the determination and transfer of sugar marketing allocations made by the USDA.  If this case is overturned, it could result in the Company experiencing a reduction in marketing allocations equal to the loss of approximately 15,000 acres in future crop years assuming no other related factors were to change.

Item 1A.  Risk Factors.

For a detailed discussion of certain risk factors that could affect the Company’s operations, financial condition or results for future periods, see Item 1A, Risk factors, in the Company’s 2008 Annual Report on Form 10-K.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3.  Defaults Upon Senior Securities

None

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Item 4.  Submission of Matters to a Vote of Security Holders

The Company held meetings in November 2008 with its shareholders from the five geographical districts where the Company’s Red River Valley factories are located.

At the Drayton Factory District Meeting held on November 10, 2008, the shareholders re-elected Robert M. Green as a director. He received 106 of the 107 votes cast.  His new three-year term begins on December 5, 2008 and expires in December 2011.  William Baldwin and Neil C. Widner will continue as directors for the Drayton Factory District.

At the East Grand Forks Factory District Meeting held on November 11, 2008, the shareholders re-elected Brian R. Erickson as a director. He received all of the 100 votes cast with one abstention and one spoiled ballot.  His new three-year term begins on December 5, 2008 and expires in December 2011.  John F. Gudajtes and Curtis E. Haugen will continue as directors for the East Grand Forks Factory District.

At the Hillsboro Factory District Meeting held on November 12, 2008, the shareholders re-elected John Brainard as a director. He received all of the 44 votes cast.  His new three-year term begins on December 5, 2008 and expires in December 2011.  Francis L. Kritzberger and Jeff D. McInnes will continue as directors for the Hillsboro Factory District.

At the Crookston Factory District Meeting held on November 12, 2008, the shareholders elected Donald Andringa as a director. He received 50 of the 69 votes cast.  His three-year term begins December 5, 2008 and expires in December 2011.  Mr. Andringa is 54 years old and has been a sugarbeet farmer for 35 years with his farming operations near Crookston, Minnesota.  Mr. Andringa currently serves on the Board of Directors of the Red River Valley Farmers Insurance Pool and the Advisory Board for the University of Minnesota-Crookston Northwest Research and Outreach Center.  Mr. Andringa previously served on Board of Directors of the Crookston Factory District Grower Association, the Red River Valley Sugarbeet Growers Association’s Executive Committee and the American Sugarbeet Growers Association Board of Directors.  Mr. Andringa replaces Ronald E. Reitmeier who was unable to stand for re-election due to the provisions of the Company Bylaws which prohibit a person from serving more than four consecutive terms as a director.  Curtis Knutson and Steve Williams will continue as directors for the Crookston Factory District.

At the Moorhead Factory District Meeting held on November 13, 2008, the shareholders elected Dale Kuehl as a director. He received 56 of the 58 votes cast.  His three-year term begins December 5, 2008 and expires in December 2011.  Mr. Kuehl is 51 years old and has been a sugarbeet farmer for 33 years with his farming operations near Glydon, Minnesota.  Mr. Kuehl currently serves on the American Sugarbeet Growers Association’s Board of Directors.  Mr. Kuehl previously served on the Boards of Directors of the Moorhead Factory District Grower Association, the Red River Valley Sugarbeet Growers Association, the International Sugarbeet Institute and the Red River Valley Coop Power Association.  Mr. Kuehl replaces Michael A. Astrup who was unable to stand for re-election due to the provisions of the Company Bylaws which prohibit a person from serving more than four consecutive terms as a director.  Richard Borgen and William A. Hejl will continue as directors for the Moorhead Factory District.

Item 5.  Other Information.

None.

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Item 6. Exhibits

Item No.		Method of Filing
3.1	Restated Articles of Incorporation of American Crystal Sugar Company	Incorporated by reference to Exhibit 3(i) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
3.2	Restated By-laws of American Crystal Sugar Company	Incorporated by reference to Exhibit 3(ii) from the Company’s Registration Statement on Form S-1 (File No. 333-11693), declared effective November 13, 1996.
4.1	Restated Articles of Incorporation of American Crystal Sugar Company	See Exhibit 3.1
4.2	Restated By-laws of American Crystal Sugar Company	See Exhibit 3.2
10.1	Form of Operating Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(u) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.2	Form of Member Control Agreement between Registrant and ProGold Limited Liability Company	Incorporated by reference to Exhibit 10(v) from the Company’s Registration Statement on Form S-1 (File No. 33-83868), declared effective November 23, 1994.
10.3	Registrant’s Senior Note Purchase Agreement	Incorporated by reference to Exhibit 10.24 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
10.4	Registrant’s Senior Note Inter-creditor and Collateral Agency Agreement	Incorporated by reference to Exhibit 10.25 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
10.5	Registrant’s Senior Note Restated Mortgage and Security Agreement	Incorporated by reference to Exhibit 10.26 from the Company’s Annual Report on Form 10-K for the year ended August 31, 1999
++10.6	Long Term Incentive Plan, dated June 23, 1999	Incorporated by reference to Exhibit 10.31 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2000
10.7	Uniform Member Marketing Agreement between the Registrant and Midwest Agri-Commodities Company dated September 1, 2001.	Incorporated by reference to Exhibit 10.28 from the Company’s Form 10-Q for the quarter ended November 30, 2001

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10.8	Registrant’s Senior Note Purchase Agreement dated January 15, 2003	Incorporated by reference to Exhibit 10.29 from the Company’s Form 10-Q for the quarter ended February 28, 2003
++10.9	Long Term Incentive Plan, dated August 24, 2005	Incorporated by reference to Exhibit 10.25 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2005
10.10	Term and Seasonal Loan Agreements between the Registrant and CoBank, ACB dated July 31, 2006	Incorporated by reference to Exhibit 10.24 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2006
10.11	Second Amendment to Amended and Restated Loan Agreement between the Registrant and CoBank, ACB dated November 3, 2006.	Incorporated by reference to Exhibit 10.25 from the Company’s Form 10-Q for the quarter ended November 30, 2006.
++10.12	Employment Agreement dated March 21, 2007 between the Registrant and David A. Berg.	Incorporated by reference to Exhibit 10.26 from the Company’s Form 10-Q for the quarter ended February 28, 2007.
10.13	Third Amendment to Amended and Restated Loan Agreement between the Registrant and CoBank, ACB dated April 2, 2007.	Incorporated by reference to Exhibit 10.22 from the Company’s Form 10-Q for the quarter ended May 31, 2007
10.14	Fourth Amendment to Amended and Restated Loan Agreement between the Registrant and CoBank, ACB dated July 25, 2007.	Incorporated by reference to Exhibit 10.23 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2007
10.15	Growers’ Contract (5-year Agreement) for the crop years 2008 through 2012	Incorporated by reference to Exhibit 10.24 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2007
10.16	Commitment and Acceptance Agreement between the Registrant and CoBank, ACB dated November 6, 2007	Incorporated by reference to Exhibit 10.24 from the Company’s Form 10-Q for the quarter ended November 30, 2007
10.17	Amended and Restated Uniform Member Sugar Marketing Agreement between the Registrant and United Sugars Corporation dated September 20, 2007.	Incorporated by reference to Exhibit 10.22 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2008
10.18	Fifth Amendment to Amended and Restated Loan Agreement between the Registrant and CoBank, ACB dated July 23, 2008.	Incorporated by reference to Exhibit 10.23 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2008
10.19	Stipulation Agreement between Registrant and State of Minnesota Pollution Control Agency, dated November 25, 2008	Filed herewith electronically
++10.20	Restated Supplemental Executive Retirement Plan, dated December 5, 2008	Filed herewith electronically
++10.21	Restated Board of Directors Deferred Compensation Plan, dated December 8, 2008	Filed herewith electronically

21

21.1	List of Subsidiaries of the Registrant	Incorporated by reference to Exhibit 21.1 from the Company’s Annual Report on Form 10-K for the year ended August 31, 2008
31.1	Rule 13a-14(a)/15(d)-14(a) Certification of the Chief Executive Officer	Accompanying herewith electronically
31.2	Rule 13a-14(a)/15(d)-14(a) Certification of the Chief Financial Officer	Accompanying herewith electronically
32.1	Section 1350 Certification of the Chief Executive Officer	Accompanying herewith electronically
32.2	Section 1350 Certification of the Chief Financial Officer	Accompanying herewith electronically

+              Confidential treatment under Rule 24b-2 of the Securities and Exchange Act of 1934, as amended, has been granted with respect to designated portions of this document.

++           A management contract or compensatory plan required to be filed with this report.

22

SIGNATURES

Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		AMERICAN CRYSTAL SUGAR COMPANY
		(Registrant)
Date:	January 14, 2009	/s/ Teresa Warne
		Teresa Warne
		Corporate Controller,
		Chief Accounting Officer
		Duly Authorized Officer

23

EX-10.19

Exhibit 10.19

STATE OF MINNESOTA

MINNESOTA POLLUTION CONTROL AGENCY

IN THE MATTER OF:	American Crystal	STIPULATION AGREEMENT
	Sugar Company

Part 1. PARTIES. This Stipulation Agreement (“Agreement”) applies to and is binding upon the following parties:

a.     American Crystal Sugar Company (“Regulated Party”); and

b.     The Minnesota Pollution Control Agency (“MPCA”).

Unless specified otherwise in this Agreement, where this Agreement identifies actions to be taken by the MPCA, the Commissioner or the Commissioner’s designees shall act on the MPCA’s behalf.

Part 2. PURPOSE AND SCOPE OF STIPULATION AGREEMENT. The purpose of this Agreement is to resolve the alleged violations set out in Part 6 of this Agreement by specifying actions the Regulated Party agrees to undertake. By entering into this Agreement, the Regulated Party is settling a disputed matter between itself and the MPCA and does not admit that the alleged violations set out in Part 6 of this Agreement occurred. However, the Regulated Party agrees that the MPCA may rely upon the alleged violations set out in Part 6 as provided in Part 11 of this Agreement. Except for the purposes of implementing and enforcing this Agreement, nothing in this Agreement constitutes an admission by either Party, or creates rights, substantive or procedural, that can be asserted or enforced with respect to any claim of or legal action brought by a person who is not a party to this Agreement.

Part 3. AUTHORITY. This Agreement is entered under the authority vested in the MPCA by Minnesota Statutes Chapters 115 and 116.

Part 4. DEFINITIONS. Unless otherwise explicitly stated, the definitions in Minnesota Statutes Chapters 115, 115A, 115B, 115C, 116, 116B and in Minnesota Rules Chapters 7000 to 7151 apply, as appropriate, to the terms used in this Agreement.

1

Part 5. BACKGROUND. The following is the background of this Agreement:

a.     Minn. R. 7009.0080 establishes a hydrogen sulfide (H2S) ambient air standard of 0.05 parts per million (ppm) measured as a half-hour average which is not to be exceeded more than two times per year.

b.     Minn. R. 7009.0080 also establishes a H2S ambient air standard of 0.03 ppm measured as a half-hour average which is not to be exceeded more than two times in any five consecutive days.

c.     The Regulated Party is a Minnesota corporation and operates three sugar beet processing facilities located in Moorhead, E. Grand Forks, and Crookston, Minnesota.

d. On July 1, 2003, Air Emission Permit No. 11900001-002 was issued to the Regulated Party for operation of the sugar beet processing facility located in Crookston, Minnesota (Crookston Facility).

e.     On March 30, 2005, Air Emission Permit No. 11900002-004 was issued to the Regulated Party for operation of the sugar beet processing facility located in E. Grand Forks, Minnesota (E. Grand Forks Facility).

f.      On March 10, 2005, Air Emission Permit No. 02700001-007 was issued to the Regulated Party for operation of the sugar beet processing facility located in Moorhead, Minnesota (Moorhead Facility).

g.     On June 6, 2006, Air Emission Permit No. 02700001-009 was issued to the Regulated Party for operation of the Moorhead Facility. Air Emission Permit No. 02700001-009 amended and replaced Air Emission Permit No. 02700001-007 for the Moorhead Facility. Permit Action No. 02700001-008 was initiated on September 12, 2005, but was dropped at the request of the Regulated Party resulting in a break in the sequence of issued permit numbers.

h.     The permits require the Regulated Party to operate an ambient air H2S monitoring network at each facility to measure the ambient concentration of H2S at the property line of each facility from April 1 through October 31 annually.

i.      The data the Regulated Party collects is due to the MPCA by November 30 of each year.

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j.      The Regulated Party collected H2S data from the ambient air monitoring network at each facility from: April 1, 2005, through October 31, 2005, April 1, 2006 through October 31, 2006; and April 1, 2007, through October 31, 2007.

k.     The following tables summarize the readings above the standards from the 2005, 2006 and 2007 monitoring periods:

Crookston H2S Violations of 30 ppb Standard 2005

	No. of Readings	Avg. of Readings
Dates	in Violation	in Violation (ppb)
10/14/05 – 10/17/05	5	34

Crookston H2S Violations of 50 ppb Standard 2005

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
8/26/05	1	58

Moorhead H2S Violations of 30 ppb Standard 2005

	No. of Readings	Avg. of Readings
Dates	in Violation	in Violation (ppb)
7/23/05 – 7/26/05	9	42

Moorhead H2S Violations of 50 ppb Standard 2005

	No. of Readings	Avg. of Readings
Dates	in Violation	in Violation (ppb)
7/24/05	2	67
7/25/05 – 7/26/05	4	57

E. Grand Forks H2S Violations of 30 ppb Standard 2005

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
4/3/05 – 4/6/05	4	35
4/11/05 – 4/12/05	7	40
5/4/05 – 5/9/05	18	39
5/9/05 – 5/14/05	25	39
5/16/05 – 5/18/05	14	38
5/21/06 – 5/25/05	17	36
6/10/05 – 6/11/05	2	42
6/15/05 – 6/20/05	4	37
6/29/05 – 7/1/05	15	39
7/21/05 – 7/23/05	3	37

3

E. Grand Forks H2S Violations of 50 ppb Standard 2005

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
5/6/05 – 5/8/05	9	64
5/9/05	2	52
5/16/05 – 5/19/05	25	69
5/21/05	1	69
5/23/05	2	56
6/10/05	2	66
6/15/05 – 6/16/05	2	60
6/19/05	2	68
6/29/05	9	67
7/21/05	3	64
8/9/05	1	59
10/31/05	1	71

Crookston H2S Violations of 30 ppb Standard 2006

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
6/4/06 – 6/6/06	2	39
9/4/06 – 9/7/06	5	39

Crookston H2S Violations of 50 ppb Standard 2006

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
9/5/06	1	52
9/6/06	1	57

Moorhead H2S Violations of 30 ppb Standard 2006

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
6/2/06	1	35
8/29/06	1	35

E. Grand Forks H2S Violations of 30 ppb Standard 2006

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
4/10/06 – 4/14/06	7	36
4/16/06 – 4/21/06	15	41
4/28/06 – 5/1/06	25	42
5/4/06 – 5/7/06	4	36
5/9/06 – 5/10/06	14	41
5/15/06 – 5/20/06	12	39
5/23/06 – 5/26/06	14	41
5/28/06 – 6/1/06	11	38
6/2/06 – 6/7/06	17	39
6/9/06 – 6/14/06	16	37
6/14/06 – 6/19/06	27	39
6/19/06 – 6/24/06	13	39
6/25/06 – 6/28/06	5	46
6/30/06	1	31

4

E. Grand Forks H2S Violations of 30 ppb Standard 2006 continued

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
8/19/06 – 8/20/06	2	45
8/24/06 – 8/29/06	5	39
8/29/06 – 9/2/06	4	42
9/9/06 – 9/13/06	3	45

E. Grand Forks H2S Violations of 50 ppb Standard 2006

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
4/13/06	7	74
4/16/06	8	65
4/18/06 – 4/20/06	24	72
4/22/06	1	60
4/26/06	1	55
4/28/06 – 4/29/06	23	73
5/1/06	6	74
5/6/06	1	58
5/7/06	2	58
5/10/06	2	58
5/18/06 – 5/19/06	5	81
5/24/06 – 5/28/06	24	69
5/31/06 – 6/3/06	23	73
6/5/06	2	53
6/6/06 - 6/7/06	8	80
6/9/06 – 6/11/06	41	82
6/12/06 – 6/13/06	5	56
6/14/06 – 6/17/06	48	80
6/19/06 – 6/21/06	21	73
6/23/06 – 6/25/06	18	72
6/27/06 - 6/28/06	15	74
6/30/06	3	68
8/18/06 – 8/20/06	22	80
8/22/06	2	63
8/24/06	1	64
8/26/06	2	74
8/29/06	13	87
9/2/06	2	56

Crookston H2S Violations of 30 ppb Standard 2007 

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
4/29/07	2	31
7/3/07 - 7/7/07	12	40
8/14/07 – 8/16/07	12	41
8/23/07 – 8/28/07	2	44
8/29/07 – 9/2/07	1	34

5

Crookston H2S Violations of 50 ppb Standard 2007

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
7/4/07 – 7/5/07	8	78
7/7/07	2	66
7/22/07	1	53
8/15/07 – 8/16/07	4	58
8/25/07	1	72
8/28/07 – 8/29/07	4	67

Moorhead H2S Violations of 30 ppb Standard 2007

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
4/27/07 – 6/2/07	8	39
6/2/07 – 6/6/07	21	37
6/13/07 – 6/18/07	15	38
6/19/07 – 6/22/07	2	31
8/12/07 – 8/13/07	2	39
8/18/07 – 8/20/07	4	38
8/31/07 – 9/3/07	1	34

Moorhead H2S Violations of 50 ppb Standard 2007

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
6/1/07 – 6/4/07	5	61
6/13/07	1	59
6/14/07	1	64
6/16/07 – 6/17/07	11	69
7/23/07	2	68
8/18/07	1	71

E. Grand Forks H2S Violations of 30 ppb Standard 2007

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
4/17/07 – 4/19/07	6	36
6/13/07 – 6/17/07	6	45
6/20/07 – 6/25/07	7	37
6/29/07 – 7/3/07	7	39
7/6/07 – 7/10/07	7	35
7/13/07 – 7/18/07	6	39
7/19/07 – 7/23/07	7	39
7/27/07 – 7/31/07	5	41

E. Grand Forks H2S Violations of 50 ppb Standard 2007

Dates	No. of Readings in Violation	Avg. of Readings in Violation (ppb)
6/16/07 – 6/17/07	5	66
6/29/07 – 7/2/07	11	61
7/6/07	6	74
7/9/07 – 7/10/07	3	62
7/17/07 – 7/18/07	5	66
7/27/07	1	54

6

1.     Air Emission Permit No. 11900002-005 contains an emission limit of 0.25 pounds per hour (lb/hr) for particulate matter with an aerodynamic diameter less than or equal to ten microns (PM10) from the E. Grand Forks Facility’s West Pellet Cooler (EU006).

m.    On October 2, and 4, 2007, the Regulated Party conducted performance stack testing for EU006 PM10 emissions. The October 2, and 4, 2007, performance test documented the EU006 PM10 emission rate at 0.36 lb/hr. The EU006 PM10 emission rate exceeded the PM10 emission limit by 30 percent.

n.     On November 28, and 29, 2007, the Regulated Party conducted a retest for EU006 PM10 emissions. The November 28, and 29, 2007, performance test documented the EU006 PM10 emission rate at 0.11 lb/hr.

o.     On May 10, 2007, the Regulated Party submitted a minor permit amendment application to modify the South Pulp Dryer (EU007) to accept and combust biogas.

p.     On January 8, 2008, the MPCA determined that the modification to convert EU007 to combust biogas would require a major permit amendment.

q.     On February 5, 2008, the MPCA conducted a compliance evaluation of the Facility. At the time of the evaluation, the MPCA staff documented that the Regulated Party had already installed the piping and valves required to direct biogas to EU007. The Regulated Party stated that, while the piping and valves had already been installed, no biogas had yet been combusted in EU007.

r.      Air Emission Permit No. 027000001-009 contains a PM10 emission limit of 5.0 lb/hr and a particulate matter (PM) emission limit of 5.0 lb/hr for the Lime Kiln (EU004) at the Moorhead Factory.

s.     On November 27, 2007, the Regulated Party conducted performance stack testing for EU004 PM10 and PM emissions. The November 27, 2007, performance test documented the EU004 PM10 emission rate at 8.7 lb/hr and the PM emission rate at 12.0 lb/hr. The EU004 PM10 emission rate exceeded the PM10 emission limit by 74 percent and the PM emission rate exceeded the PM limit by 140 percent.

7

t.      On February 6, 14, and 15, 2008, the Regulated Party conducted a retest for EU004 PM10 and PM emissions. The February 6, 14, and 15, 2008, performance test documented the EU004 PM10 emission rate at 3.5 lb/hr.

Part 5A. STATEMENT OF THE REGULATED PARTY. The Regulated Party has provided the following statement. The MPCA takes no position on this Statement.

The Regulated Party states the following:

The Regulated Party seeks continually to improve its environmental performance and to become a better neighbor. In this regard, it has made substantial investments in money, time, and effort not only to comply with environmental regulations, but to exceed regulatory requirements and move beyond compliance.

Specifically, in accordance with the requirements of a 2003 Stipulation Agreement with the MPCA, the Regulated Party spent a total of $13,716,924 – including $7,272,973 in capital investments and $6,443,951 in chemical expenses – in order to control H2S emissions and associated odors at its three Minnesota facilities.

After fulfilling the requirements of the 2003 Stipulation Agreement, the Regulated Party spent almost two and a half times that amount – including $18,918,688 in capital investments and $14,305,004 in chemical expenses, for a total of $33,223,692 – in voluntarily undertaking further steps to control H2S.

These additional steps included, but were not limited to:

a.     The installation of a pre-acidification wastewater treatment unit at the E. Grand Forks facility.

b.The installation of a permeable pond cover over the high-strength wastewater pond at the Moorhead facility.

c.The installation of mini-clarifiers on each mud press at the E. Grand Forks and Moorhead facilities.

d.Improved pulp press performance at all three facilities.

e.Improved management of beet pile runoff at all three facilities.

f.Improved by-products management.

8

g.Improved beet storage management at all three facilities through the use of ice mats and insulation membranes.

h.The use of odor neutralizers at all three facilities.

In addition, the Regulated Party created an internal Odor Control Task Force to identify and evaluate additional potential measures to improve performance with respect to H2S, including, but not limited to, measures to reduce sources of wastewater generation, measures to increase wastewater treatment efficiency, and measures to improve wastewater storage.

The Capital Project Completion Dates set forth in the 2008 H2S Management Strategies are based on the assumption that the MPCA will review and approve all necessary submittals within 60 days and that all required permits for a capital project have been identified.

Part 6. ALLEGED VIOLATIONS. The MPCA alleges that the Regulated Party has violated the following requirements of statute, rule and/or permit condition:

a.     Minn. R. 7009.0080 STATE AMBIENT AIR QUALITY STANDARDS.

The following table contains the state ambient air quality standards.

Pollutant/
Air	Primary	Secondary
Contaminant	Standard	Standard	Remarks
Hydrogen	0.05 ppm by		1/2 hour average not
Sulfide	volume (70.0		to be exceeded over
	micrograms per		2 times per year
	cubic meter)
	0.03 ppm by		1/2 hour average not
	volume (42.0		to be exceeded over
	micrograms per		2 times in any 5
	cubic meter)		consecutive days

Crookston Facility

During the period of April 1, 2005, through October 31, 2005, the Crookston monitoring network recorded exceedance events which demonstrated five violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2006, through October 31, 2006, the Crookston monitoring network recorded exceedance events which demonstrated seven violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

9

During the period of April 1, 2007, through October 31, 2007, the Crookston monitoring network recorded exceedance events which demonstrated 29 violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2005, through October 31, 2005, the Crookston monitoring network recorded an exceedance event which demonstrated one violation of the 0.05 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2006, through October 31, 2006, the Crookston monitoring network recorded exceedance events which demonstrated two violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2007, through October 31, 2007, the Crookston monitoring network recorded exceedance events which demonstrated 20 violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

Moorhead Facility

During the period of April 1, 2005, through October 31, 2005, the Moorhead monitoring network recorded exceedance events which demonstrated nine violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2006, through October 31, 2006, the Moorhead monitoring network recorded exceedance events which demonstrated two violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2007, through October 31, 2007, the Moorhead monitoring network recorded exceedance events which demonstrated fifty-53 violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2005, through October 31, 2005, the Moorhead monitoring network recorded exceedance events which demonstrated six violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2007, through October 31, 2007, the Moorhead monitoring network recorded exceedance events which demonstrated 21 violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

E. Grand Forks Facility

During the period of April 1, 2005, through October 31, 2005, the E. Grand Forks monitoring network recorded exceedance events which demonstrated 109 violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2006, through October 31, 2006, the E. Grand Forks monitoring network recorded exceedance events which demonstrated 195 violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2007, through October 31, 2007, the E. Grand Forks monitoring network recorded exceedance events which demonstrated 53 violations of the 0.03 ppm standard contained in Minn. R. 7009.0080.

10

During the period of April 1, 2005, through October 31, 2005, the E. Grand Forks monitoring network recorded exceedance events which demonstrated 59 violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2006, through October 31, 2006, the E. Grand Forks monitoring network recorded exceedance events which demonstrated 330 violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

During the period of April 1, 2007, through October 31, 2007, the E. Grand Forks monitoring network recorded exceedance events which demonstrated 31 violations of the 0.05 ppm standard contained in Minn. R. 7009.0080.

b.Air Emission Permit No. 11900002-005

Subject Item: EU006 Pellet Cooler

What to do	Why to do it
Particulate matter < 10 microns: less than or equal to 0.25 lbs/hour for each stack (SV 006 and SV 007)	Title I condition: 40 CFR § 52.21(k); Minn. R. 7007.3000

On October 2, and 4, 2007, the Regulated Party conducted performance stack testing for EU006 PMl0 emissions. The October 2, and 4, 2007, performance test documented the EU006 PM10 emission rate at 0.36 lb/hr. The EU006 PM10 emission rate exceeded the permitted PMl0 emission limit by 30 percent.

c.Minn. R. 7007.0150 PERMIT REQUIRED.

Subpart 1. Prohibition. No person may construct, modify, reconstruct, or operate an emissions unit, emission facility, or stationary source except in compliance with an air emission permit from the agency. Exceptions to the requirement to obtain a permit are located in part 7007.0300. Exceptions to the requirement to obtain a permit amendment are located in parts 7007.1250 and 7007.1350. A person violates this subpart when the person begins actual construction on a new source, reconstruction, or modification prior to obtaining the permit or amendment, except as allowed in parts 7007.0750, subpart 7, 7007.1450, subpart 7, and 7007.1500, subpart 3a.

Minn. R. 7007.1500 MAJOR PERMIT AMENDMENTS.

Subpart 1. Major permit amendment required. A “major permit amendment” is required for any change to permit conditions or any modification at a permitted stationary source that is not allowed under parts 7007.1250 and 7007.1350 and for which an amendment cannot be obtained under the administrative permit amendment provisions of part 7007.1400, or the minor or moderate permit amendment provisions of part 7007.1450. The following always require major permit amendments:

...

11

B.    any amendment to establish or amend a permit condition that is required to be based on a case-by-case determination of an emission limitation or other standard, on a source-specific determination of ambient impacts, or on a visibility or increment analysis;

On May 10, 2007, the Regulated Party submitted a minor permit amendment application to modify the South Pulp Dryer (EU007) to accept and combust biogas. On January 8, 2008, the MPCA determined that the modification to convert EU007 to combust biogas would require a major permit amendment under Minn. R. 7007.1500. On February 5, 2008, the MPCA conducted a compliance evaluation of the Facility. At the time of the evaluation, the MPCA staff documented that the Regulated Party had installed the piping and valves required to direct biogas to EU007. The Regulated Party failed to obtain a major permit amendment prior to modifying EU007 as required by Minn. R. 7007.0150 and Minn. R. 7007.1500.

d. Air Emission Permit No. 02700001-009

Subject Item: EU 004 Vertical Lime Kiln

What to do	Why to do it
Particulate Matter < 10 microns: less than or equal to 5.0 lbs/hour during normal operation.	Title I Condition: 40 CFR Section 52.21(k); Minn. R. 7007.3000
Total Particulate Matter: less than or equal to 5.0 lbs/hour during normal operation.	Title I Condition: 40 CFR Section 52.21(k); Minn. R. 7007.3000

On November 27, 2007, the Regulated Party conducted performance stack testing for EU004 PM10 and PM emissions. The November 27, 2007, performance test documented the EU004 PM10 emission rate at 8.7 lb/hr and the PM emission rate at 12.0 lb/hr. The EU004 PM10 emission rate exceeded the PM10 emission limit by 74 percent and the PM emission rate exceeded the PM limit by 140 percent.

Part 7. CIVIL PENALTY. The Regulated Party agrees to pay One Hundred and Eighty-Five Thousand Dollars ($185,000) to the MPCA as a civil penalty for the violations alleged in Part 6 within 30 days after the effective date of this Agreement. Payment of the penalty amount of $185,000 is to be by check or money order payable to the Minnesota Pollution Control Agency. The check must be mailed to: Enforcement Penalty Coordinator, Minnesota Pollution Control Agency, 520 Lafayette Road North, St. Paul, Minnesota 55155-4194.

If the Regulated Party fails to make the required payment on time, the MPCA may assess and the Regulated Party agrees to pay a late payment charge, in addition to the civil penalty, to be assessed as follows. Forty-five days after the effective date of this Agreement, the Regulated Party is obligated to pay a late charge in an amount equal to ten percent of the unpaid civil penalty. Sixty days after the effective date of this Agreement, the Regulated Party is obligated to pay an additional late charge in an amount equal to twenty percent of the unpaid civil penalty.

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Part 8. REGULATED PARTY REQUIREMENTS. The Regulated Party agrees to the following requirements:

a.        The Regulated Party shall implement the 2008 Hydrogen Sulfide Management Strategies for its Moorhead, E. Grand Forks and Crookston facilities. The Strategies are attached as Exhibits A, B and C and are hereby incorporated into and made enforceable parts of this Agreement. If the Regulated Party submits monthly monitoring reports, for a facility, that show three consecutive months of exceedances that, after validation, may constitute violations of the ambient hydrogen sulfide standards, the MPCA may require that the Regulated Party prepare and submit an evaluation of the applicable H2S Management Strategy for that facility. The parties shall meet and confer about the monitored exceedances and the hydrogen sulfide evaluation. The parties may agree to revise the H2S Management Strategy or Strategies.

b.       Prior to any of the construction or modifications required by any of the Strategies, the Regulated Party shall determine, under applicable rules, whether such construction or modification requires a permit or approval from the MPCA and shall obtain such permit or approval as provided for by the rules.

c.        By January 31 of each year, while the Agreement is in effect, the Regulated Party shall submit a written report that documents all activities completed, under the 2008 Hydrogen Sulfide Management Strategies, during the previous calendar year and outlines the activities the Regulated Party expects to complete during the current calendar year.

Part 9. PENALTIES FOR VIOLATIONS OF THIS AGREEMENT.

a.        If the Regulated Party fails to comply with a Capital Project Completion Date, as listed in Table 1 of the Moorhead, E. Grand Forks or Crookston 2008 Hydrogen Sulfide Management Strategies, the Regulated Party shall pay to the MPCA a penalty in the amount of $500 per capital project for each day beyond the proposed completion date. If the Regulated Party fails to comply with a By-products Management Plan for removal of by-products from the facilities, as described in Section 2.1(3) of the Moorhead, E. Grand Forks and Crookston 2008 Hydrogen Sulfide Management Strategies, the Regulated Party shall pay to the MPCA a penalty in the amount of $500 per day for each day of failure. If the Regulated Party fails to commence implementation of the corrective

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actions contained in the Straw Management Plan as described in Attachment E, Appendix F, or Appendix D of the Moorhead, E. Grand Forks or Crookston 2008 Hydrogen Sulfide Management Strategies respectively, within 24 hours of identifying a noncompliant straw-cover, the Regulated Party shall pay to the MPCA a penalty in the amount of $500 per day for each day of failure. If the Regulated Party fails to submit reports as required by Part 9.c., the Regulated Party shall pay to the MPCA a penalty in the amount of $100 per day for each day of failure.

b.     Penalties for failure to comply with requirements of Part 9 of this Agreement shall accrue from the date the Regulated Party was to have fulfilled the requirement until the Regulated Party fulfills the requirement. Penalties shall not accrue while the MPCA considers a timely extension request under Part 15 or during dispute resolution under Part 13, unless the MPCA determines that the Regulated Party filed the request or initiated dispute resolution solely for purposes of delay. If the Regulated Party does not pursue dispute resolution under Part 13 for denial of a timely extension request, penalties shall accrue from the date the extension request is denied by the MPCA Case Contact. If the Regulated Party pursues dispute resolution for denial of an extension request and does not file a timely challenge in a court of competent jurisdiction as provided by Part 13, penalties shall accrue from the date of a Commissioner’s dispute resolution decision against the Regulated Party until the Regulated Party fulfills the requirement that is the subject of the extension request.

c.     The Regulated Party shall pay a penalty under this Part within 30 days after receiving written notice from the MPCA that the penalty is due. The written notice shall specify the provision of the Agreement that the Regulated Party has not fulfilled and indicate the date penalties began to accrue. If the Regulated Party fails to make timely payment, the MPCA may assess and the Regulated Party agrees to pay a late payment charge, in addition to the stipulated penalty, to be assessed as follows. Forty-five days after receipt of written notice, the Regulated Party shall be obligated to pay a late charge in an amount equal to ten percent of the unpaid stipulated penalty. Sixty days after receipt of written notice, the Regulated Party shall be obligated to pay an additional late charge in an amount equal to twenty percent of the unpaid stipulated penalty.

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d.     In dispute resolution before the Commissioner under Part 13, the Regulated Party can contest the factual basis for the MPCA’s determination that the Regulated Party has not fulfilled a requirement of this Agreement covered by this Part. However, the Regulated Party waives its right to challenge, on legal grounds, the requirement that it pay penalties under this Part.

e.     The Regulated Party shall not be liable for payment of penalties for failure to comply with requirements of Part 9 of this Agreement covered by this Part if it has submitted to the MPCA a timely request for an extension of schedule under Part 15 and the MPCA has granted the request. The MPCA’s grant of an extension of schedule waives the payment of penalties covered by this Part only on the requirements for which the MPCA granted an extension of schedule and only for the time period specified by the MPCA in the grant of an extension. An extension of schedule for one requirement of Part 9 does not extend the schedule for any other requirement of Part 9.

f.      Any requirement of this Agreement may be enforced as provided in Minn. Stat. § 115.071 (2004). Payment of a stipulated penalty does not relieve the Regulated Party of its obligation to fulfill and complete requirements under the Agreement and to otherwise comply with the terms and conditions of the Agreement.

Part 10. COVENANT NOT TO SUE AND RESERVATION OF REMEDIES. So long as the Regulated Party performs according to and has complied with the terms, covenants, and agreements contained in this Agreement, the MPCA agrees not to exercise any administrative, legal, or equitable remedies available to the MPCA with respect to the Regulated Party to address the violations alleged and described in Part 6, the violations alleged in the MPCA Notice of Violation issued to the Regulated Party dated July 17, 2007, or any other violations related to hydrogen sulfide, which the MPCA could have pleaded in a civil action based on written information in the possession of the MPCA at the time this Agreement become effective. In addition, for so long as the Regulated Party is in compliance with the provisions of Part 9 of this Agreement, the MPCA agrees not to exercise any administrative, legal, or equitable remedies available to the MPCA to address future violations of the state ambient air quality standards for hydrogen sulfide set forth in Minn. Rule 7009.0080 until after the requirements of Part 9 are complete for each facility. The MPCA reserves the right to enforce this Agreement or take any action authorized by law, if the Regulated Party fails to comply with the

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terms and conditions of this Agreement. Further, the MPCA reserves the right to seek to enjoin violations of this Agreement and to exercise its emergency powers pursuant to Minn. Stat. § 116.11 (2004) in the event conditions or the Regulated Party’s conduct warrant such action. Nothing in this Agreement shall prevent the MPCA from exercising these rights and nothing in this Agreement constitutes a waiver of these rights.

The Regulated Party agrees to waive all claims it may now have, as of the effective date of this Agreement, under Minn. Stat. § 15.472 for fees and expenses arising out of matters leading up to and addressed in this Agreement.

Part 11. REPEAT VIOLATIONS. Federal and state environmental programs establish harsher penalties for violations of environmental laws or rules that constitute repeat violations. In a proceeding to resolve alleged violations by the Regulated Party, if any, occurring after the date of the alleged violations set out in Part 6 of this Agreement, the Regulated Party may argue about the extent to which the violations alleged in Part 6 of this Agreement should affect the penalty amount for the later violations, but waives the right: (1) to contend that the violations alleged in Part 6 of this Agreement did not occur as alleged; and (2) to require the MPCA to prove the violations alleged in Part 6 of this Agreement.

Part 12. RESOLUTION OF DISPUTES. The parties to this Agreement shall resolve disputes that arise as to any part of the Agreement as follows:

a.     Either party, acting through its Case Contact (as named in Part 16 below), may initiate dispute resolution by providing to the Case Contact of the other party an initial written statement setting forth the matter in dispute, the position of the party, and the information the party is relying upon to support its position. The other party, acting through its Case Contact, shall provide a written statement of its position and supporting information to the Case Contact of the initiating party within 14 calendar days after receipt of the initial written statement.

b.     If the parties, acting through their Case Contacts, do not reach a resolution of the dispute and reduce such resolution to writing in a form agreed upon by the parties within 21 calendar days after the initiating party receives the statement of position from the responding party, the Commissioner shall issue a written decision resolving the dispute. The written decision may address

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stipulated penalties assessed pursuant to Part 10. The Commissioner’s decision shall be considered a final decision of the MPCA for purposes of judicial review.

c.     The Commissioner’s decision shall become an integral and enforceable part of this Agreement unless the Regulated Party timely challenges the decision in a court of competent jurisdiction. Failure to timely challenge means the Regulated Party agrees to comply with the MPCA Commissioner’s decision on the matter in dispute and to pay any penalties that accrue pursuant to Part 10 for failure to fulfill requirements of this Agreement that are the subject of the dispute resolution. Further, if the Commissioner’s decision assesses penalties pursuant to Part 10 of this Agreement, the Regulated Party agrees to and shall pay the amount of penalty determined by the Commissioner within 60 days after receiving the Commissioner’s decision.

d.     Throughout any dispute resolution, the Regulated Party shall comply with all portions of the Agreement that the MPCA determines are not in dispute.

Part 13. VENUE. Actions brought by the MPCA to enforce requirements and terms of this Agreement shall be venued in Ramsey County District Court.

Part 14. EXTENSION OF SCHEDULES. If the Regulated Party wants an extension of a deadline included in a schedule set out in Part 9, the Regulated Party must request the extension in writing at least ten days before the scheduled deadline, or as soon as possible before that date if the reason for the extension request arises less than ten days before the deadline. Each deadline extension request shall separately specify the reason why the extension is needed. No requested extension shall be effective until approved in writing by the MPCA, acting through the MPCA Case Contact or the Commissioner. The MPCA shall grant an extension only for the period of time the MPCA determines is reasonable under the circumstances. The written approval or grant of an extension request shall be considered an enforceable part of the Agreement.

The Regulated Party has the burden of demonstrating to the satisfaction of the MPCA that the request for the extension is timely, and that good cause exists for granting the extension. Good cause can include, but is not limited to, the following:

a.        Circumstances beyond the reasonable control of the Regulated Party; and

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b.       Delays caused by the MPCA in reviewing timely submittals required by this Agreement, the Regulated Party submitted in complete and approvable form, which make it not feasible for the Regulated Party to meet the required schedules.

Good cause does not include unanticipated costs, increases in the cost of control equipment, or delays in MPCA review of submittals when the submittals are not in complete and approvable form.

The Regulated Party may challenge a decision by the MPCA to deny a request for an extension under Part 13.

Part 15. CASE CONTACT. The MPCA and the Regulated Party shall each designate a Case Contact for the purpose of overseeing the implementation of this Agreement. The MPCA Case Contact is Rachel Peters. The Regulated Party’s Case Contact is Patricia Hansen. Either party may change its designated Case Contact by notifying the other party in writing, within five days of the change. To the extent possible, communications between the Regulated Party and the MPCA concerning the terms and conditions of this Agreement shall be directed through the Case Contacts. The address, telephone number, and email address of the MPCA’s Case Contact is: 7678 College Road, Suite 105, Baxter, Minnesota, 56425; 218-825-2120; rachel.peters@pca.state.mn.us. The address, telephone number, and email address of the Regulated Party’s Case Contact is: 101 North Third Street, Moorhead, Minnesota 56560; 218-236-4347; phansen@crystalsugar.com.

Part 16. REGULATED PARTY INFORMATION. The Regulated Party shall not knowingly make any false statement, representation or certification in any record, report, plan or other document filed or required to be submitted to the MPCA under this Agreement. The Regulated Party shall immediately upon discovery report to the MPCA any errors in such record, report, plan or other document.

Part 17. REVIEW OF SUBMITTALS. The MPCA, acting through its Commissioner, Case Contact, or other designated MPCA staff, shall review all submittals made by the Regulated Party as required by this Agreement and shall notify the Regulated Party in writing of the approval or disapproval of each submittal, if applicable. The MPCA and the Regulated Party shall consult with each other upon the request of either party during the review of submittals or modifications. If any

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submittal is disapproved in whole or in part, the MPCA Commissioner or designated MPCA staff shall notify the Regulated Party of the specific inadequacies and shall indicate the necessary amendments or reviews. Within 15 calendar days after receipt of any notice of disapproval, the Regulated Party shall submit revisions and take actions to correct the inadequacies.

Part 18. ACCESS. During the term of this Agreement, the Regulated Party agrees to provide the MPCA and its staff access to Regulated Party’s facilities and its records and documents related to the implementation of this Agreement to the extent provided under Minn. Stat. § 116.091 (2004) or other law, conditioned only upon the presentation of credentials.

Part 19. SAMPLING AND DATA AVAILABILITY. The Regulated Party shall make available to the MPCA the results of any sampling, tests, or other data generated by the Regulated Party, or on its behalf, to implement the requirements of this Agreement. Nothing in this paragraph is intended to waive or alter any protection afforded by statute to data that qualifies for an exception to public disclosure.

Part 20. RETENTION OF RECORDS. The Regulated Party shall retain in its possession all records, documents, reports and data related to this Agreement. The Regulated Party shall preserve these records, documents, reports and data for a minimum of three years after the termination of this Agreement despite any document retention policy of the Regulated Party to the contrary, and shall promptly make all such documentation available for review upon request by the MPCA.

Part 21. APPLICABLE LAWS AND PERMITS. The Regulated Party shall undertake all actions required to be taken pursuant to this Agreement in accordance with the requirements of all applicable state and federal laws and regulations. Except when the MPCA has specified and authorized a different compliance method in Part 9, the Regulated Party must also comply with all applicable permits, orders, stipulation agreements and schedules of compliance. Nothing in this Agreement exempts or relieves the Regulated Party of its obligation to comply with local governmental requirements.

Part 22. OTHER CLAIMS. Nothing herein shall release the Regulated Party from any claims, causes of action or demands in law or equity by any person, firm, partnership or corporation not a signatory to this Agreement for any liability it may have arising out of or relating to the release of

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any pollutant or contaminant from its operations or from a facility. Neither the Regulated Party nor the MPCA shall be held as a party to any contract entered into by the other party to implement the requirements of this Agreement.

Part 23. HOLD HARMLESS AGREEMENT. The Regulated Party agrees to indemnify, save and hold the MPCA, its agents and employees harmless from any and all claims or causes of action arising from or on account of acts or omissions of the Regulated Party, its officers, employees, agents, or contractors in implementing the activities conducted pursuant to this Agreement; provided, however, that the Regulated Party shall not indemnify the MPCA or save or hold its employees and agents harmless from any claims or causes of action arising out of the acts or omissions of the MPCA, or its employees and agents. When the Regulated Party is required to hold the MPCA harmless, the MPCA shall give the Regulated Party notice of any claim or cause of action subject to this Part and the Regulated Party has the right to participate in the defense against any claim or cause of action. No settlement shall be effective against the Regulated Party unless the Regulated Party agrees to the settlement. Nothing herein waives or modifies the provisions of the Minnesota Tort Claims Act, Minn. Stat. §§ 3.732, et seq., and other applicable law.

Part 24. SUCCESSORS, AGENTS AND CONTRACTORS. This Agreement shall be binding upon the Regulated Party and its successors and assigns and upon the MPCA, its successors and assigns. If the Regulated Party sells or otherwise conveys or assigns any of its right, title or interest in the Facility, the conveyance shall not release the Regulated Party from any obligation imposed by this Agreement, unless the party to whom the right, title or interest has been transferred or assigned agrees in writing to fulfill the obligations of this Agreement and the MPCA approves the transfer or assignment. The Regulated Party shall ensure that the Regulated Party’s agents, contractors and subsidiaries comply with the terms and conditions of this Agreement.

Part 25. AMENDMENTS. Except with respect to extensions of schedules granted under Part 15 and approved submittals under Part 18, this Agreement may be amended only by written agreement between the parties. The provisions of the attached Hydrogen Sulfide Management Strategies may be amended as provided in each Strategy.

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Part 26. EFFECTIVE DATE. This Agreement shall be effective on the date it is signed by the MPCA.

Part 27. TERMINATION. The provisions of this Agreement shall be deemed satisfied and terminated when the Regulated Party receives written notice from the MPCA that the Regulated Party has demonstrated, to the satisfaction of the MPCA, that all terms of the Agreement have been completed.

Part 28. SURVIVAL. The provisions of Parts 2, 11, 12, 17, 20, 21, 22, 23, 24, 25, and 29 of this Agreement and the rights, duties and obligations of the MPCA and the Regulated Party created in those provisions shall survive termination of this Agreement.

BY THEIR SIGNATURES BELOW, THE UNDERSIGNED REPRESENT THAT THEY
HAVE AUTHORITY TO BIND THE PARTIES THEY REPRESENT

American Crystal Sugar Company		STATE OF MINNESOTA
		POLLUTION CONTROL AGENCY
By:	/s/ Joseph James Talley	By:	/s/ Brad Moore
Name:	Joseph James Talley		Brad Moore
Title:	Chief Operating Officer		Commissioner
Date:	11/25/08	Date:		11/25/08

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EX-10.20

Exhibit 10.20

AMERICAN CRYSTAL SUGAR COMPANY

RESTATED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Amended and Restated November 2008

TABLE OF CONTENTS

									Page
INTRODUCTION									1
ARTICLE I								DEFINITIONS	2
ARTICLE II								PARTICIPATION	4
	2.01.			ELIGIBILITY TO PARTICIPATE					4
ARTICLE III								SUPPLEMENTAL RETIREMENT BENEFIT	4
		3.01.			COMPANY CONTRIBUTIONS				4
		3.02.			EMPLOYEE CONTRIBUTIONS				5
		3.03.			ADJUSTMENT TO ACCOUNTS				6
		3.04.			INVESTMENTS				6
		3.05.			VESTING				6
		3.06.			PAYMENT OF BENEFITS				7
		3.07.			DEATH BENEFIT				8
		3.08.			CONTRIBUTIONS TO TRUST				8
		3.09.			BENEFITS UNDER LONG TERM INCENTIVE PLAN				8
ARTICLE IV							ADMINISTRATION		8
			4.01.		POWERS				8
			4.02.		COMPANY				10
			4.03.		LIABILITY				10
ARTICLE V						MISCELLANEOUS			10
			5.01.		AMENDMENT AND TERMINATION				10
			5.02.		NO ALIENATION OF BENEFITS				11
			5.03.		NO CONTRACT OF EMPLOYMENT				11
			5.04.		EXPENSES				11
			5.05.		FUNDING				11
			5.06.		GOVERNING LAW				11
			5.07.		SEVERABILITY				11
			5.08.		INCOMPETENT PARTICIPANTS				12

AMERICAN CRYSTAL SUGAR COMPANY

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Introduction

WHEREAS, American Crystal Sugar Company, a Minnesota agriculture cooperative corporation (the “Company”), maintains the American Crystal Sugar Company 401(k) Partnership Plan and Trust and Retirement Plan A for Employees of American Crystal Sugar Company; and

WHEREAS, Code Sections 401(a)(17), 402(g), 414(s) and 415 place limits on the contributions which can be made on behalf of a participant under a qualified defined contribution plan and a qualified defined benefit plan; and

WHEREAS, Code Sections 401(a)(4), 401(k), and 401(m) impose nondiscrimination requirements on salary reduction and employer matching contributions made on behalf of a participant under a qualified defined contribution plan; and

WHEREAS, the Company adopted the American Crystal Sugar Company Supplemental Executive Retirement Plan (the “Plan”), effective October 2, 1994, to provide a select group of management or highly compensated employees with supplemental retirement benefits and the opportunity to make additional deferrals; and

WHEREAS, the Company has amended the Plan from time to time, including amendments required to comply with Code Section 409A and the notices, regulations and other guidance of general applicability issued thereunder; and

WHEREAS, the Company desires to amend and restate the American Crystal Sugar Company Supplemental Executive Retirement Plan to reflect all such amendments and to further clarify certain provisions of the Plan;

NOW, THEREFORE, the Company hereby adopts the amended and restated Plan, generally effective January 1, 2008.  Participation Agreements in effect prior to the adoption of this amended and restated Plan shall remain in effect pursuant to Section 3.02(C).

RESOLVED, FURTHER, that, for purposes of P.L. 104-95, 4 U.S.C. Section 114, governing state taxation of nonqualified deferred compensation, the Pension SERP Account shall constitute a separate plan maintained solely for the purpose of providing retirement benefits in excess of the limitations imposed on the Pension Plan by Code Sections 401(a)(17) or 415, or any other limitation on contributions or benefits imposed on the Pension Plan by the Code.  Further, the rules governing state taxation of nonqualified deferred compensation under P.L. 104-95, 4 U.S.C. Section 114, shall apply to the 401(k) SERP Account, Employee SERP Contribution Account and Employer SERP Contribution Account only if the Participant elects to receive his or her Accounts in the form of equal annual installments over a period of ten (10) years.

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ARTICLE I

DEFINITIONS

Whenever used herein with the initial letter capitalized, words and phrases shall have the meaning stated below unless a different meaning is plainly required by the context.  For purposes of construction of this Plan, the masculine term shall include the feminine and the singular shall include the plural in all cases in which they could thus be applied.

ACCOUNTS shall mean the 401(k) SERP Account, Pension SERP Account, Employer SERP Contribution Account and Employee SERP Contribution Account, maintained for the benefit of each Participant pursuant to Sections 3.01 and 3.02, and any other account established under and described in any other provision of this Plan.

BENEFICIARY means the persons or person or other entity designated by a Participant to receive any benefit under the Plan which may be due upon the Participant’s death.  The dissolution of the marriage of a Participant shall void a beneficiary designation by the Participant in favor of the Participant’s spouse in that marriage.  That dissolution, however, shall have no affect on any other Beneficiary named by the Participant in the beneficiary designation form on file with the Administrator at the time of that dissolution or on any beneficiary designation form made by the Participant subsequent to that dissolution.  If the Participant has not designated a Beneficiary, if no Beneficiary designated by the Participant survives the Participant, or if, following a dissolution of marriage, the Participant has not named any other Beneficiary, any benefit payable under the Plan shall be paid to the Participant’s estate.

BOARD OF DIRECTORS means the Board of Directors of American Crystal Sugar Company.

CODE means the Internal Revenue Code of 1986, as amended from time to time.

COMPANY means American Crystal Sugar Company, a Minnesota agriculture cooperative corporation.

COMPENSATION means Compensation as defined in Section 1.12(A) of the 401(k) Plan, except however, Compensation shall include amounts deferred under Section 3.02 of this Plan.

DISABILITY means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.

EMPLOYEE SERP CONTRIBUTION ACCOUNT means the account established on behalf of each Participant pursuant to Section 3.02.

EMPLOYER CONTRIBUTION means the Employer Contribution provided for under the terms of the 401(k) Plan for employees who are hired or rehired on or after September 1, 2007, or who transfer from a union position to a nonunion position on or after September 1, 2007.

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EMPLOYER SERP CONTRIBUTION ACCOUNT means the account established on behalf of each Participant pursuant to Section 3.02.

401(k) PLAN means the American Crystal Sugar Company 401(k) Partnership Plan and Trust.

401(k) SERP ACCOUNT means the account with that name established on behalf of a Participant pursuant to Section 3.01.

PARTICIPANT means a person who has satisfied the requirements of Section 2.01.

PARTICIPATION AGREEMENT means an agreement executed by a Participant and the Company authorizing the Company to deliver a portion of the Participant’s Compensation through regular payroll deductions.

PENSION PLAN means Retirement Plan A for Employees of American Crystal Sugar Company.

PENSION SERP ACCOUNT means the account with that name established on behalf of a Participant pursuant to Section 3.01.

PLAN means the American Crystal Sugar Company Supplemental Executive Retirement Plan as it may be amended from time to time.

PLAN YEAR means, for the purposes of the 401(k) Plan, the twelve (12) month period which begins on January 1, and ends on December 31.  For the purposes of the Pension Plan, Plan Year means the twelve (12) month period which begins on March 1 and ends on February 28.

SEPARATION FROM SERVICE means termination of employment with the Company and all affiliates for any reason, including but not limited to voluntary resignation, termination by the Company (either with or without cause) or retirement.  A Participant shall not be deemed to have a Separation from Service if the Participant is on military leave, sick leave, or other bona fide leave of absence if the period of such leave does not exceed six (6) months, or, if longer, so long as the Participant’s right to reemployment with the Company is provided either by statute or contract.  If the period of leave exceeds six (6) months and the Participant’s right to reemployment is not provided either by statute or contract, the Participant shall be deemed to have a Separation from Service on the first day immediately following such six-month period.

TRUST means the trust established or maintained by the Company that is used in connection with this Plan to assist the Company in meeting its obligations under the Plan and which is hereby incorporated into the Plan by this reference.

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ARTICLE II

PARTICIPATION

2.01.ELIGIBILITY TO PARTICIPATE

The Chief Executive Officer, Chief Operating Officer, Chief Financial Officer and any Vice-President shall be eligible to participate in the Plan.  In addition, the Board of Directors or its delegate may, from time to time, identify other employees of the Company who are select management or highly compensated employees of the Company as eligible to participate in this Plan on the date designated by the Board of Directors.  The Company shall designate whether such employee is eligible to be credited with Company contributions pursuant to Section 3.01, to make employee contributions pursuant to Section 3.02, or both.

ARTICLE III

SUPPLEMENTAL RETIREMENT BENEFIT

3.01.COMPANY CONTRIBUTIONS

(a)The Company shall maintain a 401(k) SERP Account and a Pension SERP Account on its books on behalf of each Participant.  Each Plan Year, the Company shall credit each Participant’s Accounts with the amounts determined in (1) and (2) below:

(1)The 401(k) SERP Account of a Participant who participates in the 401(k) Plan shall be credited with a contribution equal to (A) reduced by (B) as follows:

(A)An amount equal to the lesser of:

(i)The amount deferred under the 401(k) Plan; plus the amount deferred under Section 3.02 of this Plan; or

(ii)Four percent (4%) of the Participant’s Compensation.

(B)The amount the Company actually contributed as a matching contribution on the Participant’s behalf under the 401(k) Plan.

(2)The Pension SERP Account of a Participant who participates in the Pension Plan shall be provided a benefit equal to (A) reduced by (B) as follows:

(A)The Participant’s Pension Plan benefit if the limitation of Code Sections 415 and 401(a)(17) did not apply and amounts deferred under Section 3.02 of this Plan had been included in the definition of compensation under the Pension Plan,

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(B)The benefit amount actually provided on the Participant’s behalf under the Pension Plan.

(b)A Participant’s Accounts shall be credited with the amounts determined pursuant to Section 3.01(a) above at the same time such amounts would have been credited to the Participant’s account in the 401(k) Plan and the Pension Plan, respectively.

(c)The Company shall maintain an Employer SERP Contribution Account on its books on behalf of each Participant who is eligible for an Employer Contribution under the 401(k) Plan.  Throughout the Plan Year, the Company shall credit such Participant’s Employer SERP Contribution Account with an amount equal to (A) reduced by (B) as follows:

(A)The Participant’s Employer Contribution calculated by assuming that the limitations of Code Sections 415 and 401(a)(17) did not apply and that the amounts deferred under Section 3.02 of this Plan had been included in the definition of compensation under the 401(k) Plan,

(B)The amount of the Employer Contribution actually contributed on the Participant’s behalf under the 401(k) Plan.

Such amount shall be credited to the Participant’s Employer SERP Contribution Account at the same time such amounts would have been credited to the Participant’s Employer Contribution Account maintained for the Participant under the 401(k) Plan.

3.02.EMPLOYEE CONTRIBUTIONS

(a)Each Participant may irrevocably elect to defer Compensation under the Plan by authorizing, on a Participation Agreement, regular payroll deductions equal to between two percent (2%) and twenty percent (20%) of his Compensation in integral percentages.

(b)Each participant may also irrevocably elect to defer up to one hundred percent (100%) of any bonuses he is paid by the Company during the Plan Year or any Per Acre Profit Payments he receives during the Plan Year; provided, however, that deferrals of Per Acre Profit Payments shall not be permitted under this Plan on or after January 1, 2005.

(c)Prior to the later of (i) the first day of the Plan Year, or (ii) the 31st day after the Participant becomes eligible to participate in the Plan, each Participant shall enter into a Participation Agreement.  Such Participation Agreement shall be irrevocable, shall apply only to Compensation earned after the date of the Participation Agreement and shall remain in effect for the Plan Year unless the Participant has a Separation from Service.  A Participant may not modify his Participation Agreement during a Plan Year.

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(d)The Company shall maintain an Employee SERP Contribution Account on its books on behalf of each Participant electing to defer Compensation, bonuses or Per Acre Profit Payments pursuant to this Section 3.02; provided, however, that deferrals of Per Acre Profit Payments shall not be permitted under this Plan on or after January 1, 2005.  During each Plan Year, the Company shall credit each Participant’s Employee SERP Contribution Account with an amount equal to the amounts deferred pursuant to Section 3.02(a) and 3.02(b).

3.03.ADJUSTMENT TO ACCOUNTS

Each Participant’s Accounts shall be valued at fair market value as of the last day of each Plan Year and such other dates as are selected by the Company.  The Accounts shall reflect the Participant’s aggregate deferral amounts and any earnings or losses attributable to such amounts.

The Participant’s Pension SERP Account shall not be valued under this Section 3.03 but shall reflect the benefit described in Section 3.01(a)(2).

The earnings or losses credited to a Participant’s Accounts shall be based upon the earnings or losses of the investment options applicable to those Accounts pursuant to Section 3.04.  For purposes of crediting earnings or losses as of a valuation date, all contributions under this Plan that have been credited to those Accounts since the prior valuation date will be treated as having been credited as of the prior valuation date.

3.04.INVESTMENTS

A Participant may request that his deferrals be allocated among the available investment options established by the Company.  The initial allocation request shall remain in effect for all subsequent deferrals until changed by the Participant.  A Participant may change his or her investment allocation by completing such written or electronic forms as may be required by the Company, and shall become effective as soon as administratively feasible after the Company or other person identified on such forms receives the Participant’s request.  Although the Company intends to invest deferrals according to the Participant’s requests, it reserves the right to invest deferrals without regard to such requests.

The Company may make investment options available pursuant to the Trust.

3.05.VESTING

(a)Except as otherwise provided in Appendix B, amounts credited pursuant to Section 3.01(a)(2), as adjusted pursuant to Section 3.03, shall become nonforfeitable when and to the extent they would have become nonforfeitable had they been contributed to the Pension Plan.

(b)Amounts credited pursuant to Sections 3.01(a)(1) and 3.02, as adjusted pursuant to Section 3.03, shall be nonforfeitable at all times.

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(c)Except as otherwise provided in Appendix B, amounts credited pursuant to Section 3.01(c), as adjusted pursuant to Section 3.03, shall become nonforfeitable when and to the extent they would have become nonforfeitable had they been contributed to the Participant’s Employer Contribution Account maintained for the Participant under the 401(k) Plan.

3.06.PAYMENT OF BENEFITS

Within ninety (90) days after the earliest of the Participant’s Separation from Service, Disability, death or the date specified by the Participant, the Company shall pay the Participant the vested portion of his Accounts in one of the following methods as elected by the Participant:

(a)one lump sum payment; or

(b)equal annual installments over a period not to exceed ten (10) years.

The Participant shall elect the date and form of distribution at the same time he or she first completes a Participation Agreement pursuant to Section 3.02.  If the Participant does not elect a date and form of distribution, payment shall be made in one lump sum payment within ninety (90) days after the earliest of the Participant’s Separation from Service, Disability or death.

Notwithstanding the foregoing, prior to December 31, 2007, a Participant may file a one-time election (the “Special Election”) to select a distribution date and method of distribution for his or her Accounts; provided, however, that, with respect to a Special Election made on or after January 1, 2006, and on or before December 31, 2006, such Special Election shall not postpone any payment that was otherwise scheduled to be made during calendar year 2006 nor accelerate payment of any portion of the Participant’s Accounts to a date within calendar year 2006; and provided, further, that, with respect to a Special Election made on or after January 1, 2007, and on or before December 31, 2007, such Special Election shall not postpone any payment that was otherwise scheduled to be made during calendar year 2007 nor accelerate payment of any portion of the Participant’s Accounts to a date within calendar year 2007.  Under any such Special Election, the Participant shall not be required to postpone payment for at least five (5) years after the distribution event.  Such election shall be subject to such administrative rules as the Company may deem necessary or desirable for compliance with Code Section 409A and the notices, regulations and other guidance of general applicability issued thereunder.

With the exception of a Participant’s Special Election, the Participant may elect a new form of distribution; provided, however, that such election must be made at least twelve (12) months prior to the original distribution date and must postpone payment for at least five (5) years after such original distribution date; and provided, further, that such new election shall not be effective if it precedes the Participant’s Separation from Service with the Company by less than one year.

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Actuarial equivalence under the foregoing paragraphs shall be determined on the basis of the published 1984 Unisex Pension Mortality Table and a 7% interest rate assumption.  Early retirement reductions outlined in Section 4.2 of Retirement Plan A for Employees of American Crystal Sugar Company shall apply; however, additional reductions applied to benefit payments which commence later than the first day of the month following retirement shall not apply.

3.07.DEATH BENEFIT

In the event of the death of a Participant prior to payment of a vested portion of the Participant’s Accounts, any unpaid vested amounts shall be paid to the Participant’s Beneficiary pursuant to method of distribution previously elected by the Participant pursuant to Section 3.06.  If no form of distribution has been elected, such amounts shall be paid to such Beneficiary in one lump sum payment as soon as feasible after the Participant’s death.

3.08.CONTRIBUTIONS TO TRUST

The Company shall make contributions to the Trust each Plan Year which shall be sufficient to meet the Company’s obligations under the Plan.  These contributions shall be made throughout the Plan Year at such times as the Company may determine and as may be agreed upon with the trustee of the Trust.  Contributions with respect to Accounts other than the Pension SERP Account shall match allocations under this Plan, including any earnings not generated in the Trust (such as earnings attributable to a fixed rate investment option).

3.09.BENEFITS UNDER LONG TERM INCENTIVE PLAN

The American Crystal Sugar Company Long Term Incentive Plan established in the year 2000 provides for amounts to be credited to an Account under this Plan.  Accordingly, an Account shall be established under this Plan with respect to those amounts and shall be credited with earnings and losses under the terms of the Plan.  Such Account shall be vested and shall be subject to any additional terms and conditions applicable to that Account under the terms of that Incentive Plan.  Except to the extent permitted by Code Section 409A and the notices, regulations and other guidance of general applicability issued thereunder, this Section 3.09 shall have no further force and effect on or after January 1, 2005.

ARTICLE IV

ADMINISTRATION

4.01.POWERS

(a)The Company shall appoint one or more persons to administer the Plan.  Such persons shall have, and shall exercise and perform, all of the powers, rights, authorities, and duties necessary to administer the Plan, including the authority and discretion to construe and interpret the Plan, decide all questions of eligibility

8

for and the amount, manner and time of payment of any benefit payable hereunder.  Such persons shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan.

(b)The procedures for filing claims for payments under the Plan are described below.  For claims procedures purposes, the “Claims Manager” shall be the Company.

(1)A Participant who believes he or she is entitled to a payment under the Plan may submit a claim for such payment in writing to the Company.  Any claim must be made by the Participant or his or her Beneficiary in writing and state the claimant’s name and the nature of the payment to be made under the Plan on a form acceptable to the Company.  If for any reason a claim under this Plan is denied by the Company, the Claims Manager shall deliver to the claimant a written explanation setting forth the specific reasons for the denial, specific references to the pertinent provisions under the Plan on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and information on the procedures to be followed by the claimant in obtaining a review of his or her claim, all written in a manner calculated to be understood by the claimant.  For this purpose:  (i) the claimant’s claim shall be deemed to be filed when presented in writing to the Claims Manager and (ii) the Claims Manager’s explanation shall be in writing delivered to the claimant within 90 days of the date the claim is filed.

(2)The claimant shall have 60 days following his or her receipt of the denial of the claim to file with the Claims Manager a written request for review of the denial.  For such review, the claimant or the claimant’s representative may review pertinent documents and submit written issues and comments.

(3)The Claims Manager shall decide the issue on review and furnish the claimant with a copy within 60 days of receipt of the claimant’s request for review of the claimant’s claim.  The decision on review shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, as well as specific references to the pertinent provisions in the Plan on which the decision is based.  If a copy of the decision is not so furnished to the claimant within such 60 days, the claim shall be deemed denied on review.  In no event may a claimant commence legal action for benefits the claimant believes are due the claimant until the claimant has exhausted all of the remedies and procedures afforded the claimant by this Section 4.01(b).

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4.02.COMPANY

Whenever the Company, under the terms of the Plan, is permitted or required to do or perform any act or matter or thing, it shall be done and performed by the Chief Executive Officer of the Company or such officer’s delegate, except with respect to those matters as to which authority is specifically reserved to the Company’s Board of Directors and except for those matters described in Section 2.01.

4.03.LIABILITY

Notwithstanding any of the provisions of the Plan to the contrary, neither the Company nor any individual acting as an employee or agent of the Company shall be liable to any Participant or any other person for any claim, loss, liability or expense incurred in connection with the Plan, unless attributable to fraud or willful misconduct on the part of the Company or any such employee or agent of the Company.

ARTICLE V

MISCELLANEOUS

5.01.AMENDMENT AND TERMINATION

The Company reserves the power to alter, amend or terminate the Plan at any time and from time to time by the action of the Board of Directors and the interest of each Participant is subject to the powers so reserved.  An amendment shall be authorized by the Board of Directors and shall be stated in an instrument in writing signed in the name of the Company by a person or persons authorized by the Board of Directors.  After the instrument has been so executed, the Plan shall be deemed to have been amended in the manner therein set forth, and all parties interested herein shall be bound thereby.  No amendment to the Plan may alter, impair, or reduce the benefits of a Participant that are vested under the Plan prior to the effective date of such amendment without the written consent of the affected Participant.

Notwithstanding the foregoing, the Company expressly reserves the right to amend the Plan to the extent necessary or desirable to comply with the requirements of Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder without the consent of any Participant.  Further, in the event the Board of Directors terminates the Plan, such termination and the distribution of all Participants’ benefits shall be made within the time prescribed by and in compliance with Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.

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5.02.NO ALIENATION OF BENEFITS

No payee may assign, anticipate, or otherwise encumber any payment due him under this Plan.  Any payment due to a payee under this Plan shall be exempt from the claims of his creditors.

5.03.NO CONTRACT OF EMPLOYMENT

Nothing herein contained shall be construed to constitute a contract of employment between the Company and any Participant.

5.04.EXPENSES

The expenses of administering the Plan shall be paid by the Company.

5.05.FUNDING

The Plan shall at all times be considered entirely unfunded both for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended, and no provision shall at any time be made with respect to segregating assets of the Company for payment of any amounts hereunder.  Any funds with respect to payment to be made hereunder shall continue for all purposes to be part of the general assets of the Company and available to the general creditors of the Company in the event of the Company’s bankruptcy (when the Company is involved in a pending proceeding under the Federal Bankruptcy Code) or insolvency (when the Company is unable to pay its debts as they mature).  No Participant or any other person shall have any interests in any particular assets of the Company by reason of the right to receive a benefit under the Plan and to the extent the Participant or any other person acquires a right to receive benefits under this Plan, such right shall be no greater than the right of any general unsecured creditor of the Company.  The Plan constitutes a mere promise by the Company to make payments to the Participants in the future.  Nothing contained in the Plan shall constitute a guaranty by the Company or any other person or entity that any funds in any trust or the assets of the Company will be sufficient to pay any benefit hereunder.  Furthermore, no Participant shall have any right to a benefit under the Plan except in accordance with the terms of the Plan.

5.06.GOVERNING LAW

To the extent not preempted by the laws of the United States of America, the laws of the State of Minnesota shall be the controlling state law in all matters relating to this Plan.

5.07.SEVERABILITY

If any provisions of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, but this Plan shall be construed and enforced as if the illegal and invalid provisions never had been included herein.

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5.08.INCOMPETENT PARTICIPANTS

If any person entitled to payment under the Plan has been declared incompetent and a conservator or other person legally charged with the care of such person or of his or her estate has been appointed, any distribution under the Plan to which the person is entitled shall be paid to such conservator or other person legally charged with the care of the person or his or her estate.  Except as provided above, when the Company has determined that such person is unable to manage his or her affairs, the Company may provide for such distribution or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person.  Any such distribution shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan therefor.

IN WITNESS WHEREOF, this Plan has been executed on behalf of the Company by its duly authorized officers as of the 5th day of December, 2008.

AMERICAN CRYSTAL SUGAR COMPANY
By:	/s/ David Berg
	Its:	President/CEO

ATTEST:
By:
	Its:

3152709/6

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EX-10.21

Exhibit 10.21

AMERICAN CRYSTAL SUGAR COMPANY

BOARD OF DIRECTORS

RESTATED DEFERRED COMPENSATION PLAN

ARTICLE 1.

PURPOSE

1.1Deferred Compensation.  The purpose of the American Crystal Sugar Company Board of Directors Restated Deferred Compensation Plan (the “Plan”) is to provide deferred compensation to the members of the Board of Directors (“Board”) of American Crystal Sugar Company (the “Company”).  The Plan is an unfunded deferred compensation arrangement for a select group of advisors, management or highly compensated employees within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974 (“ERISA”) and 29 C.F.R. § 2520.104-23(b)(2), and is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the notices, regulations and other guidance of general applicability issued thereunder.

ARTICLE 2.

ADMINISTRATION

2.1Administration and Delegation of Authority.  Except as provided in Section 5.11, the Plan shall be administered by the Chief Executive Officer of the Company or its delegate (hereinafter referred to as the “Administrator”).  No member of the Board shall participate in any decisions concerning the payments to be made to him or her, or other matters relating to his or her benefits hereunder.

2.2Powers.  Except as otherwise provided, and subject to the provisions of the Plan, the Administrator shall have full power and authority to administer and interpret the Plan, to adopt and revise rules, regulations and guidelines relating to the Plan and, to make all other determinations necessary or advisable for the administration of the Plan.  Decisions and determinations by the Administrator shall be final and binding on all parties including, but not limited to, the Company and its members, employees and officers, whether or not they participate in the Plan.

ARTICLE 3.

DEFERRED COMPENSATION

3.1Deferral of Fees.  Each member of the Board of Directors of the Company (a “Participant”) may file, on a form prescribed by the Administrator, prior to January 1 of each year, an irrevocable election to defer the receipt of all or a portion of the board and committee fees payable to the board member during such calendar year.  Such election shall apply only to fees earned for services performed after the election is filed, and shall continue to apply to fees earned in all subsequent calendar years unless the Participant files a new deferral election prior to January 1st of such year.  Amounts so deferred shall be credited to the Participant’s Deferred Compensation Account.  Further, such election shall specify the form of payment for all amounts credited to the Participant’s Deferred Compensation Account.

3.2Deferred Compensation Account.  All compensation deferred by a Participant shall be credited from time to time to the Participant’s Deferred Compensation Account.  For calendar years ending prior to January 1, 2009, such Deferred Compensation Account shall be adjusted for earnings, compounded monthly, using the five-year Treasury Bond rate on the preceding December 31st.  Effective January 1, 2009, the Participant’s Deferred Compensation Account shall be adjusted for earnings, compounded monthly, at a rate equal to the Company’s weighted average cost of short-term and long-term borrowing, which rate shall be determined as of the end of the immediately preceding fiscal year of the Company and shall remain in effect for the following calendar year.  By way of example, the rate for the 2009 calendar year shall be determined as of the fiscal year ending August 31, 2008.  All such earnings adjustments shall be made on each Annual Accounting Date and on such other dates as selected by the Administrator, until all amounts credited to such Account have been distributed as provided in Section 3.4 below.

3.3Vesting.  A Participant’s Deferred Compensation Account shall be fully vested at all times.

3.4Payment.  Within ninety (90) days after the earliest of the Participant’s Separation from Service, death, or attainment of age 65, the Company shall pay the Participant the balance of his or her Deferred Compensation Account in one of the following methods as elected by the Participant:

3.4.1One lump sum payment; or

3.4.2Equal annual installments over a period not to exceed ten (10) years.

The Participant must elect the form of distribution for his or her Deferred Compensation Account at the same time he or she first completes a deferral election pursuant to Section 3.1.  If the Participant does not elect a form of distribution, payment shall be made in one lump sum payment.  The Participant may elect a new form of distribution; provided, however, that such election must be made at least twelve (12) months prior to the original distribution date and must postpone payment for at least five (5) years after such original distribution date; and provided, further, that such new election shall not be effective if it precedes the Participant’s Separation from Service by less than one year.

ARTICLE 4.

DEFINITIONS

4.1Accounting Date.  “Accounting Date” means any date as of which the Administrator elects to determine the value of the balance in a Participant’s Deferred Compensation Account, including Annual Accounting Dates.  An “Annual Accounting Date is August 31st of each year.

4.2Beneficiary.  “Beneficiary” means the person or persons, natural or otherwise, designated by a Participant to receive benefits in the event of the Participant’s death.  A

2

Participant may revoke or change his or her beneficiary designation at any time without the consent of the Beneficiary.  To be effective, such designation, revocation or alteration shall be in writing, in a form approved by the Administrator, and shall be filed with and accepted by the Administrator.  The most recently dated beneficiary designation form which is validly filed with the Administrator by a Participant shall revoke all previously dated beneficiary designation forms filed by such Participant.  If a Participant fails to designate a Beneficiary or if no Beneficiary designated by the Participant survives the Participant, any remaining payments shall be paid to the Participant’s estate.  If a Beneficiary dies before receiving all of the payments to which such Beneficiary is entitled, any remaining payments shall be paid to such Beneficiary’s estate.

The dissolution of the marriage of a Participant shall void a beneficiary designation by the Participant in favor of the Participant’s spouse in that marriage.  That dissolution, however, shall have no affect on any other Beneficiary named by the Participant in the beneficiary designation form on file with the Administrator at the time of that dissolution or on any beneficiary designation form made by the Participant subsequent to that dissolution.  If, following a dissolution of marriage, the Participant has not named any other Beneficiary, any benefit payable under the Plan shall be paid to the Participant’s estate.

4.3Effective Date.  The initial effective date of the Plan was June 30, 1994.  The effective date of this restatement is January 1, 2005.

4.4Separation from Service.  “Separation from Service” or any variation thereof shall mean the Participant’s termination, resignation or withdrawal from the Board of Directors.

ARTICLE 5.

MISCELLANEOUS PROVISIONS

5.1Nontransferability.  No Participant or any Beneficiary shall have any right to assign, encumber or otherwise anticipate the right to receive payment hereunder, and the value of the Participant’s Deferred Compensation Account under the Plan shall not be subject to garnishment, attachment or any other legal process by the creditors of any Participant or Beneficiary hereunder.

5.2Liability of Company.  The Company shall have no liability in connection with the Plan except to pay any nonforfeitable benefits in accordance with the terms of the Plan.  The Company has made no representations to any Participant with respect to the tax implications of any transactions contemplated by the Plan.  Each Participant shall obtain his or her own counsel to advise the Participant with respect to the tax effect of the Plan.

5.3Binding Effect.  The Plan shall be binding upon the Participants and the Company and their heirs, executors and assigns.

5.4Payment in Case of Incompetency.  If, in the judgment of the Administrator based upon facts and information readily available to it, any person entitled to receive a payment hereunder is incapable for any reason of personally receiving and giving a valid receipt for the

3

payment of a benefit, the Administrator may cause such payment or any part thereof to be made to the duly appointed guardian or legal representative of such person, or to any person or institution contributing to or providing for the care and maintenance of such person, provided that no prior claim for said payment has been made by a duly appointed guardian or legal representative of such person.  The Administrator shall not be required to see to the proper application of any such payment made in accordance with the provisions hereof, and any such payment shall constitute payment for the account of such person and a full discharge of any liability or obligation of the Company.

5.5Withholding.  The Company shall have the right to deduct from all amounts payable hereunder any state or federal taxes required by law to be withheld with respect to such awards.

5.6Right to Terminate.  No member of the Board of Directors or other person shall have any claim or right to receive awards under or otherwise participate in the Plan.  Neither the Plan nor any action taken hereunder shall be construed as giving any member of the Board of Directors any right to be retained in any service relationship with the Company, interfere with the right of the Company to discharge any member at any time, give the Company the right to require a member to continue to provide services, or interfere with the member’s right to terminate his or her relationship at any time.

5.7Plan Shall be Unfunded.  The Plan shall at all times be entirely unfunded, no action shall be taken at any time which would have the effect of segregating assets of the Company for payment of any benefit hereunder, and no Participant or other person shall have any interest in any particular assets of the Company by reason of the right to receive a benefit hereunder.  Any Participant or other person shall have only the rights of a general unsecured creditor of the Company with respect to any rights hereunder.

5.8Compliance with Applicable Laws. The Company and Participants intend that the Plan comply with the applicable provisions of the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder, with the applicable provisions of ERISA, as amended, and the regulations thereunder, and with any provisions of the Securities Exchange Act of 1934, as amended, that may be applicable.  If, at a later date, these provisions are construed in such a way as to make the Plan null and void, the Plan shall be given effect in a manner that shall best carry out this intention.  The Plan shall be construed in all events so that Section 409A of the Internal Revenue Code and the notices, regulations and other guidance of general applicability issued thereunder shall not cause the inclusion of the amounts set forth above in income to the Participants prior to the payment of such amounts.

5.9Notices.  Any notice, election or form to be delivered pursuant to the Plan shall be given in writing and delivered, personally or by first-class mail, postage prepaid, to the Company, the Participant or any other person, as the case may be, at their last known address.

5.10Headings.  Headings or titles at the beginning of articles and sections are for convenience of reference, shall not be considered a part of the Plan, and shall not influence its construction.

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5.11Amendment and Termination.  The Board, and only the Board, may alter, amend or terminate the Plan at any time; provided, however, that, no amendment to the Plan may alter, impair or reduce the value of any Participant’s Deferred Compensation Account to the extent vested prior to the effective date of such amendment, without the written consent of any affected Participant.  Notwithstanding the foregoing, the Company expressly reserves the right to amend the Plan to the extent necessary or desirable to comply with the requirements of Code Section 409A and the notices, regulations and other guidance of general applicability issued thereunder.  Further, in the event the Board of Directors terminates the Plan, such termination and the distribution of all Participants’ benefits shall be made within the time prescribed by and in compliance with Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.

5.12Governing Law.  The provisions of the Plan shall be construed and enforced according to the laws of the State of Minnesota to the extent that such laws are not preempted by any applicable federal law.

The Company has caused this Plan to be executed by its duly authorized officer effective as of this 8th day of December, 2008.

AMERICAN CRYSTAL SUGAR COMPANY
By	/s/ David Berg
	Its	President/CEO

4395952

5

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, David A. Berg, certify that:

1.I have reviewed this report on Form 10-Q of American Crystal Sugar Company (the registrant);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)all significant deficiencies and material weaknesses in the design or operation of the internal controls over financial reporting which are likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

January 14, 2009	/s/ DAVID A. BERG
	David A. Berg
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Thomas S. Astrup, certify that:

1.I have reviewed this report on Form 10-Q of American Crystal Sugar Company (the registrant);

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e and 15d-15e) for the registrant and have:

a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c)disclosed in this report any changes in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a)all significant deficiencies and material weaknesses in the design or operation of the internal controls over financial reporting which are likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

January 14, 2009	/s/ THOMAS S. ASTRUP
	Thomas S. Astrup
	Vice President-Finance and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATE PURSUANT TO SECTION 906

OF SARBANES – OXLEY ACT OF 2002

The undersigned, David A. Berg, Chief Executive Officer of American Crystal Sugar Company, (the “Company”), does hereby certify that to his knowledge:

1.     The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2008 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.     Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 14th day of January, 2009.

By:	/s/ DAVID A. BERG
Name: David A. Berg
Title: President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATE PURSUANT TO SECTION 906

OF SARBANES – OXLEY ACT OF 2002

The undersigned, Thomas S. Astrup, Chief Financial Officer of American Crystal Sugar Company, (the “Company”), does hereby certify that to his knowledge:

1.     The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2008 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.     Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be executed this 14th day of January, 2009.

By:	/s/ THOMAS S. ASTRUP
Name: Thomas S. Astrup
Title: Vice President-Finance and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.