Minn Dak Farmers Cooperative 10K 2009 Annual report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

xAnnual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended
AUGUST 31, 2009
Or
oTransition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Commission File
No. 33-94644

MINN-DAK FARMERS COOPERATIVE
(Exact name of Registrant as specified in its charter)


North Dakota	23-7222188
(State of incorporation)	(I.R.S. Employer Identification Number)

7525 Red River Road
Wahpeton, North Dakota 58075	(701) 642-8411
(Address of principal executive offices)	(Registrant’s telephone number)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
o YESx NO

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
o YESx NO

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.x YESo NO

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.o YESx NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.x

Indicate by check mark if the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated fileroAccelerated fileroNon-accelerated filerxSmaller Reporting Coo

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YESo NOx

Minn-Dak Farmers Cooperative (the “Company” or the “Registrant”) has previously registered securities for offer and sale pursuant to the Securities Act of 1933, as amended (the “Securities Act”). As a result of that previous registration under the Securities Act, under Sections 15(d) and 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is obligated to file quarterly reports on form 10-Q, annual reports on Form 10-K and supplemental reports on Form 8-K. However, the Company has not registered any of its securities under Section 12(g) of the Exchange Act. The Company is exempt from any obligation to register its securities under the Exchange Act due to the provisions of Section 12(g)(2)(E), which exempts from Exchange Act registration any security of an issuer, such as the Company, which is a “cooperative association” as defined in the Agricultural Marketing Act of 1929. As a result, those provisions of the Exchange Act, which are applicable only to securities registered under Section 12 of that act, do not apply to shares issued by the Company. The provisions, which do not apply to the Company’s shares, include the regulation of proxies under Section 14 of the Exchange Act and the reporting and other obligations of directors, officers and principal stockholders under Section 16 of the Exchange Act.

This report contains forward-looking statements and information based upon assumptions by the Company’s management, including assumptions about risks and uncertainties faced by the Company. Any statements regarding future market prices, anticipated costs, agricultural results, operating results and other statements that are not historical facts contained in this annual report are considered forward-looking statements. The words “expect”, “project”, “estimate”, “believe”, “anticipate”, “plan”, “intend”, “could”, “may”, “predict”, and similar expressions are also intended to be identified as forward-looking terminology. Such statements involve risks, uncertainties and assumptions, including, without limitation, market factors, the effect of weather and economic conditions, farm and trade policy, the available supply of sugar, available quantity and quality of sugarbeets and other factors detailed elsewhere in this and other Company filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

SHAREHOLDER STOCK VALUE

The Company is a closed cooperative whose common stock and preferred stock are subject to significant restrictions on transfer and eligibility requirements. No public market for voting and non-voting common equity of the Company is established and it is unlikely in the foreseeable future that a public market for its voting and non-voting common equity will develop.

Stock purchased by investors in the Company typically do not use valuation methods that are commonly used for stock bought or sold on the open market for personal or institutional investment purposes.

The Company is typically referred to as a “Closed Cooperative”. In a “Closed Cooperative”, members must purchase equity (represented by classes of preferred shares) in a cooperative to acquire the rights to participate in the cooperative’s business, and membership must be approved by the Cooperative’s Board of Directors. The Company requires shareholders to own a Unit of Preferred Stock, which currently entitles a member to grow and deliver a maximum number of acres of sugarbeets per unit as authorized by the Board of Directors for each farming year. See Part II Item 5 for a more detailed explanation.

As of November 24, 2009, 474 shares of the Company’s Common Stock and 72,200 “units” of the Registrant’s Preferred Stock, each consisting of 1 share of Class A Preferred Stock, 1 share of Class B Preferred Stock and 1 share of Class C Preferred Stock, were outstanding.

The Company has not made any repurchases of its securities in the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.

There is only a limited, private market for shares of the Company’s Common or Preferred Stock, as such shares may be held only by farmer-producers who are eligible for membership in the Company. The Company’s common stock and preferred stock are not listed or admitted for trading on any stock market, any system of inter-dealer quotation, or on the Pink Sheets, the OTC Bulletin Board or any other quotation service for market makers. Transfer of shares, if any, is subject to significant restriction, including the approval of the Company’s Board of Directors and the requirement that preferred stock must be transferred together. Therefore, there is no established public trading market for any class of common equity of the Company and it is unlikely that a public market for the Company’s units will develop in the foreseeable future.

A number of stock transfers, representing approximately 7 percent of available stock, were not arms length (estate settlements, estate planning from one generation to the next, etc.) and an accurate value for that stock was not available. The Company believes that less than 2 percent of its available stock was traded at arm’s length during the fiscal year ended August 31, 2009. Of the stock transferred at arms length, the transfers were made during the first, second and third quarters of the Company’s fiscal year and, to the best of the Company’s knowledge, ranged in price from $2,200 to $3,000 per unit with first quarter sales being in the lower range and third quarter sales being in the higher range. The fourth quarter did not have any arms length transactions. The value of stock is highly dependent upon an individual stockholder’s ability to raise sugarbeets successfully both agronomically and financially. Prior to purchasing stock, a potential stockholder is advised to properly research the agronomic aspect of stock ownership.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I


ITEM 1.	BUSINESS

GENERAL

The Company is a North Dakota agricultural cooperative that was formed in 1972 and currently has 474 members. Membership in the Company is limited to sugarbeet growers located in those areas of North Dakota and Minnesota within an approximate fifty (50) mile radius of the Company’s offices and sugarbeet processing facilities in Wahpeton, North Dakota. The Company’s facilities allow the members to process their sugarbeets into sugar and other products. The products are pooled and then marketed through the services of marketing agents under contract with the Company. The sugar-marketing agent, United Sugars Corporation, is a cooperative association owned by its members, the Company, American Crystal Sugar Company and United States Sugar Corporation. The Company’s sugarbeet molasses and sugarbeet pulp are also marketed through a marketing agent, Midwest Agri-Commodities Company. Midwest Agri-Commodities Company is a cooperative association owned by its members, the Company, American Crystal Sugar Company, Southern Minnesota Beet Sugar Cooperative and Michigan Sugar Company. The Company owns a 100 percent interest in Minn-Dak Yeast Company, Inc. (“Minn-Dak Yeast”), which has facilities located adjacent to the Company’s sugar production facilities, and which produces fresh baker’s yeast.

The Company’s corporate headquarters are located at 7525 Red River Road, Wahpeton, North Dakota 58075, telephone number (701) 642-8411. Its fiscal year ends August 31. The Company’s website iswww.mdf.coop. The Company files annual, quarterly and periodic reports with the United States Securities and Exchange Commission (SEC). The SEC maintains an Internet site at http:/www.sec.gov that contains reports and other information filed electronically about the Company.

PRODUCTS AND PRODUCTION

The Company is engaged primarily in the production and marketing of sugar from sugarbeets. The Company also produces and markets certain co-products, sugarbeet molasses and sugarbeet pulp pellets. The Company’s subsidiary Minn-Dak Yeast uses a portion of the Company’s sugarbeet molasses as the growth medium in the production of fresh baker’s yeast. Minn-Dak Yeast provided revenues totaling approximately 6 percent of the Company’s total revenues for the fiscal year ended August 31, 2009.

The Company processes sugarbeets grown by its members at its sugarbeet processing facility located in Wahpeton, North Dakota. The processing period generally occurs from September to March or April of the following year, depending on the size of the crop.

Because the Company’s harvest period is much shorter than its processing period, sugarbeet long-term storage is very important to maximize the earnings from each crop year. Each harvest is unique and critical judgments are made by the agricultural staff regarding each crop. Judgments are impacted by the weather conditions at the time of harvest. If the weather is too warm or too cold when the sugarbeets are harvested they will not store well.

The Company uses what it considers to be the best industry practices to preserve and extend the quality of sugarbeets it has in storage. The methods utilized by the Company include, but are not limited to: minimizing pile height, leveling the tops of piles, infrared scanning, timely hauling, splitting piles, passive ventilation, active ventilation, covering active ventilation piles with plastic, storage sheds, and insulating sugarbeets in storage sheds. Each method is evaluated for its anticipated economic impact for each crop year.

The period during which the Company’s processing facility is in operation to process sugarbeets into sugar and co-products is referred to as the “campaign.” The campaign typically begins in September of each year and continues until the available supply of sugarbeets has been depleted. Once the sugarbeets arrive at the processing facility, the basic steps in producing sugar from them include: washing; slicing into thin strips called “cossettes”; extracting the sugar from the cossettes in a diffuser; purifying the resulting “raw juice” and boiling it, first in an evaporator to thicken it and then in vacuum pans to crystallize the sugar; separating the sugar crystals in a centrifuge; drying the sugar; and storing sugar in bulk form for bulk and bag shipping.

The Company’s sugarbeet co-products include sugarbeet molasses, sugarbeet pulp pellets and sugarbeet pressed pulp. After the extraction of raw juice from the cossettes, the remaining sugarbeet pulp is dried, processed into pellets and sold as animal feed or not dried and sold as wet animal feed to the local market. Sugarbeet molasses is the process materials left after all economical means have been taken to extract the sugar from the process. The sugarbeet molasses is sold primarily to yeast and pharmaceutical manufacturers and for use in animal feeds.

RECENT CROPS

The Company’s members harvested 2.0 million tons of sugarbeets from the 2009-crop, approximately 9 percent less than the most recent 5-year average. The Company’s shareholder/growers were unable to harvest approximately 10 percent of the crop due to extremely wet harvest conditions in a significant part of its growing area. Sugar content of the 2009-crop at harvest was 7 percent below the average of the five most recent years. Due to the lower harvested tons and lower sugar content, the Company’s production of sugar from the 2009-crop sugarbeets is expected to be 18 percent less than the average of the five most recent years of sugar production. This forward-looking material is based on the Company’s expectations regarding the processing of the 2009 sugarbeet crop; the actual production results obtained by processing those sugarbeets could differ materially from the Company’s current estimate as a result of factors that include changes in production efficiencies, purchase of non-patronage beets and storage conditions for the Company’s sugarbeets.

The Company’s initial sugarbeet payment estimate totals $40.00 per ton or $0.15546174 per harvested /bonus extractible pound of sugar, with the final sugarbeet payment determined in October of 2010. This projected payment is 19 percent less than the final 2008-crop payment per ton and 12 percent less per pound of extractible sugar. The lower projected 2009-crop payment per ton results from fewer total tons of beets processed, lower sugar content in the sugarbeets, lower pulp prices versus the prior year and increased operating and fixed costs per ton; offset somewhat by higher sugar prices versus the prior year.

For a discussion of the calendar 2008, 2007 and 2006 crops and results of operations for fiscal years 2009, 2008 and 2007, see “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”

GROWERS’ AGREEMENTS

The Company purchases virtually all of its sugarbeets from members under contract with the Company. All members have automatically renewing contracts with the Company covering each growing season (the “Growers’ Agreements”). At the end of each year, the Growers Agreement automatically extends for an additional year, so that such agreements always have a remaining term of one year, unless the Company, prior to the automatic renewal, has given notice of termination. In that situation, the agreement will not renew, but will continue in effect for the then remaining year under the agreement. Each Unit of Preferred Stock currently entitles a member to grow the maximum number of acres per share authorized by the Board of Directors for each farming year. The Company’s Board of Directors has the discretion to adjust the acreage that may be planted for each Unit of Preferred Stock held by the members. For the 2009-crop year the Company’s Board of Directors authorized its members to plant up to 1.60 acres per unit but no less than 1.40 acres per unit. For the 2010-crop year, the Company’s Board of Directors has authorized members a planting level of up to 1.60 acres but no less than 1.40 acres per unit; however, this authorization is subject to change by the board before the planting of the 2010-crop. The authorized acres for planting are due to a desire to more fully utilize the Company’s plant capacity and the anticipated sugar marketing allocations that will be available for the 2010-crop production. (For a discussion of the current farm bill sugar allocations, see Management’s Discussion on Government Programs and Regulations.)

Under the terms of the Growers Agreement, each member receives payment for his or her sugarbeets based on a price per pound of extractable and bonus sugar. The price per pound of extractable and bonus sugar is determined by dividing the total grower distribution of net proceeds (less the amount credited to members investment from member patronage and credited to retained earnings from non-member patronage) by the total of members’ pounds of extractable and bonus sugar. Extractable pounds of sugar are calculated by the processing of sugarbeet samples taken from members’ sugarbeets during harvest. Bonus sugar is a formula driven program premium for delivery of sugarbeets during early harvest. Each member’s grower payment is obtained by multiplying that member’s total pounds of extractable and bonus sugar times the price per pound of extractable and bonus sugar as determined above.

Under the Growers Agreement, each member receives an initial installment of the payment for his or her sugarbeets on or about November 15, soon after delivery of his or her crop to the Company. That initial installment is subject to adjustment by the Company’s Board of Directors and management, but will not exceed 65 percent of the estimated price per pound of extractable and bonus sugar. A second installment is paid in early February; that installment, in combination with the first installment, will not exceed 70 percent of the estimated price per pound of extractable and bonus sugar. A third installment is paid in early April, with the aggregate of all installments paid to that date not to exceed 80 percent of the estimated price per pound of extractable and bonus sugar. A fourth installment payment is paid in early July, with the total of installment payments to that date not to exceed 95 percent of the estimated price per pound of extractable and bonus sugar. The final payment is determined after the end of the Company’s fiscal year, ending on August 31, and is an amount necessary to bring the total of all payments to the price to be paid per pound of extractable and bonus sugar to all growers during the applicable fiscal year. In addition, the Company’s annual patronage net income, if any, which is equal to the Company’s sales less all expenditures and member sugarbeet payments, is distributed to the members on the basis of the pounds of extractable sugar obtained from each of the members’ sugarbeets; such amounts are distributed in either cash payments or allocated in the form of patronage credits to the member’s patronage account on the books of the Company.

COMPANY DISTRICTS

The Company’s by-laws provide that the Company’s members are to be divided into districts for the purposes of voting and the election of members of the Board of Directors. Those districts do not have specific geographic boundaries but, instead, contain a loosely defined area representing the area served by a particular piling station to which members deliver their sugarbeets for storage until the sugarbeets are to be processed. When a member joins the Company, he or she is assigned to a particular district based upon criteria including: (i) the physical location of the shareholder’s sugarbeet growing acres relative to a piling site; (ii) if the previous criteria do not clearly indicate the district to which the shareholder should be assigned, then the physical location of the shareholder’s base of farming operations relative to a piling site (some members deliver sugarbeets to more than one piling site due to the locations of their various fields, even though they are assigned to membership in only one district); and (iii) if the first two criteria do not provide a clear indication of the district to which the shareholder should be assigned, then the shareholder is given the option of being assigned to the district which would best serve the needs of that shareholder.

Given that shareholders are assigned to districts based upon ease of delivery of harvested sugarbeets and because shareholders own different numbers of Units of Preferred Stock, each district includes a different number of acres of sugarbeet production and, therefore, a different quantity of sugarbeets delivered to the Company. However, none of the districts provides the Company with a materially disproportionate quantity of the sugarbeets produced by the Company’s members. While the allocation of members to the various districts has a significant impact on the election of directors, the Company does not believe that the districts represent a significant factor in the day-to-day business operations of the Company.

RESEARCH AND DEVELOPMENT

The Company conducts very little research and development activity, but does participate in some sugar industry research and development activities. Any research findings are then shared by the entire sugar industry. Participatory research and development is accomplished through such organizations as the Beet Sugar Development Foundation and North Dakota/Minnesota Research and Education Board. The Company participates in the organizations listed above through the efforts of its representatives to the boards of directors of those entities. The Company’s representatives, either a member of the Company’s Board of Directors or a management employee of the Company, allow the Company to participate in and help direct agricultural and factory operations research and development activities carried out by the listed organizations. Those organizations also have established various committees on which the Company has placed certain of its employees. That practice is designed to provide the company with direct access to any research and development information available from the applicable committees. None of the Company’s employees or directors devotes a significant portion of their time and energies to the activities described in this section.

During the fiscal year ended on August 31, 2009, the Company contributed approximately $0.1 million to the North Dakota/Minnesota Research and Education Board to fund that entity’s research and development activities and the Company spent $0.4 million for research aimed at process improvements.

The Company also has established a sugarbeet seed committee, which reviews the performance of new and existing sugarbeet seed varieties. The committee then advises the Board of Directors with regard to those sugarbeet seed varieties that should be approved by the Board of Directors for use by the Company’s shareholders.

ENVIRONMENTAL MATTERS

The Company is subject to a broad range of evolving environmental laws and regulations. These laws and regulations include the Food Quality Protection Act of 1996, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the Comprehensive Environmental Response, Compensation and Liability Act. Other than what is provided herein, the Company is not aware of any areas of non-compliance.

The Company has $0.2 million of environmental capital improvements budgeted for the fiscal year ending August 31, 2010, slightly more than was budgeted for the fiscal year ending August 31, 2009.

Compliance with these laws and related regulations is an ongoing process that, at the current levels of spending, is not expected to have a material effect on the Company’s capital expenditures, earnings or competitive position. Environmental concerns are, however, inherent in most major agricultural operations, including those conducted by the Company, and there can be no assurance that the cost of compliance with environmental laws and regulations will not be material. Moreover, it is possible that future developments, such as increasingly strict environmental laws and enforcement policies there under, and further restrictions on the use of agricultural chemicals, could result in increased compliance costs.

On March 10, 2009, the United States Environmental Protection Agency (“EPA”) proposed regulations mandating reporting of greenhouse gas emissions from “all sectors of the economy.” The proposed regulation would apply to downstream facilities with greenhouse gas emissions equal to or greater than 25,000 tons per year and to upstream suppliers of fossil fuels and industrial greenhouse gases as well as to manufacturers of vehicles and engines. Those subject to the regulations would be required to submit annual reports of emissions of carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), sulfur hexafluoride (SF₆), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and other fluorinated gasses. The Company is monitoring this and similar proposed regulation changes and their potential impact to the Company.

MARKET AND COMPETITION

Current U.S. Government statistics estimated total U.S. sugar deliveries for domestic food and beverage consumption at 195.9 million cwt refined for its fiscal year beginning October 1, 2008 and ending September 30, 2009 (fiscal year 2009). For the same period ending in 2008 (fiscal year 2008), total deliveries were 196.4 million cwt refined. Comparing the two years shows demand decreased slightly for U.S. sugar sellers. The U.S. Government estimates that fiscal year 2010 deliveries will total 189.5 million cwt refined, about 3.3 percent less than fiscal year 2009. The deliveries are expected to be lower due to less Mexican sugar imports to the U.S. (tighter supplies and rising prices for semi-refined [estandar] sugar in Mexico) and HFCS deliveries increasing to recapture a goodly portion of the market share in fiscal year 2010 lost to sugar from Mexico in fiscal year’s 2008 and 2009. However, it remains to be seen if consumer preferences can change sufficiently to accept HFCS in products that had made the switch to sugar and/or if firms producing HFCS will aggressively market their product to recapture markets lost to sugar. The Company cannot determine at this time whether imports from Mexico will be reduced as much as the U.S. Government’s estimate. However, should that be the case, reduced imports from Mexico could have the effect of supporting existing U.S. sugar prices.

Given the size of the domestic market, the Company’s sugar production and sales represent approximately 2.8 percent of the total domestic market for refined sugar in fiscal year 2009. United Sugars Corporation, which sells the Company’s production through a sugar marketing pool, represented approximately 25 percent share of the fiscal year 2009 U.S. sugar market.

The U.S. refined sugar market is a mature market and has grown over the past ten years at a rate of slightly less than 1percent per year. Its growth is affected by the substitution of high fructose corn syrups, artificial and other non-sucrose sweeteners for sugar in beverages and certain food products and imported sugar-containing products. The substitution of non-sugar sweeteners for sugar not only reduced demand for sugar in the United States, but has also resulted in a high degree of sugar industry contraction. Also, sugar companies have been consolidating or closing as a result of marketplace conditions. Today there are seven sugar sellers, with approximately 90 percent of U.S. sugar market share concentrated in the top five sellers, most of which are integrated sugarbeet and sugarcane suppliers. The Company’s main competitors in the domestic market are Imperial Sugar Company, American Sugar Refining Company, Amalgamated Sugar Company and Cargill. Competition in the U.S. sugar industry, because sugar is a fungible commodity, is primarily based upon price, customer service and reliability as a supplier.

GOVERNMENT PROGRAMS AND REGULATION

Domestic sugar prices are supported under a program administered by the United States Department of Agriculture (“USDA”). Under the current program, which was initiated in 1981 and extended under the Food Security Act of 1985, the Food, Agriculture, Conservation and Trade Act of 1990, the Federal Agriculture Improvement and Reform Act of 1996, the Farm Security and Rural Investment Act of 2002 and now the Food, Conservation, and Energy Act of 2008 (the “Farm Bill”), the price of sugar is required to be maintained above the price at which producers could forfeit sugar to repay non-recourse loans obtained through the Commodity Credit Corporation (“CCC”). The USDA maintains sugar prices without cost to the U.S. Treasury by regulating the quantity of sugar imports. The U.S. currently imports approximately 23 percent of its total domestic needs.

Food, Conservation, and Energy Act of 2008

The Farm Bill was enacted in June 2008. It contains several provisions related to the domestic sugar industry, with the ultimate goal of such provisions to achieve 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 restricts imports of foreign sugar, maintains a non-recourse loan program, and establishes a system of marketing allocations for sugarbeet and sugarcane producers in an attempt to balance the supply and demand for sugar in the U.S. domestic sugar market.

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. When 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 USDA has historically maintained 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 regulating the quantity of sugar imports and the establishment of an overall allotment quantity for the domestic sugar producers. Under the Tariff Rate Quota (TRQ) implemented October 1, 1990, sugar-producing countries are allowed to export a fixed quantity of sugar into the United States duty-free or subject to minimal duties. The amount of the TRQ established by USDA for fiscal year 2010 is 1,231,497 short tons raw value (STRV), or the minimum access commitment level under World Trade Organization (WTO). In addition, the USDA also set the fiscal year 2010 refined TRQ at 99,251 STRV and estimated the entry from the Central American Free Trade Agreement, the Dominican Republic Free Trade Agreement (CAFTA, DR trade agreement) and the Singapore, Bahrain, Jordan and Peru Free Trade Agreements a TRQ total of 126,481 STRV. The USDA has projected that the amount of raw and refined sugar TRQ from all sources will total 1,182,229 STRV for fiscal year 2010, or 83 percent of fiscal year 2009 estimated TRQ entries.

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 load 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 22.9 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.

In order to reduce the risk of sugar forfeitures to the CCC and to provide balance in the marketplace, the Farm Bill establishes annual flexible marketing allotments for both cane and sugarbeet sugar processors. The Farm Bill requires the USDA to set the overall allotment quantity (OAQ) for the U.S. domestic sugar market for each crop year at no less than 85 percent of the estimated quantity of sugar for domestic consumption. Once the USDA has determined the OAQ for a crop year, it then determines each allotment for sugarbeet and sugarcane sugar by multiplying the OAQ by 54.35 percent for beet and 45.65 percent for cane. An individual processor’s allocation of the allotment for a crop year is determined by formula set forth in the Farm Bill. Each domestic processor of sugar, which includes the Company, is provided an allocation whenever allotments are in effect, based upon that formula. Sugarbeet processor allocations are based on each sugar processor’s sugar production history, while sugar cane processor allocations are based on past marketings, ability to market and past processings. The USDA annually establishes individual processor’s allocations.

Under the Farm Bill, a processor may market sugar in excess of its allocation if such sales (i) enable another processor to meet its allocation, (ii) facilitate the export of sugar or (iii) are made for nonhuman consumption. Or any sugar in excess of a processor’s allocation may be held until such time that allotments are lifted or additional allocations become available. The USDA can assess a penalty equal to three times the U.S. market value of any quantity of sugar marketed in excess of a processor’s allocation. The Farm Bill and its related regulations do not allow marketing allocations to be traded among processors. The Farm Bill does, however, provide for the transfer of allocations associated with a particular processing facility in the event ownership of the facility is transferred.

The marketing allotments and allocations set forth under the Farm Bill affect the sugar processed from the 2008 crop through the 2012 crop. On an annual basis, the marketing allotments, and the corresponding allocation to the Company, will determine the amount of sugar the Company can sell into the domestic market. The Company’s allocation may reduce the amount of sugar the Company can market for a given year, thus reducing the number of acres of sugarbeets required for processing. The Company anticipates that it may have to increase or reduce its authorized planted acres each year to more closely match its anticipated allocation of sugar sales. The Company also manages its allocation needs by selling non-allocation sugar to other sugar producers and for non-human consumption needs, which are not counted against allocation sales.

North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA) governs sweetener trade between the U.S. and Mexico. Under the NAFTA sugar from Mexico may enter and be sold in the U.S. in any quantity without the added cost of tariffs. The U.S. Government forecasts that Mexico will export 1,402,000 short tons raw value to the U.S. in 2008-2009, which would represent approximately 13.4 percent of domestic sugar consumption for food and other; and 760,000 short tons raw value in 2009-2010, representing approximately 7.5 percent of domestic sugar consumption for food. Key variables that ultimately will determine the amount of imports from Mexico include: (1) Mexican production; (2) Mexican high fructose corn syrup use; (3) Mexican third-country imports and possible substitution; (4) Mexican government policy decisions, such as a proposed ethanol program and others that could mitigate or increase exports to the U.S.; (5) domestic U.S. production of beet and cane sugar; and (6) possible U.S. and Mexico government agreement on a rational sugar trade policy, other than what currently exists in the NAFTA. Excessive imports of Mexican sugar could cause material harm to the U.S. sugar market, however, the Company is unable to determine what the level of imports would need to be in order to trigger material harm.

The Company believes the North American Free Trade Agreement (“NAFTA”) may present a potential serious public policy challenge to itself and the domestic sugar industry. Under the terms of the NAFTA text the agreement established a common market between the United States and Mexico in sugar in 2008. Effective January 1, 2008, under NAFTA, there are no duties or quantitative restraints between the two countries on all sugar and HFCS trade.

Should there be low world raw sugar prices it would be economically viable for Mexican sugar to enter the United States in any year, if the Mexican interests so choose. Since January 1, 2008 there has not been a sugar market disruption due to NAFTA in the US for a variety of reasons; mostly those reasons have to do with the market conditions that currently exist in the US and Mexico, including supply / demand reasons. It is possible that the NAFTA could, in the future, have a material adverse effect on the Company through a reduction in acreage that can be planted by the Company’s shareholders, and/or a reduction in sugar selling prices, and a corresponding reduction in the sugarbeet payment to the shareholders and to the Company earnings. The magnitude of the impact cannot be determined at this time.

World Trade Organization

Under the General Agreement on Tariffs and Trade Act of 1990 (“GATT”), tariff rate quotas were implemented for certain sugar producing countries that provided for a fixed quantity of sugar imports duty-free or subject to minimal duties. Unlimited additional quantities may be imported upon payment of a tariff of 15.36 cents per pound of refined sugar prior to shipment (to date, very little sugar has been imported under this higher tariff level). Further, imports of sugar under the tariff rate quota are based upon the difference between domestic sugar consumption and domestic sugar production, with one exception. Under the terms of the GATT the minimum imports of sugar are established at 1,257,000 short tons, raw value. Therefore, even if the difference between domestic sugar consumption and production are less than 1,257,000 short tons, raw value, GATT will require that 1,257,000 short tons be imported into the United States from the quota holding foreign countries.

The World Trade Organization (WTO) met in November, 2001 in Doha, Qatar where members launched new multilateral trade negotiations aimed at improving market access, reducing and eventually phasing out all forms of export subsidies and substantial reductions in trade-distorting domestic support. Any agreements reached during the Doha Round could present a threat to the domestic sugar industry because sugar is one of the most highly protected sectors within world agricultural trade and is thus a target for reform.

The 147 members of the WTO reached an agreement July 31, 2004, on a framework for the final phase of the Doha Development Agenda of global trade talks. The original deadline to complete talks by January 1, 2005, has been postponed a number of times. Talks have stalled repeatedly and currently there appears to be little chance of WTO countries completing the Doha in the short term. The effect of any final WTO agreement on United States farm programs and the sugar program in particular and the Company will depend largely on the details of the agreement, which have not yet been fully negotiated.

Dominican Republic - Central American Free Trade Agreement

The Dominican Republic - Central American Free Trade Agreement (DR-CAFTA) was signed into law in 2005 and was substantially implemented starting on January 1, 2006. As a result, the Company has seen an increase in the amount of sugar that will be imported into the United States as a result of this agreement. The impact of this trade agreement on the Company will continue to be assessed by taking into consideration this and all of the other agreements that require certain amounts of raw or refined sugar to be imported to the US, and the resultant amount of sugar that becomes available for sale in the domestic sugar marketplace. It is possible that the trade agreement could have a material adverse effect on the Company through a reduction in acreage that can be planted by the Company’s shareholders, and/or a reduction in sugar selling prices, and a corresponding reduction in the sugarbeet payment to the shareholders and the Company earnings. The magnitude of the impact cannot be determined at this time.

Regional and Bilateral Free Trade Agreements

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 Company believes these agreements, if they reach fruition, could negatively impact the Company’s profitability.

The U.S. Government has negotiated or is currently negotiating free trade agreements with a number of countries and regions that are major producers of sugar. The primary agreements under consideration that affect sugar, to the Company’s knowledge, are the Columbia Free Trade Agreement; the Thailand Free Trade Agreement; the Panama Free Trade Agreement; the Free Trade Area of the Americas; the South African Customs Union Free Trade Agreement, and others. The Columbia Free Trade Agreement and the Panama Free Trade Agreement have been completed, signed, but as yet not been ratified by the U.S. Congress. The Company is uncertain when these two trade agreements will be brought before Congress for a vote. The Company believes these agreements, should they reach fruition, could negatively impact the Company’s profitability. Many of the countries included in these agreements are major sugar producers and exporters. 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.

The U.S. sugar industry and the Company recognize the potential negative impact that would result if these agreements were entered into by the United States.

The impact of the various trade agreements on the Company can not 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/or a reduction in sugar selling prices, and a corresponding reduction in the sugarbeet payment to the shareholders and to the Company earnings. The magnitude of the impact cannot be determined at this time.

The Farm Bill provides price support provisions for sugar. However, if the price support program including the Tariff Rate Quota system described above were eliminated in its entirety, or if the effectiveness that the United States’ price support program provides from foreign competitors were materially reduced, the Company could be materially and adversely affected. In such a situation if the Company were not able to adopt strategies that would allow it to compete effectively in a greatly changed domestic market for sugar, the adverse affects could impact the Company’s continued viability and the desirability of grower sugarbeets for delivery to the Company.

EMPLOYEES

As of November 2, 2009, the Company had 305 full time employees, of whom 268 were hourly and 37 were salaried. It also employs approximately 395 additional hourly seasonal workers during the sugarbeet harvest and processing campaign. The Company has a collective bargaining agreement with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (AFL-CIO, CLC) for its factory group. The contract became effective June 1, 2005 and continues through May 31, 2011. Office, clerical, management, truck drivers and harvest employees are not unionized. Full time employees are provided with health, dental and vision insurance, a defined benefit or defined contribution retirement plan, a 401(k) retirement savings plan, a long term disability plan, sick leave plan, term life insurance, vacation plan and holiday pay. Seasonal workers are also provided some of these same employee benefits. The Company considers its employee relations to be excellent.


ITEM 1A.	RISK FACTORS

If any of the following risks actually occur, the Company’s results of operations, cash flows and the trading price of our common stock could be negatively impacted. Although the Company believes that it has identified and discussed below the key, significant risk factors affecting its business, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect its performance or financial condition.

Regional and Bilateral Trade Agreements

In the event that the United States government enters into bilateral trade agreements with sugar producing countries, the amount of sugar in the domestic sugar market could be impacted. A change in the supply of sugar could put pressure on the price of sugar, which would impact the Company’s profitability.

Government Programs and Regulations; Legislation

The nature and scope of future legislation and regulation affecting the sugar market cannot be predicted and there can be no assurance that price supports and market protections will continue in their present forms. If the price support programs were eliminated in their entirety, or if certain protections the United States government provides from foreign competitors were materially reduced, the Company could be materially and adversely affected. In such a situation, if the Company were not able to adopt strategies that would allow it to compete effectively in a greatly changed domestic market for sugar, the adverse effects could negatively impact the desirability of growing sugarbeets for delivery to the Company, the Company’s financial results, and the Company’s continued viability.

Legislation that would significantly increase energy costs, health care costs, or other employee benefit costs could have severe adverse impacts on the financial returns of the Company.

Unregulated Foreign Competition

Under the current terms of the NAFTA and other government regulations, imports of sugar from Mexico may enter the U.S. market. These imports could oversupply the U.S. market and negatively affect the price of sugar. The Company, along with the domestic sugar industry, is seeking improvements to NAFTA to address the matter. If the sugar industry is unsuccessful in these and any other endeavors it pursues to prevent the influx of Mexican sugar into the U.S. market, there could be adverse financial consequences to the Company and its members.

The Farm Bill

The impact of the Farm Bill on the operations of the Company cannot be completely predicted. The long-term ramifications of the marketing allotment and allocation program depend on the Company’s base allocation received on an annual basis and its ability to obtain access, if necessary, to additional allocations at a reasonable price.

Operating Expenses and Sugar Prices

The Company has an ongoing strategy of maximizing profitability by controlling operating expenses and maximizing production of sugar. This strategy is necessary because the price of sugar has remained within a fairly narrow government program controlled price range. The strategy includes ongoing activities that include constant review of costs and a capital expenditure program that emphasizes efficiencies through cost reduction or production increases. The Company cannot be assured that its continued efforts in this area will result in its continued or increased profitability.

The Company consumes large quantities of energy in its operations. The Company annually consumes coal, electricity, metallurgical coke, diesel fuel, and natural gas; therefore significant changes in energy prices would have a significant affect on the operating costs of the Company. The Company also consumes operating supplies whose costs are impacted by the price of energy, and therefore the price to the Company. The Company has a strategy to purchase its energy needs and operating supplies as cheaply as possible through long-term contracts, volume purchases and competitive bidding.

Beet Seed Availability

On January 24, 2008, the Center for Food Safety along with other groups filed a lawsuit against the USDA indicating that, a full environmental impact study should have been completed before it made the decision to deregulate Roundup Ready® sugarbeets. On September 21, 2009 the U.S. District Court (Court) ruled against the USDA finding that the USDA violated federal law by not preparing an Environmental Impact Statement before deregulating Roundup Ready® sugarbeets. The Court has determined that the USDA now needs to prepare a full Environmental Impact Statement. The actual direct impact of the decision on sugarbeet producers and the Company will become more clear during the “remedy phase” of the case, which will occur over the next several months. The Center for Food Safety has not asked the Court to prohibit planting of Roundup Ready® sugarbeets. However, if the Court restricts planting in 2010, conventional varieties would need to be utilized, which could have a negative impact on the sugarbeet producers’ crop yields. Chemical manufacturers have significantly reduced planned production of conventional herbicides due to the rapid increase in planting of Roundup Ready® sugarbeets. Weed control for conventional varieties could be difficult if there is an inadequate supply of conventional herbicides. Therefore, the risk of Roundup Ready® sugarbeet restrictions could have a significant, negative financial impact to the Company and to its members.

Weather and Other Factors

The sugarbeet, as with most other crops, is affected by weather conditions during the growing and harvesting seasons. Additionally, weather conditions during the processing season affect the Company’s ability to store sugarbeets held for processing. Growing and storage conditions different from the Company’s expectations may change the quantity and quality of sugarbeets available for processing and therefore may affect the quantity of sugar produced by the Company. A significant reduction in the quantity or quality of sugarbeets harvested resulting from adverse weather conditions, disease (such as rhizomania) or other factors could result in increased per unit processing costs and decreased production, with adverse financial consequences to the Company and its members.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

There are no unresolved written SEC staff comments regarding the Company’s periodic or current reports under the Securities Exchange Act of 1934.


ITEM 2.	PROPERTIES

The Company operates a single sugarbeet processing factory at Wahpeton, North Dakota that is located in the Red River Valley area of Minnesota-North Dakota. The Company owns the factory, receiving sites, and the land on which they are located.

The properties are adequate to process normal and above normal crop sizes, and for the last three years have averaged a slice rate of 9,587 tons per day. The 2006-crop was the largest tonnage in the history of the Company, amounting to approximately 3,019,000 tons of sugarbeets. If the Company encounters normal weather patterns, which will in turn provide normal long-term sugarbeet storage conditions, then it does not anticipate having material difficulties in processing crops equal in size to the 2006-crop. Achievement of the levels of slice and sugar production in the factory is due mostly to the quality of the crop and the Company’s effort to maximize the potential production from a crop.

Minn-Dak Yeast Company (MDYC), of which the Company is a 100 percent owner, operates a single factory yeast manufacturing business at Wahpeton, North Dakota. MDYC owns the factory and the land on which it is located. During fiscal 2009, fresh yeast was produced and sold into the domestic yeast marketplace.

All properties are held subject to a mortgage by the Company’s primary lender.


ITEM 3.	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. Other than as provided herein, the Company is not currently involved in legal proceedings that have arisen in the ordinary course of its business, and the Company is also unaware of certain other potential claims that could result in the commencement of legal proceedings. The Company carries insurance that provides protection against certain types of claims.

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 and expanding control program designed to meet these environmental laws and regulations. As disclosed under “ENVIRONMENTAL MATTERS” above, there currently are no pending regulatory enforcement actions and the Company believes that it is in substantial compliance with applicable environmental laws and regulations.


ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the Company’s shareholders during the quarter ended August 31, 2009.

At the Annual Meeting of Shareholders which is to be held on December 8^th, 2009, the following seats on the board of directors will be up for election: District #1, District #6, and District #8. A brief biography of each of the candidates for the open seats follows.

DISTRICT #1

ALTON THEEDE is the incumbent from this district and has decided not to run for reelection.

KEVIN KUTZER grew up in a family farming operation and continues that tradition in a family joint venture operation with brother Kyle and son Corey raising wheat, soybeans, sugarbeets, and corn in the Fairmount, ND. Mr. Kutzer received an Associate Degree in Pre Engineering at the North Dakota State College of Science in Wahpeton, ND and a B.S. in Mechanized Agriculture at North Dakota State University in Fargo, ND. Mr. Kutzer has served on the boards of the Lamars Co-op Elevator and AgCountry Farm Credit Services. He has served on the St. Anthony’s Church Council and Cemetery Board.

DISTRICT #6

CHARLES STEINER has been a director since 2000 and currently serves as the board secretary. Mr. Steiner has been farming near Foxhome, MN since 1969. Mr. Steiner graduated from the Northwest School of Agriculture, University of Minnesota at Crookston, MN. Mr. Steiner serves as the ex-officio member on the board of directors for United Sugars Company.

DISTRICT #8

DOUGLAS ETTEN has been a director since 1997 and currently serves as the board chairman. Mr. Etten has been farming near Foxhome, MN since graduating from Concordia College in Business and Math in 1974. He is also one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC. He also serves on the board of directors of Minn-Dak Yeast Company, United Sugars Corporation, and Midwest Agri-Commodities Company.

PART II


ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

SHAREHOLDER STOCK VALUE

The Company is typically referred to as a “closed cooperative.” In a “closed cooperative”, members must purchase equity (represented by classes of preferred shares) in a cooperative to acquire the rights to participate in the cooperative’s business, and membership must be approved by the Company’s Board of Directors.

The Company’s equity consists of common stock and preferred stock. The Company’s preferred stock consists of Class A preferred stock, Class B preferred stock and Class C preferred stock, with one share of each class of preferred stock constituting a “unit” of preferred stock.

Stock is not purchased in the Company using the traditional valuation methods used for stock commonly bought or sold for personal or institutional investment purposes.

A requirement for owning the Company’s stock includes the shareholder being actively engaged in farming and having an active interest in the crop being produced.

The Company believes a shareholder purchases the Company’s stock in order to secure acreage delivery rights, and therefore is based upon the purchaser’s ability to make a profit by delivering sugarbeets to the Company.

The Company believes each individual shareholder will have a different financial model for its economic analysis of Company stock purchase. Estimates for direct input costs to raise a sugarbeet crop vary significantly from shareholder to shareholder. The Company has no direct knowledge of the total of the direct input costs.

A shareholder is at risk for the size and quality of the sugarbeet crop to be raised. The ability of a shareholder to raise a quality crop of significant quantity to not only cover the shareholder’s input costs, but also provide for a return on stock ownership and stockholder management inputs is key to determining the economic value the Company’s stock holds for the shareholder or potential shareholder.

A shareholder is able to insure the risk of growing a crop through the purchase of Federal Crop Insurance. The Federal Crop Insurance program is managed by RMA, a branch of the United States Government. Changes in the Federal Crop Insurance program may have a significant impact on the level of financial risk that a shareholder may be able to insure.

A shareholder is also at financial risk based on the ability of the Company to pay the shareholder a sugarbeet payment that provides him/her with a profit.

Because the return to a shareholder is based upon the results of an entire year, the Company believes reliance upon one quarter of financial activity in comparison to a similar quarter of activity in a prior year is of limited value versus comparisons made at fiscal year end. Quarterly financial statements have significant management judgments regarding the final crop value.

Because the Company and other sugar companies have different methods of describing and paying their shareholders for sugarbeets delivered, the publicly announced payments by companies need to be adjusted for quality, patronage, trucking, and re-hauling costs to arrive at a comparable payment to the shareholder/grower for the delivery of those sugar beets.

The Company’s common stock and preferred stock are not listed or admitted for trading on any stock market, any system of inter-dealer quotation, or on the Pink Sheets, the OTC Bulletin Board or any other quotation service for market makers. Transfer of shares, if any, is subject to significant restriction, including the approval of the Company’s Board of Directors and the requirement that preferred stock must be transferred together. Therefore, there is no established public trading market for any class of common equity of the Company and it is unlikely that a public market for the Company’s units will develop in the foreseeable future.

Further, the rules of the Securities and Exchange Commission require that the Company provide a line graph presenting the cumulative, five-year returns on an indexed basis with a broad market index and either a nationally recognized industry standard or an index of peer companies selected by the Company. Because there is no established public trading market for any class of the Company’s equity securities, the Company is unable to estimate the value of any class of the Company’s equity securities or present a line graph or any other information comparing the value of any of the Company’s equity securities with any index.

As of November 24, 2009, there were 474 holders of the Company’s common stock and 474 holders of units of the Company’s preferred stock.

The Company has not transacted any repurchases of its securities in the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K.

There is only a limited, private market for shares of the Company’s Common or Preferred Stock. A number of stock transfers, representing approximately 7 percent of available stock, were not arms length (estate settlements, estate planning from one generation to the next, etc.) and an accurate value for that stock was not available. The Company believes that less than 2 percent of its available stock was traded at arm’s length during the fiscal year ended August 31, 2009. Of the stock transferred at arms length, the transfers were made during the first, second and third quarters of the Company’s fiscal year and, to the best of the Company’s knowledge, ranged in price from $2,200 to $3,000 per unit with first quarter sales being in the lower range and third quarter sales being in the higher range. The fourth quarter did not have any arms length transactions. The value of stock is highly dependent upon an individual stockholder’s ability to raise sugarbeets successfully both agronomically and financially. Prior to purchasing stock, a potential stockholder is advised to properly research the agronomic aspect of stock ownership.

Holders of the Company’s common stock are entitled to share in the Company’s profits and losses based upon sugar delivered, to receive distributions of the Company’s net cash flow when declared by the Board of Directors, to participate in the distribution of the Company’s assets if it dissolves or liquidates, and, to vote on matters submitted to a vote of the Company’s members. Under state law and the Company’s Bylaws, each member of the Company is entitled to one vote, regardless of the number of shares the member holds. Holders of the Company’s common stock are committed under Uniform Delivery and Marketing Agreements to grow and deliver a minimum and maximum number of acres of sugarbeets per unit of preferred stock as authorized by the Board of Directors for each farming year. The Company’s common stock and preferred stock may be held only by farmer-producers who are eligible for membership in the Company and may only be transferred with the consent of the Board of Directors of the Company.

The Company has never declared a dividend. The Company distributes its patronage based upon net margins in the form of qualified or non-qualified allocated patronage using the sugar delivered for the crop year as the distribution factor.


ITEM 6.	SELECTED FINANCIAL DATA

The following table summarizes selected financial data for each of the last five fiscal years. The selected financial data of the Company should be read in conjunction with the financial statements and related notes included inItem 8. of this report.


	Fiscal Year Ended August 31,
FINANCIAL DATA	2009		2008		2007		2006		2005
(in thousands)
Revenues	$	225,034	$	243,573	$	278,571	$	176,967	$	189,681
Distribution of net proceeds (1)		96,053		110,863		148,415		76,096		88,408
Total assets		179,884		177,063		177,666		163,129		158,996
Long-term debt, including current maturities		38,545		31,872		36,931		42,008		44,455
Members’ investment (2)		76,143		84,016		83,373		83,951		83,410
Property and equipment additions, net of retirements		9,246		8,560		4,947		4,426		4,916
Working capital		13,387		10,163		13,265		14,025		12,433

RATIOS
Ratio of long-term debt to equity (3)		.44		.32		.39		.45		.47
Ratio of net proceeds to fixed charges (4)		48.64		35.36		35.56		22.50		31.42
Current ratio		1.24		1.17		1.23		1.36		1.38

PRODUCTION DATA (5)
Acres harvested (members)		75,097		107,649		116,646		102,121		98,819
Tons of sugarbeets purchased (members)		1,863,920		2,208,622		3,019,475		1,810,269		2,295,904
Tons purchased per acre harvested		24.82		20.52		25.89		17.73		23.23
Payment to members per ton of sugarbeets delivered, plus allocated patronage and unit retains (6)	$	51.35	$	48.96	$	49.06	$	41.89	$	38.08

Sugar (cwts):
Produced (from member and purchased sugarbeets, includes high raw)		5,427,888		6,914,346		7,822,687		4,848,804		5,868,576
Sold (includes purchased sugar)		5,834,662		7,060,619		7,301,360		4,844,315		6,093,437

Beet pulp pellets (tons):
Produced		102,073		107,600		147,888		101,328		119,054
Sold		90,715		106,006		151,791		105,138		113,913

Beet molasses (tons):
Produced		87,647		99,349		130,878		79,599		89,797
Sold		61,240		87,803		88,652		47,007		73,824
Sold for Yeast Subsidiary Production		23,531		25,307		31,513		21,821		23,586

Yeast (pounds, in thousands):
Produced		35,975		37,436		39,248		34,787		32,043
Sold		36,071		37,436		39,152		34,670		31,984

(1) Net Proceeds are the Company’s gross revenues, less the costs and expenses of producing, purchasing and marketing sugar, sugar co-products, and yeast, but before payments to members for sugarbeets. (For a more complete description of the calculation of Net Proceeds, see “Description of Business-Growers’ Agreements”.)

(2) Members’ investment includes preferred and common stock, unit retention capital, allocated patronage and retained earnings.

(3) Calculated by dividing the Company’s long-term debt, exclusive of the current maturities of such debt, by equity.

(4) Computed by dividing (i) the sum of Net Proceeds plus fixed charges, plus amortization of capitalized interest by (ii) the sum of interest expense and interest capitalized. The Company does lease certain items, such as some office equipment. Due to the proportionately small amounts involved, an interest factor on lease payments has not been included in the total of the Company’s fixed charges or the calculation of this ratio. See Exhibit 12.

(5) Information for a fiscal year relates to the crop planted and harvested in the preceding calendar year (e.g., information for the fiscal year ended August 31, 2008, relates to the 2007 crop).

(6) Reflects the total amount paid in cash and allocated to individual grower equity accounts for each ton of sugarbeets delivered.


ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the Company’s financial statements and notes included elsewhere in this Report. This discussion contains forward-looking statements that involve risks and uncertainties. The Company’s actual future results may differ materially from those anticipated in the forward-looking statements contained in this section; such differences could arise as a result of a variety of factors including, but not limited to, the market and regulatory factors described elsewhere in this Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Preparation of the Company’s consolidated financial statements requires estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Management continually evaluates these estimates based on historical experience and other assumptions it believes to be reasonable under the circumstances.

The difficulty in applying these policies arises from the assumptions, estimates and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty of the assumptions, estimates and judgments increases, the level of precision decreases, meaning that actual results could be different from those currently estimated.

Estimates are considered to be critical if they meet both of the following criteria: (1) the estimate requires assumptions about material matters that are uncertain at the time the accounting estimates are made, and (2) other materially different estimates could have been reasonably made or material changes in the estimates are reasonably likely to occur from period to period. The Company’s critical accounting estimates include the following:

Subsidiaries

Subsidiaries that are controlled by the Company are consolidated in the Company’s financial statements. The Company has created and capitalized a wholly owned subsidiary called Link Acquisition Company LLC on December 18, 2008, which was formed to advance possible strategic business activities by the Company.

Inventory Valuation

Inventories of refined sugar, sugar thick juice and pulp and molasses to be sold on a pooled basis are valued at net realizable value, while third-party purchased refined sugar to be sold on a pooled basis is valued at the lower of cost or market. Inventory of yeast is valued at the lower of average cost or market. Materials and supplies are valued at most recent purchase price that approximates cost. During the periods when sugarbeets are purchased from growers, but not yet converted into granulated sugar or sugar thick juice, that inventory is valued at grower payment cost. In valuing inventories at net realizable value, the Company, in effect sells the remaining inventory to the subsequent periods sugar and co-product pool. The Company derives its estimates from sales contracts, recent sales and evaluations of market conditions and trends. Changes in market conditions may cause estimates to differ from actual results.

Property and Equipment, Property and Equipment Held for Lease, and Depreciation

Property and equipment, and property and equipment held for lease are depreciated for financial reporting purposes principally using straight-line methods with estimated useful lives ranging from 3 to 40 years. Economic circumstances or other factors may cause management’s estimates of expected useful lives to differ from actual.

The Company reviews its property and equipment, and property and equipment held for lease for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recorded when the sum of the future cash flows is less than the carrying amount of the asset. An impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. There were no impairment losses incurred during the fiscal years covered by this report. However, considerable management judgment is necessary to estimate future cash flows, which may differ from actual results.

Defined Benefit Pension Plan

The Company maintains and administers a non-contributory defined benefit pension plan. The annual cost of this plan can be significantly affected by changes in assumptions and differences between expected and actual experience. The Company utilizes actuarial methods required by SFAS No. 87, “Employers’ Accounting for Pensions,” (SFAS No 87) to account for its defined benefit pension plan. The actuarial methods require numerous assumptions to calculate the net periodic pension benefit expense and the related projected benefit obligations for our defined benefit pension plan. Three of the most significant assumptions are the discount rates, expected long-term rate of return on plan assets and rate of total compensation increase. In making these assumptions, the Company is required to consider current market conditions, including changes in interest assumptions.

Key assumptions used to determine annual pension expense are as follows:


	2009	2008	2007
Discount Rate	6.2%	6.5%	6.5%
Expected return on plan assets	8.0%	8.0%	8.0%
Rate of total Compensation Increase	4.3%	4.3%	4.3%

Discount Rate: An assumed discount rate is required to be used in the pension plan actuarial valuation. The discount rate is a significant assumption. The Company’s methodology for selecting the discount rate for the Company’s plan was to seek guidance from outside pension experts for determination of the appropriate discount rate through August 31, 2008 and use the Mercer Index for dates beginning September 1, 2008.

Expected Return on Plan Assets: The expected long-term rate of return on plan assets should, over time, approximate the actual long-term returns on pension plan assets. The Company’s methodology for selecting the Expected Return on Plan Assets is to review the Company’s compensation expectations and seek guidance from outside pension experts for determination of the appropriate rate.

Rate of Total Compensation Increase: The Rate of Total Compensation Increase should, over time, approximate the actual compensation increases of the plan participants. The Company’s methodology for selecting the Rate of Total Compensation Increase is to seek guidance from outside pension experts for determination of the approximate rate.

In August 2006, the Pension Protection Act (PPA) was signed into law. The PPA modified the funding requirements for defined benefit pension plans by subjecting defined benefit plans to 100 percent of the current liability-funding target. Defined benefit plans with a funding status of less than 80 percent of the current liability are defined as being “at risk”. These provisions do not apply to plans with less than 500 participants. As of the last plan filing, the Company’s plan had 458 participants.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R”. This standard requires employers to recognize the under funded or over funded status of defined benefit pension and Post-retirement plans as an asset or liability in its statement of financial position, and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive loss, which is a component of stockholders’ equity. This standard also eliminates the requirement for Additional Minimum Pension Liability (AML) required under SFAS No. 87. As a result of the application of SFAS No. 158 as of August 31, 2009, 2008 and 2007 the Company increased liabilities by $7,547,180, $639,310 and $3,947,430. These liabilities were offset to accumulate other comprehensive income (loss). As a result of SFAS No. 158, in the year ended August 31, 2009, 2008 and 2007 the Company recognized an increase in accumulated other comprehensive income (loss) of ($7,080,155), ($2,218,282) and ($2,368,458), respectively. In accordance with FAS 158 the measurement date was moved from May 31 to August 31 creating a fifteen-month period for the current year vs. twelve-month periods the preceding two years. Full adoption of FAS 158’s the new measurement date for the plan’s liabilities resulted in a one-time addition to liability and reduction of retained earnings of $284,896 as of August 31, 2009.

Income Taxes

The Company is a nonexempt cooperative as described under Section 1381(a)(2) of the Internal Revenue Code of 1986. Accordingly, net margins from business done with member patrons, which are allocated and distributed as prescribed in Section 1382 of the Code, will be taxable to the members and not to the Company. To the extent that net margins are not allocated and paid as stated above or arise from non-patronage business, the Company shall have taxable income subject to corporate income tax rates.

Determining the consolidated provision for income tax expense, income tax liabilities and deferred tax assets and liabilities involves judgment. The Company calculates income taxes in each of the tax jurisdictions in which it operates. This involves estimating current tax liability in each jurisdiction as well as making judgments regarding the valuation of deferred tax assets. Tax liabilities can involve complex issues and may require an extended period to resolve.

On September 1, 2007 The Company adopted the provisions of FASB Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109”. FIN 48 prescribes a threshold for the financial statement recognition and measurement of a tax position taken or expected to be taken in an income tax return. FIN 48 requires that the company determine whether the benefits of tax positions are more likely than not of being sustained upon audit based upon the technical merits of the tax position. For tax positions that are more likely than not of being sustained upon audit, the Company recognizes the largest amount of the benefit that is more likely than not of being sustained in our financial statements. For tax positions that are not more likely than not of being sustained upon audit, the Company does not recognize any portion of the benefit in its financial statements.

Fair Value Measurements

Investments - - The investments in CoBank, Dakota Valley Electric Cooperative, Inc. and all other cooperatives are stated at cost, plus the cooperative’s share of allocated patronage and capital credits. The investments in United Sugars Corporation and Midwest Agri-Commodities are accounted for using the equity method, wherein the investments are recorded at the amount of the underlying equity in the net assets of the investments and adjusted to recognize the cooperative’s share of the undistributed earnings or losses. The Company believes it is not practicable to estimate the fair value without incurring excessive costs because there is no established market for this stock and it is inappropriate to estimate future cash flows, which are largely dependent on future patronage earnings of the investment.

Long-term debt and bonds payable- The fair value of obligations under long-term debt and bonds payable are estimated based on the quoted market prices for similar issues or on the current rates offered for debt of similar maturities. The carrying amount on the financial statements approximates fair market value.

LIQUIDITY AND CAPITAL RESOURCES

Because the Company operates as a cooperative, payment for member-delivered sugarbeets, the principal raw material used in producing the sugar and co-products it sells, are subordinated to all member business expenses. In addition, actual cash payments to members are spread over a period of approximately one year following delivery of sugarbeet crops to the Company and are net of unit retains and patronage allocated to them, both of which remain available to meet the Company’s capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. However, because sugar is sold throughout the year (while sugarbeets are processed primarily between September and April) 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 such operations. The short and long-term financing has been primarily provided by CoBank (the “Bank”). The Company has a short-term line of credit with the Bank totaling $50.0 million, of which $31.0 million was available as of August 31, 2009. The Company also has a $15.0 million bid loan supplement facility through the Bank. The Company also has available the USDA Sugar Loan Provisions contained in the 2008 Farm Bill to provide an additional source of seasonal financing for the current and future crops.

On October 30, 2008 the Company and its primary lender agreed to a new set of loan agreements which maintained the same levels of seasonal borrowing capacity and bid loan capacity, but added $10.0 million to its term loan agreement, with the repayment of these additional funds being amortized over twelve quarterly payments and added to the end of the prior amortization period.

On October 15, 2009, the Company’s primary lender extended the Company’s seasonal loan agreements, which are due to expire on November 1, 2009, for a period of 60 days. The seasonal loan agreements will now expire December 31, 2009. The extension will allow the Company and its primary lender additional time after the completion of the 2009 crop harvest to more accurately determine seasonal borrowing needs, and reflect those needs in the seasonal loan agreements renewal.

The loan agreements between the Bank and the Company obligate the company to maintain the following financial covenants, and in accordance with GAAP:


•	Maintain a current ratio of no less than 1.10 for the first quarter of a fiscal year and 1.15 for all other quarter and fiscal year ends;
•	Maintain a long-term debt and capitalized leases to equity ratio of not greater than .8:1;
•	Maintain available cash flow to current long-term debt ratio as defined in the agreement of not less than 1.25:1.

As of August 31, 2009 the Company was in compliance with its loan agreement covenants with the Bank.

Net Cash provided by operations totaled $12.4 million for the year ended August 31, 2009, as compared to $13.3 million for the previous year. This decrease of $1.1 million was primarily due to changes in the amount of income allocated to member’s investment of $3.8 million and an increase in Other Comprehensive Loss of $5.4 million offset by changes in the Accounts payable, accrued liabilities, other liabilities of $10.4 million and all other factors of $0.3 million.

The net cash used in investing activities totaled $7.2 million for the year ended August 31, 2009, as compared to $7.3 million for the previous year. The decrease of $0.1 million was primarily due to increased levels of capital expenditures related to improved factory efficiencies, safety and replacement activities offset by capital adjustments of unconsolidated marketing subsidiaries and proceeds from patronage refunds and equity revolvements.

The net cash used in financing activities totaled $5.2 million for the year ended August 31, 2009 as compared to $6.1 million for the previous year. This decrease of $0.9 million was primarily due to decreased seasonal debt of $10.9 million offset by increased long-term debt of $10.0 million.

The Company anticipates that the funds necessary for working capital requirements and future capital expenditures will be derived from operations, short-term borrowings, depreciation, patronage and long-term borrowings.

Working capital increased $3.2 million for fiscal year 2009. The Company funds its capital expenditure and debt retirement needs primarily from operating activities. As of August 31, 2009 the Company had approximately 7-years of long-term debt remaining with the Bank and it has two tax exempt bond issues, series 1996 with $2.6 million remaining to be paid and series 2002 with $10.9 million remaining to be paid.

The Company has protected itself from interest rate fluctuations through a strategy of using tax-exempt bond financing and a term debt portfolio that fixes rates and maturities into the future on set amounts of debt. The Bank current term debt portfolio, comprised of $14.6 million using variable interest rates and $7.9 million using fixed interest rates over various maturities, is expected to provide the Company stable term debt interest rates over the next four years at similar rates to current market rates for maturities of the same type. An increase or decrease in the interest rate market of the recent historic past is expected to be immaterial on the profitability of the Company as a result of its interest rate strategy. Capital expenditures for the years ended August 31, 2009, 2008 and 2007 totaled $8.8 million, $8.0 million and $4.9 million, respectively. The Company’s purchase of equipment by issuance of capital lease debt for the years ended August 31, 2009, 2008, and 2007 totaled $2.4 million, $0.7 million and $0.0 million respectively.

Capital expenditures for fiscal year 2010 have been approved at $6.0 million. The capital expenditures are for normal efficiency, safety and replacement activities. Failure by the Company to make capital expenditures over a period of years would result in the Company being less competitive due to its failure to reduce costs and increase operating efficiencies.

The Bonds are secured by a letter of Credit from Wells Fargo Bank. The letter of credit is ultimately secured by the plant and property of the Company’s facility at Wahpeton, ND.


Payments Due by Period

Contractual Obligations (in millions)	Total	Less Than 1 Year	1 – 3 Years	4 –5 Years	After 5 Years
Long-Term Debt	$22.5	$2.5	$9.9	$6.7	$3.4
Bonds Payable	13.5	2.1	4.2	2.1	5.1
Capital Leases	2.9	0.5	1.9	0.5	0.0
Unconditional Purchase Obligations	0.0	0.0	0.0	0.0	0.0
Other Long-Term Obligations - Pension	12.8	1.0	2.4	1.7	7.7
Total Long Term Obligations	$51.7	$6.1	$18.4	$11.0	$16.2
Interest on Long Term Debt & Bond	2.8	0.6	1.5	0.5	0.2
Operating Leases	0.9	0.8	0.1	0.0	0.0
Total Contractual Obligations	$55.4	$7.5	$20.0	$11.5	$16.4

The Company is not aware of any known trends, demands, commitments, events or uncertainties that will likely result in the Company’s liquidity increasing or decreasing materially.

Other than those items described above, the Company is not aware of any known material trends, either favorable or unfavorable, that would cause the mix of equity to debt or the cost of debt to materially change.

RESULTS OF OPERATIONS

Comparison of the years ended August 31, 2009 and 2008

Net payments to members for sugarbeets delivered by the shareholder/growers, decreased by $11.0 million or 11 percent in fiscal year 2009 and totaled $92.0 million. As of August 31, 2009, the Board of Directors authorized the payment of prior years’ member patronage and per unit retains (including equity payments to estates of deceased shareholders) totaling $3.7 million to shareholders compared to $4.4 million in the previous year. The payment of $3.7 million will leave approximately 4.7 years of prior years’ patronage and per unit retains withheld versus the prior year of 4.5 years withheld.

Revenues for the year ended August 31, 2009 were comprised of Sugar 79 percent, Pulp 10 percent, Yeast 6 percent and Molasses 5 percent.

Consolidated revenue for the year ended August 31, 2009, decreased $18.5 million or 7.6 percent from 2008. Revenue from total sugar sales decreased $23.0 million or 11.1 percent reflecting a 17.6 percent decrease in cwt. sold, and a 6.5 percent increase in the average net selling price per cwt. Revenue from pulp increased $2.5 million or 14.5 percent reflecting a 38.1 percent increase in the average net selling price per ton and a 23.6 percent decrease in tons. Revenue from molasses sales decreased $1.6 million or 13.9 percent reflecting a 16.3 percent increase in the average net selling price per ton and a 30.2 percent decrease in tons sold. The decrease in volume of sugar and co-products sold from the 2008-crop is attributable to the smaller crop size, including purchased beets from a neighboring sugarbeet cooperative, and quality when compared to the 2007 crop of beets delivered by shareholder/growers.

Revenues from yeast sales increased 4.0 percent reflecting a decrease in volume of 3.6 percent, and an increase in the average net selling price of 7.6 percent. Selling prices increased due to a reflection of higher costs in the industry, which were passed on to the customers.

The value of finished product inventories in fiscal year 2009 decreased $1.4 million from fiscal year 2008, mostly the result of a decrease in the volume of ending sugar inventory. Sugar inventory was lower due to a high demand of available sugar in the domestic marketplace.

Expenses, exclusive of grower payments for sugarbeets and cost of non-member purchased beets, decreased $5.4 million or 2 percent. Minn-Dak Farmers Cooperative (MDFC) expenses decreased $5.5 million, while Minn-Dak Yeast Company expenses, after eliminations, increased $0.1 million.

The production cost per cwt. of sugar produced increased 30 percent versus the prior year due to a combination of a 22 percent decrease in sugar produced with only a corresponding 4 percent decrease in total costs.

Of the $5.4 million decrease in the MDFC expenses, the cost of operations increased $1.2 million, or 2 percent due to a smaller volume of sugarbeets processed in a higher cost environment vs. the 2007-crop.

Sales and Distribution costs decreased $5.4 million or 11 percent. Decreases are mainly the result of the reduction in the production and sale of finished goods from the smaller sugarbeet crop. General and Administrative expenses decreased $0.2 million or 3 percent. Employee costs were the primary reasons for the decrease. Interest expense decreased $1.2 million or 37 percent, reflecting a lower level of seasonal debt and a decreased rate of interest, offset some by a higher level of term debt.

Other business income before income taxes increased $1.1 million in fiscal year 2009 due primarily to a combination of the settlement of a lawsuit and the gain on sale of equipment. Income taxes decreased by $1.7 million in fiscal year 2009 vs. fiscal year 2008. Income taxes in fiscal year 2008 were a direct result of the purchase of non-member sugarbeets from a neighboring sugarbeet processor.

Comparison of the years ended August 31, 2008 and 2007

Net payments to members for sugarbeets delivered by the shareholder/growers, decreased by $37.6 million or 27 percent in fiscal year 2008 and totaled $103.0 million. As of August 31, 2008, the board of directors authorized payment to shareholders for prior years’ member patronage and per unit retains (including equity payments to estates of deceased shareholders) totaling $4.4 million compared to $6.0 million in the previous year. The payment of $4.4 million will leave approximately 4.5 years of prior years’ patronage and per unit retains still outstanding – the same as the prior year.

Revenues for the year ended August 31, 2008 were comprised of Sugar 83 percent, Pulp 7 percent, Yeast 6 percent and Molasses 4 percent.

Consolidated revenue for the year ended August 31, 2008, decreased 12.6 percent or $35.0 million from 2007. Revenue from total sugar sales decreased $16.0 million or 7.2 percent, reflecting a 2.8 percent decrease in cwt. sold and a 4.4 percent decrease in the average net selling price per cwt. Revenue from co-products decreased 7.8 percent, reflecting a decrease of 19.4 percent in volume and an 11.6 percent increase in the average selling price per ton. The decrease in volume of sugar and co-products sold from the 2007-crop is attributable to the smaller crop size, including the non-member purchased beets; with reduced production of sugar being offset slightly by higher quality sugarbeets processed.

Revenues from yeast sales increased 2 percent reflecting a decrease in volume of 4.4 percent, and an increase in the average net selling price of 6.4 percent. Increased selling prices were necessary to help defray a portion of substantial increases in operating materials and shipping costs experienced in the production and sale of yeast.

The value of finished product inventories in fiscal year 2008 decreased $4.4 million from fiscal year 2007, mostly the result of a decrease in the volume of ending sugar inventory. Sugar inventory was lower due to the timing of contract off-take from customers.

All expenses, exclusive of grower payments for sugarbeets and cost of non-member purchased beets, decreased $4.9 million or 4 percent. Minn-Dak Farmers Cooperative (MDFC) expenses decreased $5.4 million, while Minn-Dak Yeast Company expenses, after eliminations, increased $0.5 million.

The cost per cwt. of sugar produced increased 9 percent versus the prior year due to factory maintenance costs being higher than normal in the areas of solid waste disposal and the lime kiln, and fixed costs on a per unit basis exceeding that of the prior year due to the record crop processed in fiscal year 2007.

Of the $5.4 million decrease in the MDFC expenses, the cost of operations decreased $2.5 million, or 4 percent due to the smaller volume of sugarbeets processed versus the record 2006-crop, including the record length of the 2006-crop processing period.

Sales and Distribution costs decreased $1.8 million or 4 percent. Decreases are mainly the result of the reduction in the production and sale of finished goods from the smaller sugarbeet crop and reduced cost of sugar marketing allocations. Sugar marketing allocation costs decreased $3.4 million, or 54 percent due to the smaller amount of allocation needed for the marketing of the 2007 crop versus the record volume 2006 crop. General and Administrative expenses increased $0.2 million or 2 percent. Employee costs and professional fees were the primary reasons for the increase. Interest expense decreased $1.1 million reflecting a lower average level of seasonal and term debt and a decreased rate of interest.

Other business income before income taxes increased $0.1 million due primarily to a combination of prior period activities, offset by higher losses on the disposal of equipment. Income taxes increased $1.5 million due mainly to increased non-member income.

Comparison of the years ended August 31, 2007 and 2006

Net payments to members for sugarbeets delivered by the shareholder/growers, increased by $69.0 million or 96 percent in fiscal year 2007 and totaled $140.6 million. As of August 31, 2007, the Board of Directors authorized the payment of prior years’ member patronage and per unit retains (including equity payments to estates of deceased shareholders) totaling $6.0 million to shareholders compared to $3.6 million in the previous year. The payment of $6.0 million will leave approximately 4.5 years of prior years’ patronage and per unit retains withheld versus the prior year of 4.9 years withheld.

Revenues for the year ended August 31, 2007 were comprised of Sugar 84 percent, Pulp 7 percent, Yeast 5 percent and Molasses 4 percent.

Revenue for the year ended August 31, 2007, increased $101.6 million or 57 percent from 2006. Revenue from total sugar sales increased $73.5 million or 50 percent reflecting a 47 percent increase in cwt. sold, and a 3 percent increase in the average net selling price per cwt. Revenue from co-products increased 68 percent, reflecting an increase of 38 percent in volume, and a 30 percent increase in the average selling price per ton. The increase in volume of sugar and co-products sold from the 2006-crop is attributable to the larger crop size and quality when compared to the 2005 crop of beets delivered by shareholder/growers plus the 2005-crop non-member purchased beets.

Revenues from yeast sales increased 37 percent reflecting an increase in volume of 13 percent, and an increase in the average net selling price of 24 percent. Selling prices increased due to a combination of two factors: (1) a change in the way that yeast selling prices are determined under a different marketing agreement that Minn Dak Yeast Company (MDYC) entered into in May 2006, and which accounted for the majority of increase in the calculation of the yeast price, and (2) somewhat higher selling prices for yeast.

The value of finished product inventories in fiscal year 2007 increased $12.6 million from fiscal year 2006, mostly the result of an increase in the volume of ending sugar inventory. Sugar inventory was larger due to the timing of contract off-take for a select number of customers.

Expenses, exclusive of grower payments for sugarbeets and cost of non-member purchased beets, increased $30.1 million or 30 percent. Minn-Dak Farmers Cooperative (MDFC) expenses increased $27.9 million, while Minn-Dak Yeast Company expenses increased $2.2 million.

The production cost per cwt. of sugar produced decreased 31 percent versus the prior year due to a combination of a 62 percent increase in sugar produced with only a corresponding 12 percent increase in total costs.

Of the $27.9 million increase in the MDFC expenses, the cost of operations increased $7.0 million, or 12 percent due to the record volume of sugarbeets processed, including the record length of the 2006-crop processing period.

Sales and Distribution costs increased $21.4 million or 74 percent. Increases are mainly the result of the increase in the production and sale of finished goods from the larger sugarbeet crop and from the cost of sugar marketing allocations. Sugar marketing allocation costs increased $5.0 million or 400 percent from the 2005-crop and were due to the amount of allocation acquired to allow for the marketing of the large 2006 crop. General and Administrative expenses increased $0.9 million or 15 percent. Employee costs, beet transportation equipment depreciation and expenses associated with sugar policy and farm bill renewal was the primary reasons for the increase. Interest expense increased $0.8 reflecting a higher level of seasonal debt and an increased rate of interest.

Other business income increased $0.7 million in fiscal year 2007 due primarily to the yeast business being accounted for as patronage business and income on the yeast business qualifying for cooperative tax treatment.

Estimated Fiscal Year 2010 Information

This discussion contains a summary of the Company’s current estimates of the financial results to be obtained from the Company’s processing of the 2009 sugarbeet crop. Given the nature of the estimates required in connection with the payments to members for their sugarbeets, this discussion includes forward-looking statements regarding the quantity of sugar to be produced from the 2009 sugarbeet crop, the net selling price for the sugar and co-products produced by the Company and the Company’s operating costs. These forward-looking statements are based largely upon the Company’s expectations and estimates of future events; as a result, they are subject to a variety of risks and uncertainties. Some of those estimates, such as the selling price for the Company’s products, the quantity of sugar produced from the sugarbeet crop, changes in plant production efficiencies and sugarbeet storage conditions are beyond the Company’s control. The actual results experienced by the Company could differ materially from the forward-looking statements contained herein.

The Company’s initial sugarbeet payment estimate totals $40.00 per ton or $0.15546174 per harvested /bonus extractible pound of sugar, with the final sugarbeet payment determined in October of 2010. This projected payment is 19 percent less than the final 2008-crop payment per ton and 12 percent less per pound of extractible sugar. The lower projected 2009-crop payment per ton results from fewer total tons of beets processed, lower sugar content in the sugarbeets and increased operating and fixed costs per ton; offset somewhat by higher sugar prices versus the prior year.

For a discussion of the 2008, 2007 and 2006 crops and results of operations for fiscal year’s 2009, 2008 and 2007, see “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.”


ITEM 7A.	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’s long-term debt interest costs are stabilized through the use of multi-year interest rate locks on various amounts and terms through its primary lender CoBank. This strategy allows the Company to project future interest costs and cash flows with a reasonable degree of accuracy.

The Company has long-term tax-exempt bonds using a variable interest rate. Borrowing levels have been $13.5 million for 2009, $15.5 million for 2008 and $17.4 million for 2007. The historic interest rates for these instruments have been under 6 percent with anticipated fluctuations in interest rates being less than financial debt benchmarked to LIBOR.

The Company’s short-term debt rates will vary from year to year based on the short-term interest rate market changes. Average short-term debt borrowing levels have been $28.47 million, $36.0 million and $39.2 million for the years 2009, 2008 and 2007, respectively. Because each year’s short-term debt is closely associated with each year’s crop size and the finished goods market value from that crop, the interest fluctuations will have a direct impact on the final grower sugarbeet crop payment.

The Company will from time to time have purchase obligations in foreign currency as a result of approved capital expenditure projects, and may reduce the risk of currency exchange by forward purchasing the applicable currency required for the expenditures.

The Company does not believe that it is subject to 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.


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of the Company for the fiscal year’s ended August 31, 2009, 2008 and 2007 have been audited by Eide Bailly LLP, independent registered public accounting firm. Such consolidated financial statements have been included herein in reliance upon the report of Eide Bailly LLP. The consolidated financial statements of the Company are included in Appendix A to this annual report.


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no changes in or disagreements with accountants on accounting and financial disclosure.


ITEM 9A(T).	CONTROLS AND PROCEDURES

Sarbanes-Oxley Act: The Sarbanes-Oxley Act continues to have the interpretation of its rules reviewed and changed. The Company is in compliance with the rules and interpretations of these rules as they are stated. The below listed areas of activity are not to be considered an all inclusive list, but rather an indication of how the Company’s Board of Directors and Management are approaching future compliance requirements.

Audit Committee: The audit committee is active in the oversight of the Company’s accounting, auditing, and key risk management areas. The Company’s bylaws require any board member to be actively engaged in the production of sugarbeets, therefore, the financial expert requirement for the audit committee is restricted to the pool of available directors who are eligible to serve on the audit committee. Therefore there is no financial expert, as defined within the provisions contained in the Securities and Exchange Commission that serves on the Audit Committee. However, the Company believes that, taken as a whole, the members of the Audit Committee have sufficient education, experience and qualifications to carry out their duties. The Audit Committee has formulated a confidential and anonymous employee system to allow employees to report concerns regarding questionable accounting or auditing matters. The Audit Committee has adopted a code of ethics policy for top management.

The Audit Committee has reviewed and discussed separately with management, the independent auditors, and within the Audit Committee the financial statements and the quality of accounting principles and significant judgments affecting the financial statements contained in this Form 10-K filing. As a result of these reviews and discussions, the Audit Committee considers the financial statements contained here to be fairly presented.

Internal Controls:The Company’s payments to growers are derived from crop pools with each year’s harvest creating a “Crop Pool”. It is the Company’s practice to use accounting methods to allocate revenues and costs in a manner that such revenues and expenses associated with each pool are consistently applied on a year-to-year and a pool-to-pool basis. The Company has formalized a process whereby the material risks associated with the Company are determined, documented as to how these risks are to be managed and, where appropriate, reviewed by the Audit Committee.

Management’s Annual Report on Internal Control over Financial Reporting.


(a)	Management’s Annual Report on Internal Control over Financial Reporting. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting; as such term is defined in Rules 13a-15(f) and 15d – 15(f) of the Exchange Act. Under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of our internal control over financial reporting based upon the framework inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company’s management concluded that its internal control over financial reporting is effective as of August 31, 2009

(b)	Disclosure Controls and Procedures. As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by it in reports it files or submits under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (2) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure

(c)	Attestation. This annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.


(d)	Changes in Internal Control over Financial Reporting. There was no change in the Company’s internal control over financial reporting during the fiscal quarter ended August 31, 2009 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:


	•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that its receipts and expenditures are being made only in accordance with authorizations of management and the Company’s directors; and

	•	Provide reasonable assurance regarding prevention and timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its financial statements.

Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems that are deemed to be effective provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.


ITEM 9B.	OTHER INFORMATION

On August 27, 2009, the Company and Mr. Roche entered into an amended and restated employment agreement with a term from September 1, 2009 to August 31, 2010. The amended and restated employment agreement supersedes the previous employment agreement and renewals. Pursuant to the amended and restated employment agreement, Mr. Roche will hold the position of President and Chief Executive Officer at a base salary of $352,300 per year. The matrix applicable to the profit sharing bonus as set forth in the amended and restated employment agreement is the same as applicable to fiscal year 2009, except that the amended and restated employment agreement provides that in determining the return per acre, the acre number shall be those acres available for harvest the day harvest or preharvest begins, whichever is earlier. Also, no Profit Sharing Bonus will be paid if 30 percent or more of the crop, based on planted acres, is lost or unharvested. Further, if there is a separation from employment due to retirement, termination with or without cause, or any unforeseen reason, during the Company’s fiscal year, any profit sharing bonus shall be calculated at the end of the fiscal year, pro-rated as of the employment separation date and Mr. Roche will be deemed to have earned the pro-rata portion of the profit sharing bonus up to his separation date. No profit sharing bonus is payable until the end of the fiscal year and the return per acre has been calculated. The matrix associated with the profit sharing bonus will be reviewed every two years with the first review August 31, 2010.

As with the original employment agreement, Mr. Roche is also eligible for health, dental and vision insurance on the same terms as other non-union employees, as well as other group benefits such as term life insurance, accidental death and dismemberment insurance, long-term disability insurance. If Mr. Roche retires as Chief Executive Officer on or after his 62nd birthday, the Company will provide him with medical insurance until he reaches age 65. Mr. Roche must also submit to an annual physical examination at the Company’s expense.

Mr. Roche will also be included in the Company’s non-qualified deferred compensation plan, the pension plan, supplemental executive retirement plan and 401(k) plan. Through the amended and restated employment agreement, Mr. Roche is eligible beginning September 1, 2009 for an extension of the standard Company match to its 401(k) plan (matching contribution on 100 percent of the first 4 percent of compensation provided that the employee contributes at least 4 percent to the plan) to compensation in excess of the current qualified plan compensation limit (currently $245,000), with the matching contribution amounts being applied to the Company’s Non-Qualified Deferred Compensation Plan.

Under the amended and restated employment agreement, Mr. Roche is entitled to 5 weeks of vacation, seven paid holidays and four days of floating holiday. The Company will also reimburse Mr. Roche for travel and other business expenses. Further, Mr. Roche will be provided with a laptop computer and cell phone for company business.

The provisions of the prior renewal agreement relating to termination of employment were also retained in the amended and restated employment agreement. During any term of the amended and restated employment agreement, the agreement may be terminated by either party upon written notice to the other at least ninety days prior to the end of the term, by the Company for “material breach” or “just cause” by Mr. Roche and upon Mr. Roche’s death or disability. For the purposes of the employment agreement, “material breach” and “just cause” mean willful misconduct in following legitimate directions of the Board of Directors; breach of loyalty to the cooperative; conviction of a felony; habitual drunkenness; excessive absenteeism not related to illness, sick leave or vacations, but only after notice from the Board of Directors followed by a repetition of such excessive absenteeism; dishonesty; or continuous conflicts of interest after notice in writing from the Board of Directors.

If the Company terminates Mr. Roche’s employment without cause, the Company will pay Mr. Roche’s then-current base salary for a period of 12 months, conditioned upon receipt of a general release and compliance with provisions of the renewal agreement relating to confidentiality of Company information. This post-employment payment does not apply to termination of Mr. Roche’s employment by Mr. Roche, by the Company for cause, or by reason of death or disability. The amended and restated employment agreement also contains a provision relating to the confidentiality of Company information during the term of his employment with the Company and following termination of employment.

PART III.


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

BOARD OF DIRECTORS

The table below lists the current directors of Minn-Dak Farmers Cooperative. The board of directors consists of one director from each district. Directors must be common shareholders or representatives of common shareholders belonging to the district they represent and are elected by the members of that district. In the case of a common shareholder who is other than a natural person, a duly appointed or elected representative of such common shareholder may serve as a director. The directors have been elected to serve three-year terms expiring in December of the years indicated in the table below. One director is elected each year from three selected districts. Brief biographies for each of the directors are included after the table.


Name and Address	Age	District	Director Since	Term Expires in December
Dale Blume 17668 CO RD 11 Norcross, MN 56274-3050	59	District #7 – Lehman	2005	2011

Dennis Butenhoff 14319 150^th ST So Barnesville, MN 56274-3050	63	District #9 – Peet	2004	2010

Brent Davison 7950 770^th AV Tintah, MN 56583	58	District #5 – Hawes	2003	2011

Douglas Etten 30427 W. Stalker Road Dalton, MN 56324	58	District #8 – Lyngaas	1997	2009(1)

Patrick Freese 1745 270^th ST Kent, MN 56553	50	District #4 – Factory East	2008	2011

Dennis Klosterman 7942 CTY RD 1 Mooreton, ND 58061	49	District #3 – Gorder	2004	2010

Kevin Kutzer 9005 182^nd Ave Se Fairmount, ND 58030	56	District #1 – Tyler	Nominee

Russell Mauch 16305 Hwy 13 Barney, ND 58008	54	District #2 – Factory West	1998	2010

Charles Steiner 2851 310^th AV Foxhome, MN 56543-9312	59	District #6 – Yaggie	2000	2009(2)

Alton Theede 609 3^rd AV SE Hankinson, ND 58041	65	District #1 – Tyler	2003	2009(3)


1)	Mr. Etten’s term as a director of the Company from District #8-Lyngaas expires on December 8, 2009.
2)	Mr. Steiner’s term as a director of the Company from District #6-Yaggie expires on December 8, 2009.
3)	Mr. Theede’s term as director of the Company from District #1-Factory East expires on December 8, 2009. Mr. Theede has decided not to run for reelection to the board of directors.

Dale Blume has been a director since 2005 and also serves on the board of directors for Minn-Dak Yeast Company. He graduated from the NDSU with a degree in Ag Economics in 1973. He began farming in 1971 and continues to be actively farming today. Mr. Blume is one of Minn-Dak Farmers Cooperative’s original stockholders. Mr. Blume is a member of the Delaware Township Board and is a director at the First State Bank in Kensington, MN. He is also the co-chairman of the administrative council and on the financial committee of the United Methodist Church in Herman. He also serves on the board of directors of Minn-Dak Yeast Company.

Dennis Butenhoff has been a director since 2004 and serves on the board of directors of Minn-Dak Yeast Company. Mr. Butenhoff graduated from Barnesville High School, Barnesville, MN in 1965. Prior to serving his country in the military, Mr. Butenhoff attended North Dakota State University for 4 years, focusing on ag economics. He has been farming in the Baker/Barnesville area since 1967. Mr. Butenhoff has served Trinity Lutheran Church as a Sunday school teacher and church elder. He also serves on the board of directors of Midwest Agri-Commodities Company.

Brent Davison has been a director since 2003 and currently serves as the board vice chairman. Mr. Davison earned his B.S. degree in Education at Concordia University, Moorhead, MN, graduating in 1972. Mr. Davison taught school in Warren, MN from 1972 until coming home to farm near Tintah, Minnesota area in 1974. He is currently serving on the Tintah Township Board and is a former volunteer fireman and first responder. Mr. Davison is also one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC and serves on the board of directors for United Sugars Corporation.

Douglas Etten has been a director since 1997 and currently serves as the board chairman. Mr. Etten has been farming near Foxhome, MN since graduating from Concordia College in Business and Math in 1974. He is also one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC. He also serves on the board of directors of Minn-Dak Yeast Company, United Sugars Corporation, and Midwest Agri-Commodities Company.

Patrick Freese graduated Breckenridge High School in 1977 and North Dakota College of Science in 1979. From 1979 to 1985 Mr. Freese worked as a sales coordinator for Chief Industries in Grand Island, NE. Mr. Freese has been farming near Kent, MN since 1985. Mr. Freese has, and continues to, serve his community and church in several areas. He was a member and chairman of the Minn-Dak Farmers Cooperative Political Action Committee. Mr. Freese is a member of various farm and commodity organizations.

Dennis Klosterman has been a director since 2004. Mr. Klosterman graduated from Wahpeton High School in Wahpeton in 1978. He began farming with his father and brother in the Mooreton, ND area in 1979 while attending North Dakota State College of Science and North Dakota State University. Mr. Klosterman has, and continues to, serve his community and church in several areas. He was a member and chairman of the Minn-Dak Farmers Cooperative Political Action Committee. Mr. Klosterman is a member of various farm and commodity organizations. He also serves on the board of directors for Minn-Dak Yeast Company.

Kevin Kutzer(nominee) grew up in a family farming operation and continues that tradition in a family joint venture operation with brother Kyle and son Corey raising wheat, soybeans, sugarbeets, and corn in the Fairmount, ND. Mr. Kutzer received an Associate Degree in Pre Engineering at the North Dakota State College of Science in Wahpeton, ND and a B.S. in Mechanized Agriculture at North Dakota State University in Fargo, ND. Mr. Kutzer has served on the boards of the Lamars Co-op Elevator and AgCountry Farm Credit Services. He has served on the St. Anthony’s Church Council and Cemetery Board.

Russell Mauch has been a director since 1998 and currently serves as board treasurer. Mr. Mauch graduated from North Dakota State University in 1977 with a B.S. in agriculture. From 1979 to 1981 Mr. Mauch was a commercial and agriculture loan officer for First Bank Corporation in Valley City, ND. Mr. Mauch has been farming near Barney, ND since 1981. Mr. Mauch also serves on the board of directors for United Sugars Corporation and as one of Minn-Dak’s representatives to the American Sugarbeet Growers Association in Washington, DC.

Charles Steiner has been a director since 2000 and currently serves as the board secretary. Mr. Steiner has been farming near Foxhome, MN since 1969. Mr. Steiner graduated from the Northwest School of Agriculture, University of Minnesota at Crookston, MN. Mr. Steiner serves as the ex-officio member on the board of directors for United Sugars Company.

Alton Theede has been a director since 2003. Mr. Theede has been farming in the Fairmount, North Dakota area since 1966. He earned his B.S. degree in Business Administration from the University of North Dakota, Grand Forks, ND. Mr. Theede currently serves on the board of directors for the local CHS (Cenex Harvest States) and is very involved in community service. Mr. Theede has been and continues to be active in serving the congregation of St. Phillips Catholic Church in Hankinson, ND. He also serves on the board of directors for Minn-Dak Yeast Company.

The Board of Directors meets monthly. The Company provides its directors with minimal compensation, consisting of (i) a payment of $280.00 per meeting for regular and special board meetings, (ii) the greater (a) $140.00 for any day in which directors partake in activities on the Company’s behalf that take less than five hours or (b) $280.00 for any day in which directors partake in activities on the Company’s behalf that take five hours or more. The Chairman of the Board of Directors also receives a flat $500.00 per month to compensate for the extra duties associated with that position.

Information about Committees of the Board of Directors

The Board of Directors has established a Compensation Committee, an Audit Committee and a Nominating Committee. The composition and function of these committees are set forth belowCompensation Committee.The Compensation Committee operates under a written charter and discharges the Board’s responsibilities relating to the fair and competitive compensation for the Chief Executive Officer, including reviewing and approving goals and objectives relating to the compensation of the Chief Executive Officer and the performance of the Chief Executive Officer. Based on its review, the Compensation Committee makes recommendations to the Board of Directors regarding the elements of the Chief Executive Officer’s compensation and the Compensation Committee, along with the Board of Directors, approves the compensation and other benefits of the Chief Executive Officer. A copy of the current charter of the Compensation Committee is available by following the link to “Corporate Governance” on the Company’s website at www.mdf.coop During 2009, the members of the Compensation Committee are Messrs. Charles Steiner (Chair), Dale Blume, Dennis Klosterman, Brent Davison and Alton Theede.

Nominating Committee.Shareholders from each district select two shareholders to serve as a Nominating Committee for that district. The Nominating Committee for each district is responsible for facilitating nominations for the position of director by shareholders of that district and evaluating whether shareholder proposed nominees are qualified candidates. Each Nominating Committee operates under a series of written guidelines relating to the legal requirements for the Company’s directors, qualifications of nominees, and process for soliciting shareholder nominees. During 2009, the members of the Nominating Committee were Messrs. Chris Johnson (Chair), Tim Deal, Quinn Schreiber, Butch Fuder, Brent Torkelson and Bruce Miller. In fiscal 2009, there have not been any material changes to the procedures by which shareholders may recommend nominees to the Company’s Board of Directors.

Audit Committee.The Audit Committee assists the Board in fulfilling its responsibility relating to corporate accounting and reporting practices of the Company, the quality and integrity of financial reports, the financial reporting processes, the system of internal controls; the qualifications, independence and performance of the independent auditors; and compliance by the Company with certain legal and regulatory requirements. The Audit Committee has the authority to retain, compensate, oversee and terminate the independent auditors. The Audit Committee reviews the Company annual audited financial statements, quarterly financial statements and filings with the Securities and Exchange Commission. The Audit Committee also pre-approves all audit and non-audit services performed by the independent auditor. The Audit Committee operates under a written charter that is available by following the link to “Corporate Governance” on the Company’s website at www.mdf.coop. During 2009, the Audit Committee consisted of Messrs. Russ Mauch (Chair), Dale Blume, Dennis Butenhoff, Brent Davison and Alton Theede.

The Board of Directors has reviewed the education, experience and other qualifications of each of the members of its Audit Committee. After review, the Board of Directors has determined that none of the members of the Audit Committee meet the Securities and Exchange Commission definition of an “audit committee financial expert.” However, the Company believes that, taken as a whole, the members of Audit Committee have sufficient education, experience and qualifications to carry out their duties.

Executive Officers

The table below lists the senior management employees of the Company, none of whom owns any common or preferred shares. Brief biographies for each of the officers are included after the table.


Name	Age	Position
David H. Roche	62	President and Chief Executive Officer

Steven M. Caspers	59	Executive Vice President and Chief Financial Officer

Allen E. Larson	54	Controller and Chief Accounting Officer

Thomas D. Knudsen	55	Vice President Agriculture

Greg J. Schmalz	58	Director Human Resources

Jeffrey L. Carlson	54	Vice President Operations

John S. Nyquist	54	Purchasing Manager

Susan Johnson	62	Communications Manager

Kevin R. Shannon	55	Safety Director

John Haugen	57	Vice President Engineering

David H. Roche is Minn-Dak Farmers Cooperative’s third president and CEO. He joined the Wahpeton, ND based sugar cooperative on March 1, 2001. He serves on the boards of United Sugars Corporation and Midwest Agri-Commodities. Mr. Roche is chairman of the board for Minn-Dak Yeast Company. In addition, he is a trustee of the United States Beet Sugar Association, and a member of the board of directors of The Sugar Association, Washington, D.C. Mr. Roche began his sugar industry career as a controller for Michigan Sugar Company in 1976. He progressed through the ranks until he was named president in 1994. In 1996 he became president of Savannah Foods Industrial and was appointed senior vice president of Savannah Foods & Industries. Imperial Sugar Company acquired controlling interest in Savannah in 1998. He was named as a managing director and senior vice president. Mr. Roche holds an MBA in Accounting from Michigan State University and became a Certified Public Accountant in 1974.

Steven M. Caspers is a graduate of the University of North Dakota with a Bachelor of Science in Business Administration and a major in Accounting. He has been employed with the Company since May 5, 1974. Mr. Caspers is president of Minn-Dak Yeast Company. He is active in national industry related boards and committees.

Allen E. Larson is a graduate of Moorhead State University with a Bachelor of Science in Business Administration and a major in Accounting. He has been employed with the Company since October 26, 1981.

Thomas D. Knudsen is a graduate of North Dakota State University with a Bachelor of Science in horticulture and has attended the Beet Sugar Institute at Fort Collins, Colorado. He began employment with the Company on May 24, 1977.

Greg J. Schmalz is a graduate of the University of North Dakota, Grand Forks, with a Bachelor of Arts Degree in Sociology and a Masters Degree in Guidance and Counseling. Mr. Schmalz is a member of the Society of Human Resources Management and the Agassiz Valley Human Resources Association. He began his career in human resources in 1979. He has been employed with the Company since August 30, 2004.

Jeffrey L. Carlson is a graduate of the University of Minnesota-Morris with a Bachelor of Arts in Chemistry and the University of North Dakota with a Ph.D. in Physical Chemistry. He received his MBA from North Dakota State University in 2001. Mr. Carlson began his career as a research chemist and an assistant professor in 1986. Mr. Carlson began his employment with the Company on June 4, 1990.

John S. Nyquist attended the North Dakota State College of Science, majoring in Accounting and Computer Programs. Mr. Nyquist began his purchasing and inventory control experience in 1975 in the Company storeroom. Mr. Nyquist is active in local civic and fraternal organizations. Mr. Nyquist began employment with the Company on September 15, 1975.

Susan M. Johnson has attended several post-secondary education classes in fields related to her employment at the Company. Ms. Johnson began her career in the accounting department as receptionist and payroll clerk. She has also been employed in the human resources department, the executive offices, and is currently in the position of communications manager/executive administrative assistant. Ms. Johnson began employment with the Company on June 26, 1978.

Kevin R. Shannon attended Taylor Institute and Vanguard Vo-Tech, majoring in Instrumentation. He is active in local civic organizations. Mr. Shannon began his technical and supervisory career in 1974. His employment with the Company began on June 1, 1983. Prior to becoming the safety director in September of 1992, Mr. Shannon was the Company’s tare lab supervisor.

John R. Haugen was promoted to the position of Director of Engineering on November 2, 2001 and to Vice President Engineering on August 1, 2002. He started his career with Minn-Dak Farmers Cooperative in 1976 as an Assistant Engineer and prior to this promotion held the position of Senior Engineer. Mr. Haugen is a graduate of the University of North Dakota and holds a BS in Mechanical Engineering.

Code of Ethics for Executive Officers

The Company has adopted a code of ethics that applies to all directors, officers and employees, including its principal executive officer, principal financial officer and controller. This code of ethics is included in its Standards of Business Conduct which is publicly available by following the link to “Corporate Governance” at its website atwww.mdf.coop.

The Company intends to satisfy the disclosure requirements of the Securities and Exchange Commission regarding certain amendments to, or waivers from, provisions of its code of ethics that apply to the Company’s principal executive officer, principal financial officer, principal accounting officer or controller by posting such information on the Company’s website atwww.mdf.coop.


ITEM 11.	EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis describes the Company’s compensation objectives and policies as applied to the following executive officers who are referred to in this Annual Report on Form 10-K as the Named Executive Officers:


	•	David H. Roche, President and Chief Executive Officer;
	•	Steven M. Caspers, Executive Vice President and Chief Financial Officer;
	•	John Haugen, Vice President Engineering;
	•	Jeffrey L. Carlson, Vice President Operations; and
	•	Allen Larson, Controller.

This section is intended to provide a framework within which to understand the actual compensation awarded to or earned by the Named Executive Officers during the year ended August 31, 2009, as reported in the compensation tables and accompanying narrative sections appearing on pages 42 to 45 of this Annual Report on Form 10-K.

Role of the Compensation Committee in Determining Executive Compensation

The primary responsibility of the Compensation Committee is to discharge the Board’s responsibilities relating to the fair and competitive compensation of the Company’s Chief Executive Officer. This responsibility includes reviewing and recommending to the Board the compensation and other terms of employment of the Chief Executive Officer, overseeing significant aspects of compensation and benefit programs in which the Chief Executive Officer participates, and approving performance-based goals and compensation. The Compensation Committee also annually reviews the Chief Executive Officer’s compensation and evaluates the Chief Executive Officer’s performance.

Under its charter, the Committee has the authority to engage the services of outside advisors, experts and others to assist it in performing its duties. While the Compensation Committee has used the services of a compensation consultant in the past, it did not do so in determining fiscal year 2009 compensation for the Chief Executive Officer. The Compensation Committee may choose to use the services of a compensation consultant in the future.

Role of Management in Compensation Process

The Compensation Committee does not oversee or design compensation programs for any of the Named Executive Officers other than the Chief Executive Officer. The Compensation Committee believes that it is the responsibility of the Chief Executive Officer, as the highest-ranking executive, to implement the business goals of the Company established by the Board of Directors and to manage the Company’s business against an annual budget established by the Board of Directors. In this regard, the Chief Executive Officer is responsible for determining a strategy for achieving these goals, including the allocation of personnel, time and financial resources consistent with the budget that is approved by the Board. The Compensation Committee believes it is the responsibility of the Chief Executive Officer to manage and compensate the other Named Executive Officers in a manner that provides sufficient incentives for these employees to meet the business goals of the Company and to control compensation and benefits expense for all employees, including the Named Executive Officers. In reviewing the performance of the Chief Executive Officer each year, the Compensation Committee takes into consideration the extent to which the Chief Executive Officer has successfully fulfilled these responsibilities and holds the Chief Executive Officer accountable for the performance of each executive officer reporting to him.

In determining compensation for the Chief Executive Officer, the Compensation Committee solicits input from the Director of Human Resources and the Chief Financial Officer, primarily relating to the cost of the Company’s compensation programs and the financial performance of the Company. None of the Named Executive Officers, other than the Chief Executive Officer, has a role in establishing executive compensation. From time to time, some of the Named Executive Officers are invited to attend meetings of the Compensation Committee. However, no Named Executive Officer attends any executive session of the Compensation Committee or is present during deliberations or determination of that Named Executive Officer’s compensation.

While the Chief Executive Officer does not seek approval from the Compensation Committee for the compensation of the other Named Executive Officers, the Chief Executive Officer does discuss their compensation with the Compensation Committee and with the Board of Directors from time to time to solicit input and advice.

Compensation Philosophy and Design of Compensation Programs

The Compensation Committee’s philosophy is to provide competitive levels of compensation that are consistent with the Company’s annual and long-term performance goals. The Compensation Committee attempts to balance the financial interests of the Chief Executive Officer against the Company’s goal of maximizing its return to its shareholders. In determining the competitiveness of its programs, the Compensation Committee reviews the compensation offered by other local employers, as well as other sugar production cooperatives, such as American Crystal Sugar Company and Southern Minnesota Beet Sugar Cooperative. When determining compensation for the Chief Executive Officer, the Compensation Committee considers whether the form and amount of compensation is consistent with its philosophy.

The Compensation Committee has set the Chief Executive Officer’s base salary at or below base salaries of similar positions in the region and in the Company’s industry. The Compensation Committee adjusts base salary comparables for the size of the Company’s operations, both in terms of tons of sugarbeets processed and the quantity of sugar produced. The Compensation Committee has set base salary lower than comparable salaries believing that variable cash compensation, tied to specific performance measures, should constitute a significant portion of the Chief Executive Officer’s overall cash compensation. For the Named Executive Officers other than the Chief Executive Officer, the Chief Executive Officer sets base salaries annually based, in part, on base salaries of similar positions as reported by surveys, data and other market information. The Chief Executive Officer also reviews the executive’s personal performance, the need for the salary to remain competitive with other organizations in the industry and the general budgetary guidelines established by the Chief Executive Officer. The Chief Executive Officer has typically set the base salaries of the other Named Executive Officers near the median reported for that position.

The variable cash compensation for the Chief Executive Officer is provided through two bonus programs, one based on return per acre (referred to as the “Profit Sharing Bonus”) and one recommended by the Compensation Committee for Board of Directors approval based upon the results of an annual performance review (the “Performance Bonus”). The Compensation Committee intends the Profit Sharing Bonus to be fairly challenging and that average financial performance measured by return per acre will result in a relatively low level of Profit Sharing Bonus, while above average or exceptional financial performance would be required before a higher level Profit Sharing Bonus is earned by the Chief Executive Officer. Because return per acre is the measure that best quantifies the Company’s return to shareholders, the Compensation Committee believes that this measure is appropriate to align the Chief Executive Officer’s interests with those of the shareholders. Additionally, in determining the Performance Bonus for Mr. Roche in 2009, the Compensation Committee also considered the aggregate return to shareholders and the financial performance of the Company and shareholders for fiscal year 2009, which was impacted by delays in harvest due to weather.

With the renewal agreement entered into between the Company and the Chief Executive Officer on August 31, 2008, the Profit Sharing Bonus criteria were adjusted to make this bonus more challenging. For example, the new formula for fiscal year 2009 increased the minimum return per acre that must be achieved to result in any bonus. The Compensation Committee believed that the higher minimum return per acre was appropriate because it acknowledged increased expenses experienced by shareholder/growers since the Profit Sharing Bonus formula was adopted in 2001. The new minimum return per acre is designed to ensure that bonuses will be paid only when shareholders/growers receive a meaningful return. Additionally, under the renewal agreement, the return per acre to growers that would have resulted in the maximum bonus to the Chief Executive Officer ($50,000) in fiscal year 2008 would have resulted in a bonus amount that is significantly less ($25,000) under the new formula for fiscal year 2009. The Compensation Committee also attempted to provide greater incentives for superior performance with the new formula for fiscal year 2009 by increasing the amount of bonus that could be earned at the newly established highest level of achievement. The Compensation Committee believed that these changes, which were determined in fiscal year 2008 and effective beginning with fiscal year 2009, were consistent with the philosophy stated above. In accordance with the terms of the renewal agreement entered into on August 31, 2008, the Compensation Committee will review the Profit Sharing Bonus formula every two years to ensure it continues to provide appropriate incentives consistent with the Compensation Committee’s philosophy. See “Employment and Post-Employment Arrangements” for a description of Mr. Roche’s employment agreement, as amended by the renewal agreement and as subsequently amended and restated effective August 27, 2009.

In determining the total compensation for the other Named Executive Officers, the Chief Executive Officer ascribes to much the same philosophy as the Compensation Committee but the Chief Executive Officer also considers internal pay equity, external competitiveness and the contribution of each executive to the Company’s overall performance when determining base salary and eligibility for a discretionary performance-based bonus.

Elements of In-Service Compensation

The Compensation Committee followed the guiding principles outlined above in the development and administration of the compensation of the Chief Executive Officer while employed by the Company. The elements of in-service compensation of the Chief Executive Officer consist of base salary, a Profit Sharing Bonus based on return to shareholders and a discretionary Performance Bonus based on the Chief Executive Officer’s individual performance.

The Named Executive Officers, other than the Chief Executive Officer, receive compensation while employed with the Company consisting of a base salary and a discretionary performance bonus determined by the Chief Executive Officer based upon the Company’s overall performance and the individual performance of the Named Executive Officer.

The Company does not believe that personal benefits or perquisites (i.e. “perks”) are appropriate as a significant element of compensation, in particular because perks are not conditioned upon performance and are not based upon contribution to the Company’s business. None of the Named Executive Officers received perks that were a significant compensation element in 2009.

Base Salaries

Mr. Roche and the Company entered into an employment agreement in 2001 and since that time, the Company has annually reviewed Mr. Roche’s performance to determine whether to retain Mr. Roche’s services, to establish a salary for Mr. Roche and, if necessary, to revise other terms, such as the Profit Sharing Bonus formula. The Compensation Committee set Mr. Roche’s base salary in August 2008 at the time the Company entered into the renewal of Mr. Roche’s employment agreement through August 31, 2009. Mr. Roche’s annual base salary for 2009 was set at $343,700, an increase of 3.0 percent from the annual base salary of $333,700 for 2008. The Compensation Committee increased Mr. Roche’s base salary primarily to recognize an increase in the cost of living over the prior year. Mr. Roche determined salaries for the other Named Executive Officers in July 2008 and increased annual base salaries for fiscal year 2009.

The following table sets forth the annual base salaries for 2009 and 2008 for each of the other Named Executive Officers, as well as the percentage increase in 2009 as compared to 2008:


Named Executive Officer	2009 Annual Base Salary	2008 Annual Base Salary	% Increase 2009 Over 2008
Steven M. Caspers	$177,100	$171,100	3.5%
Jeffrey L. Carlson	$145,000	$133,600	8.5%
John Haugen	$120,000	$115,500	3.9%
Allen Larson	$127,300	$123,000	3.5%

Cash Bonus Programs

The cash bonus element of total compensation is available to the Named Executive Officers through a discretionary individual performance bonus, which for the Chief Executive Officer is referred to as the “Performance Bonus.” The Chief Executive Officer is also eligible for the Profit Sharing Bonus, a cash bonus based upon the return per acre to growers in the fiscal year.

In July 2009, the Compensation Committee and the Board of Directors conducted a performance review of Mr. Roche for fiscal 2009, in part to determine whether Mr. Roche would receive a Performance Bonus. Consistent with its process in prior years, this performance review solicited a rating from the Board of Directors of Mr. Roche’s performance in areas such as leadership, communication, budget and time management, as well as overall performance. This information was compiled anonymously and discussed among the Board members. The Board of Directors reviewed various aspects of Mr. Roche’s achievements and performance in 2009, prior year compensation information (including salary, Performance Bonus and Profit Sharing Bonus amounts) and the financial returns to the shareholders in determining whether to award a Performance Bonus and the amount of the Performance Bonus. In view of the variety of the factors and the amount of information considered as well as the complexity and subjectivity of these matters, the Compensation Committee did not find it practical to, and did not attempt to, make specific assessments of, quantify, rank or otherwise assign relative weights to the specific factors considered by the Board or by the Compensation Committee. Individual members of the Compensation Committee may have given different weight to different factors. Due to the limited availability of bonus dollars and Mr. Roche’s eligibility for a Profit Sharing Bonus, the available dollars were directed to the fulfillment of the Profit Sharing Bonus obligation. This determination does not reflect Mr. Roche’s performance but rather reflects the challenges during the past crop year and the reduced return to those shareholders affected by the challenges.

Mr. Roche determined the discretionary performance bonus amounts to be paid to the other Named Executive Officers and, consistent with past practice, he received feedback from various members of the Compensation Committee and the Board of Directors. In establishing the performance bonus awards for the other Named Executive Officers, Mr. Roche considered their individual contribution toward achieving the Company goals, and the level of return to shareholders measured through dollars paid per acre of sugarbeets grown. The Company and Mr. Roche continue to consider and attempt to develop a more formal program for executive officers (other than the Chief Executive Officer) for determining performance bonus awards. The following table shows the individual Performance Bonus earned by each of the Named Executive Officers for 2009 and also shows the performance bonus as a percentage of 2009 salary:


Named Executive Officer	2009 Performance Bonus			% Of 2009 Annual Base Salary
Steven M. Caspers		$	30,000	17	%
Jeffrey L. Carlson		$	10,000	7	%
John Haugen		$	15,000	12	%
Allen Larson		$	8,000	6	%

Mr. Roche is also eligible for the Profit Sharing Bonus. This consists of a cash bonus based upon the return per acre to growers, with a matrix determining the amount of Profit Sharing Bonus at various levels of return per acre. The matrix applicable to 2009 was approved as part of the renewal agreement entered into between the Company and the Chief Executive Officer on August 31, 2008 and it sets forth the Profit Sharing Bonus that would be earned by him at various levels of return per acre to the growers as follows:


Return Per Acre to Growers		Profit Sharing Bonus Amount
$825 - $900		$15,000
$901 - $915		$25,000
$976 - $1,050		$35,000
$1,105 - $1,125		$45,000
$1,126 - $1,200		$55,000
$1,201 and over		$65,000

For the purposes of the Profit Sharing Bonus, return per acre is the amount received by the shareholders/growers as a grower payment for sugarbeets and does not include patronage, retains or trucking payments. For 2009, the return per harvested acre to the growers was in excess of $1,200 per acre. Due to the unusual situation where approximately 30 percent of the 2008 crop planted acreage was unharvested; by mutual agreement between the Board of Directors and Mr. Roche a Profit Sharing bonus of $55,000 or 16 percent of his 2009 base annual salary was earned in fiscal year 2009. As part of Mr. Roche’s amended and restated employment agreement effective August 27, 2009 no Profit Sharing Bonus will be paid if 30 percent or more of the crop, based on planted acres, is lost or unharvested.

Elements of Post-Termination Compensation

In 2001, the Company entered into an employment agreement with Mr. Roche relating to his service as the President and Chief Executive Officer, which was amended by a renewal agreement dated August 27, 2009 for the term of September 1, 2009 to August 31, 2010. Under this employment agreement as amended by the renewal agreements, Mr. Roche will be paid his then-current base salary for a period of twelve months in the event of termination of Mr. Roche’s employment without cause, upon receipt of a general release and compliance with provisions of the renewal relating to confidentiality of Company information. Mr. Roche is not entitled to post-employment payments in the event of termination of Mr. Roche’s employment by Mr. Roche, by the Company for cause, or by reason of death or disability.

If Mr. Roche’s employment were terminated without cause on August 31, 2009, he would receive $343,700 in post-termination benefits, payable over a twelve month period.

Other than with respect to Mr. Roche, the Company does not have employment agreements or arrangements with any of the other Named Executive Officers. Other than with respect to the post-termination benefits to Mr. Roche under his employment agreement, the Company does not provide for severance or any other post-termination benefits to the Named Executive Officers, except through plans in which executive officers participate generally. See “Executive Compensation – Employment and Post-Employment Arrangements” in this Annual Report on Form 10-K for a discussion of the terms of the employment agreement with Mr. Roche as in effect for fiscal year 2009, as well as Mr. Roche’s subsequently amended and restated employment agreement effective August 27, 2009.

Impact of Regulatory Requirements

In determining the compensation policies, programs and actions to be taken by the Company with respect to executive compensation, the Compensation Committee considers the impact of accounting rules, securities rules and tax rules. The Compensation Committee also regularly reviews changes in these regulatory requirements to determine their applicability and impact on the Company.

Summary Compensation Table

The following table shows information concerning compensation earned for services in all capacities during the last three fiscal years for: (i) David H. Roche, who served as the Company’s Chief Executive Officer in fiscal year 2009; (ii) Steven M. Caspers, who served as the Company’s Chief Financial Officer in fiscal year 2009; and (iii) the three other most highly compensated executive officers of the Company in fiscal year 2009 whose total compensation was at least $100,000, less the amount representing the change in pension value and nonqualified deferred compensation earnings (together referred to as the “Named Executive Officers”).


Name and Position	Year	Salary (1)		Bonus (2)		Change in Pension Value and Nonqualified Deferred Compensation Earnings (3)		All Other Compensation (4)		Total
David H. Roche,	2009	$	343,509	$	55,000	$	97,277	$	22,133	$	517,919
President & CEO	2008	$	333,483	$	81,000	$	54,772	$	21,887	$	491,142
	2007	$	322,232	$	120,000	$	58,625	$	20,459	$	521,316
Steven M. Caspers,	2009	$	177,390	$	30,000	$	147,663	$	12,025	$	367,078
Executive VP & CFO	2008	$	171,470	$	45,000	$	72,623	$	9,156	$	298,249
	2007	$	165,701	$	65,000	$	49,408	$	19,476	$	299,585
Jeffrey L. Carlson,	2009	$	145,232	$	10,000	$	40,094	$	8,264	$	203,590
V.P. Operations	2008	$	133,740	$	27,000	$	24,477	$	7,957	$	193,174
	2007	$	126,113	$	36,000	$	15,021	$	6,488	$	183,622
John Haugen,	2009	$	125,209	$	15,000	$	60,842	$	20,013	$	221,064
VP Engineering	2008	$	120,309	$	27,000	$	39,141	$	8,023	$	194,473
	2007	$	115,808	$	36,000	$	25,231	$	23,190	$	200,229
Allen Larson,	2009	$	127,502	$	8,000	$	34,516	$	13,786	$	183,804
Controller	2008	$	123,265		0	$	29,676	$	14,487	$	167,428
	2007	$	118,811	$	31,000	$	18,469	$	13,090	$	181,370


	(1)	A portion of the salary of each of Messrs. Roche and Caspers was deferred into the Company’s Nonqualified Deferred Compensation Plan. Amounts shown are not reduced to reflect the deferral elections of any of the Named Elective Officers.
	(2)	This column reflects bonuses earned in the year indicated, including both a discretionary and profit sharing bonus, where applicable. See “Compensation Discussion and Analysis – Elements of In-Service Compensation – Cash Bonus Programs” for a description of bonuses that may be earned by the Named Executive Officers.
	(3)	Amounts in this column reflect the aggregate increase in actuarial present value of the benefits under the pension plan and supplemental pension plan as applicable. A portion of the change in pension benefits value is attributable to the additional year of service, any annual salary increase and bonus received. The 2009 change in Pension Value was also affected by a change in the discount rate of 6.5 percent in 2008 to 6.19 percent in 2009. An additional portion of the change is due to a change in the pension value measurement date from May 31^st to August 31^st. This required change resulted in 15 month period of pension value growth, rather than a 12 month period, that is reflected above.
	(4)	Amounts in this column include:


	Fiscal Year 2009
Name	Company Contributions to Defined Contribution Plans (a)		Insurance Premiums (b)		Other (c)
David H. Roche	$	9,477	$	12,656		—
Steven M. Caspers	$	8,896	$	3,124		—
Jeffrey L. Carlson	$	6,889	$	1,375		—
John Haugen	$	6,088	$	1,906	$	12,019
Allen Larson	$	5,100	$	1,342	$	7,344


	Fiscal Year 2008
Name	Company Contributions to Defined Contribution Plans (a)		Insurance Premiums (b)		Other (c)
David H. Roche	$	9,313	$	12,574		—
Steven M. Caspers	$	6,296	$	2,860		—
Jeffrey L. Carlson	$	6,790	$	1,167		—
John Haugen	$	6,252	$	1,771		—
Allen Larson	$	6,171	$	1,220	$	7,096


	Fiscal Year 2007
Name	Company Contributions to Defined Contribution Plans (a)		Insurance Premiums (b)		Other (c)
David H. Roche	$	8,963	$	11,495		—
Steven M. Caspers	$	7,198	$	2,742	$	9,537
Jeffrey L. Carlson	$	5,364	$	1,124		—
John Haugen	$	4,952	$	1,579	$	16,659
Allen Larson	$	5,061	$	1,192	$	6,837


	(a)	Reflects the Company’s contribution to the 401(k) plan for each Named Executive Officer.
	(b)	Includes premiums paid by the Company for life insurance coverage in excess of $50,000 and supplemental long-term disability coverage.
	(c)	Reflects amounts paid in cash to Named Executive Officers for vacation hours.

2009 Pension Benefits

The table below sets forth information on the pension benefits for the Named Executive Officers under each of the following:


	•	Minn-Dak Farmers Cooperative Pension Plan; and

	•	Minn-Dak Farmers Cooperative Supplemental Executive Retirement Plan.

Both the Pension Plan and the SERP are described in more detail in Item 11.Executive Compensation of this Annual Report on Form 10-K under the section entitled “Employment and Post-Employment Arrangements – Post-Employment Arrangements for Named Executive Officers.”

No pension benefits were paid to any of the Named Executive Officers in fiscal year 2009. The Company does not have a policy permitting granting of additional years of pension service. Further information on these pension plans, is included within this section of this Item of Form 10-K entitled “Compensation Discussion and Analysis.”

The amounts reported in the table below equal the present value of the accumulated benefit at August 31, 2009, for the Named Executive Officers under each plan based upon the assumptions described in footnote 2.


Name	Plan Name		Number of Years Credited Service (1)		Present Value of Accumulated Benefit (2)
David H. Roche		Pension Plan		9	$	238,539
		SERP		9	$	217,682
Steven M. Caspers		Pension Plan		35	$	737,568
		SERP		35	$	15,110
Jeffrey L. Carlson		Pension Plan		19	$	194,781
John Haugen		Pension Plan		34	$	371,733
Allen Larson		Pension Plan		28	$	242,347


	(1)	An employee earns a full year of credited service in the pension plan with 1,000 or more hours of service during the year.
	(2)	The accumulated benefit is based on service and earnings (base salary and bonus, as described above) considered by the plans for the period through August 31, 2009. It includes the value of contributions made by the Named Executive Officers throughout their careers. For the Pension Plan and SERP, the present value has been calculated assuming the Named Executive Officers will remain in service until age 65, the age at which retirement may occur without any reduction in benefits, and that the benefit is payable under the available forms of annuity consistent with the assumptions as described in Note 13 to the financial statements contained elsewhere in this Annual Report on Form 10-K. As described in such note, the interest assumption is 6.19 percent for fiscal year 2009. The post-retirement mortality assumption is based on the 1983 Group Annuity Mortality Table.

Nonqualified Deferred Compensation

The table below provides information on the non-qualified deferred compensation of the Named Executive Officers in fiscal year 2009 under the Company’s Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”). Under the terms of the Deferred Compensation Plan, participants may elect to defer receipt of their compensation and the Deferred Compensation Plan provides a means for deferrals of compensation. All of the Named Executive Officers, except Mr. Carlson, participate in the Deferred Compensation Plan.

The Deferred Compensation Plan is described in more detail in Item 11.Executive Compensation of this Annual Report on Form 10-K under the section entitled “Employment and Post-Employment Arrangements – Post-Employment Arrangements for Named Executive Officers.”


Name	Executive Contributions in Fiscal Year 2009 (1)		Aggregate Earning in Fiscal Year 2009 (2)		Distribution and Withdrawals in Fiscal Year 2009 (3)		Aggregate Balance at August 31, 2009 (4)
David H. Roche	$	65,500	($	17,803)		—	$	212,733
Steven M. Caspers		—	($	12,073)		—	$	39,755
John Haugen		—	($	2,176)		—	$	11,830
Allen Larson		—	($	2,334)		—	$	8,918


	(1)	The annual salary deferrals included in this column are reflected in the salary column of the Summary Compensation Table. The deferrals of the bonus awards reflected in this column are reported in the bonus column of the Summary Compensation Table.
	(2)	Amounts in this column include gains and losses on deferred compensation invested through the Deferred Compensation Plan. None of the earnings or losses in this column are included in the Summary Compensation Table.
	(3)	Amounts in this column reflect the Distributions and Withdrawals in Fiscal Year 2009.
	(3)	Amounts in this column reflect the aggregate balance at 2009 fiscal year end.

Employment and Post-Employment Arrangements

Agreement with David H. Roche

On March 1, 2001, the Company entered into an employment agreement with David H. Roche to serve as its President and Chief Executive Officer with an initial term through August 31, 2002. This initial term has been renewed for 12 month periods running from September 1 to August 31 of the following year. Under the terms of the employment agreement, Mr. Roche is eligible for an increase in this base salary based upon an annual performance review and eligible for a profit sharing bonus based upon return per acre. See “Compensation Discussion and Analysis – Elements of In-Service Compensation – Cash Bonus Programs” for the matrix associated with the return per acre bonus. The Board of Directors also has the discretion to grant Mr. Roche a performance bonus regardless of whether the return per acre bonus is awarded. Mr. Roche is also eligible for health, dental and vision insurance on the same terms as other non-union employees, as well as other group benefits such as term life insurance, accidental death and dismemberment insurance, long-term disability insurance. If Mr. Roche retires as Chief Executive Officer on or after his 62nd birthday, the Company will provide him with medical insurance until he reaches age 65. Mr. Roche will also be included in the Company’s non-qualified deferred compensation plan, the pension plan, supplemental executive retirement plan and 401(k) plan.

During any term of the employment agreement, the agreement may be terminated by either party upon written notice to the other at least ninety days prior to the end of the term, by the Company for “material breach” or “just cause” by Mr. Roche and upon Mr. Roche’s death or disability. For the purposes of the employment agreement, “material breach” and “just cause” mean willful misconduct in following legitimate directions of the Board of Directors; breach of loyalty to the cooperative; conviction of a felony; habitual drunkenness; excessive absenteeism not related to illness, sick leave or vacations, but only after notice from the Board of Directors followed by a repetition of such excessive absenteeism; dishonesty; or continuous conflicts of interest after notice in writing from the Board of Directors.

On August 28, 2007, the Company and Mr. Roche entered into a renewal agreement that operated as an amendment to the termination provisions of the 2001 employment agreement. Under the employment agreement as modified by the renewal agreement, Mr. Roche’s employment may be terminated by either party upon 90 days’ advance notice, by the Company for “material breach” or “just cause” (as those terms are defined in the renewal agreement) and upon Mr. Roche’s death or disability. Under the renewal agreement, if the Company terminates Mr. Roche’s employment without cause, the Company will pay Mr. Roche’s then-current base salary for a period of 12 months, conditioned upon receipt of a general release and compliance with provisions of the renewal agreement relating to confidentiality of Company information. This post-employment payment does not apply to termination of Mr. Roche’s employment by Mr. Roche, by the Company for cause, or by reason of death or disability. The renewal agreement also added a provision to the employment agreement by which Mr. Roche agrees to keep confidential certain Company information during the term of his employment with the Company and following termination of employment.

On August 28, 2008, the Company and Mr. Roche entered into a renewal agreement for the period September 1, 2008 to August 31, 2009. In the renewal agreement, Mr. Roche’s annual base salary was set at $343,700 for the one-year period ended August 31, 2009. The renewal agreement also operated as an amendment to the profit sharing bonus provisions of the Mr. Roche’s employment agreement and established a new matrix of return per acre to growers and corresponding profit sharing bonus to Mr. Roche applicable to fiscal year 2009 that is set forth in “Compensation Discussion and Analysis – Elements of In-Service Compensation – Cash Bonus Programs.” The calculation of returns per acre is the same as under the prior agreement, which is the amount received by the shareholders/growers as a grower payment for sugarbeets not including patronage, retains or trucking payments. The renewal agreement entered into on August 31, 2008 also states that the scale set forth above will be reviewed every two years.

For a description of the amended and restated employment agreement dated August 27, 2009 between the Company and Mr. Roche, see Item 9B.Other Information in this Annual Report on Form 10-K.

Post-Employment Arrangements for Named Executive Officers

The Company’s employment agreement with Mr. Roche does not provide for severance (unless terminated without cause) or any other post-termination payments for 2009, except through plans in which the Named Executive Officers participate generally. The Company provides post-employment compensation for the Named Executive Officers, David H. Roche, Steven M. Caspers,, Jeffrey L. Carlson, John Haugen, and Allen Larson through the following plans:


	•	Defined benefit retirement plan;
	•	Supplemental executive retirement plan;
	•	Non-qualified deferred compensation plan; and
	•	401(k) retirement savings plan.

The Company has established the Minn-Dak Farmers Cooperative Pension Plan. The Pension Plan is a noncontributory, defined benefit retirement plan, which is available to all of its eligible employees. For 2009, there were approximately 319 eligible current employees participating in the Pension Plan, including the Named Executive Officers. The benefits of the Pension Plan are funded by periodic contributions by the Company to a retirement trust that invests the contributions and earnings from such contributions to pay benefits to employees. The Pension Plan provides for the payment of a monthly retirement benefit determined under a formula based on years of service and each employee’s compensation level. Benefits are paid to the employees upon reaching early (age 55 or older) or normal (age 65) retirement age. Benefits are reduced according to a formula if a person elects early retirement before age 65. The plan also provides for the payment of certain disability and death benefits. See the table entitled “Pension Benefits” under Item 11.Executive Compensation of this Annual Report on Form 10-K for information on the benefits for 2009 to each of the Named Executive Officers under the Pension Plan.

The Board of Directors adopted a Supplemental Executive Retirement Plan on January 21, 1997. Subject to the discretion of the Board of Directors, the Company credits to the account of each executive eligible to participate in the Supplemental Plan amounts equal to the difference between the benefits actually payable to the executive under the provisions of the defined benefit retirement plan and the amounts which would have been payable under the defined benefit retirement plan if certain provisions of the Internal Revenue Code did not prohibit the payment of such benefits. Of the Named Executive Officers, Messrs. Roche and Caspers participated in the Supplemental Executive Retirement Plan in 2009. See the table entitled “Pension Benefits” under Item 11.Executive Compensation of this Annual Report on Form 10-K for information on the benefits for 2009 to Messrs. Roche and Caspers under the Supplemental Executive Retirement Plan. Unlike the Company’s Pension Plan, the Supplementary Executive Retirement Plan is an unfunded, unsecured obligation of the Company and is not qualified for tax purposes.

On August 1, 1978 the Company executed an adoption agreement establishing an unfunded Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”) for a select group of management or highly compensated employees. Under the terms of the Deferred Compensation Plan, certain employees may elect to defer receipt of their compensation and the Deferred Compensation Plan provides a means for deferrals of compensation into various investment options. The participants may change their election among these options no more than one time per quarter. The income earned does not constitute an “above-market interest rate” as defined by the Securities and Exchange Commission.

Under the Deferred Compensation Plan, participants may elect to defer any amount of their current salary and bonus as of the end of the prior year for the first payroll period beginning in the next year of the Deferred Compensation Plan. Income will be gained or lost on a daily basis as a result of the participants directed investment of his/her account. The participant is vested in those earnings immediately. Participants are eligible for payouts from the Deferred Compensation Plan at termination, death or disability. With respect to distributions, participants may only elect to receive payments in the form of cash over no more than ten annual installments. While the Company does not provide any matching contribution under the Company’s 401(k) retirement savings plan for compensation amounts deferred into the Deferred Compensation Plan, the Company does have the discretion to make nonelective or matching contributions to the Deferred Compensation Plan. Participants have no right, either directly or indirectly, to anticipate, sell, assign or otherwise transfer any benefit accrued under the Deferred Compensation Plan. In addition, no participant has any interest in any Company assets set aside as a source of funds to satisfy its benefit obligations under the Deferred Compensation Plan, including the establishment of any trust. Participants have the status of general unsecured creditors of the Company and the Deferred Compensation Plan constitutes an unsecured promise by the Company to make benefit payments in the future. See the table entitled “Nonqualified Deferred Compensation” under Item 11.Executive Compensation in this Annual Report on Form 10-K for information on the benefits for 2009 for each of the Named Executive Officers under the Deferred Compensation Plan.

The Company maintains a Section 401(k) retirement savings plan that permits employees, including the Named Executive Officers, to elect to set aside a portion of their gross compensation on a pre-tax basis in a trust to pay future retirement benefits. The Company provides a matching contribution of 100 percent of each employee’s first 4 percent of compensation that is set aside under the plan. The amounts set aside by each employee and the Company vests immediately. Benefits under the 401(k) plan begin to be paid to the employee: (i) upon the attainment of normal retirement at age 65, or if the employee chooses, any time after early retirement at or after age 55; (ii) the date the employee terminates employment with the Company; or (iii) a pre-retirement distribution equal to the value of the employees 401(k) account, provided the employee has attained age 59 1/2 and provided a written consent of the spouse (if married). Federal law limited employee pre-tax income contributions to $15,500 in calendar year 2007 for each participating employee age 49 and under, and $20,500 for each participating employee age 50 and older. For calendar year 2009, employee pre-tax income contributions were limited to $15,500 for each participating employee age 49 and under and $20,500 for each participating employee age 50 and older. See the table entitled “Summary Compensation Table” for information on the benefits for 2009 to each of the Named Executive Officers under the Company’s 401(k) plan.

Beginning in fiscal year 2008 and for fiscal year 2009, the Company also maintains a defined contribution pension plan for all newly-hired employees who are not part of a collective bargaining arrangement. None of the Named Executive Officers participate in this defined contribution pension plan.

DIRECTOR COMPENSATION

Directors of the Company received the following amounts for Board and committee service in fiscal year 2009: $280 per regular Board meeting, special Board meeting and committee meeting. In addition, from time to time the Company requests that directors represent the Company’s interests at various industry meetings and conferences, meetings with government or regulators, meetings with shareholders and growers and other meetings with stakeholders. For attendance at each meeting requested by the Company, each director receives $140 per day for service of less than five hours and $280 per day for service of more than five hours. The Chairman of the Board of Directors also receives an additional retainer of $500 per month to compensate for the extra duties associated with that position. Mr. Doug Etten served as the Chairman of the Board of Directors in fiscal year 2009.

The following table shows for fiscal year 2009, the cash and other compensation earned by each of the Company’s directors. Other than cash retainer and meeting fees earned in fiscal year 2009 as described above, none of the Company’s directors earned any other cash or other compensation.


Name of Director	Fees Earned or Paid in Cash (1)			Total
Dale Blume		$	9,685		$	9,685
Dennis Butenhoff		$	16,135		$	16,135
Brent Davison		$	13,615		$	13,615
Doug Etten		$	22,895		$	22,895
Patrick Freese (2)		$	5,725		$	5,725
Michael Hasbargen (2)		$	2,430		$	2,430
Dennis Klosterman		$	11,950		$	11,950
Russell Mauch		$	16,625		$	16,625
Charles Steiner		$	12,320		$	12,320
Alton Theede		$	4,660		$	4,660


(1)	Includes the amount of cash compensation earned or paid in fiscal year 2009 for Board and committee service, as well as for attendance at meetings requested by the Company.
(2)	Mr. Hasbargen served on the Board until his term ended on December 9, 2008. Mr. Freese was elected as his replacement on that date.

REPORT OF THE COMPENSATION COMMITTEE

The following report of the Compensation Committee shall not be deemed to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as amended, except to the extent that the Company specifically incorporates it by reference in such filing.

The Compensation Committee has reviewed and discussed the section of this Annual Report on Form 10-K for the year ended August 31, 2009 entitled Compensation Discussion and Analysis (the “CD&A”) with management. In reliance on this review and discussion, the Compensation Committee recommended to the Board of Directors that the CD&A be included in this Annual Report on Form 10-K for the year ended August 31, 2009 for filing with the Securities and Exchange Commission.

By the Compensation Committee of the Board of Directors

Charles Steiner (Chair)
Dale Blume
Dennis Klosterman
Brent Davison
Alton Theede


ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Under state law and the Company’s Bylaws, each member of the cooperative is entitled to one vote, regardless of the number of shares the member holds. The Common Stock of the Company is voting stock and each member of the Company holds one share of Common Stock. The Preferred Stock of the Company is non-voting stock. The Company’s stock can only be held by individuals who are sugarbeet growers. To the Company’s knowledge, as of November 24, 2009, no person owned beneficially more than 5 percent of the Company’s outstanding shares and none of the principal officers listed above owned any such shares. As members of the cooperative, each director owns one share of Common Stock and is entitled to one vote. As a group, the directors own 4.85 percent of the outstanding Preferred Stock.


Name	Position with Company	No. of Shares	% of Shares

Dale Blume	Director	213	less than 1%

Dennis Butenhoff	Director	185	less than 1%

Brent Davison	Director	1,000	1.4%

Douglas Etten	Director	430	less than 1%

Patrick J Freese	Director	93	less than 1%

Dennis Klosterman	Director	400	less than 1%

Russell Mauch	Director	474	less than 1%

Charles Steiner	Director	380.5	less than 1%

Alton Theede	Director	325	less than 1%

All Directors		3,500.5	4.85%


ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Each of the Company’s directors is also a sugarbeet grower or a shareholder member or representative of a shareholder member. By virtue of their status as such members of the Company, each director or the member he represents sells sugarbeets to the Company and receives payments for those sugarbeets; also, each director could potentially receive grower trucking payments. Such payments for sugarbeets and trucking payments, either separately or together, can often exceed $120,000. However, such payments that are received by the directors, or the entities they represent, are on the same basis as payments received by other members of the Company for the delivery and payment of their sugarbeets. Except for the sugarbeet sales and receipt of grower trucking payments described in the preceding sentences, since the beginning of fiscal year 2009, the Company has not entered into any transaction and there are no currently proposed transactions, in which the Company was or is to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest.

The charter of the Audit Committee provides that the Audit Committee is responsible for reviewing and approving the terms and conditions of all of transactions the Company enters into in which an officer, director or 5 percent or greater shareholder or any affiliate of these persons has a direct or indirect material interest. The Standards of Business Conduct, which is applicable to all of the Company’s employees and directors, also prohibits the Company’s employees, including executive officers, and the Company’s directors from engaging in conflict of interest transactions. Requests for waivers by the Company’s executive officers and directors from the provisions of, or requests for consents by the Company’s executive officers and directors under, the Standards of Business Conduct must be made to the Audit Committee.

In addition, the Company has a formal related person transaction approval policy, which sets forth the Company’s policies and procedures for the review, approval or ratification of any transaction required to be reported in its filings with the Securities and Exchange Commission. The Company’s policy applies to any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships in which the Company is a participant and in which a related person has a direct or indirect interest. Through the policy, the Audit Committee has also identified and pre-approved certain transactions with related persons, including:


	•	employment of executive officers, director compensation to be reported in the Company’s Annual Report on Form 10-K,
	•	payment of ordinary expenses and business reimbursements;
	•	transactions with related companies in which the dollar amount does not exceed $60,000 or 2 percent of the other company’s total revenues;
	•	charitable contributions in which the dollar amount does not exceed $25,000 or 2 percent of the charitable organization’s receipts;
	•	payments made under our articles of incorporation, bylaws, insurance policies or other agreements relating to indemnification;
	•	transactions in which our shareholders receive proportional benefits, specifically including payments to shareholders for sugarbeets of a similar quality and quantity and grower trucking payments to shareholders based upon generally applicable formulas; and
	•	transactions that involve competitive bid, banking transactions and transactions where the terms of which are regulated by law or governmental authority.

The Audit Committee must approve any related person transaction subject to this policy before commencement of the related party transaction. If pre-approval is not feasible, the Audit Committee may ratify, amend or terminate the related person transaction. The Audit Committee will analyze the following factors, in addition to any other factors the Audit Committee deems appropriate, in determining whether to approve a related party transaction:


	•	whether the terms are fair to the Company;
	•	whether the terms of the related party transaction are no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances;
	•	whether the related party transaction is material to the Company;
	•	the role the related party has played in arranging the transaction;
	•	the structure of the related party transaction;
	•	the interests of all related parties in the transaction;
	•	the extent of the related party’s interest in the transaction; and
	•	whether the transaction would require a waiver of the Standards of Business Conduct.

The Audit Committee may, in its sole discretion, approve or deny any related person transaction. Approval of a related person transaction may be conditioned upon the Company and the related person taking such precautionary actions, as the Audit Committees deems appropriate.

Independence of Directors and Committee Members

The Board of Directors undertook a review of director independence in November 2009 as to all nine directors then serving. As part of that process, the Board reviewed all transactions and relationships between each director (or any member of his immediate family) and the Company, its executive officers and its auditors, and other matters bearing on the independence of directors. Although none of the Company’s securities are listed on any stock exchange, the Board of Directors is required to select and apply the independence standards of a stock exchange. For the purposes of determining the independence of the Company’s directors and committee members, the Board of Directors selected the NASDAQ Marketplace Rules. As a result of its review, directors Dale N. Blume, Dennis Butenhoff, Brent Davison, Douglas Etten, Patrick Freese, Dennis Klosterman, Russell Mauch, Charles Steiner and Alton Theede meet the criteria for “independence” under the NASDAQ Marketplace Rules. All members of the Audit Committee meet the “independence” requirements of Section 10A-3.

The Company has also established separate criteria for eligibility to serve as a member of the Company’s Compensation Committee and Audit Committee.

The charter of the Compensation Committee requires that this committee consist of no fewer than three Board members and that no director shall be a member if the director currently is, or at any time during the past two fiscal years has been employed by the Company or in the judgment of the Executive Committee, has a relationship that would interfere with the exercise of independent judgment in carrying out responsibilities as a director or member of the Compensation Committee. Each member of our Compensation Committee meets these requirements.

The charter of the Audit Committee requires that the Audit Committee be comprised of at least three members, all of who must be independent from management and the Company. The members of the Audit Committee should also include directors with financial or accounting backgrounds if available. The Board of Directors has reviewed the education, experience and other qualifications of each of the members of its Audit Committee. After review, the Board of Directors has determined that none of the members of the Audit Committee meet the Securities and Exchange Commission definition of an “audit committee financial expert.” However, the Company believes that, taken as a whole, the members of Audit Committee have sufficient education, experience and qualifications to carry out their duties.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES


1.	Audit Fees - paid to the Company’s principal accountant for the audit of annual financial statements and review of financial statements included in Forms 10-Q during the fiscal year ended August 31, 2009 totaled $96,550 (including a $16,000 progress billing for the 2009 audit) and $78,750 (including a $3,000 progress billing for the 2008 audit) for the fiscal year ended August 31, 2008.

2.	Audit Related Fees – none

3.	Tax Fees – paid to the Company’s principal accountant for professional services rendered for tax compliance, tax advice, and tax planning totaled $20,700 for fiscal year ended August 31, 2009 and $19,380 for the fiscal year ended August 31, 2008.


4.	All Other Fees (Employee Benefit and USDA Audits) – paid to the Company’s principal accountant for services other than detailed in Items 1 thru 3 above total $19,500 for the fiscal year ended August 31, 2009 and $18,775 for the fiscal year ended August 31, 2008.

5.	It is part of the audit committee’s duties to appoint, compensate, and oversee the engagement of, retention, or replacement of, the independent auditors who audit the financial statements of the Company and its subsidiaries. The audit committee approves all audit services to be performed by the independent auditor. The committee ensures that the independent auditor is not engaged to perform any non-audit services that are considered “prohibited activities” by the Sarbanes-Oxley law.

	The audit committee approves 100 percent of the services described in items 1 thru 4 above.

6.	The percentage of hours expended on the principal accountant’s engagement to audit the Company’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees is zero.

PART IV.


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


Documents filed as part of this report:

a.	Consolidated Financial Statements
	-	Report of Independent Registered Public Accounting Firm
	-	Consolidated Statements of Operations for the Years Ended August 31, 2009, 2008 and 2007
	-	Consolidated Balance Sheet as of August 31, 2009, 2008 and 2007
	-	Consolidated Statements of Changes in Members’ Investments for the years ended August 31, 2009, 2008 and 2007
	-	Notes to the Consolidated Financial Statements

b.	Financial Statement Schedules – None

c.	The exhibits to this Annual Report on Form 10-K are listed in the Exhibit Index, Item 15c.


Item 15a.	Report of Independent Registered Public Accounting Firm

The Audit Committee
Minn-Dak Farmers Cooperative
Wahpeton, North Dakota

We have audited the accompanying consolidated balance sheets ofMinn-Dak Farmers Cooperative (a North Dakota cooperative association) as of August 31, 2009, 2008, and 2007, and the related consolidated statements of operations, change in members’ investments and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we do not express such an opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion the consolidated financial statements referred to above present fairly, in all material respects, the financial position ofMinn-Dak Farmers Cooperative as of August 31, 2009, 2008, and 2007, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/S/S Eide Bailly LLP

Fargo, North Dakota
November 24, 2009

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED BALANCE SHEETS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007


	2009		2008		2007
ASSETS

CURRENT ASSETS
Cash	$	93,949	$	159,175	$	254,906

Receivables
Trade accounts		14,299,830		16,376,068		18,620,647
Growers		10,196,312		7,313,090		4,907,384
Income tax		—		234,461		—
Other		2,551		2,551		90,227
		24,498,693		23,926,170		23,618,258

Advances to affiliates - Midwest Agri-Commodities Co. and United Sugars Corporation		1,105,797		1,492,451		—

Inventories
Refined sugar, pulp and molasses to be sold on a pooled basis		27,046,374		28,452,755		32,843,130
Nonmember refined sugar		1,451,972		1,357,893		28,793
Yeast		200,317		167,799		167,808
Materials and supplies		11,296,034		10,159,944		9,046,232
		39,994,697		40,138,391		42,085,963

Deferred charges		1,324,353		1,436,316		2,038,296

Prepaid expenses and other assets		3,109,313		2,149,816		1,502,146

Current deferred income tax asset		25,600		145,000		688,000

Total current assets		70,152,402		69,447,319		70,187,569


PROPERTY, PLANT AND EQUIPMENT
Land and land improvements		27,130,273		26,476,273		25,183,905
Buildings		37,757,659		37,592,109		37,481,480
Factory/Ag equipment		147,419,262		141,263,455		137,993,774
Other equipment		4,675,425		3,766,400		4,096,525
Capitalized Leases		2,960,658		746,210		—
Construction in progress		4,690,526		4,500,912		1,382,936
		224,633,803		214,345,359		206,138,620
Less accumulated depreciation		127,336,389		119,566,871		111,843,105
		97,297,414		94,778,488		94,295,515

OTHER ASSETS

Investment in other cooperatives and unconsolidated marketing cooperatives		11,343,602		11,523,024		11,500,298
Long-term deferred income taxes		—		—		150,000
Other		1,090,477		1,314,071		1,532,847
		12,434,079		12,837,095		13,183,145

	$	179,883,895	$	177,062,902	$	177,666,229

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED BALANCE SHEETS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007


	2009			2008			2007
LIABILITIES AND MEMBERS’ INVESTMENT

CURRENT LIABILITIES
Short-term notes payable	$	18,977,978		$	24,440,000		$	19,000,000

Current portion of long-term debt and capital leases		2,905,841			2,594,188			2,591,849
Current portion of bonds payable		2,120,000			2,010,000			1,915,000
		5,025,841			4,604,188			4,506,849
Accounts payable
Trade		11,566,445			9,511,224			4,840,632
Checks Outstanding		545,766			—			—
Growers		17,704,288			17,429,879			23,289,239
Income tax		—			—			122,271
		29,816,499			26,941,103			28,252,142
Payable to affiliates - Midwest Agri-Commodities Co. and United Sugars Corporation		—			—			842,476

Accrued liabilities		2,945,383			3,299,010			4,320,742

Total current liabilities		56,765,701			59,284,301			56,922,209

LONG-TERM DEBT AND CAPITAL LEASES, NET OF CURRENT PORTION		22,148,959			13,778,143			16,923,816

BONDS PAYABLE		11,370,000			13,490,000			15,500,000

LONG-TERM DEFERRED INCOME TAX LIABILITY		354,400			443,000			—

LONG-TERM UNRECOGNIZED TAX BENEFITS LIABILITY		274,075			256,075			—

LONG-TERM PENSION LIABILITY		12,827,360			5,795,189			4,947,297

COMMITMENTS AND CONTINGENCIES (NOTE 10)

Total liabilities		103,740,495			93,046,708			94,293,322

MEMBERS’ INVESTMENT
Preferred stock
Class A - 100,000 shares authorized, $105 par value; 72,200 shares issued and outstanding		7,581,000			7,581,000			7,581,000
Class B - 100,000 shares authorized $75 par value; 72,200 shares issued and outstanding		5,415,000			5,415,000			5,415,000
Class C - 100,000 shares authorized, $76 par value; 72,200 shares issued and outstanding		5,487,200			5,487,200			5,487,200
		18,483,200			18,483,200			18,483,200

Common stock, 600 shares authorized, $250 par value; 474 shares issued and outstanding on 8-31-09,
483 shares outstanding on 8-31-08 and
484 shares outstanding on 8-31-07		118,500			120,750			121,000
Paid in capital in excess of par		32,094,407			32,094,407			32,094,407
Nonqualified allocated patronage		28,298,718			28,298,508			27,598,667
Accumulated other comprehensive loss		(12,811,235	)		(4,890,516	)		(2,368,458	)
Retained earnings		9,959,810			9,909,845			7,444,091
		76,143,400			84,016,194			83,372,907

	$	179,883,895		$	177,062,902		$	177,666,229

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007


	2009			2008		2007

REVENUE
From sales of sugar, sugar co-products, and yeast, net of discounts	$	225,034,020		$	243,573,467	$	278,571,049

EXPENSES
Production costs of sugar, co-products, and yeast sold		79,586,897			73,592,737		69,697,547
Sales and distribution costs		43,308,982			48,667,319		50,494,042
General and administrative		7,065,675			7,275,736		7,104,136
Interest		2,017,946			3,230,496		4,296,972
		131,979,500			132,766,288		131,592,697

OTHER INCOME		2,493,245			1,299,870		1,436,693

NET PROCEEDS RESULTING FROM MEMBER AND NON-MEMBER BUSINESS BEFORE INCOME TAXES		95,547,765			112,107,049		148,415,045

INCOME TAXES EXPENSE (BENEFIT)		(505,145	)		1,243,679		—

NET PROCEEDS RESULTING FROM MEMBER AND NON-MEMBER BUSINESS	$	96,052,910		$	110,863,370	$	148,415,045

DISTRIBUTION OF NET PROCEEDS
Credited to members’ investment
Components of net income
Income from non-member business	$	334,861		$	2,721,265	$	267,785
Patronage income		3,727,840			5,117,244		7,560,504

Net income credited to member’s investment		4,062,701			7,838,509		7,828,289

Payments to members for sugarbeets, net of unit retention capital		91,990,209			103,024,861		140,586,756

NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS	$	96,052,910		$	110,863,370	$	148,415,045

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS’ INVESTMENT

YEARS ENDED AUGUST 31, 2009, 2008, AND 2007


	Preferred Stock		Common Stock			Paid in Capital In Excess of Par Value		Non-Qualified Allocated Patronage			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total			Comprehensive Income/ (Loss)

BALANCE, AUGUST 31, 2006	$	18,483,200	$	120,000		$	32,094,407	$	26,077,023		$	—		$	7,176,306		$	83,950,936
Stock - Sales - common (10 shares)				2,500														2,500
Repurchases - common (6 shares)				(1,500	)													(1,500	)
Revolvement of unit retention capital																		—
Revolvement of prior years’ allocated patronage									(6,038,860	)								(6,038,860	)
Net income for the year ended August 31, 2007									7,560,504						267,785			7,828,289		$	7,828,289
Pension liability adjustment												(2,368,458	)					(2,368,458	)		(2,368,458	)

Comprehensive Income (Loss)																				$	5,459,831

BALANCE, AUGUST 31, 2007		18,483,200		121,000			32,094,407		27,598,667			(2,368,458	)		7,444,091			83,372,907
Stock - Sales - common (8 shares)				2,000														2,000
Repurchases - common (9 shares)				(2,250	)													(2,250	)
Revolvement of unit retention capital																		—
Revolvement of prior years’ allocated patronage									(4,417,403	)								(4,417,403	)
Adoption of FIN 48															(255,511	)		(255,511	)
Net income for the year ended August 31, 2008									5,117,244						2,721,265			7,838,509		$	7,838,509
Pension liability adjustment												(2,522,058	)					(2,522,058	)		(2,522,058	)

Comprehensive Income (Loss)																				$	5,316,451

BALANCE, AUGUST 31, 2008		18,483,200		120,750			32,094,407		28,298,508			(4,890,516	)		9,909,845			84,016,194
Stock - Sales - common (6 shares)				1,500														1,500
Repurchases - common (15 shares)				(3,750	)													(3,750	)
Revolvement of patronage-Estate									(101,701	)								(101,701	)
Revolvement of prior years’ allocated patronage									(3,625,929	)								(3,625,929	)
Effects of FAS 158 Adjustments															(284,896	)		(284,896	)
Net income for the year ended August 31, 2009									3,727,840						334,861			4,062,701		$	4,062,701
Pension liability adjustment												(7,920,719	)					(7,920,719	)		(7,920,719	)

Comprehensive Income (Loss)																				$	(3,858,018	)

BALANCE, AUGUST 31, 2009	$	18,483,200	$	118,500		$	32,094,407	$	28,298,718		$	(12,811,235	)	$	9,959,810		$	76,143,400

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007


	2009			2008			2007
OPERATING ACTIVITIES
Income allocated to members’ investment	$	4,062,701		$	7,838,509		$	7,828,289
Accumulated other comprehensive loss		(7,920,718	)		(2,522,058	)		(2,368,458	)
Add (deduct) noncash items
Depreciation		8,440,002			8,115,079			7,936,825
Amortization		359,548			436,512			327,198
(Gain) Loss on disposal of equipment		(108,602	)		112,747			3,393
(Gain)Loss allocated from unconsolidated marketing subsidiaries		(115,543	)		43,419			57,149
Noncash portion of patronage capital credits		(974,925	)		(644,842	)		(714,194	)
Deferred income taxes		30,800			1,136,000			(2,071,000	)
(Increase)/Decrease in cash surrender of retired executive life insurance		49,555			20,224			(55,048	)
Changes in assets and liabilities:
Accounts receivable and advances		(420,329	)		(2,408,377	)		(3,591,066	)
Inventory and prepaid expenses		(815,803	)		1,299,903			(13,019,660	)
Deferred charges and other		114,473			629,083			4,204
Accounts payable, accrued liabilities, and other liabilities		9,665,509			(662,766	)		15,071,712

NET CASH FROM OPERATING ACTIVITIES		12,366,668			13,393,433			9,409,344

INVESTING ACTIVITIES
Proceeds from disposition of property, plant and equipment		332,455			11,170			30,404
Capital expenditures		(8,817,485	)		(7,975,759	)		(4,865,834	)
Capital adjustment of unconsolidated marketing subsidiary		871,094			325,357			(61,072	)
Proceeds from patronage refunds and equity revolvements		418,184			272,726			240,461

NET CASH USED FOR INVESTING ACTIVITIES		(7,195,752	)		(7,366,506	)		(4,656,041	)

FINANCING ACTIVITIES
Sale (repurchase) of common stock, net		(2,250	)		(250	)		1,000
Net proceeds (repayments) of short-term debt		(5,462,022	)		5,440,000			4,555,000
Checks Outstanding		545,766			—			—
Proceeds from long term debt		10,000,000			—			—
Payment of financing fees		(207,405	)		(284,410	)		(260,570	)
Payment of long-term debt/lease		(5,692,828	)		(5,239,138	)		(5,076,890	)
Payment of unit retains and allocated patronage		(4,417,403	)		(6,038,860	)		(3,940,530	)

NET CASH USED FOR FINANCING ACTIVITIES		(5,236,142	)		(6,122,658	)		(4,721,990	)

NET CHANGE IN CASH		(65,226	)		(95,731	)		31,313

CASH, BEGINNING OF YEAR		159,175			254,906			223,593

CASH, END OF YEAR	$	93,949		$	159,175		$	254,906

MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASHFLOWS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007


	2009			2008		2007

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for
Interest	$	2,067,437		$	3,438,931	$	4,848,602

Income tax net payments (refunds)	$	(790,406	)	$	1,930,729	$	160,050

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment purchased by issuance of capital lease	$	2,365,296		$	746,210	$	—

See Notes to Consolidated Financial Statements.

NOTE 1 - PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Principal Business Activity

Minn-Dak Farmers Cooperative (the Company) is a North Dakota cooperative association owned by its member-growers for the purpose of processing sugarbeets and marketing sugar and co-products. Minn-Dak Yeast Company, Inc. (Minn-Dak Yeast) is a North Dakota corporation engaged primarily in the production and marketing of bakers yeast. Link Acquisition Company LLC (Link) was formed to advance possible strategic business activities by the Company. Approximately 94% of net sales is related to sugarbeet operations and 6% is related to yeast operations.

The majority of the net proceeds from the Company are from member patronage business.

Principles of Consolidation

The financial statements include the accounts of the Company and its wholly owned subsidiaries, Minn-Dak Yeast and Link. Significant intercompany activity has been eliminated from the Balance Sheet, Statement of Operations, Statement of Members’ Investment and Statements of Cash Flows.

Receivable and Credit Policy

Trade receivables are uncollateralized customer obligations due under normal trade terms requiring payment within 15 to 90 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Customer account balances with invoices dated over 90 days old are considered delinquent. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices. The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. Management reviews all trade receivable balances that exceed 90 days from the invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. Additionally, management estimates an allowance to apply to the aggregate trade receivables to create a general allowance covering those amounts. The allowance is based on an evaluation of the receivables account with particular attention paid to the largest customer balances and the risk profile of the entire portfolio.

Credit Risk

The Company and Minn-Dak Yeast grant credit to food processors located throughout the United States. In addition, the Company grants credit to member-growers located in North Dakota and Minnesota, for sugarbeet seed, technology fees, and co-products.

Inventories

Inventories of refined sugar, thick juice, pulp and molasses to be sold on a pooled basis are valued at net realizable value, while third-party purchased refined sugar to be sold on a pooled basis is valued at the lower of cost or market. Inventory of yeast is valued at the lower of average cost or market. Materials and supplies are valued at most recent purchase price that approximates cost. During the periods when sugarbeets are purchased from growers, but not yet converted into bin sugar or thick juice, that inventory is valued at grower payment cost. In valuing inventories at net realizable value, the Company, in effect sells the remaining inventory to the subsequent periods sugar and co-product pool.

Reclassifications

Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements.

Prepaid Expense and Other Assets

Sugar allocation and prepaid insurance costs related to the subsequent fiscal year are recorded as assets and subsequently expensed to the following fiscal year.

Deferred Charges

Agricultural development and labor procurement costs incurred in connection with the sugarbeet crop to be harvested in September and October of the following fiscal year, are deferred and subsequently charged to expense for the fiscal year applicable to the ensuing processing period.

Property, Plant, Equipment and Depreciation

Property, plant and equipment are stated at cost. Additions, renewals and betterments are capitalized, whereas expenditures for maintenance and repairs are charged to expense. The cost and related accumulated depreciation of assets retired or sold are removed from the appropriate asset and depreciation accounts and the resulting gain or loss is reflected in income.

It is the policy of the Company to provide depreciation based on methods designed to amortize the cost of the properties over their estimated useful lives. Property, plant and equipment are depreciated for financial reporting purposes, principally using declining balance methods, with estimated useful lives ranging from 3 to 40 years. Statutory lives and methods are used for income tax reporting purposes. Capital lease equipment is depreciated in accordance with SFAS No. 13.

Capitalized assets include indirect costs such as fringe benefits, interest and engineering when appropriate. The indirect costs capitalized for the years ended August 31, 2009 and 2008 and 2007 were $205,240, $133,775 and $158,642, respectively. There was no construction-period interest capitalized for the years ended August 31, 2009, 2008 and 2007.

Goodwill and Other Intangible Assets

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, the Company does not amortize goodwill. The Company has annually evaluated goodwill and other intangible assets for impairment and concluded that no impairment charge was necessary.

Investments in Other Cooperatives and Unconsolidated Marketing Subsidiaries

Equity Value Investments in Unconsolidated Marketing Investments - The investments in United Sugars Corporation and Midwest Agri-Commodities Company are accounted for using the equity method, wherein the investment is recorded at the amount of the underlying equity in the net assets of the investments and adjusted to recognize the Company’s share of the undistributed earnings or losses. Transactions with these companies are considered to be related party transactions.

Investments in Other Cooperatives - The investments in stocks and capital credits of other cooperatives are stated at cost, plus the Company’s share of allocated patronage and capital credits.

Income Taxes

A consolidated federal income tax return is filed for the Company and its subsidiaries. Deferred income taxes are provided for in the timing of certain temporary deductions/increases for financial and income tax reporting purposes.

Revenue Recognition

The Company generally recognizes revenue at the point of customer receipt of product.

Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Self-Funded Insurance

The Contract year for the Company’s employee health plan starts January 1 and ends December 31. In Fiscal year 2008, the Company operated with a fully insured employee health plan through December 2007. The Company switched to a self-funded employee health plan January 1, 2008. Beginning January 1, 2008 the Company contracted with a North Dakota insurance carrier to insure individual health claims exceeding $40,000 and aggregate annual health claims in excess of 120% of expected claims for the plan year. The Company estimates its exposure for claims incurred but not paid at the end of each reporting period and uses historical information supplied by the Company’s insurance carrier to estimate its liability for these claims. This liability is estimated, based on employee enrollment and factors that are established at each contract renewal. Actual claims experience may differ from Company estimates.

Uninsured Cash Balance

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to certain limits. At times during the year, the Company’s balances exceeded these limits. The Company does not consider this a material risk.

Impairment and Disposal of Long-Lived Assets

The Company accounts for impairment or disposal of long-lived assets in accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Long-lived assets to be disposed of by sale are reported at the lower of the carrying amount or fair value less costs to sell, and will cease to be depreciated. SFAS No. 144 also requires long-lived assets to be disposed of, other than by sale, to be considered as held and used until disposed of, requiring the depreciable life to be adjusted as an accounting change.

Shipping and Handling Costs

Shipping and handling costs are included in cost of product sold upon receipt of the Company’s product by its customers as well as the net realizable value calculations of the inventory through allocations from the Company’s marketing Subsidiary.

Advertising

The Company’s advertising costs are expensed as incurred. Advertising expense for the years ended August 31, 2009, 2008 and 2007 totaled $19,955, $21,568 and $20,922, respectively.

Pension Liability

In accordance with FAS 158, the Company records the liability for its defined benefit retirement plan as the benefit obligation in the financial statements. The Company has determined that the future tax benefits associated with FAS 158 are patronage sourced and, therefore, will flow directly to the shareholder/growers. As a result, no future tax benefit to the Company is recorded.

Fair Value

In September 2006, the FASB issued FAS 157, “Accounting for Fair Value Measurements.” FAS 157 defines fair value, and establishes a framework for measuring fair value in GAAP, and expands disclosure about fair value measurements. In February 2008, the FASB issued FSP FAS 157-2, “Effective Date of FASB Statement 157” to defer the effective date for nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a non-recurring basis until fiscal years beginning after November 15, 2008. In February 2008, the FASB also issued FSP FAS 157-1, “Application of FASB Statement 157 to FASB Statement 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,” which excludes FAS 13, “Accounting for Leases” (“FAS 13”), as well as other accounting pronouncements that address fair value measurements on lease classification or measurement under FAS 13. The provisions of FAS 157 for financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) were effective for the Company for the fiscal year beginning September 1, 2008. The Company accordingly adopted the provisions of FAS 157 for these items on September 1, 2008, which did not have a material impact on its consolidated financial statements.

The Company elected to apply the deferral under FSP FAS 157-2, and accordingly, will not apply FAS 157 to its non-financial assets and liabilities that are recognized or disclosed at fair value, until fiscal year 2010. We do not expect that the application of the deferred portion of FAS No. 157 will have a material impact on the Company’s consolidated financial statements.

Fair value is defined under SFAS 157 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs. SFAS No. 157 established a fair value hierarchy that prioritizes the assumptions, or “inputs,” used in applying valuation techniques. The three levels of inputs within fair value hierarchy include:


	o	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

	o	Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

	o	Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Recently Issued Accounting Pronouncements

FAS 141 (R) Business Combinations – This statement defines the acquirer, establishes the acquisition date, and defines how the acquisition method is applied to financial statements. It also recognizes and measures goodwill or a gain from a bargain purchase. On April 1, 2009 the FASB also released FSP No. FAS 141(R)-1,Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address some of the application issues under SFAS No. 141(R) Business Combinations. FSP No. FAS 141(R)-1 deals with the initial recognition and measurement of an asset acquired or a liability assumed in a business combination that arises from a contingency provided the asset or liability’s fair value on the date of acquisition can be determined. When the fair value can’t be determined, the FSP requires using the guidance under SFAS No. 5,Accounting for Contingencies and FASB Interpretation (FIN) No. 14,Reasonable Estimation of the Amount of a Loss. The application of these statements will only apply and be effective should the Company acquire the business assets of another entity after August 31, 2009.

The FASB has issued statement No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. This statement replaces Statement No. 162 and establishes theFASB Accounting Standards Codification^TM. (Codification) as the source of authoritative preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC Registrants. All guidance constrained in the Codification carries and equal level of authority. This statement becomes effective for the Company for the first quarter of 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 Accounting Standards Update (ASU) No. 2009-05,Fair Value Measurements and Disclosures (Topic 820). This ASU provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of liabilities. This ASU provides clarification: of the measurement techniques required in circumstances in which a quoted price in an active market for the identical liability is not available; of the requirements related to restrictions that prevent a transfer of a liability; and of the requirements for certain Level 1 fair value measurement situations. This ASU becomes effective for the Company for the first quarter of 2010. The Company does not expect that the adoption of this ASU will have a material effect on the Company’s financial statements.

Change in Accounting Policy

FAS 158 Employers Accounting for Defined Benefit Pension Plans and other Post-retirement Plans – This statement requires an employer that is a business entity and sponsors one or more single employer defined benefit plans to recognize the funded status of a benefit plan, measured as the difference between plan assets at fair value and the projected benefit obligation in the financial statement.

In September of 2006, the FASB issued FAS No. 158 “Employers Accounting for Defined Benefit Pension Plans and Other Post-retirement plans”. This pronouncement was adopted by the Company with the notation that the Company would continue to measure its plan’s liabilities as of May 31. However, with full adoption of FAS 158, the new measurement date for the plan’s liabilities is August 31, 2009, which resulted in a one-time addition to liability and reduction of retained earnings of $284,896.

Concentration and Sources of Labor

The Company’s total factory campaign and full time workforce consists of 463 employees, of which 57% is covered by a collective bargaining agreement. The agreement expires on May 31, 2011.

Risks and Uncertainties

Interest costs - The Company is at risk for interest rate changes in both seasonal and long-term debt. The Company has long-term variable and fixed rates on a substantial portion of its long-term debt. The variable rate has limited variability on its rate; therefore the Company does not consider it’s interest rate risk for long-term debt to be material. Short-term debt risk is not expected to have a material impact on the Company’s annual return to its growers.

Accumulated Other Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income (Loss), establishes rules for reporting comprehensive income and loss and its components. Accumulated other comprehensive loss consists of the SFAS No. 158 adjustment and is presented in the Statement of Member’s Investment. See Note 12.

NOTE 2 - INTANGIBLE ASSETS

Intangible assets derived from the purchase of the non-controlling interest in Minn-Dak Yeast include $110,152 of Goodwill, which is not being amortized; $514,000 for Customer Relations and $62,000 for a Non-Compete Agreement, which are being amortized on a straight-line basis over 5 years. The amortization of these intangible assets for the years ended August 31, 2009, 2008 and 2007 was $143,127, $143,127 and $38,400, respectively. The cumulative amortization of these intangible assets for the years ended August 31, 2009, 2008 and 2007 is $337,455, $194,327 and $51,200, respectively.

NOTE 3 - INVESTMENTS

The investment in stock of other cooperatives and unconsolidated marketing subsidiaries consists of the following:


	2009		2008		2007

Dakota Valley Electric Cooperative	$	5,978,829	$	5,632,704	$	5,409,916
CoBank		4,964,489		4,801,609		4,676,881
United Sugars Corporation		216,396		971,797		1,255,082
Midwest Agri-Commodities		10,717		10,867		96,359
Other		173,171		106,047		62,060

	$	11,343,602	$	11,523,024	$	11,500,298


NOTE 4 -	SHORT-TERM DEBT, LONG-TERM DEBT, CAPITAL LEASE PAYABLE, AND BONDS PAYABLE

Short-Term Debt

Information regarding short-term debt for the years ended August 31, are as follows:


	2009		2008		2007

Seasonal loan with CoBank, due December 1, 2009, interest variable, currently at 1.65%	$	18,977,978	$	24,440,000	$	19,000,000

On October 15, 2009 Co-Bank extended the maturity date for the seasonal debt line and supplemental facility from November 1, 2009 to December 31, 2009.

The Company has a $50,000,000 seasonal line of credit with CoBank, with $31,022,022 available on August 31, 2009. The Company also has a $15,000,000 bid loan supplemental facility with CoBank. As of August 31, 2009 there were no advances against this line. Advances, maturity dates, and interest rates on the supplemental facility, which expires on December 31, 2009, are not guaranteed. The lines are secured with a first lien on substantially all property and equipment and current assets of the Company. The Company also utilizes the USDA’s CCC Sugar Loan Program to provide an additional source of seasonal financing. Un-advanced funds remaining from the $50,000,000 seasonal debt line are subject to a 0.25% commitment fee.

Maximum borrowings, average borrowing levels and average interest rates for short-term debt for the years ended August 31, are as follows:


	2009			2008			2007

Maximum borrowings	$	45,551,000		$	57,767,930		$	74,850,000

Average borrowing levels	$	28,410,018		$	36,003,083		$	39,241,154

Average interest rates		2.23	%		4.23	%		6.32	%

Long-Term Debt

On October 30, 2008, the Company increased the term debt line with CoBank by $10.0 million.

Information regarding long-term debt at August 31 is as follows:


	2009			2008			2007
CoBank term loan, with fixed and variable rates, due in varying principal repayments through August 20, 2016, fixed interest rates currently at 5.60% to 6.26% and variable interest rate currently at 1.65%, with a first lien on substantially all property, equipment, and current assets of the Company located in Wahpeton, ND	$	22,461,958		$	15,789,655		$	19,113,793

Less current maturities		(2,495,773	)		(2,493,103	)		(2,493,103	)

Long term maturities	$	19,966,185		$	13,296,552		$	16,620,690

In addition, the Company can make special advance payments on its term loans with CoBank after its seasonal loans have been paid in full, with the understanding that the special advance payments will be re-advanced subject to the reinstatement provisions, prior to the granting of any new seasonal loans. Any such advance payments are subject to a commitment fee of 0.25% of the daily un-advanced commitment.

Interest expense for the years ended August 31, 2009, 2008 and 2007 totaled $2,017,945, $3,230,496 and $4,296,972, respectively.

Principal amounts due on the Company’s long-term debt are as follows:


Years ending August 31,

2010	$	2,495,773
2011		3,327,697
2012		3,327,697
2013		3,327,697
2014		3,327,697
Thereafter		6,655,397

Total Principal amounts due	$	22,461,958

Capital Leases

The Company is the lessee of equipment under capital leases with varying expiration dates. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. On August 31, 2009 the Capitalized Costs of the leased assets were $2,960,658 and accumulated depreciation was $365,403. This equipment is being depreciated in accordance with SFAS No. 13. Depreciation of assets under these capital leases is included in depreciation expense.

Minimum future lease payments under capital leases are as follows:


Years ending August 31,

2010	$	534,573
2011		534,573
2012		534,573
2013		900,184
2014		152,450
2015		320,754

Total minimum lease payments	$	2,977,107

Less: Amount representing interest		384,265

Present value of net minimum lease payment	$	2,592,842

Less: Current Maturities		410,068

Long Term Maturities	$	2,182,774

Bonds Payable

The Company financed construction projects related to the processing facility through the sale of Solid Waste Disposal Revenue and Industrial Development Revenue Bonds, Series 1996 and 2002, by Richland County North Dakota. The Company has leased the property and equipment from the County for the sum of the annual principal and interest payments on the bonds. Under the terms of the lease, the Company is responsible for the real estate taxes, insurance, repairs and maintenance, and other costs incident to the ownership of the property. The leased property is included with property and equipment in the financial statements and the bonds have been recorded as a direct obligation of the Company. Ownership of the property and equipment will transfer to the Company when the bonds are repaid in full. The Company guarantees the bonds. The Company has letter of credit arrangements with a bank that provides security for obligations under the bonds payable totaling approximately $13,947,022 at August 31, 2009. There were no outstanding advances under these letter of credit arrangements as of August 31, 2009.

Information regarding Bonds Payable at August 31 is as follows:


	2009			2008			2007

Richland County North Dakota Bonds, with variable rates, due in varying principal repayments through January 2011. Variable interest rate currently at 0.79%	$	2,570,000		$	3,755,000		$	4,880,000

Richland County North Dakota Bonds, with variable rates, due in varying principal repayments through April 2019. Variable interest rate currently at 0.69%	$	10,920,000		$	11,745,000		$	12,535,000

	$	13,490,000		$	15,500,000		$	17,415,000

Less Current Maturities		(2,120,000	)		(2,010,000	)		(1,915,000	)

Long Term Maturities	$	11,370,000		$	13,490,000		$	15,500,000

Minimum future principal payments required on the obligations under bonds payable are as follows:


Years ending August 31,

2010	$	2,120,000
2011		2,230,000
2012		955,000
2013		1,005,000
2014		1,055,000
Thereafter		6,125,000

	$	13,490,000

Bond financing costs incurred in connection with the financing of the construction projects related to the processing facility have been capitalized. The Company is amortizing the bond financing costs over the terms of the financing obtained.

Amortization of bond financing cost for the years ended August 31, 2009, 2008 and 2007 totaled $28,362, $28,362 and $33,340, respectively.

NOTE 5 - MEMBERS’ INVESTMENT AND GROWER PAYMENTS

The ownership of nondividend bearing common stock is restricted to a “member-producer,” as defined in the by-laws of the Company. Each member-producer shall own only one share of common stock and is entitled to one vote at any meeting of the members. Each member-producer is also required to purchase units of preferred stock and is entitled to grow the maximum acres per unit of preferred stock as is authorized by the Board of Directors each farming year. The Company’s Board of Directors authorized the members to plant 1.60, 1.50 and 1.60 acres per unit of preferred stock for the fiscal years 2009, 2008 and 2007, respectively. A unit consists of one share each of Class A, Class B and Class C preferred stock. The preferred shares are nonvoting and nondividend bearing. The Company’s Board of Directors must approve all transfers and sales of stock.

The Company’s net income, determined in accordance with generally accepted accounting principles consistently applied, shall be distributed annually on the basis of delivered pounds of sugar, in cash or in the form of credits to each member-producer’s patronage credit account as established on the books of the Company. In the event of a loss in any one-year, the Company shall act in such a manner as to first recoup the loss from those patrons who were patrons in the year in which the loss occurred.

Under the terms of the Company sugarbeet growing contracts with each of its member-producers, the Company is obligated to pay the member-producers for sugarbeets delivered at a price per pound of extractable sugar. However, if, in the opinion of the Company’s Board of Directors, the working capital position of the Company is insufficient, the Company shall withhold and/or retain from the price to be paid per pound of extractable sugar such amounts as are deemed by the Board of Directors to be necessary for operations, the deductions to be made at such time and in a manner as the Board of Directors shall decide. The amount so withheld and or retained shall be evidenced in the records of the Company by allocated patronage and/or per unit retains in favor of the growers. The Board of Directors has the power to determine whether such allocated patronage and/or per unit retains shall be “qualified” or “nonqualified” for income tax purposes.

The Company allocated non-qualified patronage to the members for the years ended August 31, 2009, 2008 and 2007 of $3,727,840, $5,117,244 and $7,560,504, respectively. During the year ended August 31, 2009, the Company revolved the remaining 46% of the allocated patronage for the fiscal year ended August 31, 2003 totaling $2,199,418 and 33% of the allocated patronage for the fiscal year ended August 31, 2004, totaling $1,426,511. In addition, for the fiscal the period ending August 31, 2009, 2008 and 2007 the Company revolved $101,701, $-0-, and $-0- of allocated patronage to certain deceased members’ estates.

During the year ended August 31, 2008, the Company revolved the remaining 52% of the allocated patronage for the fiscal year ended August 31, 2002 totaling $1,868,412 and 54% of the allocated patronage for the fiscal year ended August 31, 2003, totaling $2,548,991.

During the year ended August 31, 2007, the Company revolved the remaining 94% of the allocated patronage for the fiscal year ended August 31, 2001, totaling $4,324,506 and 48% of the allocated patronage for the fiscal year ended August 31, 2002, totaling $1,714,354.

NOTE 6 - INVESTMENT IN MARKETING COOPERATIVES

The Company has formed common marketing agency agreements with United Sugars Corporation (United Sugars) and Midwest Agri-Commodities (Midwest) to be the exclusive marketing agents for all products produced by the Company and other member processors.

The Company’s ownership requirement in United Sugars is calculated periodically and is based on the average volume of sugar produced during the five previous fiscal years. The investment is accounted for on the equity method and the amount of sales and related costs recognized by each member processor is allocated based on their pro-rata share of production for the year. The Company provided United Sugars with cash advances on an ongoing basis for its share of operating and marketing expenses incurred. During the years ended August 31, 2009, 2008 and 2007, the Company had advanced $30,078,285, $34,383,138 and $30,775,443, for operating and marketing expenses incurred respectively. The Company had outstanding advances due to/(from) United Sugars as of August 31, 2009, 2008 and 2007 of $(1,740,649), $(2,064,472) and $36,638, respectively. The Company accounts for United Sugars’ SFAS No. 158 adjustment as an additional change in accumulated other comprehensive income (loss).

The Company has a one-fourth ownership interest in Midwest. The amount of the investment is accounted for using the equity method. All sugarbeet pulp and a portion of the molasses produced are sold by Midwest as an agent for the Company. The amount of sales and related costs to be recognized by each owner is allocated based on their pro-rata share of production for the year. The Company provided Midwest with cash advances on an ongoing basis for its share of operating and marketing expenses incurred by Midwest. The Company advanced Midwest during the years ended August 31, 2009, 2008 and 2007, $8,440,062, $9,026,985 and $9,410,648, respectively. The Company had outstanding advances due to Midwest as of August 31, 2009, 2008 and 2007 of $634,852, $572,020 and $805,838, respectively. The owners of Midwest guarantee, on a pro-rata basis, the $9,000,000 short-term line of credit that Midwest has with its primary lender. The Company accounts for Midwest’s SFAS No. 158 adjustment as an additional change in accumulated other comprehensive income (loss).

NOTE 7 - INCOME TAXES

The significant components of deferred tax assets and liabilities included on the balance sheet at August 31, are as follows:


	2009			2008			2007

Deferred tax assets
Non-qualified allocated patronage due to members	$	11,319,000		$	11,319,000		$	11,040,000
Net operating loss carry forwards		6,121,600			5,706,455			4,393,000
Other		1,113,741			2,427,545			3,428,000

Total deferred tax assets		18,554,341			19,453,000			18,861,000

Deferred tax liabilities
Depreciation		18,528,741			16,325,000			15,834,000
Other		354,400			3,426,000			2,189,000

Total deferred tax liabilities		18,883,141			19,751,000			18,023,000

Net deferred tax asset (liability)	$	(328,800	)	$	(298,000	)	$	838,000

Classified as follows
Current asset	$	25,600		$	145,000		$	688,000
Long-term asset (liability)		(354,400	)		(443,000	)		150,000

Net deferred tax asset (liability)	$	(328,800	)	$	(298,000	)	$	838,000

The state and federal operating loss carry forwards totaling approximately $15,303,976 will expire in 2015 through 2026.

The provision for income taxes is as follows:

	2009			2008			2007

Current expense (benefit)	$	(535,945	)	$	107,679		$	2,071,000
Net change in temporary differences		30,800			1,136,000			(2,071,000	)

Provision for income taxes	$	(505,145	)	$	1,243,679		$	—

The items accounting for the difference between expected tax (benefit) computed at the federal statutory rate of 35% and the provision of income taxes were as follows:


	2009			2008			2007
Expected federal income tax expense at the statutory rate		35.0	%		35.0	%		46.2	%
State tax expense at statutory rate		5.0	%		5.0	%		6.6	%
Payments to members		-40.0	%		-38.3	%		-52.2	%
Other, net		-0.5	%		-0.6	%		-0.6	%

Effective tax rate		-0.5	%		1.1	%		0.0	%

The Company allocates the patronage related benefits of the Domestic Production Activities Deduction directly to its patrons. During the years ended August 31, 2009, 2008 and 2007 the Company passed through $5,742,508, $-0- and $-0- respectively to its patrons.

Significant temporary timing differences between financial and income tax reporting are as follows:


	1.	When non-qualified allocated patronage is elected by the Board of Directors, the Company is not allowed an income tax deduction until they are paid in cash to the member-producers, where as qualified allocated patronage is deducted when declared.
	2.	Depreciation - For financial reporting purposes, the companies use straight-line and accelerated methods of depreciation with lives of 3 to 40 years, while, for income tax purposes, the companies use required statutory depreciable lives and methods.
	3.	Non-qualified patronage credits from investments in other cooperatives - For financial statement purposes, the companies recognize income when the patronage credit notification is received while, for income tax purposes, the companies recognize income when the patronage is received in cash.
	4.	Inventory capitalization - For income tax reporting purposes, certain overhead costs are included as a part of inventory costs in accordance with inventory capitalization rules. These costs are charged to expense as incurred for financial reporting purposes.
	5.	Recognition of vacation pay - For financial reporting purposes, vacation pay is charged to expense as accrued, whereas, for income tax purposes, vacation pay is deducted to the extent paid within 2 ½ months of year end.
	6.	On August 31, 2006, the Company had a net $915,560 in non-patronage long-term tax liability resulting from a combination of non-patronage tax issues that will reverse over the life of certain assets now considered to be member business related. The Company will amortize the $915,560 long-term liability over the approximate remaining book life of those assets generating the liability. The amortization of the long-term tax liability for the years ended August 31, 2009, 2008 and 2007 was $88,600, $236,280 and $236,280, respectively leaving a remaining balance on August 31, 2009 of $354,400 to be amortized in future years.
	7.	Non-qualified deferred compensation is deducted for book purposes as incurred and deducted for tax purposes as paid.

Adoption of FASB Interpretation No. 48

The total amount of unrecognized tax benefits as of August 31, 2009 is $274,075. These amounts include accrued interest and penalties of $91,692.

The aggregate changes in the balance of the Company’s gross unrecognized tax benefits were as follows for the periods indicated:


Year Ended August 31,	2009		2008		2007

Balance unrecognized tax benefits	$	256,075	$	—	$	—
Increases for tax positions related to current year		18,000		—		—
Increases for tax positions related to prior year		—		256,075		—
Reductions for tax positions of prior years		—		—		—
Decreases related to settlements		—		—		—
Reductions due to lapsed statute of limitations		—		—		—
Balance unrecognized tax benefits	$	274,075	$	256,075	$	—

Tax returns filed as of August 31, 2003 through current filings are open for examination.

NOTE 8 - DEPRECIATION

The Company’s depreciation expense for the years ended August 31, 2009, 2008 and 2007 was $8,420,580, $8,095,659 and $7,953,469, respectively.

NOTE 9 - 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 and expanding control program designed to meet these environmental laws and regulations. While the Company will continue to have ongoing environmental compliance requirements, currently there are no pending regulatory enforcement actions and the Company believes that it is in substantial compliance with applicable environmental laws and regulations.

The Company cannot predict whether future changes in environmental laws or regulations might increase the cost of operating its facilities and conducting its business. Any such changes could have financial consequences for the Company and its members.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

During fiscal year 1997, the Company entered into a long-term lease agreement on a property, which included providing a guarantee for the notes to finance the leased property. The Company’s contingent liability related to these notes totaled $571,648 as of August 31, 2009.

During fiscal year 2000, the Company sold certain notes receivable with recourse. The Company’s contingent liability related to these notes totaled $110,262 as of August 31, 2009.

NOTE 11 - OPERATING LEASES

The Company is a party to various operating leases for vehicles and equipment. Future minimum payments for long-term leases for the years ending August 31, under these obligations, are as follows:


Years ending August 31,

2010	$	868,930
2011		57,975
2012		674
	$	927,579

Operating lease and contract expenses for the years ended August 31, 2009, 2008 and 2007, totaled $1,145,998, $1,535,475 and $1,834,441, respectively.

NOTE 12 - EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company has a qualified 401(k) employee benefit plan that covers all employees meeting eligibility requirements. The Company’s matching contribution to the plan is at a level of 100% of employee contributions, with a maximum of 4% of compensation. Employer contributions to the plan for the years ended August 31, 2009, 2008 and 2007 totaled $637,822, $631,063 and $570,045, respectively.

Effective September 1, 2007, individual participating employees who have met the non-elective eligibility requirements of the plan received a contribution of 4% of their compensation each pay period as provided by the plan. Individuals participating in this benefit are excluded from the non-contributory defined benefit plan. Employer contributions to the plan for the years ended August 31, 2009 and 2008 totaled $65,657 and $53,907, respectively.

Pension plan

The Company has a non-contributory defined benefit plan, which covers substantially all employees who meet certain requirements of age, hours worked per year, years of service, and age at retirement or termination. The pension funding policy is to deposit with independent trustees amounts allowable by law. Funds deposited with trusts and insurance companies are maintained to provide pension benefits to plan participants and their beneficiaries. The Company’s measurement date was changed to August 31, 2009 and for the prior years the measurement date was May 31, 2008 and 2007, respectively.

In August 2006, the Pension Protection Act (PPA) was signed into law. The PPA modified the funding requirements for defined benefit pension plans by subjecting defined benefit plans to 100% of the current liability-funding target. Defined benefit plans with a funding status of less than 80% of the current liability are defined as being “at risk”. These provisions do not apply to plans with less than 500 participants. As of the last plan filing, the Company’s plan had 458 participants.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R”. This standard requires employers to recognize the under funded or over funded status of defined benefit pension and Post-retirement plans as an asset or liability in its statement of financial position, and recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive loss, which is a component of stockholders’ equity. This standard also eliminates the requirement for Additional Minimum Pension Liability (AML) required under SFAS No. 87. As a result of the application of SFAS No. 158 as of August 31, 2009, 2008 and 2007 the Company increased liabilities by $7,547,180, $639,310 and $3,947,430. These liabilities were offset to accumulate other comprehensive income (loss). As a result of SFAS No. 158, in the year ended August 31, 2009, 2008 and 2007 the Company recognized an increase in accumulated other comprehensive income (loss) of ($7,080,155), ($2,218,282) and ($2,368,458), respectively. In accordance with FAS 158 the measurement date was moved from May 31, 2007 and May 31, 2008 to August 31, 2009 creating a fifteen-month period vs. twelve-month periods the preceding two years.

The following table sets forth the plan’s funded status at August 31:


	2009			2008			2007

Change in benefit obligation
Benefit obligation at beginning of year	$	26,101,309		$	25,712,339		$	23,525,263
Service cost		1,284,966			940,135			958,696
Interest cost		2,175,966			1,558,671			1,530,008
Experience (gain)/loss due to participant changes		2,774,339			(1,351,129	)		370,582
Benefits paid		(1,260,410	)		(758,707	)		(672,210	)

Benefit obligation at end of year		31,076,170			26,101,309			25,712,339

Change in plan assets
Fair value of plan assets at beginning of year		20,158,363			20,277,824			16,961,551
Actual return on plan assets		(2,494,214	)		(360,683	)		2,990,887
Employer contribution		2,097,024			1,060,000			1,075,000
Benefits and expenses paid		(1,280,595	)		(818,778	)		(749,614	)

Fair value of plan assets at end of year		18,480,578			20,158,363			20,277,824

Funded status		(12,595,592	)		(5,942,946	)		(5,434,515	)
Unrecognized net actuarial loss		—			—			—
Unrecognized prior service cost		—			—			—
Unrecognized transition (asset) obligation		—			—			—

Accrued benefit cost liability	$	(12,595,592	)	$	(5,942,946	)	$	(5,434,515	)


	Pension Benefits
	2009			2008			2007

Non-current assets	$	—		$	—		$	—
Current liabilities		—			—			(660,125	)
Noncurrent liabilities		(12,595,592	)		(5,942,946	)		(4,774,390	)
	$	(12,595,592	)	$	(5,942,946	)	$	(5,434,515	)

	2009			2008			2007

Net loss	$	11,466,409		$	4,436,275		$	3,745,541
Prior service cost		128,798			169,107			201,889
	$	11,595,207		$	4,605,382		$	3,947,430

The accumulated benefit obligation for all defined benefit pension plans for the years ended August 31, 2009, 2008 and 2007 were $22,858,793, $19,721,092 and $18,725,646, respectively.


	2009		2008		2007

Weighted-average assumptions as of August 31
Discount rate	6.2	%	6.5	%	6.5	%
Expected return on plan assets	8.0	%	8.0	%	8.0	%
Rate of total compensation increase	4.3	%	4.3	%	4.3	%

The net periodic pension cost for the years ended August 31, includes the following components:


	2009			2008			2007

Components on net periodic benefit cost
Service cost	$	1,284,966		$	940,135		$	958,696
Interest cost		2,175,966			1,558,671			1,530,008
Expected return on plan assets		(2,036,453	)		(1,621,109	)		(1,362,530	)
Amortization of prior service cost		40,309			32,782			56,848
Amortization of transition amount		—			—			—
Amortization of net (gain) or loss		295,057			—			239,581

Net periodic benefit cost	$	1,759,845		$	910,479		$	1,422,603

The 2009 data includes a fifteen-month period. The net periodic cost is allocated as follows:


Current Period	$	1,474,949
Adjustment to Retained Earnings		284,896
Total	$	1,759,845

The Company’s pension plan weighted-average asset allocation at August 31, by asset category is as follows:


	2009			2008			2007
Asset category
Equity securities		61	%		66	%		69	%
Debt securities		37	%		31	%		27	%
Other		2	%		3	%		4	%

Total		100	%		100	%		100	%

Investment Philosophy

The Company’s investment philosophy to achieve acceptable returns with reasonable risks involves diversification into different investment asset classes, which in turn, mitigates an over exposure to any one segment of investment alternatives, avoids market timing, and controls fees.

Expected Return on Plan Assets

The Company’s Pension Committee has relied upon the advice of an independent pension fund consultant to determine the expected return on plan assets for similar funds using similar investment philosophies.

Contributions

The Company expects to contribute $2,800,000 to its pension plan in 2010.

Distributions (Expected Future)

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


2010	$	989,219
2011		800,842
2012		733,877
2013		881,539
2014		888,594
Thereafter, through 2019		6,795,845

As a result of SFAS No. 158, the Company has recognized a charge to accumulated other comprehensive loss as follows:


Fiscal Year Ended August 31:	2009		2008		2007

Beginning Balance	$	4,890,516	$	2,368,458		—
Minn Dak Farmers Cooperative		7,080,155		2,218,280		2,368,458
United Sugars		771,949		209,017		—
Midwest Agri		68,615		94,761		—

Ending Balance	$	12,811,235	$	4,890,516	$	2,368,458

Non-qualified benefit plans

The Company has various non-qualified plans for those employees who meet certain requirements.

The Supplemental Executive Retirement Plan (SERP) is designed to provide an employee who exceeds the annual compensation limit of the Company’s defined benefit plan with a benefit as if the annual compensation limit didn’t apply. This plan is unfunded; therefore there are no assets associated with this plan. The cumulative liability for this plan for the years ended August 31, 2009, 2008 and 2007 was $231,768, $276,562 and $117,243, respectively.

The Non-Qualified Deferred Compensation plan allows an employee to defer wages to a future date. The deferment becomes part of the company assets. To receive payments under this plan, the participant must meet the requirements of the plan or separate from the Company. The cumulative assets and liabilities for this plan for the years ended August 31, 2009, 2008 and 2007 were $365,015, $385,745 and $579,599, respectively.

Non-Qualified key-life insurance - The Company has life insurance policies on a former executive sufficient to cover a $500,000 obligation to the former executive’s estate. The policies are self sufficient, and requiring no additional funding for the term of the policies.

NOTE 13 - FAIR VALUE MEASUREMENTS

Investments - The investments in CoBank, Dakota Valley Electric Cooperative, Inc. and all other cooperatives are stated at cost, plus the cooperative’s share of allocated patronage and capital credits. The investments in United Sugars Corporation and Midwest Agri-Commodities are accounted for using the equity method, wherein the investments are recorded at the amount of the underlying equity in the net assets of the investments and adjusted to recognize the cooperative’s share of the undistributed earnings or losses. The Company believes it is not practicable to estimate the fair value without incurring excessive costs because there is no established market for this stock and it is inappropriate to estimate future cash flows, which are largely dependent on future patronage earnings of the investment.

NOTE 14 – SUBSEQUENT EVENTS

The Company has considered subsequent events through November 24, 2009.


Item 15c.	Exhibits


Index
3(i)		Articles of Amendment to the Articles of Incorporation of Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1996 as filed on November 21, 1996.
3(ii)		Articles of Incorporation of Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
3(iii)		Amended Bylaws of Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2008 as filed on November 26, 2008.
10(a)		Growers’ Agreement (three-year Agreement) (example of agreement which each Shareholder is required to sign.
10(b)		Amended and Restated Uniform Member Marketing Agreement by and between United Sugars Corporation and Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-k for the fiscal year ended August 31, 2007 as filed November 29, 2007.
10(e)		Memorandum of Understanding and Uniform Member Agreement by and between Midwest Agri-Commodities Company and Minn-Dak Farmers Cooperative. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2006 as filed on November 28, 2006.
10(k)		Agreement for Electrical Service. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
10(l)		Master Coal Purchase and Sale Agreement and Railroad Equipment Lease Agreement (Confidential Treatment has been requested as to certain provisions). Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2006 as filed on November 28, 2006.
10(m)		Minn-Dak Farmers Cooperative Pension Plan. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
10(p)		Amendment to Minn-Dak Farmers Cooperative Pension Plan. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1997 as filed on November 25, 1997.
10(q)		Amendment to Minn-Dak Farmers Cooperative Pension Plan. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 1998 as filed on November 24, 1998.
10(r)		David H. Roche Employment Agreement. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2001 as filed on November 29, 2001 and Amended and Restated Agreement dated August 27, 2009.
12		Statement re Computation of Ratio of Net Proceeds to Fixed Charges.
21		Subsidiaries of the Registrant. Incorporated by reference from the Company’s Registration Statement on Form S-1 (File No. 33-94644), declared effective September 11, 1995.
31.1		Certification of the President/Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act.
31.2		Certification of the Executive Vice President/Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act.
31.3		Certification of the Controller/Chief Accounting Officer in accordance with Section 302 of the Sarbanes-Oxley Act.
32		Certification of the President/Chief Executive Officer and the Executive Vice President/Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act.
99.1		Audit Committee Charter. Incorporated by reference from the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003 as filed on November 26, 2003.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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.


	MINN-DAK FARMERS COOPERATIVE

	BY	/S/ David H. Roche
		DAVID H. ROCHE, PRESIDENT AND CHIEF EXECUTIVE OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DUTIES INDICATED.


SIGNATURE	TITLE	REPORT DATE

/s/ David H. Roche	President and	11-24-09
David H. Roche	Chief Executive Officer

/s/ Steven M. Caspers	Executive Vice President and	11-24-09
Steven M. Caspers	Chief Financial Officer

/s/ Allen E. Larson	Controller and	11-24-09
Allen E. Larson	Chief Accounting Officer

/s/ Dale Blume		11-24-09
Dale Blume	Director

/s/ Dennis Butenhoff		11-24-09
Dennis Butenhoff	Director

/s/ Brent Davison		11-24-09
Brent Davison	Director

/s/ Doug Etten		11-24-09
Doug Etten	Director

/s/ Patrick Freese		11-24-09
Patrick Freese	Director

/s/ Dennis Klosterman		11-24-09
Dennis Klosterman	Director

/s/ Russell Mauch		11-24-09
Russell Mauch	Director

/s/ Charles Steiner		11-24-09
Charles Steiner	Director

/s/ Alton Theede		11-24-09
Alton Theede	Director

Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

Minn Dak Farmers Cooperative Inactive 10-K2009 FY Annual report

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