Registration Statement No.

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form S-1
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
FARMLAND INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Kansas 44-0209330
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2011
(Primary Standard Industrial Classification Code Number)
3315 North Farmland Trafficway, Kansas City, Missouri 64116-0005
816-459-6000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

J. F. Berardi
Executive Vice President and Chief Financial Officer
Farmland Industries, Inc.
3315 North Farmland Trafficway, Kansas City, Missouri 64116-0005
816-459-6201
(Name, Address, including zip code, and telephone number, including area code,
of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement, as determined by
market conditions.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. ( X )

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. ( )

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( )

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ( )

CALCULATION OF REGISTRATION FEE

PROPOSED MAXIMUM
AGGREGATE AMOUNT OF

OFFERING OR REGISTRATION
TITLE OF EACH CLASS OF SECURITY BEING REGISTERED EXCHANGE PRICE FEE

Demand Loan Certificates $ 50,000,000 $ 17,241
Subordinated Capital Investment Certificates
-Ten Year $ 70,000,000 $ 24,138
-Five Year $ 65,000,000 $ 22,414
Subordinated Monthly Income Capital Investment Certificates
-Ten Year $ 35,000,000 $ 12,069
-Five Year $ 20,000,000 $ 6,897

Total $ 240,000,000 $ 82,759(1)

(1)Pursuant to Rule 429, the combined prospectus filed as a part of this
Registration Statement relates as well to Registrant's Form S-1 Registration
Statements No. 33-51319 and No. 33-56821. The amount of securities registered
and fees paid in connection with earlier registration statements are:
Registration Statement No. 33-51319 - $45,074,024 and $15,543,
respectively; Registration Statement No. 33-56821 - $112,039,000 and
$38,634, respectively.

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

PART I
FARMLAND INDUSTRIES, INC.

CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K

ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS

1. Forepart of Registration Statement and Cover of Registration Statement
Outside Front Cover Page of Prospectus Cross Reference Sheet
Front Page of Prospectus

2. Inside Front and Outside Back Available Information
Cover Pages of Prospectus Reports to Security Holders
3. Summary Information, Risk Factors Prospectus Summary
and Ratio of Earnings to Fixed Charges Risk Factors

4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable

6. Dilution Not Applicable

7. Selling Security Holders Not Applicable
8. Plan of Distribution Plan of Distribution

9. Description of Securities to be Registered Description of the Ten-Year
Subordinated Capital Investment
Certificates

Description of the Five-Year
Subordinated Capital Investment
Certificates
Description of the Ten-Year
Subordinated Monthly Income Capital
Investment Certificates

Description of the Five-Year
Subordinated Monthly Income Capital
Investment Certificates

Description of the Demand Loan
Certificates
10. Interests of Named Experts and Counsel Legal Matters

11. Information with Respect to the Registrant
(a) 1. Business Development The Company
Business - General

2. Industry Segments Note 12 of Notes to Consolidated
Financial Statements Financial Statements

3. Business Description - Narrative Business
4. Foreign and Domestic Operations Note 12 of Notes to Consolidated
Financial Statements

(b) Description of Properties Business
(c) Legal Proceedings Legal Proceedings

(d) Market Price of and Dividends on Not Applicable
Registrant's Common Equity and Related
Stockholder Matters

(e) Financial Statement Filing Index to Farmland Consolidated
Financial Statements
(f) Selected Financial Data Selected Consolidated Financial
Data

(g) Supplementary Financial Information Not Applicable
(h) Management's Discussion and Analysis of Management's Discussion and
Financial Condition and Results of Operations Analysis of Financial Condition and
Results of Operations

(i) Changes in and Disagreements with Not Applicable
Accountants on Accounting and
Financial Disclosure

(j) Directors and Executive Officers Management
(k) Executive Compensation Executive Compensation

(l) Security Ownership of Certain Beneficial Not Applicable
Owners and Management

(m) Certain Relationships and Certain Transactions
Related Transactions
12. Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities

PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 4, 1995

FARMLAND INDUSTRIES, INC.

Amounts Offered to:
The General Existing
Public Security Holders

SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
TEN-YEAR $ 50,000,000 $ 20,000,000
FIVE-YEAR $ 40,000,000 $ 25,000,000
SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES
TEN-YEAR $ 15,000,000 $ 20,000,000
FIVE-YEAR $ 10,000,000 $ 10,000,000
DEMAND LOAN CERTIFICATES $ 50,000,000 $ -0-

SEE "RISK FACTORS" ON PAGE 8 FOR A DESCRIPTION OF CERTAIN RISK FACTORS THAT
SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THESE SECURITIES. IN
MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

This next paragraph is placed vertically at the left margin on the print
document:

Information contained herein is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement and the accompanying prospectus shall
not constitute an offer to sell or the solicitation of an offer to buy nor
shall there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.

Farmland Industries, Inc. ("Farmland" or the "Company") is offering: (1)
to the owners of its Subordinated Capital Investment Certificates the right to
exchange (see "Exchange Offer") such certificates for an equivalent principal
amount of any Subordinated Monthly Income Capital Investment Certificate ($5,000
minimum) which, at the time of the exchange, is being offered by this
Prospectus, and (2) to the owners of its Subordinated Capital Investment
Certificates, which have been held until eligible for redemption prior to
maturity at the option of the owner, the right to exchange such certificates for
an equivalent principal amount of any Subordinated Capital Investment
Certificate which, at the time of the exchange, is being offered by this
Prospectus. This offer will expire at 12:00 P.M. Eastern Standard Time on
December 31, 1996, unless terminated prior to such date.

The date of this Prospectus is December ___, 1995

(Continued on following pages)
(Continued from preceding page)

Underwriting
Price to Discounts Proceeds to
Public(1) Commissions(2) Farmland(2)

Subordinated Capital Investment Certificates*
--$100 minimum
Ten-Year Total $ 50,000,000 $ 50,000,000
Five-Year Total $ 40,000,000 $ 40,000,000
Subordinated Monthly Income Capital
Investment Certificates*
--$5,000 minimum (additional units in
incremental amounts of $1,000 or more)
Ten-Year Total $ 15,000,000 $ 15,000,000
Five-Year Total $ 10,000,000 $ 10,000,000
Demand Loan Certificates*
--$100 minimum
Total $ 50,000,000 $ 50,000,000

<FN>
*See "Determination of the Certificate Interest Rate."

(1) Farmland's offering of Subordinated Capital Investment Certificates,
Subordinated Monthly Income Capital Investment Certificates and Demand Loan
Certificates (referred to herein as "Debt Certificates") is being made in
compliance with the terms of a partial exemption from the requirements of
Schedule E of the Bylaws of the National Association of Securities Dealers,
Inc. ("NASD"). As a condition of this partial exemption, a minimum of 80
percent of the dollar amount of aggregate sales made in this offering must
be to individuals or entities who are members of a defined group, the
definition of which has been approved by the NASD.

(2) The Debt Certificates offered hereby for cash and for exchange are offered
on a "best efforts" basis by Farmland Securities Company ("FSC") and
American Heartland Investments, Inc. ("AHI") and may be offered by other
broker-dealers selected by Farmland. See "Plan of Distribution." The
offering is for an indeterminate period of time, not expected to be in
excess of two years with no minimum amount of securities which must be
sold. The proceeds to Farmland are before deducting estimated commissions
and expenses to be paid by Farmland of $2,567,000 and $1,256,000,
respectively, assuming that all securities offered hereby are sold.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: 500 West Madison
Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center, 13th Floor, New
York, NY 10048. Copies of such material can also be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.

REPORTS TO SECURITY HOLDERS

Farmland intends to make available to holders of its Debt Certificates,
upon written request from any such holder to the address stated on page 4, a
copy of the latest annual report containing the audited Consolidated Financial
Statements of Farmland and its subsidiaries.

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION
WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF SO GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY FARMLAND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY ANY SUCH SECURITIES IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY DISTRIBUTION OF THE SECURITIES UNDER THIS PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AT ANY TIME SUBSEQUENT TO THE RESPECTIVE DATES AT WHICH INFORMATION IS
GIVEN HEREIN OR THE DATE OF THIS PROSPECTUS.

TABLE OF CONTENTS

Page

PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . 4
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . 15
DETERMINATION OF THE CERTIFICATE INTEREST RATE . . . . . . . . . . . . 24
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
HOW TO ACCEPT EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . 27
HOW TO TRANSFER OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . 28
DESCRIPTION OF THE TEN-YEAR SUBORDINATED
CAPITAL INVESTMENT CERTIFICATES . . . . . . . . . . . . . . . . . . 28
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED
CAPITAL INVESTMENT CERTIFICATES . . . . . . . . . . . . . . . . . . 32
DESCRIPTION OF THE TEN-YEAR SUBORDINATED
MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES . . . . . . . . . . 36
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED
MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES . . . . . . . . . . 39
DESCRIPTION OF THE DEMAND LOAN CERTIFICATES . . . . . . . . . . . . . . 43
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
PATRONAGE REFUNDS AND DISTRIBUTION OF NET EARNINGS . . . . . . . . . . 57
EQUITY REDEMPTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . 57
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
QUALIFIED INDEPENDENT UNDERWRITER . . . . . . . . . . . . . . . . . . . 60
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 65
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 68
INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 70

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context requires otherwise, (i) "Farmland" or the "Company" herein
refers to Farmland Industries, Inc. and its consolidated subsidiaries, (ii) all
references herein to "year" or "years" are to fiscal years ended August 31,
(iii) all references herein to "tons" are to United States short tons, and (iv)
all references herein to "membership" are to persons eligible to receive
patronage refunds from Farmland including voting members, associate members and
other patrons with which farmland has a currently effective patronage refund
agreement.

FARMLAND INDUSTRIES, INC.
P. O. Box 7305
Kansas City, Missouri 64116
Telephone (816) 459-6000

Business As of August 31, 1995, Farmland is an agricultural farm supply and
processing and marketing cooperative headquartered in Kansas City,
Missouri that is owned primarily by its members and operates on a
cooperative basis. Farmland's membership consisted of 1,800
cooperative associations of farmers and ranchers and 11,500 pork or
beef producers or associations of such producers. Founded originally
in 1929, Farmland has grown from revenues of $310,000 during its first
year of operation to over $7.2 billion during 1995.

The Company is one of the largest cooperatives in the United States in
terms of revenues. In 1995, Farmland had exports to approximately 72
countries, and derived 47% of its grain revenues from export sales.
Substantially all foreign grain sales generally are paid in U.S.
Dollars.

The Company conducts business primarily in two operating areas:
agricultural inputs and outputs. On the input side of the
agricultural industry, the Company operates as a farm supply
cooperative. On the output side of the agricultural industry, the
Company operates as a processing and marketing cooperative.

The Company's farm supply operations consist of three principal
product divisions - petroleum, crop production and feed - that produce
and distribute farm supply products principally at wholesale. Over
50% of the Company's farm supply products sold in 1995 was produced in
plants owned by the Company or operated by the Company under long-term
lease arrangements. Approximately 64% of the Company's farm supply
products sold in 1995 were sold at wholesale to farm cooperative
associations which are members of Farmland. These farm cooperatives
distribute products primarily to farmers and ranchers in states which
comprise the corn belt and the wheat belt and who utilize the products
in the production of farm crops and livestock.

On the output side, the Company's processing and marketing operations
include the processing of pork and beef, the marketing of fresh pork,
processed pork and fresh beef and the storage and marketing of grain.
In December 1995, the Company plans to commence processing wheat into
gluten for use primarily in the commercial baking and pet food
industries and starch for numerous industrial purposes. In 1995,
approximately 68% of the hogs processed and 49% of the grain marketed
were supplied to the Company by its members. Substantially all of the
Company's pork and beef products sold in 1995 were processed in plants
owned by the Company.

No material part of the business of any segment of the Company is
dependent on a single customer or a few customers. The Company
competes for market share with numerous participants (including other
cooperatives) with various levels of vertical integration, product and
geographical diversification, sizes and types of operations.
Financial information about the Company's industry segments is
presented in Note 12 of the Notes to Consolidated Financial Statements
included herein.

THE OFFERING

OFFERED AT 100% OF
AGGREGATE FACE AMOUNT

FOR FOR
CASH EXCHANGE

Description of Securities* (see pages 28, 32, 36, 39, and 43):
Subordinated Capital Investment Certificates - $100 Minimum
Interest payable or compounded semiannually at the
Certificate Interest Rate
10-year maturity $ 50,000,000 $ 20,000,000
5-year maturity $ 40,000,000 $ 25,000,000
Subordinated Monthly Income Capital Investment Certificates
- $5,000 Minimum (additional units may be purchased in
increments of $1,000 or more)
Interest payable monthly at the Certificate Interest Rate
10-year maturity $ 15,000,000 $ 20,000,000
5-year maturity $ 10,000,000 $ 10,000,000
Demand Loan Certificates - $100 minimum $ 50,000,000 $ -0-

<FN>
*The Subordinated Capital Investment Certificates and Subordinated Monthly
Income Capital Investment Certificates are referred to in this Prospectus as
"Subordinated Debt Certificates."

PLAN OF DISTRIBUTION
Offered on a best efforts basis by FSC and AHI and may be offered by
selected broker-dealers. See "Plan of Distribution."

UNDERWRITING DISCOUNTS AND COMMISSIONS
Farmland will pay commissions to FSC not to exceed 4% of the sale price of
Demand Loan Certificates and Subordinated Debt Certificates being offered.
Farmland will pay all expenses and liabilities incurred by FSC, limited to
an amount not to exceed 3% of the aggregate sales price of Demand Loan and
Subordinated Debt Certificates being offered. Farmland will pay to AHI and
to other selected broker-dealers for their services a sales commission of
not more than 4% of the face amount of the Subordinated Debt Certificates
and not more than 1/2 of 1% of the face amount of the Demand Loan
Certificates which the broker-dealers sell. See "Plan of Distribution."

PURPOSE OF THE EXCHANGE OFFER
The purpose of the exchange offer is to extend the period of time for which
Farmland may utilize funds borrowed from an investor in its Subordinated
Debt Securities.

METHOD OF TRANSACTING AN EXCHANGE
The exchange offer may be accepted by delivering any of the Subordinated
Debt Certificates which are eligible for exchange, to Farmland Securities
Company, P.O. Box 7305, Kansas City, Missouri 64116, Dept. 79 or to
American Heartland Investments, Inc., P. O. Box 1303, Salina, Kansas
67402. Such certificates should be assigned to Farmland in the transfer
section (on the reverse side of the certificate) and endorsed by all
persons whose names appear on the face of the certificate. For additional
information regarding the exchange, see "How to Accept Exchange Offer," or
call (816) 459-6360 or write to the above address for specific information.

USE OF PROCEEDS
Any proceeds received will be used to fund portions of capital expenditures
and investments in ventures which are estimated to be approximately $379.4
million through the two-year period ending August 31, 1997, or to redeem
any of the $54.0 million of outstanding Subordinated Debt Certificates,
which mature at various times prior to August 31, 1997, or to redeem any
outstanding Subordinated Debt Certificates prior to maturity at the request
of owners to the extent provided in each Subordinated Debt Certificate's
trust indenture. See "Use of Proceeds," "Business - Other Matters -
Capital Expenditures," and "Description of Subordinated Capital Investment
Certificates," "Description of Subordinated Monthly Income Capital
Investment Certificates" and "Description of Demand Loan Certificates."

SELLING PRICE
100% of Face Amount.

PROVISIONS FOR REDEMPTION OR PREPAYMENT
Owners of the Subordinated Debt Certificates may not liquidate their
investments except under restricted conditions summarized below and as more
fully stated in each of the Subordinated Debt Certificate's respective
trust indenture.

A. Farmland will not redeem any of the Ten-Year Subordinated Capital
Investment Certificates prior to maturity except:

(i) upon death of an owner; or,

(ii) after the date any Ten-Year Subordinated Capital Investment
Certificate becomes eligible for redemption prior to maturity
at the option of the owner, in additional amounts limited in
any month to the greater of $500,000 or 1/2 of 1% of the
balance outstanding under the Ten-Year Subordinated Capital
Investment Certificates' trust indenture at the end of the
previous month, provided such balance outstanding is greater
than $5,000,000. If such balance outstanding is less than
$5,000,000 there will be no limitation on early redemption of
eligible Ten-Year Subordinated Capital Investment
Certificates outstanding under such trust indenture.

B. Farmland will not redeem any of the Five-Year Subordinated Capital
Investment Certificates prior to maturity except:

(i) upon death of an owner; or,

(ii) after the date any Five-Year Subordinated Capital Investment
Certificate becomes eligible for redemption prior to maturity
at the option of the owner, in additional amounts limited in
any month to the greater of $500,000 or 1/2 of 1% of the
balance outstanding under the Five-Year Subordinated Capital
Investment Certificates' trust indenture at the end of the
previous month, provided such balance outstanding is greater
than $5,000,000. If such balance outstanding is less than
$5,000,000 there will be no limitation on early redemption of
eligible Five-Year Subordinated Capital Investment
Certificates outstanding under such trust indenture.

C. Farmland will not redeem the Subordinated Monthly Income Capital
Investment Certificates prior to maturity except upon the death of an
owner.

Farmland has the right to call the Subordinated Capital Investment
Certificates any time after two years from the date of issuance thereof.
See the subcaption "Redemption" within the description of each type of
certificate.

RISK FACTORS

Prospective investors should consider carefully, in addition to the other
information contained in this Prospectus, the following risk factors before
purchasing the Demand Loan Certificates and Subordinated Debt Certificates
offered hereby.

INCOME TAX MATTERS

In July 1983, Farmland sold the stock of Terra, a wholly owned subsidiary
engaged in oil and gas exploration and production operations, and exited its oil
and gas exploration and production activities. The gain from the sale of Terra
amounted to $237.2 million for tax reporting purposes.

On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes (exclusive of
statutory interest thereon) in the aggregate amount of $70.8 million. The
asserted deficiencies relate primarily to the Company's tax treatment of a
$237.2 million gain resulting from its sale, in July 1983, of the stock of Terra
Resources, Inc. ("Terra") and the IRS's contention that Farmland incorrectly
treated the Terra sale gain as income against which certain patronage-sourced
operating losses could be offset. The statutory notice further asserts that
Farmland incorrectly characterized for tax purposes gains aggregating
approximately $14.6 million, and a loss of approximately $2.3 million, from
dispositions of certain other assets.

On June 11, 1993, Farmland filed a petition in the United States Tax Court
contesting the asserted deficiencies in their entirety. The case was tried on
June 13-15, 1995. The parties submitted post-trial briefs to the court on
September 14, 1995; reply briefs were submitted to the court on November 28,
1995.

If the United States Tax Court decides in favor of the IRS on all
unresolved issues raised in the statutory notice, Farmland would have additional
federal and state income tax liabilities aggregating approximately $85.8 million
plus accumulating statutory interest thereon (approximately $178.3 million,
before tax benefits of the interest deduction, through August 31, 1995), or
$264.1 million in the aggregate at August 31, 1995. In addition, such a
decision would affect the computation of Farmland's taxable income for its 1989
tax year and, as a result, could increase Farmland's federal and state income
taxes for that year by approximately $5.0 million plus applicable statutory
interest thereon. Finally, the additional federal and state income taxes and
accrued interest thereon, which would be owed based on an adverse decision,
would become immediately due and payable unless the Company appealed the
decision and posted the requisite bond to stay assessment and collection.

The liability resulting from an adverse decision would be charged to
current operations and would have a material adverse effect on the Company and
may affect its ability to pay, when due, principal and interest on the Company's
indebtedness. In order to pay any such tax claim, the Company would have to
consider new financing arrangements, including the incurrence of indebtedness
and the sale of assets. Moreover, the Company would be required to renegotiate
the Credit Agreement with its bank lenders, as well as other existing financing
agreements with certain other parties, not only to permit such new financing
arrangements, but also to cure events of default under the Credit Agreement and
certain of such other existing financing agreements and to maintain compliance
with various requirements of the Credit Agreement and such other existing
financing agreements, including working capital and funded indebtedness
provisions, in order to avoid default thereunder. No assurance can be given
that such financing arrangements or such renegotiation would be successfully
concluded. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition, Liquidity and Capital Resources".

SUBORDINATION AND ADDITIONAL DEBT

The Subordinated Debt Certificates offered by this Prospectus for sale and
for exchange are unsecured obligations of Farmland and are subordinated in
right of payment to all existing and future Senior Indebtedness
(as defined below). Senior Indebtedness of Farmland includes the Demand Loan
Certificates, money borrowed from time to time from certain financial
institutions and amounts due and payable under any instrument which
provides that such amounts are to be Senior Indebtedness. The indentures
under which the Subordinated Debt Certificates and Demand Loan Certificates are
issued do not contain any provisions that would limit the ability of the Company
or any of its affiliates to incur indebtedness (secured or unsecured; non-
subordinated or subordinated) or that would afford holders of the Subordinated
Debt Certificates and Demand Loan Certificates protection in the event of a
highly leveraged transaction, restructuring, change in control, merger or
similar transaction involving the Company that may adversely affect holders of
the Subordinated Debt Certificates and Demand Loan Certificates. See
"Description of the Ten-Year Subordinated Capital Investment Certificates,"
"Description of the Five-Year Subordinated Capital Investment Certificates,"
"Description of the Ten-Year Subordinated Monthly Income Capital Investment
Certificates," "Description of the Five-Year Subordinated Monthly Income Capital
Investment Certificates," and "Description of the Demand Loan Certificates,"
herein. On the date of this Prospectus, in accordance with covenants in certain
borrowing and lease agreements, the total amount of funded debt and senior
funded debt outstanding may not exceed 52% and 43% of capitalization,
respectively. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the subcaption "Subordination" within the
description of each type of Subordinated Debt Certificate.

The Demand Loan Certificates are general unsecured and non-subordinated
obligations of the Company and rank on parity in right of payment with all other
unsecured and non-subordinated indebtedness of the Company.

In addition, the Demand Loan Certificates and the Subordinated Debt
Certificates will be effectively subordinated to all obligations of Farmland's
subsidiaries. Any right of Farmland to receive assets of any of its
subsidiaries upon the liquidation or recapitalization of any such subsidiary
(and the consequent right of holders of the Demand Loan Certificates and the
Subordinated Debt Certificates to participate in those assets) will be subject
to the claims of such subsidiary's creditors, except to the extent that Farmland
itself is recognized as a creditor of such subsidiary. Even if Farmland is
recognized as a creditor of a subsidiary, Farmland's claims still would be
subject to any security interests in the assets of such subsidiary and any
indebtedness or other liability of such subsidiary that is senior to Farmland's
claims. Accordingly, by operation of the foregoing principles, the Demand Loan
Certificates and the Subordinated Debt Certificates will be effectively
subordinated to all indebtedness and other liabilities, including trade accounts
payable, of Farmland's subsidiaries.

As of August 31, 1995, (i) the Company had outstanding $441.7 million of
Senior Indebtedness, including the Demand Loan Certificates, (ii) the Company
had outstanding $300.0 million aggregate principal amount of subordinated
indebtedness, including the Subordinated Debt Certificates, (iii) certain of the
Company's subsidiaries had outstanding $144.9 million aggregate principal amount
of indebtedness, of which $129.4 million was nonrecourse to the Company, and
(iv) the Company had outstanding other instruments (principally long-term
leases) which provide for aggregate payments of approximately $115.7 million
over fifteen years.

RESTRICTED REDEMPTION RIGHTS OF HOLDERS OF SUBORDINATED DEBT CERTIFICATES

OWNERS OF THE SUBORDINATED DEBT CERTIFICATES MAY NOT LIQUIDATE THEIR
INVESTMENTS EXCEPT UNDER RESTRICTED CONDITIONS SUMMARIZED BELOW AND MORE FULLY
STATED IN EACH OF THE SUBORDINATED DEBT CERTIFICATE'S RESPECTIVE TRUST
INDENTURE. THE RESTRICTED REDEMPTION RIGHTS OF HOLDERS OF THE SUBORDINATED
DEBT CERTIFICATES MAY BE UNSUITABLE TO THE INVESTMENT OBJECTIVES OF CERTAIN
PROSPECTIVE INVESTORS.

Farmland will not redeem any of the Subordinated Capital Investment
Certificates prior to maturity except: (i) upon death of an owner; or,
(ii) after the date any Subordinated Capital Investment
Certificate becomes eligible for redemption prior to maturity
at the option of the owner, in additional amounts limited in
any month to the greater of $500,000 or 1/2 of 1% of the
balance outstanding under the Subordinated Capital Investment
Certificates' respective trust indenture at the end of the
previous month, provided such balance outstanding is greater
than $5,000,000. If such balance outstanding is less than
$5,000,000, there will be no limitation on early redemption
of eligible Subordinated Capital Investment Certificates
outstanding under such trust indenture.

Farmland will not redeem the Subordinated Monthly Income Capital Investment
Certificates prior to maturity except upon the death of an owner.

Farmland has the right to call the Subordinated Capital Investment
Certificates any time after two years from the date of issuance thereof. See
the subcaption "Redemption" within the description of each type of certificate.

SOURCE OF FUNDS TO PAY INTEREST AND PRINCIPAL

Farmland does not establish special cash reserves for payment of principal
or interest on its Demand Loan and Subordinated Debt Certificates. In the past,
Farmland has relied on general corporate funds provided by operations, sales of
assets, and other borrowings (including the issuance of other Demand Loan and
Subordinated Debt Certificates) to fund such payments. Farmland intends to make
interest payments on and to redeem Demand Loan and Subordinated Debt
Certificates in accordance with the respective trust indentures with cash from
operations, borrowings, and from issuance of other Demand Loan or Subordinated
Debt Certificates.

GENERAL FACTORS AFFECTING THE BUSINESS

The Company's revenues, margins and net income depend, to a large extent,
on conditions in agriculture and may be volatile due to factors beyond the
Company's control, such as weather, crop failures, federal agricultural
programs, production efficiencies and U.S. imports and exports. In addition,
various federal and state regulations to protect the environment encourage
farmers to reduce the amount of fertilizer and other chemical applications that
they use. Global variables which affect supply, demand and price of crude oil,
refined fuels, natural gas and other commodities may impact the Company's
operations. Historically, changes in the costs of raw materials used in the
manufacture of the Company's finished products have not necessarily resulted in
corresponding changes in the prices at which such products have been sold by the
Company. Management cannot determine the extent to which these factors may
impact future operations of the Company. The Company's cash flow and net income
may continue to be volatile as conditions affecting agriculture and markets for
the Company's products change. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business - Raw Materials"
included herein.

LIMITED ACCESS TO EQUITY CAPITAL MARKETS

As a cooperative, the Company cannot sell its equity to traditional public
or private markets. Instead, equity is raised largely from cooperative voting
members, associate members and other persons with which Farmland is a party to a
currently effective patronage agreement (''patrons''). Farmland's equity
results from payment of the noncash portion of patronage refunds (the allocated
equity portion) with common stock, associate member common stock and capital
credits and from net income on transactions with nonmembers (retained earnings).
See ''Business - Patronage Refunds and Distribution of Net Earnings'' and '' -
Equity Redemption Plans" included herein.

ENVIRONMENTAL MATTERS

The Company is subject to various stringent federal, state and local
environmental laws and regulations in the United States which regulate the
Company's petroleum operations, farm supply manufacturing and distribution
operations, its food processing and marketing operations and its grain marketing
operations, or which may impose liability for the cleanup of environmental
contamination. The Company has incurred and will continue to incur substantial
capital expenditures and operating costs related to these laws and regulations.
The Company cannot, however, predict the impact of new or amended laws or
regulations, nor can it predict with certainty how existing laws and regulations
will be enforced or interpreted. See ''Management's Discussion and Analysis of
Financial Condition and Results of Operation - Matters Involving the
Environment'' and ''Business - Matters Involving the Environment'' included
herein.

Many of the Company's current and former facilities have been in operation
for many years and, over such time, the Company and other predecessor operators
of such facilities have generated, used, stored, or disposed of substances or
wastes that are or might be considered hazardous under applicable environmental
laws. As a result of such operations, the soil and groundwater at or under
certain of the Company's current and former facilities have been contaminated.
Company expenditures in connection with the cleanup of contamination at such
facilities is discussed below herein (see "Business - Capital Expenditures and
Investments in Ventures"). Material expenditures may be required by
the Company in the future to remediate contamination from past or future
releases of hazardous substances or wastes.

The Company wholly or jointly owns or operates 56 manufacturing properties
and has potential responsibility for environmental conditions at a number of
former manufacturing facilities and at waste disposal facilities operated by
third parties. The Company is investigating or remediating contamination at 24
properties. The Company has also been identified as a potentially responsible
party (a ''PRP'') under the federal Comprehensive Environmental Response,
Compensation and Liability Act (''CERCLA'') at various National Priority List
sites and has unresolved liability with respect to the past disposal of
hazardous substances at five such sites. Such laws may impose joint and several
liability on certain statutory classes of persons for the costs of investigation
and remediation of contaminated properties, regardless of fault or the legality
of the original disposal. These persons include the present and former owner or
operator of a contaminated property, and companies that generated, disposed of,
or arranged for the disposal of, hazardous substances found at the property.
During 1994 and 1995, the Company paid approximately $1.4 million and $3.2
million, respectively, for environmental investigation and remediation.

The Company is aware of probable obligations for environmental matters at
32 properties. As of August 31, 1995, the Company has made an environmental
accrual of $18.5 million. The Company periodically reviews and, as appropriate,
revises its environmental accruals. Based on current information and regulatory
requirements, the Company believes that the accruals established for
environmental expenditures are adequate.

The Company's actual final costs of resolving certain environmental
matters are not quantifiable, and therefore have not been accrued, because such
matters are in preliminary stages and the timing, extent and costs of various
actions which governmental authorities may require are currently unknown.
Management also is aware of other environmental matters for which there is a
reasonable possibility that the Company will incur costs to resolve. It is
possible that the costs of resolution of the matters described in this paragraph
may exceed the liabilities which, in the opinion of management, are probable and
which costs are reasonably estimable at August 31, 1995. In the opinion of
management, it is reasonably possible for such costs to be approximately an
additional $19.8 million. See "Business - Matters Involving the Environment".

ABSENCE OF PUBLIC MARKET

There is currently no trading market for Farmland's Subordinated Debt
Certificates or Demand Loan Certificates. It is unlikely that a secondary
market for these securities will develop.

AFFILIATED UNDERWRITER

Farmland Securities Company ("FSC") is a wholly-owned subsidiary of
Farmland. FSC's business is limited to the offer and sale of securities issued
by Farmland. This offering is being made in compliance with terms of a partial
exemption from requirements of Schedule E of the NASD Bylaws; no persons, other
than persons associated with Farmland or FSC, participated in determining the
price and other terms of the securities offered hereby. See "Plan of
Distribution" included herein.

POTENTIAL TAXABLE GAINS OR LOSSES FROM THE EXCHANGE

An exchange of Subordinated Debt Certificates in a transaction permitted
by this Prospectus could result in a gain or a loss for purposes of
determining taxable income of holders of Subordinated Debt Certificates.
See "Exchange Offer" included herein.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of the end of and for
each of the years in the five-year period ended August 31, 1995 are derived from
the Consolidated Financial Statements of the Company, which Consolidated
Financial Statements have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The Consolidated Financial Statements as of
August 31, 1994 and 1995 and for each of the years in the three-year period
ended August 31, 1995 (the "Consolidated Financial Statements"), and the
independent auditors' report thereon, are included elsewhere herein. The
information set forth below should be read in conjunction with information
appearing elsewhere herein: "Management's Discussion and Analysis of Financial
Condition and Results of Operations", the Consolidated Financial Statements and
related notes, and the independent auditors' report which contains an
explanatory paragraph concerning income tax adjustments proposed by the IRS
relating to Terra.

Year Ended August 31
1991 1992 1993 1994 1995
(Amounts in Thousands except ratios)

SUMMARY OF OPERATIONS:(1)(2)
Net Sales . . . . . . . . . $ 3,638,072 $ 3,429,307 $ 4,722,940 $ 6,677,933 $ 7,256,869
Operating Income of Industry
Segments . . . . . . . . . . 156,765 160,912 86,579 154,799 293,381
Interest Expense . . . . . . . 36,951 27,965 36,764 51,485 53,862
Income (Loss) From
Continuing Operations . . . 42,693 61,046 (30,400) 73,876 162,799
Net Income (Loss) . . . . . . . $ 42,693 $ 62,313 $ (30,400) $ 73,876 $ 162,799

DISTRIBUTION OF NET INCOME (LOSS):
Patronage Refunds:
Allocated Equity . . . . . . $ 17,837 $ 1,038 $ 1,155 $ 44,032 $ 61,356
Cash and Cash Equivalents . 12,571 17,918 495 26,580 33,061
Earned Surplus and Other
Equities . . . . . . . . . . 12,285 43,357 (32,050) 3,264 68,382
$ 42,693 $ 62,313 $ (30,400) $ 73,876 $ 162,799
RATIO OF EARNINGS TO FIXED
CHARGES(3) . . . . . . . . . 1.9 2.5 Note 3 2.2 4.0

BALANCE SHEETS:
Working Capital . . . . . . . . $ 122,124 $ 208,629 $ 260,519 $ 290,704 $ 319,513
Property, Plant and Equipment,
Net . . . . . . . . . . 490,712 446,002 504,378 501,290 592,145
Total Assets . . . . . . . . . 1,369,231 1,526,392 1,719,981 1,926,631 2,185,943
Long-Term Debt (excluding
current maturities) . . . . 291,192 322,377 485,861 517,806 506,033
Capital Shares and Equities . . 497,364 588,129 561,707 585,013 687,287

[FN]
(1) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Financial Condition, Liquidity and Capital
Resources" for a discussion of the pending income tax litigation relating
to Terra, a former subsidiary of the Company.

(2) Acquisitions and Dispositions:

(a) During 1994, the Company acquired 79% of the common stock of National
Carriers, Inc. ("NCI") for a cash purchase price of $4.4 million. NCI
is a trucking company located in Liberal, Kansas. NCI provides
substantially all the trucking service needs of National Beef Packing
Company, L.P. ("NBPC"), a limited partnership. See Note 2 of the
Notes to Consolidated Financial Statements included herein.

(b) In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain"). The purchase price for Tradigrain ($31.4 million) was
paid in cash. See Note 2 of the Notes to Consolidated Financial
Statements included herein.

(c) During 1993, Farmland acquired a 58% interest in NBPC (having
increased to 68% on March 31, 1995 and, subsequent to August 31, 1995,
such interest having increased to approximately 76%). Effective April
15, 1993, NBPC acquired Idle Wild Foods, Inc.'s beef packing plant and
feedlot located in Liberal, Kansas. See Note 2 of the Notes to
Consolidated Financial Statements included herein.

(d) On August 30, 1993, The Cooperative Finance Association ("CFA")
purchased 10,113,000 shares of its voting common stock from Farmland
as part of a recapitalization plan which established CFA as an
independent finance association for its members. As a result of CFA's
stock purchase and amendments to CFA's bylaws, Farmland did not have
voting control of CFA at August 31, 1993 and, therefore, did not
include CFA in its consolidated balance sheet at August 31, 1993.
Farmland's remaining investment in CFA is being accounted for by the
cost method.

(e) The following unaudited financial information for the year ended
August 31, 1993 presents pro forma results of operations of the
Company as if the disposition of CFA and the acquisition of NBPC had
occurred at the beginning of the period presented. The pro forma
financial information includes adjustments for amortization of
goodwill, additional depreciation expense, and increased interest
expense both on recourse and nonrecourse debt assumed in the
acquisitions. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred
had the Company been a single entity which excluded CFA and included
NBPC for the full year 1993. See Note 2 of the Notes to Consolidated
Financial Statements included herein.
August 31
1993
(Unaudited)
(Amounts in Thousands)

Net Sales . . . . . . . . . . . . $ 5,357,867
Income (Loss) Before
Extraordinary Item . . . . . . (44,040)

(3)In computing the ratio of earnings to fixed charges, earnings represent
pretax income (loss) for the enterprise as a whole including 100% of such
income (loss) of minority-owned subsidiaries which have fixed charges, the
Company's share of 50%-owned entities and any distributed earnings (but not
losses or undistributed earnings) of less-than-50% owned entities plus fixed
charges. Fixed charges consist of interest and finance charges on all
indebtedness plus that portion of rentals considered to be the interest
factor. Income was inadequate to cover fixed charges for the year ended
August 31, 1993. The dollar amount of the coverage deficiency was $36.6
million.

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company has historically maintained two primary sources for debt
capital: a substantially continuous public offering of its debt securities (the
"continuous debt program") and bank lines of credit.

The Company's debt securities issued under the continuous debt program
generally are offered on a best-efforts basis through the Company's wholly owned
broker-dealer subsidiary, Farmland Securities Company, and through American
Heartland Investments, Inc. (which is not affiliated with Farmland), and also
may be offered by selected unaffiliated broker-dealers. The types of securities
offered in the continuous debt program include certificates payable on demand
and five- and ten-year subordinated debt certificates. The total amount of such
debt outstanding and the flow of funds to, or from, the Company as a result of
the continuous debt program are influenced by the rate of interest which
Farmland establishes for each type of debt certificate offered and by options of
Farmland to call for redemption certain of its outstanding debt certificates.
During the year ended August 31, 1995, the outstanding balance of demand
certificates decreased by $9.6 million and the outstanding balance of
subordinated debt certificates increased by $19.9 million.

Farmland has a $650.0 million Credit Agreement. The Credit Agreement
provides short-term credit of up to $450.0 million to finance seasonal
operations and inventory, and revolving term credit of up to $200.0 million. At
August 31, 1995, short-term borrowings under the Credit Agreement were $250.8
million, revolving term borrowings were $85.0 million and $35.8 million was
being utilized to support letters of credit issued on behalf of Farmland by
participating banks.

Farmland pays commitment fees under the Credit Agreement of 1/10 of 1%
annually on the unused portion of the short-term commitment and 1/4 of 1%
annually on the unused portion of the revolving term commitment. In addition,
Farmland must maintain consolidated working capital of not less than $150.0
million, consolidated net worth of not less than $475.0 million and funded
indebtedness and senior funded indebtedness of not more than 52% and 43% of
Combined Total Capitalization (as defined in the Credit Agreement),
respectively. All computations are based on consolidated financial data adjusted
to exclude nonrecourse subsidiaries (as defined in the Credit Agreement). At
August 31, 1995, Farmland was in compliance with all covenants under the Credit
Agreement. The Company and the bank participants annually renew the short-term
commitments of the Credit Agreement. The next renewal date is in May 1996.
Management expects that the short-term commitment will be renewed; however, at
such annual renewal date, any bank participant may choose not to renew its
portion of the short-term commitment. The revolving term loan facility will
expire in May 1997.

The Company maintains other borrowing arrangements with banks and financial
institutions. Under such agreements, at August 31, 1995, $47.2 million was
borrowed. Financial covenants of these arrangements generally are not more
restrictive than under the Credit Agreement.

The Company also has filed a registration statement with the Securities and
Exchange Commission to issue $200.0 million of debt. No such securities have
been issued by the Company. If issued, such debt would be unsecured and non-
subordinated obligations of the Company and would rank on parity in right of
payment with all other unsecured and non-subordinated indebtedness of the
Company.

In the opinion of management, these arrangements for debt capital are
adequate for the Company's present operating and capital plans. However,
alternative financing arrangements are continuously evaluated.

NBPC maintains borrowing agreements with a group of banks which provide
financing support for its beef packing operations. Such borrowings are
nonrecourse to Farmland or Farmland's other affiliates. At August 31, 1995,
$90.0 million was available under this facility of which $32.0 million was
borrowed and $1.0 million was utilized to support letters of credit. In
addition, NBPC has incurred certain long-term borrowings from Farmland. NBPC has
pledged certain assets to Farmland and such group of banks to support its
borrowings.

Tradigrain, which is comprised of seven international grain trading
subsidiaries of Farmland, has borrowing agreements with various international
banks which provide financing and letters of credit to support current
international grain trading transactions. Obligations of Tradigrain under these
loan agreements are nonrecourse to Farmland or Farmland's other affiliates. At
August 31, 1995, such borrowings totaled $70.3 million.

Leveraged leasing has been utilized to finance railcars and a substantial
portion of the Company's fertilizer production equipment. Under the most
restrictive covenants of its leases, the Company has agreed to maintain working
capital of at least $75.0 million, Consolidated Funded Debt of not greater than
65% of Consolidated Capitalization and Senior Funded Debt of not greater than
50% of Consolidated Capitalization (all as defined in the most restrictive
lease).

As a cooperative, Farmland's member-sourced net earnings (i.e., income from
business done with or for members) are distributed to its voting members,
associate members and patrons in the form of common equity, capital credits or
cash. For this purpose, net income or loss was determined in accordance with the
requirements of federal income tax law up to 1994 and is determined in
accordance with generally accepted accounting principles in 1995 and after.
Other income is treated as "nonmember-sourced income". Nonmember-sourced income
is subject to income tax and after-tax earnings are transferred to earned
surplus. Under Farmland's bylaws, the member-sourced income is distributed to
members as patronage refunds unless the earned surplus account, at the end of
that year, is lower than 30% of the sum of the prior year-end balance of
outstanding shares, associate member shares, capital credits, nonmember capital
and patronage refunds for reinvestment. In such cases, member-sourced income is
reduced by the lesser of 15% or an amount required to increase the earned
surplus account to the required 30%. The amount by which the member-sourced
income is so reduced is treated as nonmember-sourced income. The member-sourced
income remaining is distributed to members as patronage refunds. For the years
1993, 1994 and 1995, the earned surplus account exceeded the required amount by
$3.8 million, $2.3 million and $62.8 million, respectively.

Generally, a portion of the patronage refund is distributed in cash and the
allocated equity portion is distributed in common stock, associate member common
stock or capital credits (depending on the membership status of the recipient),
or the Board of Directors may determine to distribute the allocated equity
portion in any other form or forms of equities. The allocated equity portion of
the patronage refund is determined annually by the Board of Directors, but the
allocated equity portion of the patronage refund is not deductible for federal
income tax purposes when it is issued unless at least 20% of the amount of the
patronage refund is paid in cash. The allocated equity portion of the patronage
refund is a source of funds from operations which is retained for use in the
business and increases Farmland's equity base. Common stock and associate
member common stock may be redeemed by cash payments from Farmland to holders
thereof who participate in Farmland's base capital plan. Capital credits and
other equities of Farmland and Foods may be redeemed under other equity
redemption plans. The base capital plan and other equity redemption plans are
described under "Business - Equity Redemption Plans" included herein.

Cash provided by operating activities totaled $44.7 million in 1995
compared with $106.0 million in 1994. This decrease reflects the cash effect of
increased inventories and accounts receivable (principally in the output
business, and mostly the grain business).

Other major sources of cash include $42.5 million from disposition of
investments and collections on long-term notes receivable, $37.1 million from an
increase in checks and drafts outstanding which is attributable to the Company's
cash management systems, $10.3 million from investors in demand loan and
subordinated debt certificates and $9.2 million from bank loans and other notes.

Major uses of cash during 1995 include $124.7 million for capital additions
or improvements, $26.8 million for acquisition of investments and notes
receivable, $26.6 million for patronage refunds and dividends distributed from
1994 earnings and $12.4 million for the redemption of allocated equities under
the Farmland base capital plan and special allocated equity redemption plan.

On March 24, 1993, the IRS issued a statutory notice to Farmland asserting
deficiencies in federal income taxes (exclusive of statutory interest thereon)
in the aggregate amount of $70.8 million. The asserted deficiencies relate
primarily to the Company's tax treatment of a $237.2 million gain resulting from
its sale, in July 1983, of the stock of Terra and the IRS's contention that
Farmland incorrectly treated the Terra sale gain as income against which certain
patronage-sourced operating losses could be offset. The statutory notice
further asserts that Farmland incorrectly characterized for tax purposes gains
aggregating approximately $14.6 million, and a loss of approximately $2.3
million, from dispositions of certain other assets.

If the United States Tax Court decides in favor of the IRS on all
unresolved issues raised in the statutory notice, Farmland would have additional
federal and state income tax liabilities aggregating approximately $85.8 million
plus accumulating statutory interest thereon (approximately $ 178.3 million,
before tax benefits of the interest deduction, through August 31, 1995), or
$264.1 million in the aggregate at August 31, 1995. In addition, such a
decision would affect the computation of Farmland's taxable income for its 1989
tax year and, as a result, could increase Farmland's federal and state income
taxes for that year by approximately $5.0 million plus applicable statutory
interest thereon. Finally, the additional federal and state income taxes and
accrued interest thereon, which would be owed based on an adverse decision,
would become immediately due and payable unless the Company appealed the
decision and posted the requisite bond to stay assessment and collection.

No provision has been made in the Consolidated Financial Statements for
federal or state income taxes (or interest thereon) in respect of the above
described IRS claims. Farmland believes that it has meritorious positions with
respect to all of these claims.

In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that Farmland's
treatment of the Terra sale gain was substantially, if not entirely, correct.
Such counsel has further advised, however, that none of the issues involved in
this dispute is free from doubt, and there can be no assurance that the courts
will ultimately rule in favor of Farmland on any of these issues.

RESULTS OF OPERATIONS FOR YEARS ENDED AUGUST 31, 1993, 1994 AND 1995

The Company's revenues, margins and net income depend, to a large extent,
on conditions in agriculture and may be volatile due to factors beyond the
Company's control, such as weather, crop failures, federal agricultural
programs, production efficiencies and U.S. imports and exports. In addition,
various federal and state regulations to protect the environment encourage
farmers to reduce the use of fertilizers and other chemicals. Global variables
which affect supply, demand and price of crude oil, refined fuels, natural gas
and other commodities may impact the Company's operations. Historically,
changes in the costs of raw materials used in the manufacture of the Company's
finished products have not necessarily resulted in corresponding changes in the
prices at which such products have been sold by the Company. Management cannot
determine the extent to which these factors may impact future operations of the
Company. The Company's cash flow and net income may continue to be volatile as
conditions affecting agriculture and markets for the Company's products change.

The increase (decrease) in sales and operating income by business segment
in each of the years in the three-year period ended 1995, compared with the
respective prior year, is presented in the below table.
Management's discussion of industry segment sales, operating income or loss
and other factors affecting the Company's net income during 1993, 1994 and 1995
follows the table.

Change in Sales Change in Net Income
1993 1994 1995 1993 1994 1995
Compared Compared Compared Compared Compared Compared
with 1992 with 1993 with 1994 with 1992 with 1993 with 1994
(Amounts in Millions) (Amounts in Millions)

INCREASE (DECREASE) OF
INDUSTRY SEGMENT -
SALES AND OPERATING
INCOME OR LOSS:
Petroleum . . . . . . . . . . $ (92) $ (32) $ 21 $ (13) $ 32 $ (35)
Crop Production . . . . . . . (13) 278 8 (60) 74 73
Feed . . . . . . . . . . . . 34 49 (60) (1) (4) (7)
Food Processing and Marketing 563 943 337 (8) 4 56
Grain Marketing . . . . . . . 798 674 279 1 (34) 52
Other . . . . . . . . . . . . 4 43 (6) 7 (4) -0-
$ 1,294 $ 1,955 $ 579 $ (74) $ 68 $ 139

CORPORATE EXPENSES AND OTHER:
General corporate expenses (increase) decrease . . . . . . . . . . . . $ 9 $ (9) $ (14)
Other income and deductions (net) increase (decrease) . . . . . . . . . 7 14 (6)
Interest expense (increase) decrease . . . . . . . . . . . . . . . . . (9) (15) (2)
Equity in net income of investees increase (decrease) . . . . . . . . . (10) 23 11
Minority owners' interest in net income
of subsidiaries (increase) decrease . . . . . . . . . . . . . . . . (1) 5 (14)
Provision for loss on disposition
of assets (increase) decrease . . . . . . . . . . . . . . . . . . . (29) 29 -0-
Income taxes (increase) decrease . . . . . . . . . . . . . . . . . . . 15 (11) (25)
Net income increase (decrease) . . . . . . . . . . . . . . . . . . . . $ (92) $ 104 $ 89

In computing the operating income or loss of an industry segment, none of
the following have been added or deducted: corporate expenses (included in the
statements of operations as selling, general and administrative expenses),
which cannot practicably be identified or allocated to an industry segment,
interest expense, interest income, equity in net income (loss) of investees,
other income (deductions) and income taxes.

PETROLEUM

SALES

Sales of the petroleum business increased $21.3 million in 1995 compared
with 1994, or 2.5%. Sales of gasoline increased $42.1 million due to 9.6%
higher unit sales and 2.4% higher prices. Sales of distillates and propane
decreased $14.3 million and $3.0 million, respectively, and sales of other
petroleum products decreased $3.5 million. Unit sales of distillates and
propane decreased as a result of the mild winter and a wet spring.

Sales of petroleum products reflect a decrease of $31.9 million in 1994
compared with 1993 primarily due to lower prices of refined fuels and propane.
The effect of lower prices was to reduce reported sales by approximately $62.4
million. Part of this decrease was offset by the effect of a 6% increase in
refined fuels and propane unit sales.

Sales of the petroleum segment decreased $92.2 million in 1993 compared
with 1992, primarily a result of a 12% decrease in unit sales of refined fuels
(gasoline, diesel and distillates) and a 2% decline of the average selling price
thereof. Unit sales decreased principally because the Company sold its
investment in National Cooperative Refinery Association ("NCRA") in June 1992.
The refined fuels unit sales decrease in 1993 reduced sales by approximately
$92.2 million compared with 1992 and lower prices of refined fuels reduced sales
by $17.7 million. Sales of other products (principally asphalt and coke)
decreased $12.4 million. Propane sales increased approximately $30.1 million in
1993 due to a 27% increase in unit sales and 18% higher prices.

OPERATING INCOME

The petroleum business incurred an operating loss of $8.0 million in 1995
compared with operating income of $27.2 million in 1994. This was attributable
to increased crude oil costs (approximately 9%) without corresponding increases
in finished product selling prices.

Results from petroleum operations increased $31.7 million in 1994 compared
with 1993 primarily because unit margins on diesel fuels with low levels of
sulfur (required by the Environmental Protection Agency ("EPA") for diesel fuel
sold after September 30, 1993) were higher than the prior year. These margins,
which were significantly higher immediately after the crossover to the low
sulfur level diesel fuels, decreased to normal levels later in 1994. In
addition, margins on other refined fuels improved in 1994 compared with 1993
because the cost per barrel of crude oil decreased and because production at the
Coffeyville, Kansas refinery was substantially higher than in the prior year.

Operating income of the petroleum segment decreased $12.8 million in 1993
compared with 1992. The favorable effects of improved margins in propane and
lower marketing and administrative expenses were more than offset by the
unfavorable effects of lower income from distributing fuels produced by NCRA and
the write-down to market value of certain petroleum inventories.

CROP PRODUCTION

SALES

Sales of the crop production business increased $8.0 million in 1995
compared with 1994. Sales of plant nutrients increased $117.9 million due to
higher selling prices. Unit sales of plant nutrients decreased slightly from
the record level of 7.4 million tons set in 1994. Sales of crop protection
products reflect a decrease of $109.9 million as a result of placing the
Company's crop protection operations in a 50%-owned joint venture on January 1,
1995.

Crop production sales in 1994 increased $278.5 million compared with 1993
due to higher plant nutrient prices and unit sales. The average price per ton
of nutrient increased approximately 13.3% and unit sales increased approximately
1.1 million tons or 18%.

Sales of the crop production segment decreased $13.0 million in 1993
compared with 1992. Nitrogen fertilizer sales increased $54.1 million due to 8%
higher unit sales and because the average selling price increased 3%. Phosphate
fertilizer sales decreased $64.7 million. This decrease is primarily a result
of the sale of the Green Bay, Florida phosphate plant to a 50%-owned joint
venture. Subsequent to this sale (on November 15, 1991) export sales from the
Green Bay plant have not been reported in the Company's operations. In 1992,
the Company's sales included export sales from the Green Bay plant of $60.9
million.

OPERATING INCOME

Operating income of the crop production business increased $72.7 million in
1995 compared with 1994. In addition, the Company's share of the net income of
joint ventures engaged in phosphate manufacturing increased $4.6 million and the
Company's share of net income of WILFARM was $2.2 million. The increased
operating results from crop production operations was principally attributable
to the effect of higher selling price on unit margins and contributed
significantly to the Company's increased net income in 1995.

Operating income of the crop production business in 1994 increased $74.4
million compared with 1993. This increase resulted from higher unit sales and
unit margins. Unit margins in 1994 were approximately twice the level of 1993
which increased operating income in this segment approximately $66.8 million.
Unit sales increased over one million tons (18%) which increased operating
income by approximately $10.8 million. In addition, included in the statement
of operations in the caption, "Equity in income (loss) of investees", is $15.3
million in 1994 representing the Company's share of net income from fertilizer
joint ventures. This is an increase of $23.4 million compared with 1993.
Demand for plant nutrients in 1994 was stronger than in 1993 due to an increase
in the number of acres under cultivation, principally corn acreage (corn acreage
harvested was relatively low in 1993 due to wet weather and the resulting floods
in the Company's trade territory). In addition, demand for plant nutrients was
stimulated by favorable weather conditions during the fall and spring
application seasons. The increased demand for plant nutrients translated into
higher unit sales and margins and contributed significantly to the Company's
increased net income in 1994.

Operating income of the crop production segment decreased $60.3 million in
1993 compared with 1992, primarily because of a 29% higher natural gas cost (the
principal raw material consumed in producing nitrogen fertilizer) which was not
recovered through selling prices. Fertilizer margins decreased approximately
$43.2 million because of higher natural gas cost. In addition, phosphate
fertilizer margins decreased approximately $7.1 million because decreased
phosphate fertilizer selling prices more than offset decreased cost. In
addition, the Company's share of the net loss of fertilizer ventures (included
in the Company's Consolidated Statement of Operations in the caption "Equity in
net income (loss) of investees") was $8.1 million in 1993 compared with a loss
of $1.3 million in 1992.

FEED

SALES

Sales of the feed business decreased $60.1 million in 1995 compared with
1994. This decrease reflects lower unit sales in traditional markets for beef,
dairy and swine feed partly offset by increased commercial (bulk) feed sales.
Unit sales of dairy feed decreased because the number of dairy cattle on feed
programs in the Company's trade territory decreased in 1995. Beef and swine
feed unit sales decreased because the relatively low market prices available to
livestock producers encouraged such producers to reduce input costs wherever
possible and such efforts were aided by the mild winter during which pastures in
most of the Company's trade area remained open and provided suitable grazing for
beef cattle.

Sales of feed products increased $48.7 million in 1994 compared with 1993.
Unit sales of formula feed and feed ingredients each increased approximately 10%
which generated a $39.6 million increase in sales. The balance of the sales
increase resulted primarily from higher feed ingredient prices.

Sales of the feed segment increased $33.9 million in 1993 compared with
1992, primarily because of higher unit sales. Formula feed unit sales increased
approximately 9% which increased sales $20.3 million. Feed ingredients unit
sales increased approximately 12% which increased sales by $18.1 million. In
addition, sales of animal health products increased $2.0 million. Lower formula
feed selling prices partly offset the effect of higher unit sales.

OPERATING INCOME

Operating income of the feed business decreased $7.0 million in 1995
compared with 1994. This decease is attributable to decreased unit sales in
traditional markets with cooperatives combined with a net loss on sales to
commercial accounts.

Operating income of the feed business segment decreased $3.7 million in
1994 compared with 1993. Gross margins decreased approximately $.5 million
reflecting lower margins on feed ingredients and pet food of $.8 million and $.4
million, respectively, partly offset by $.7 million higher margins on animal
health products. In addition, feed sales, marketing and administration expenses
increased $3.2 million primarily due to higher commissions and other variable
compensation plans.

Operating income of the feed segment of $20.7 million in 1993 decreased
slightly compared with 1992. The decrease was due to the impact of lower
selling prices.

FOOD PROCESSING AND MARKETING

SALES

Sales of the food processing and marketing business increased $337.3
million in 1995 compared with 1994. Sales of beef increased $350.6 million.
Approximately $235.0 million of this increase resulted from NBPC's purchase of
assets from Hyplains Beef L.C. (formerly 50%-owned by Farmland). The balance of
the increased sales of beef resulted primarily from increased volume
(approximately 16%) at NBPC's plant. Sales of pork decreased $13.3 million
reflecting the net effect of lower wholesale pork prices, partly offset by
higher unit sales.

Sales of the food processing and marketing business increased $943.0
million in 1994 compared with 1993. Sales of beef increased $747.0 million
principally because NBPC has been included in the Company's 1994 results for the
full year. NBPC was acquired in April 1993. Pork sales increased
$195.9 million, due mostly to including operations of the Monmouth, Illinois
plant in the Company's results for a full year in 1994. This plant was acquired
in February 1993. In addition, sales of specialty meats of the Company's
Carando division increased $13.0 million.

Food processing and marketing sales increased $562.5 million in 1993
compared with 1992, primarily due to business acquisitions. In April 1993, the
Company and partners organized NBPC. Farmland acquired a 58% ownership interest
in NBPC (such interest having increased to 68% effective March 31, 1995 and,
subsequent to August 31, 1995, such interest having increased to 76%) which
acquired a beef packing plant and feedlot located in Liberal, Kansas. As a
result of this acquisition, the Company's sales included beef sales of $442.1
million in 1993. In February 1993, Foods purchased a pork processing plant
located at Monmouth, Illinois. As a result of this acquisition, sales of pork
products increased approximately $90.0 million. Sales of fabricated pork
products at the Company's other plants increased $17.0 million and sales of
specialty meats of the Carando division increased $8.3 million.

OPERATING INCOME

Operating income of the food processing and marketing business increased
$56.5 million in 1995 compared with 1994. This increase includes increased
operating income of $43.5 million in beef operations and $13.0 million in pork
operations. In addition, the Company's share of net income of Hyplains in 1995
(for the period prior to its acquisition by NBPC) increased $5.2 million
compared with 1994. These increases reflect increased unit margins (mostly a
result of lower cattle and hog market prices) and an increased number of cattle
and hogs processed.

Operating income in the food processing and marketing segment of $20.6
million in 1994 reflects an increase of $4.1 million compared with 1993. The
increase includes $13.0 million higher operating income of the pork business
partly offset by an $8.9 million decrease of operating income of the beef
business. Operating income from pork processing and marketing operations
increased primarily due to higher volume and higher margins on fresh pork,
branded pork, hams and specialty meats of the Carando division. Operating
income of the beef business decreased owing to weak consumer demands for beef
and industry price competition.

Operating income of the food processing and marketing segment decreased
$8.7 million in 1993 compared with 1992. The decrease is primarily due to a
4.6% increase in live hog costs. Margins on fabricated products and hams
increased $3.6 million and $4.4 million, respectively, and margins on beef
products (not included in the Company's operations in 1992) were $4.2 million.
These increases resulted from acquisitions which increased sales as discussed
above. However, these increases were more than offset by the effects of the
4.6% increase in live hog costs which could not be fully recovered through
increased wholesale prices of fresh and processed pork products and by higher
selling and administrative expenses.

GRAIN MARKETING

SALES AND OPERATING INCOME

Sales of grain increased $279.0 million in 1995 compared with 1994. This
increase resulted from higher grain prices and unit sales, primarily export
sales. Operating income of the grain business totaled $17.9 million in 1995
compared with a loss of $33.5 million in 1994. The increase in operating
results was attributable to approximately 59.0 million bushels higher export
volume by the North American grain division increased volume of international
grain brokered by Tradigrain and as a result of more favorable unit margins
which developed as market prices increased in response to decreased worldwide
production in 1995.

Grain sales increased $673.6 million in 1994 compared with 1993 primarily
due to the acquisition of Wells-Bowman Trading Company and from operating
elevators in Utah and Idaho which were leased to the Company in 1994.

The grain marketing business had an operating loss of $33.5 million in 1994
compared with near break-even operations in 1993. The operating loss in 1994
includes an operating loss of $14.4 million in the international operations of
Tradigrain and an operating loss of $19.1 million in the Company's grain
division. The loss in 1994 resulted primarily from negative unit margins on
international grain transactions and higher domestic operating expenses.

Grain operations which were acquired in July 1992 reported sales for the
full year in 1993 of $953.5 million. Sales for the two months ended August 31,
1992 were $155.2 million.

In 1993, operating income of the grain business was $.1 million compared
with a loss of $.7 million for the two months ended August 31, 1992. In 1993,
grain marketing operations were relocated to Kansas City from Enid, Oklahoma, an
export elevator at Houston, Texas was sold and certain duplicative
administrative costs were eliminated. As a result, cost reductions were
realized in 1993.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses ("SG&A") increased $39.1
million in 1995 compared with 1994. Approximately $25.3 million of the increase
was directly connected to business segments (primarily the grain and pork
businesses) and has been included in the determination of the operating income
of business segments. The increase of general corporate expenses, not
identified to business segments ($13.8 million), reflects higher variable
compensation, pension and other employee costs and higher costs for legal
services.

SG&A increased $81.5 million in 1994 compared with 1993. However, as a
percent of sales, these expenses were slightly lower in 1994 than in 1993.
Approximately $17.6 million of the increase resulted from acquisition of
Tradigrain and NCI and from including NBPC in the Company's financial statements
for the full year in 1994. Approximately $29.0 million of the increase was in
pork marketing and processing and resulted primarily from including the
Monmouth, Illinois pork plant in the Company's operations for a full year, and
from higher sales of pork. Farm supply businesses and the grain marketing
business had higher SG&A of $13.1 million and $3.4 million, respectively. The
balance of the SG&A increase was primarily due to variable compensation plans.

These expenses decreased $12.3 million in 1993 compared with 1992 primarily
due to SG&A directly connected to business segments. Corporate, general and
administrative expenses, not identified to business segments (see Note 12 of the
Notes to Consolidated Financial Statements) decreased $9.3 million in 1993
compared with 1992.

OTHER INCOME (DEDUCTIONS)

INTEREST EXPENSE

Interest expense increased $2.4 million in 1995 compared with 1994,
reflecting a higher average interest rate (approximately 1/2% higher), partly
offset by a lower amount of average borrowings.

Interest expense reflects an increase of $14.7 million in 1994 compared
with 1993. The increase is primarily attributable to including the interest
costs of NBPC's beef operations in the Company's financial statements for a full
year in 1994, the acquisition of NCI and Tradigrain in May 1994 and by higher
interest rates.

Interest expense increased $8.8 million in 1993 compared with 1992 due to
an increase of the average level of borrowings, partly offset by lower interest
rates.

PROVISION FOR LOSS ON DISPOSITION OF ASSETS

At August 31, 1993, management was negotiating to sell the Company's
refinery at Coffeyville, Kansas. Based on the progress of negotiation and the
transactions contemplated, operations for 1993 included a $20.0 million
provision for loss on the sale of the refinery. Accordingly, the net carrying
value of property, plant and equipment was reduced by $20.0 million at August
31, 1993. The transactions contemplated were subject to certain conditions,
including negotiation of final agreements. During 1994, management determined
that final sale terms anticipated by the potential purchaser were not in the
Company's best interest. Accordingly, negotiations were terminated, and the
sale was not consummated.

In 1993, the Company entered discussions with a potential purchaser of a
dragline. Based on these discussions, the Company estimated a loss of $6.2
million from the sale. Accordingly, at August 31, 1993, the carrying value of
the dragline was written down by $6.2 million and a provision for this loss was
included in the Company's Consolidated Statement of Operations for the year then
ended. In 1994, this sale was consummated on terms substantially as expected.

At August 31, 1993, the carrying value of a pork processing plant at Iowa
Falls, Iowa was written down by $3.3 million to an estimated disposal value.

CAPITAL EXPENDITURES

See "Business - Capital Expenditures and Investments in Ventures" included
herein.

OTHER, NET

In June 1993, the Company filed a lawsuit against 43 insurance carriers and
other parties (the "Defendants") seeking declaratory judgments regarding the
Defendants' insurance coverage obligations for environmental remediation costs.
In 1994 and 1995, the Company negotiated settlements with 20 and 2 insurance
companies, respectively, and, as part of the settlements, the Company provided
the Defendants with releases of various possible environmental obligations. As
a result of these settlements, the Company received cash payments of $13.6
million and $.3 million in 1994 and 1995, respectively, and has included such
amounts in the caption "Other income (deductions): Other, net" in the Company's
and Consolidated Statement of Operations for the year then ended. See Note 16
of the Notes to Consolidated Financial Statements included herein.

MATTERS INVOLVING THE ENVIRONMENT

See "Risk Factors - Environmental Matters" and "Business - Matters
Involving the Environment" included herein.

RECENT ACCOUNTING PRONOUNCEMENTS

In the first quarter of 1995, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 115, ''Accounting for Certain
Investments in Debt and Equity Securities'' (''Statement 115''), which was
issued by the Financial Accounting Standards Board (''FASB'') in May 1993.
Statement 115 expands the use of fair value accounting and the reporting for
investments in equity securities that have readily determinable fair values and
for all investments in debt securities. The effect of the Company's
implementation of Statement 115 at September 1, 1994 was insignificant.

In the first quarter of 1995, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112, ''Employer's Accounting for
Postemployment Benefits'' (''Statement 112''), which was issued by FASB in
November 1992. Statement 112 establishes standards of accounting and reporting
for the estimated cost of benefits provided to former or inactive employees. The
effect of the Company's implementation of Statement 112 at September 1, 1994 was
insignificant.

Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and For Long-Lived Assets to be Disposed of,"
was issued by the Financial Accounting Standards Board ("FASB") in March 1995
and is effective for fiscal years beginning after December 15, 1995 (the
Company's 1997 fiscal year). Statement 121 establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangible, and
goodwill related to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. Management expects that
the adoption of Statement 121 will not have a significant impact on the
Company's Consolidated Financial Statements.

DETERMINATION OF THE CERTIFICATE INTEREST RATE

The Certificate Interest Rate ("CIR") is the interest rate per annum on the
Subordinated Debt Certificates as determined by Farmland, from time to time,
after giving consideration to the current rates of interest established by
various money markets, and Farmland's need for funds. With respect to the
Demand Loan Certificates, the CIR is the interest rate for Demand Loan
Certificates as determined, from time to time, by Farmland. Any change in the
CIR will not affect the CIR on any Subordinated Capital Investment Certificates,
Subordinated Monthly Income Capital Investment Certificates, or Demand Loan
Certificates for which the full purchase price was received prior to the change.
Except as hereinafter provided, each Demand Loan Certificate shall earn interest
at the CIR in effect on the date of issuance of such Demand Loan Certificate for
a period of six (6) months only; provided, however, that if during such six (6)
month period the CIR for Demand Loan Certificates is increased to a rate higher
than that currently in effect for a Demand Loan Certificate, then each such
Demand Loan Certificate shall earn interest at the increased rate from the
effective date of the increase to the end of such Demand Loan Certificate's then
current six (6) month period. Six (6) months from the date of issuance of each
Demand Loan Certificate and each six (6) month anniversary date thereafter, such
Demand Loan Certificate shall, if not redeemed, earn interest at the CIR for
Demand Loan Certificates in effect on such anniversary date, but only for a six
(6) month period from such anniversary date, subject to the escalation
provisions previously set forth. A decrease in the CIR for Demand Loan
Certificates will have no effect on the CIR of any Demand Loan Certificate
issued prior to the decrease unless such decreased rate is in effect on the
first day of the next subsequent six (6) month period of such outstanding Demand
Loan Certificate.

On the date of this Prospectus, the CIR was 7.0% on Five-Year and 7.75% on
Ten-Year Subordinated Capital Investment Certificates; 7.0% on Five-Year, and
7.75% on Ten-Year Subordinated Monthly Income Capital Investment Certificates;
and 6.0% on Demand Loan Certificates. Whenever the CIR is changed, this
Prospectus shall be amended to specify the interest rate in effect, after the
effective date of the change as specified in the amendment, on the Certificates
to be offered pursuant to such Prospectus. Whenever the CIR is changed, each
respective Demand Loan Certificate and Subordinated Debt Certificate owner is
notified in writing of the change as specified in the amendment. Information
concerning the CIR can be obtained from the Prospectus or from Farmland
Securities Company, Post Office Box 7305, Kansas City, Missouri 64116 (telephone
1-800-821-8000, extension 6360). See "Description of the Ten-Year and Five-Year
Subordinated Capital Investment Certificates," "Ten-Year and Five-Year
Subordinated Monthly Income Capital Investment Certificates" and "Demand Loan
Certificates."

USE OF PROCEEDS

The offering is made on a best efforts basis with no established minimum
amount of Subordinated Debt Certificates and Demand Loan Certificates that must
be sold. No assurance can be provided as to the amount of net proceeds the
Company may receive as a result of this offering. Assuming that all of the
Subordinated Debt and Demand Loan Certificates offered hereby are sold, net
proceeds to the Company will be approximately $161.2 million after deducting
estimated commissions and expenses. Any proceeds to the Company from this
offering may be used: 1) to fund portions of the Company's capital expenditures
and investments in ventures which are estimated to be approximately $379.4
million through the two-year period ending August 31, 1997; 2) to refinance
approximately $54.0 million of Subordinated Debt Certificates with interest
rates of 7.25% to 11% which mature at various times prior to August 31, 1997;
or 3) to redeem Subordinated Debt Certificates prior to maturity at owners'
requests, restricted to the limited redemption rights of owners as described
in each Subordinated Debt Certificate's respective trust indenture. To the
extent that proceeds from sales of the securities offered hereby are less than
amounts required for these purposes, such insufficient amounts may be obtained
from operations, from bank or other borrowings or from other financing
arrangements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition, Liquidity and
Capital Resources", "Other Matters - Capital Expenditures" and the
subcaption "Redemptions" within the description of each type of certificate.

PLAN OF DISTRIBUTION

The securities offered by this Prospectus for cash and for exchange are
offered by FSC and AHI, and may be offered by other broker-dealers selected by
Farmland. The offering is on a best efforts basis. There is no requirement
that any minimum amount of securities offered hereby must be sold. The offering
shall be for an indeterminate period of time not expected to be in excess of two
years.

FSC, located at 3315 North Farmland Trafficway, Kansas City, Missouri, is a
wholly-owned subsidiary of Farmland organized for the sole purpose of offering
Farmland's Demand Loan and Subordinated Debt Certificates for sale to the
general public and/or for exchange and to solicit offers therefor which are
subject to acceptance by Farmland. FSC is a member of the NASD and the
Securities Investor Protection Corporation (SIPC). FSC's involvement in this
offering is in compliance with terms of a partial exemption from requirements of
Schedule E of the NASD Bylaws; no persons, other than persons associated with
Farmland or FSC, participated in determining the price and other terms of the
securities offered hereby. FSC is under no firm commitment or obligation to
solicit offers for any specified amount of such debt securities. FSC's
commitment is to use its best efforts to solicit such orders. Farmland will pay
commissions to FSC not to exceed 4% of the aggregate price of Demand Loan
Certificates and Subordinated Debt Certificates being offered. Farmland will
pay all expenses and liabilities incurred by FSC, limited to an amount not to
exceed 3% of the aggregate sales price of Demand Loan and Subordinated Debt
Certificates being offered. FSC is a registered broker-dealer under the
Securities Exchange Act of 1934, as amended, but has only limited authority to
engage in the offer and sale of securities issued by Farmland. Farmland will
indemnify FSC for certain liabilities under the Securities Act of 1933, as
amended (the "Securities Act").

The Company has engaged AHI, located at 110 E. Iron, P. O. Box 1303,
Salina, Kansas 67402, to offer Farmland Demand Loan and Subordinated Debt
Certificates to the general public and for exchange and to solicit offers
therefore which are subject to acceptance by Farmland. Farmland may engage
other broker-dealers that are qualified to offer and sell the Demand Loan
Certificates and Subordinated Debt Certificates in a particular state and that
are members of the National Association of Securities Dealers, Inc. AHI and
each broker-dealer participating in this offering shall be held responsible for
complying with all statutes, rules and regulations of all jurisdictions in which
each participating broker-dealer offers the Demand Loan and Subordinated Debt
Certificates for sale. Farmland will pay to AHI and may pay to other selected
broker-dealers for their services a sales commission of not more than 4% of the
face amount of Subordinated Debt Certificates and not more than 1/2 of 1% of the
face amount of Demand Loan Certificates which AHI and other selected
broker-dealers sell. In addition, Farmland will pay to AHI and may pay to other
selected broker-dealers an unallocated due diligence and marketing fee of not
more than 1/2 of 1% of the face amount of such certificates the broker-dealers
sell. Farmland may indemnify AHI and other selected broker-dealers for certain
liabilities arising out of violations by Farmland of blue sky laws, or the
Securities Act.

Interstate/Johnson Lane Corporation, a member of the NASD, participated as
a qualified independent underwriter in the "due diligence" review with respect
to the preparation of this Prospectus and received approximately $50,000 for
such participation. As discussed above, Interstate/Johnson Lane Corporation
will not be participating in the pricing of this issue.

EXCHANGE OFFER

Farmland is offering: (1) to the owners of its Subordinated Capital
Investment Certificates the right to exchange such certificates for an
equivalent principal amount of any Subordinated Monthly Income Capital
Investment Certificate ($5,000 minimum) which, at the time of the exchange, is
being offered by this Prospectus. The option to exchange a Subordinated Capital
Investment Certificate into a Subordinated Monthly Income Capital Investment
Certificate is not affected by the period of time the Subordinated Capital
Investment Certificate has been held. Farmland will not redeem Subordinated
Monthly Income Capital Investment Certificates prior to maturity except upon
death of the owner. (2) Farmland is offering to the owners of its Subordinated
Capital Investment Certificates, which have been held until eligible for
redemption prior to maturity at the option of the owner, the right to exchange
such certificates for an equivalent principal amount of any Subordinated Capital
Investment Certificate which, at the time of the exchange, is being offered by
this Prospectus. The option to exchange into Subordinated Capital Investment
Certificates is affected by the period of time the outstanding certificate has
been held. The required holding period is as follows:

Then, to be
If, at the time of issuance eligible for exchange,
the maturity period the certificate must
of the certificate held was: have been held for:
(In Years) (In Years)
5 2
10 3
15 5
20 5

The exchange will be made effective on the day certificates eligible for
exchange are received at Farmland's office in Kansas City, Missouri, provided,
however, that any certificates received within a ten (10) day period preceding
the record date of such certificates, the exchange shall be made effective as of
the first day following such record date. The exchange is irrevocable after the
effective date, but is revocable at any time prior to the effective date.
Notice of an owner's revocation may be in writing, delivered to the address
given below (see "How to Accept Exchange Offer") or by telephone to (816)
459-6360. This exchange offer will expire at 12:00 P.M. Eastern Standard Time
on December 31, 1996, unless terminated prior to such date. Owners of
certificates eligible for exchange shall be notified by letter from Farmland at
least 30 days prior to the effective date of Farmland's termination of this
exchange offer.

Any interest accrued on a certificate being exchanged will be paid on the
day the exchange is made effective.

The opinion of Robert B. Terry, Vice President and General Counsel of
Farmland, which opinion is set forth herein in full as follows, is: The
exchange of certificates would be considered as taxable exchanges. The basis
for determining a taxable gain or loss on a taxable exchange is for an owner to
take into account as gain or loss the difference between the fair market value
of the security being received and his basis (usually cost) in the security
being exchanged. As a practical matter, most owners should have no gain or loss
since the securities were sold at 100% of Face Amount and are being exchanged at
100% of Face Amount. However, since it is possible for a prior owner to have
sold his certificate to another person at a cost which is more or less than he
had paid for it, a subsequent owner could have a different cost than the
original issued cost. Any gain or loss recognized on a taxable exchange would
be taken into account for purpose of federal income taxes as a gain or loss from
the sale or disposition of a capital asset and would be short-term gain or loss
unless, at the time of exchange, it had been held for a period of more than
twelve months. Owners of these certificates should seek advice from their tax
advisor before accepting the exchange offer.

HOW TO ACCEPT EXCHANGE OFFER

The exchange offer may be accepted by delivering any of the Subordinated
Capital Investment Certificates, which are eligible for exchange (see "Exchange
Offer" immediately above), to Farmland Securities Company, P.O. Box 7305, Kansas
City, Missouri 64116 or American Heartland Investments, Inc. P. O. Box 1303,
Salina, Kansas, 67402. The certificates should be assigned to Farmland in the
transfer section (on the reverse side of the certificate) and endorsed by all of
the persons whose names appear on the face of the certificate. Should any
registered owner be incapable of endorsing the certificate, additional
documentation may be necessary. Call (816) 459-6360 or write to the above
address for specific information. Should registered owners wish to have the new
certificate issued to persons other than as shown on the certificate being
surrendered in the exchange, the endorsement signatures must be guaranteed by a
commercial bank or trust company officer or a NASD member firm representative.
The exchange offer must be accompanied by a completed "Order and Receipt for
Investment" form supplied by FSC or AHI. The U.S. Treasury Form W-9, Backup
Withholding Certificate, included on the order form must be completed and
signed by the principal owner of the new certificate.

HOW TO TRANSFER OWNERSHIP

To transfer ownership of certificates, the certificates should be assigned
to the new owner(s) in the transfer section on the reverse side of the
certificate and endorsed by all persons named on the face of the certificate.
Should any registered owner be incapable of endorsing the certificate,
additional documentation may be necessary. Call (816) 459-6360 or write
Farmland Industries, Inc., P.O. Box 7305, Kansas City, Mo. 64116, Dept. 79 for
specific information. All transfer requests require that endorsement signatures
be guaranteed by a commercial bank or trust company officer or an NASD member
firm representative. Requests for transfer should be accompanied by a completed
transfer form supplied by Farmland. The U.S. Treasury Form W-9 Backup
Withholding Certificate included with or on the transfer form must be completed
and signed by the new principal owner.

The transfer will be made effective on the day certificates to be
transferred are received at Farmland's office in Kansas City, Missouri,
provided, however, that any certificates received within a ten (10) day period
preceding the record date of such certificates, the transfer shall be made
effective as of the first day following such record date.

DESCRIPTION OF THE TEN-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES

The Ten-Year Subordinated Capital Investment Certificates, hereinafter
within this section ("Description of the Ten-Year Subordinated Capital
Investment Certificates") referred to as "Certificates," bearing an interest
rate hereinafter described in this section and referred to in this section as
the "CIR", are issued under an indenture (the "Indenture of November 8, 1984")
dated November 8, 1984, as amended January 3, 1985 and December 3, 1991,
between Farmland Industries, Inc. ("Farmland") and Commerce Bank of
Kansas City, National Association, Kansas City, Missouri, as Trustee
(the "Trustee.")

The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections of
the Indenture of November 8, 1984. Where references are made to particular
sections of said Indenture, such sections are incorporated by reference as a
part of the statements, made, and such statements are qualified in their
entirety by such reference.

GENERAL

The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. Interest on the principal sum at the CIR per annum is
payable at the election of the owner, made at the time of purchase,
(i) semiannually or (ii) at maturity or at the date of
redemption if redeemed prior to maturity. See "Certificate Interest Rate"
below. The Certificates are issued in amounts of $100 or more as of the first
day on which payment of the full purchase price has been received by Farmland in
Kansas City, Missouri. Any payments (other than wire transfers) received after
noon shall be deemed received by Farmland on the next business day. Wire
transfers are effective when funds are received. The Certificates mature ten
years from date of issue. The payment of the principal at maturity may, at the
request of the owner, be paid in a lump sum or in equal monthly, quarterly,
semiannual or annual installments, including interest on the unpaid balance at
the rate of six percent (6%) per annum, over a period of not more than
thirty-six months.

The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 8, 1984, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be issued
by Farmland. At August 31, 1995, a total of $126.6 million was outstanding.

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P. O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.

CERTIFICATE INTEREST RATE

The CIR is the rate per annum stated on the face of the Certificate.
The CIR will be such rate as in effect on the date of issuance, as Farmland
may from time to time determine, but any change of the CIR
will not affect the CIR on any Certificate for which the full purchase price was
received prior to the change. See "Determination of the Certificate Interest
Rate."

Interest at the CIR per annum is payable on the principal sum at the
election of the purchaser, made at the time of purchase, in one of the following
ways: (i) semiannually on January 1 and July 1 to owners of record on the last
preceding December 31 and June 30, respectively; or (ii) at maturity, or at the
date of redemption if redeemed prior to maturity, compounded semiannually on
December 31 and June 30 at the CIR which is stated on the face of the
Certificate. Any election to receive payment of the interest semiannually is
irrevocable. The election to receive payment of the interest at maturity, or at
the date of redemption if redeemed prior to maturity, will be terminated upon
written request of the owner, such termination to be effective as of the last
previous interest compounding date. Such termination is irrevocable and, at the
same time, is an election to thereafter receive payment of the interest
semiannually. Any interest attributable to periods starting with the date of
purchase and ending with the effective date of the written request of the holder
to terminate the election to receive payment of the interest at maturity or at
the date of redemption if redeemed prior to maturity will be paid upon receipt
of the written request to terminate the election. Farmland shall have the right
at any time by notice to the owner to terminate any obligation to continue
retaining the interest of any owner pursuant to an owner's election. Such
termination shall be effective as of the opening of business on the day
following the first interest compounding date after such notice is mailed to the
owner and the owner will be paid all the interest in the owner's account on the
effective date.

REMEDIES IN EVENT OF DEFAULT

The Indenture of November 8, 1984 contains provisions identifying events
which are defined for all purposes of the Indenture as "defaults" (except when
the terms are otherwise defined for specific purposes). The Indenture describes
the duties and alternative courses of action which, upon the occurrence of a
default, will be taken by the Trustee as directed by written notice of the
holders of a majority of the principal amount of the Certificates then
outstanding. The Indenture provides that action taken by the Trustee, as a
result of default, will not impair and that no other provisions in the Indenture
will impair the rights of any certificate owner to receive payment of the
principal of and interest on such Certificates on or after the respective dates
expressed on such Certificate nor will such act by the Trustee or other
provisions in the Indenture impair the right of such certificate owner to
institute suit for enforcement of such payment, except that 75 per centum in
principal amount of the Certificates at the time outstanding may consent on
behalf of the owners of all the outstanding Certificates to a postponement of an
interest payment for a period not exceeding three years from its due date.

SUBORDINATION

The payment of the principal and interest on the Certificates is, to the
extent set forth in the Indenture of November 8, 1984, subordinate in right of
payment to the extent set forth in the Indenture to the prior payment in full of
all Senior Indebtedness, whether now outstanding or hereafter incurred. "Senior
Indebtedness" is defined as (a) the principal of and interest on indebtedness
of Farmland (other than the indebtedness of Farmland with respect to its
Subordinated Certificates of Investment issued under indentures dated February
25, 1970 and under indentures dated November 29, 1971; and with respect to its
Subordinated Capital Investment Certificates issued under indentures dated July
29, 1974, and under an indenture dated November 29, 1976, and under an indenture
dated October 24, 1978, and under an indenture dated October 24, 1979, and under
an indenture dated May 20, 1980, and under indentures dated November 5, 1980 and
under indentures dated November 8, 1984; and with respect to its Subordinated
Monthly Income Capital Investment Certificates issued under an indenture dated
July 29, 1974, and under an indenture dated October 24, 1979, and under an
indenture dated November 5, 1980, and under an indenture dated November 8, 1984,
and under an indenture dated November 11, 1985; and with respect to its
Subordinated Individual Retirement Account Certificates issued under an
indenture dated November 20, 1981 and under an indenture dated November 8, 1984)
for money borrowed from or guaranteed to banks, trust companies, insurance
companies, or pension trusts or evidenced by securities issued under the
provisions of an indenture or similar instrument between Farmland and a bank or
trust company other than indebtedness evidenced by instruments which expressly
provide that such indebtedness is not superior, or (b) indebtedness created
after the date of the Indenture of November 8, 1984, as to which the instrument
creating or evidencing the indebtedness provides that such indebtedness is
superior in right of payment to the Certificates.

In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or in
bankruptcy, insolvency, receivership or other proceeding of Farmland, the
holders of all Senior Indebtedness shall be entitled to receive payment in full
before the owners of the Certificates are entitled to receive payment. After
payment in full of the Senior Indebtedness, the owners of the Certificates will
be entitled to participate in any distribution of assets, both as such owners
and by virtue of subrogation to the rights of the holders of the Senior
Indebtedness to the extent that the Senior Indebtedness was benefited by the
receipt of distributions to which the owners of the Certificates would have been
entitled if there had been no subordination. By reason of such subordination,
in the event of Farmland's insolvency, holders of Senior Indebtedness may
receive more, ratably, and owners of the Certificates may receive less, ratably,
than other creditors of Farmland (Section 4.05(a)).

See "Risk Factors - Subordination and Additional Debt".

REDEMPTION

The Certificates may be redeemed, after two (2) years from date of
issuance, at the option of Farmland at any time prior to maturity, on at least
ten days written notice, at face value plus accrued interest to the date of
redemption only. The Indenture of November 8, 1984 permits Farmland to select
in any manner at its discretion the Certificates to be redeemed.

Commencing three (3) years after date of issuance, a limited amount of
Certificates can be redeemed prior to maturity during each month. The maximum
amount that Farmland will redeem prior to maturity during any month is the
greater of $500,000 or 1/2 of 1% of the balance outstanding provided the balance
outstanding is greater than $5,000,000. If the balance outstanding is less than
$5,000,000 there will be no limitation on early redemption of eligible
Certificates.

The 1/2 of 1% limitation is determined as follows:

(1) Add the face amount of Certificates held by all
investors at the end of the preceding month to establish
the "combined amount" held by investors at the end of
the preceding month.

(2) Multiply the "combined amount" by 1/2 of 1%.

If the amount made available for redemption prior to maturity (as
determined in step one and two) exceeds the amount requested for redemption
prior to maturity, such excess is carried over to the next month and added to
the amount available for redemption prior to maturity, provided however that any
excess will not be carried beyond Farmland's fiscal year end.

Redemption prior to maturity will be made upon the surrender of such
eligible Certificates properly endorsed accompanied by written request for early
redemption to Farmland, in the order in which such written requests for
redemption prior to maturity are received by Farmland. In addition to the
amount available for redemption prior to maturity as determined above,
redemptions will be made in the case of death of an owner of the Certificates
upon written request of the legal owner accompanied by satisfactory proof of
ownership. Redemptions prior to maturity will be made at the face value of the
Certificates plus interest to the date of redemption only. Amounts available
for redemption prior to maturity are not set aside in a separate fund (Sections
3.01 and 3.02).

CONCERNING THE TRUSTEE

The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 8, 1984, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount of
the Certificates outstanding at the time of the occurrence of a default have the
right to require the Trustee to take action to remedy such default. Upon the
occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Sections 6.03 and 7.02).

MODIFICATION OF THE INDENTURE

The Indenture of November 8, 1984 contains provisions permitting Farmland,
with the consent of the Trustee, to execute supplemental indentures (a) to
evidence any succession for another corporation to Farmland and the assumption
by the successor corporation of covenants and obligations of Farmland, (b) to
add further covenants or provisions which Farmland's Board of Directors and the
Trustee consider to be for the protection of the holders of the Certificates,
or (c) to cure any ambiguity in the Indenture (Section 10.01).

The Indenture of November 8, 1984 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indenture shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
Certificates then outstanding (Section 10.02).

DEFAULTS AND NOTICE THEREOF

The Indenture of November 8, 1984 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to pay
interest on Certificates when due, continued for 60 days; (3) certain events of
bankruptcy or insolvency; and (4) failure to perform any other covenant or
agreement contained in the Indenture, continued for 90 days. Failure to pay
either principal or interest when due during the pendency of any dissolution or
liquidation proceeding or action to endorse payment of indebtedness shall also
constitute such a default (Section 6.01).

The Indenture of November 8, 1984 provides that the Trustee shall within 90
days after the occurrence of a default, not including periods of grace, give to
the Certificate owners notice of all such defaults unless such defaults have
been cured; provided that, except in the case of default in the payment of
principal of or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate owners
(Section 6.02).

The Indenture of November 8, 1984 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the conditions
and covenants provided for in said Indenture as may be required from time to
time by the Securities and Exchange Commission. Summaries of any such reports
filed with the Trustee or the Securities and Exchange Commission pursuant to
rules and regulations as prescribed by the Securities and Exchange Commission
shall be transmitted to the owners of Certificates in the manner and to the
extent provided for in the Indenture (Section 5.03).

The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
said Indenture.

SATISFACTION AND DISCHARGE OF INDENTURE

The Indenture of November 8, 1984 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).

DESCRIPTION OF THE FIVE-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES

The Five-Year Subordinated Capital Investment Certificates, hereinafter
within this section ("Description of the Five-Year Subordinated Capital
Investment Certificates") referred to as "Certificates," bearing an interest
rate hereinafter described in this section and referred to in this section as
the "CIR", are issued under an indenture (the "Indenture of November 8, 1984")
dated November 8, 1984, as amended January 3, 1985 and December 3, 1991,
between Farmland Industries, Inc. ("Farmland") and Commerce Bank of
Kansas City, National Association, Kansas City, Missouri, as Trustee
(the "Trustee.")

The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections of
the Indenture of November 8, 1984. Where references are made to particular
sections of said Indenture, such sections are incorporated by reference as a
part of the statements made, and such statements are qualified in their entirety
by such reference.

GENERAL

The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. Interest on the principal sum at the CIR per annum
is payable at the election of the owner made at the time
of purchase (i) semiannually or (ii) at maturity or at the date of redemption if
redeemed prior to maturity. See "Certificate Interest Rate" below. The
Certificates are issued in amounts of $100 or more as of the day on which
payment of the full purchase price has been received by Farmland in Kansas City.
Any payments (other than wire transfers) received after noon shall be deemed
received by Farmland on the next business day. Wire transfers are effective
when funds are received. The Certificates mature five years from date of issue.
The payment of the principal at maturity may, at the request of the owner, be
paid in a lump sum or in equal monthly, quarterly, semiannual or annual
installments, including interest on the unpaid balance at the rate of six
percent (6%) per annum, over a period of not more than thirty-six months.

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.

CERTIFICATE INTEREST RATE

The CIR is the rate per annum stated on the face of the Certificate. The
CIR will be such rate as is in effect on the date of issuance, as Farmland may
from time to time determine, but any change of the CIR will not affect the CIR
on any Certificate for which the full purchase price was received prior to the
change. See "Determination of the Certificate Interest Rate."

Interest at the CIR per annum is payable on the principal sum at the
election of the purchaser, made at the time of purchase, in one of the following
ways: (i) semiannually on January 1 and July 1, to owners of record on the last
preceding December 31 and June 30, respectively; or (ii) at maturity or at the
date of redemption if redeemed prior to maturity, compounded semiannually, on
December 31 and June 30 at the CIR which is stated on the face of the
Certificate. Any election to receive payment of the interest semiannually is
irrevocable. The election to receive payment of the interest at maturity, or at
the date of redemption if redeemed prior to maturity, will be terminated upon
written request of the owner, such termination to be effective as of the last
previous interest compounding date. Such termination is irrevocable and, at the
same time, is an election to thereafter receive payment of the interest
semiannually. Any interest attributable to periods starting with the date of
purchase and ending with the effective date of the written request of the holder
to terminate the election to receive payment of the interest at maturity or at
the date of redemption if redeemed prior to maturity will be paid upon receipt
of the written request to terminate the election. Farmland shall have the right
at any time by notice to the owner to terminate any obligation to continue
retaining the interest of any owner pursuant to an owner's election. Such
termination shall be effective as of the opening of business on the day
following the first interest compounding date after such notice is mailed to the
owner and the owner will be paid all the interest in the owner's account on the
effective date.

REMEDIES IN EVENT OF DEFAULT

SUBORDINATION

The payment of the principal and interest on the Certificates is, to the
extent set forth in the Indenture of November 8, 1984, subordinate in right of
payment to the prior payment in full of all Senior Indebtedness, whether now
outstanding or hereafter incurred. "Senior Indebtedness" is defined as (a) the
principal of and interest on indebtedness of Farmland (other than the
indebtedness of Farmland with respect to its Subordinated Certificates of
Investment issued under indentures dated February 25, 1970 and under indentures
dated November 29, 1971; and with respect to its Subordinated Capital Investment
Certificates issued under indentures dated July 29, 1974, and under an indenture
dated November 29, 1976, and under an indenture dated October 24, 1978, and
under an indenture dated October 24, 1979, and under an indenture dated May 20,
1980, and under indentures dated November 5, 1980 and under indentures dated
November 8, 1984; and with respect to its Subordinated Monthly Income Capital
Investment Certificates issued under an indenture dated July 29, 1974, and under
an indenture dated October 24, 1979, and under an indenture dated November 5,
1980, and under an indenture dated November 8, 1984, and under an indenture
dated November 11, 1985; and with respect to its Subordinated Individual
Retirement Account Certificates issued under an indenture dated November 20,
1981 and under an indenture dated November 8, 1984) for money borrowed from or
guaranteed to banks, trust companies, insurance companies, or pension trusts or
evidenced by securities issued under the provisions of an indenture or similar
instrument between Farmland and a bank or trust company other than indebtedness
evidenced by instruments which expressly provide that such indebtedness is not
superior, or (b) indebtedness created after the date of the Indenture of
November 8, 1984, as to which the instrument creating or evidencing the
indebtedness provides that such indebtedness is superior in right of payment to
the Certificates.

In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or in
bankruptcy, insolvency, receivership or other proceeding of Farmland the holders
of all Senior Indebtedness shall be entitled to receive payment in full before
the owners of the Certificates are entitled to receive payment. After payment
in full of the Senior Indebtedness, the owners of the Certificates will be
entitled to participate in any distribution of assets, both as such owners and
by virtue of subrogation to the rights of the holders of the Senior Indebtedness
to the extent that the Senior Indebtedness was benefited by the receipt of
distributions to which the owners of the Certificates would have been entitled
if there had been no subordination. By reason of such subordination, in the
event of Farmland's insolvency, holders of Senior Indebtedness may receive more,
ratably, and owners of the Certificates may receive less, ratably, than other
creditors of Farmland (Section 4.05(a)).

See "Risk Factors - Subordination and Additional Debt".

REDEMPTION

The Certificates may be redeemed, after two (2) years from date of
issuance, at the option of Farmland at any time prior to maturity, on at least
ten days' written notice, at face value plus accrued interest to the date of
redemption only. The Indenture of November 8, 1984 permits Farmland to select
in any manner at its discretion the Certificates to be redeemed.

Commencing two (2) years after date of issuance, a limited amount of
Certificates can be redeemed prior to maturity during each month. The maximum
amount that Farmland will redeem prior to maturity during any month is the
greater of $500,000 or 1/2 of 1% of the balance outstanding provided the balance
outstanding is greater than $5,000,000. If the balance outstanding is less than
$5,000,000 there will be no limitation on early redemption of eligible
Certificates.

The 1/2 of 1% limitation is determined as follows:

(1) Add the face amount of Certificates held by each
investor at the end of the preceding month to establish
the "combined amount" held by investors at the end of
the preceding month.

(2) Multiply the "combined amount" by 1/2 of 1%.

Redemption prior to maturity will be made upon the surrender of such
eligible Certificates properly endorsed accompanied by written request for early
redemption to Farmland, in the order in which such written requests for
redemption prior to maturity are received by Farmland. In addition to the
amount available for redemption prior to maturity as determined above,
redemptions will be made in the case of death of an owner of the Certificates
upon written request of the legal owner accompanied by satisfactory proof of
ownership. Redemptions prior to maturity will be made at the face value of
the Certificates plus interest to the date of redemption only. Amounts
available for redemption prior to maturity are not set aside in a separate
fund (Sections 3.01 and 3.02).

CONCERNING THE TRUSTEE

The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 8, 1984, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount of
the Certificates outstanding at the time of the occurrence of a default have the
right to require the Trustee to take action to remedy such default. Upon the
occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of the outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Sections 6.03 and 7.02).

MODIFICATION OF THE INDENTURE

The Indenture of November 8, 1984 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in the
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indenture shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
Certificates then outstanding (Section 10.02).

DEFAULTS AND NOTICE THEREOF

The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
the indenture.

SATISFACTION AND DISCHARGE OF INDENTURE

The Indenture of November 8, 1984 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).

DESCRIPTION OF THE TEN-YEAR SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT
CERTIFICATES

The Ten-Year Subordinated Monthly Income Capital Investment Certificates,
hereinafter within this section ("Description of the Ten-Year Subordinated
Monthly Income Capital Investment Certificates") referred to as "Certificates,"
bearing an interest rate hereinafter described in this section and referred to
in this section as the "CIR", are issued under an indenture (the "Indenture of
November 8, 1984") dated November 8, 1984, as amended January 3, 1985 and
November 20, 1985, between Farmland Industries, Inc. ("Farmland") and Commerce
Bank of Kansas City, National Association, Kansas City, Missouri, as Trustee
(the "Trustee.")

The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections of
the Indenture of November 8, 1984. Where references are made to particular
sections of said Indenture, such sections are incorporated by reference as a
part of the statements made, and such statements are qualified in their entirety
by such reference.

GENERAL

The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. The Certificates are issued in amounts of $5,000 or
more and in additional increments of $1,000 or more as of the day on which
payment of the full purchase price has been received by Farmland in Kansas City,
Missouri. Any payments (other than wire transfers) received after noon shall be
deemed received by Farmland on the next business day. Wire transfers are
effective when funds are received. The Certificates mature ten years from date
of issue. Interest on the principal sum at the CIR per annum is payable
monthly on the first day of each month following the month in
which a Certificate is issued. The payment of the principal at maturity may, at
the request of the owner, be paid in a lump sum or in equal monthly, quarterly,
semiannual or annual installments, including interest on the unpaid balance at
the rate of six percent (6%) per annum, over a period of not more than
thirty-six months.

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6201.

CERTIFICATE INTEREST RATE

REMEDIES IN EVENT OF DEFAULT

SUBORDINATION

The payment of the principal and interest on the Certificates is, to the
extent set forth in the Indenture of November 8, 1984, subordinate in right of
payment to the prior payment in full of all Senior Indebtedness, whether now
outstanding or hereafter incurred. "Senior Indebtedness" is defined as (a) the
principal of and interest on indebtedness of Farmland (other than the
indebtedness of Farmland with respect to its Subordinated Certificates of
Investment issued under indentures dated February 25, 1970 and under indentures
dated November 29, 1971; and with respect to its Subordinated Capital Investment
Certificates issued under indentures dated July 29, 1974, and under an indenture
dated November 29, 1976, and under an indenture dated October 24, 1978, and
under an indenture dated October 24, 1979, and under an indenture dated May 20,
1980, and under indentures dated November 5, 1980, and under indentures dated
November 8, 1984, and under an indenture dated November 11, 1985; and with
respect to its Subordinated Monthly Income Capital Investment Certificates
issued under an indenture dated July 29, 1974, and under an indenture dated
October 24, 1979, and under an indenture dated November 5, 1980 and under an
indenture dated November 8, 1984, and under an indenture dated November 11,
1985; and with respect to its Subordinated Individual Retirement Account
Certificates issued under an indenture dated November 20, 1981 and under an
indenture dated November 8, 1984) for money borrowed from or guaranteed to
banks, trust companies, insurance companies, or pension trusts or evidenced by
securities issued under the provisions of an indenture or similar instrument
between Farmland and a bank or trust company other than indebtedness evidenced
by instruments which expressly provide that such indebtedness is not superior,
or (b) indebtedness created after the date of the Indenture of November 8, 1984,
as to which the instrument creating or evidencing the indebtedness provides that
such indebtedness is superior in right of payment to the Certificates.

In the event of any distribution of assets of Farmland under any
dissolution, winding up, total or partial liquidation, reorganization or
bankruptcy, insolvency, receivership or other proceeding of Farmland, the
holders of all Senior Indebtedness shall be entitled to receive payment in full
before the owners of the Certificates are entitled to receive payment. After
payment in full of the Senior Indebtedness, the owners of the Certificates will
be entitled to participate in any distribution of assets, both as such owners
and by virtue of subrogation to the rights of the holders of the Senior
Indebtedness to the extent that the Senior Indebtedness was benefited by the
receipt of distributions to which the owners of the Certificates would have been
entitled if there had been no subordination. By reason of such subordination,
in the event of Farmland's insolvency, holders of Senior Indebtedness may
receive more, ratably, and owners of the Certificates may receive less, ratably,
than other creditors of Farmland (Section 4.05(a)).

See "Risk Factors - Subordination and Additional Debt".

REDEMPTION

The Certificates can not be called for redemption by Farmland at any time
prior to maturity (Section 3.01).

In addition, Farmland will not redeem the Certificates prior to maturity
upon request of the owner. Redemption will be made in the case of death of an
owner of the Certificates upon written request of the legal owner accompanied by
satisfactory proof of ownership. Redemptions prior to maturity will be made at
the face value of the Certificates plus interest to the date of redemption only.
Amounts available for redemption prior to maturity are not set aside in a
separate fund (Section 3.02).

CONCERNING THE TRUSTEE

The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 8, 1984, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount of
the Certificates outstanding at the time of the occurrence of a default have the
right to require the Trustee to take action to remedy such default. Upon the
occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of the outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Sections 6.03 and 7.02).

MODIFICATION OF THE INDENTURE

The Indenture of November 8, 1984 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indentures shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
Certificates then outstanding (Section 10.02).

DEFAULTS AND NOTICE THEREOF

The Indenture of November 8, 1984 provides that the Trustee shall within 90
days after the occurrence of a default, not including periods of grace, give to
the Certificate owners notice of all such defaults unless such defaults have
been cured; provided that, except in the case of default in the payment of
principal or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate owners
(Section 6.02).

The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
said Indenture.

SATISFACTION AND DISCHARGE OF INDENTURE

The Indenture of November 8, 1984 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).

DESCRIPTION OF THE FIVE-YEAR SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT
CERTIFICATES

The Five-Year Subordinated Monthly Income Capital Investment Certificates,
hereinafter within this section ("Description of the Five-Year Subordinated
Monthly Income Capital Investment Certificates") referred to as "Certificates,"
bearing an interest rate hereinafter described in this section and referred to
in this section as the "CIR", are issued under an indenture dated November 11,
1985 (the "Indenture of November 11, 1985") between Farmland Industries, Inc.
("Farmland") and Commerce Bank of Kansas City, National Association, Kansas
City, Missouri, as Trustee (the "Trustee").

The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 11, 1985, and do not
purport to be complete. The section references therein refer to the sections of
said Indenture of November 11, 1985. Where references are made to particular
sections of the said Indenture, such sections are incorporated by reference as a
part of the statements made, and such statements are qualified in their entirety
by such reference.

GENERAL

The Certificates are direct obligations of Farmland, but are not secured
and are not negotiable. The Certificates are issued in amounts of $5,000 or
more and in additional increments of $1,000 or more as of the day on which
payment of the full purchase price has been received by Farmland in Kansas City,
Missouri. Any payments (other than wire transfers) received after noon shall be
deemed received by Farmland on the next business day. Wire transfers are
effective when funds are received. The Certificates mature five years from date
of issue. Interest on the principal sum at the CIR per annum is payable
monthly on the first day of each month to the owners of record
on such payment date commencing with the first day of the month which follows
the month in which the Certificate is issued. The payment of the principal at
maturity may, at the request of the owner, be paid in a lump sum or in equal
monthly, quarterly, semiannual or annual installments, including interest on the
unpaid balance at the rate of six percent (6%) per annum, over a period of not
more than thirty-six months.

The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 11, 1985, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be issued
by Farmland. At August 31, 1995, a total of $21.6 million was outstanding.

CERTIFICATE INTEREST RATE

The CIR is the rate per annum stated on the face of the Certificate. The
CIR will be such rate as is in effect at the date of issuance, as Farmland may
from time to time determine, but any change of the CIR will not affect the CIR
on any Certificate for which the full purchase price was received prior to the
change. See "Determination of the Certificate Interest Rate."

REMEDIES IN EVENT OF DEFAULT

The Indenture of November 11, 1985 contains provisions identifying events
which are defined for all purposes of the Indenture as "defaults" (except when
the terms are otherwise defined for specific purposes). The Indenture describes
the duties and alternative courses of action which, upon the occurrence of a
default, will be taken by the Trustee as directed by written notice of the
holders of a majority of the principal amount of the Certificates then
outstanding. The Indenture provides that action taken by the Trustee, as a
result of default, will not impair and that no other provisions in the Indenture
will impair the rights of any certificate owner to receive payment of the
principal of and interest on such Certificates on or after the respective dates
expressed on such Certificate nor will such act by the Trustee or other
provisions in the Indenture impair the right of such Certificate owner to
institute suit for enforcement of such payment, except that 75 per centum in
principal amount of the Certificates at the time outstanding may consent on
behalf of the owners of all the outstanding Certificates to a postponement of an
interest payment for a period not exceeding three years from its due date.

SUBORDINATION

The payment of the principal and interest on the Certificates is, to the
extent set forth in the Indenture of November 8, 1984, subordinate in right of
payment to the prior payment in full of all Senior Indebtedness, whether now
outstanding or hereafter incurred. "Senior Indebtedness" is defined as (a) the
principal of and interest on indebtedness of Farmland (other than the
indebtedness of Farmland with respect to its Subordinated Certificates of
Investment issued under indentures dated February 25, 1970, and under indentures
dated November 29, 1971; and with respect to its Subordinated Capital Investment
Certificates issued under indentures dated July 29, 1974, and under an indenture
dated November 29, 1976, and under an indenture dated October 24, 1978, and
under an indenture dated October 24, 1979, and under an indenture dated May 20,
1980, and under indentures dated November 5, 1980, and under indentures dated
November 8, 1984, and under an indenture dated November 11, 1985; and with
respect to its Subordinated Monthly Income Capital Investment Certificates
issued under an indenture dated July 29, 1974, and under an indenture dated
October 24, 1979, and under an indenture dated November 5, 1980, and under an
indenture dated November 8, 1984, and under an indenture dated November 11,
1985; and with respect to its Subordinated Individual Retirement Account
Certificates issued under an indenture dated November 20, 1981, and under an
indenture dated November 8, 1984) for money borrowed from or guaranteed to
banks, trust companies, insurance companies, or pension trusts or evidenced by
securities issued under the provisions of an indenture or similar instrument
between Farmland and a bank or trust company other than indebtedness evidenced
by instruments which expressly provide that such indebtedness is not superior,
or (b) indebtedness created after the date of the Indenture of November 11,
1985, as to which the instrument creating or evidencing the indebtedness
provides that such indebtedness is superior in right of payment to the
Certificates.

See "Risk Factors - Subordination and Additional Debt".

REDEMPTION

The Certificates can not be called for redemption by Farmland at any time
prior to maturity (Section 3.01).

CONCERNING THE TRUSTEE

The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, is the Trustee under the Indenture of November 11, 1985, and is to
perform only such duties as are specifically set forth in that Indenture. In
the case of a default, the owners of a majority in aggregate principal amount of
the Certificates outstanding at the time of the occurrence of a default have the
right to require the Trustee to take action to remedy such default. Upon the
occurrence of a default, the Trustee may, and upon the written request of a
majority in aggregate principal amount of the outstanding Certificates shall,
declare the principal of all Certificates outstanding and interest accrued
thereon immediately due and payable (Sections 6.03 and 7.02).

MODIFICATION OF THE INDENTURE

The Indenture of November 11, 1985 contains provisions permitting Farmland,
with the consent of the Trustee, to execute supplemental indentures (a) to
evidence any succession for another corporation to Farmland and the assumption
by the successor corporation of covenants and obligations of Farmland, (b) to
add further covenants or provisions which Farmland's Board of Directors and the
Trustee consider to be for the protection of the holders of the Certificates,
or (c) to cure any ambiguity in the Indenture (Section 10.01).

The Indenture of November 11, 1985 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Certificates then outstanding, to execute
supplemental indentures, provided that no such supplemental indentures shall
(1) extend the fixed maturity of any Certificates, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest,
without the consent of the owner of each Certificate so affected, or (2) reduce
the 66-2/3% requirement as to the consent of the owners of the Certificates for
changes in any supplemental indenture, without the consent of the owners of all
Certificates then outstanding (Section 10.02).

DEFAULTS AND NOTICE THEREOF

The Indenture of November 11, 1985 provides that any of the following shall
constitute a default: (1) failure to pay principal when due; (2) failure to pay
interest on Certificates when due, continued for 60 days; (3) certain events of
bankruptcy or insolvency; and (4) failure to perform any other covenant or
agreement contained in the Indenture, continued for 90 days. Failure to pay
either principal or interest when due during the pendency of any dissolution or
liquidation proceeding or action to endorse payment of indebtedness shall also
constitute such a default (Section 6.01).

The Indenture of November 11, 1985 provides that the Trustee shall within
90 days after the occurrence of a default, not including periods of grace, give
to the Certificate owners notice of all such defaults unless such defaults have
been cured; provided that, except in the case of default in the payment of
principal or interest on any of the Certificates, the Trustee shall be
protected in withholding such notice if and so long as the Trustee determines
that the withholding of such notice is in the interest of the Certificate owners
(Section 6.02).

The Indenture of November 11, 1985 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the conditions
and covenants provided for in said Indenture as may be required from time to
time by the Securities and Exchange Commission. Summaries of any such reports
filed with the Trustee or the Securities and Exchange Commission pursuant to
rules and regulations as prescribed by the Securities and Exchange Commission
shall be transmitted to the owners of Certificates in the manner and to the
extent provided for in said Indenture (Section 5.03).

The Indenture of November 11, 1985 does not require any periodic evidence
to be furnished as to the absence of default or as to compliance with the terms
of the Indenture.

SATISFACTION AND DISCHARGE OF INDENTURE

The Indenture of November 11, 1985 shall be discharged upon payment or
redemption of all Certificates or upon deposit with the Trustee of funds
sufficient therefor (Section 12.01).

DESCRIPTION OF THE DEMAND LOAN CERTIFICATES

The Demand Loan Certificates are issued under an indenture (the "Indenture
of November 20, 1981") dated November 20, 1981, as amended January 4, 1982,
between Farmland Industries, Inc. ("Farmland") and Commerce Bank of Kansas City,
National Association, Kansas City, Missouri as Trustee (the "Trustee.")
Effective January 31, 1989, Commerce Bank resigned as Trustee and UMB Bank,
National Association, Kansas City, Missouri has been appointed the Trustee.

The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 20, 1981 and do not
purport to be complete. The section references therein refer to the sections of
the Indenture of November 20, 1981. Where references are made to particular
sections of said Indenture, such sections are incorporated by reference as
part of the statements made, and such statements are qualified in their entirety
by such reference.

GENERAL

The Demand Loan Certificates are direct obligations of Farmland but are not
secured and are not negotiable. The Demand Loan Certificates are issued in
amounts of $100 or more, and dated on the day payment of the full purchase price
is received by Farmland in Kansas City, Missouri. Any payments (other than wire
transfers) received after noon shall be deemed received by Farmland on the next
business day. Wire transfers are effective when funds are received. If
purchased and held by a member of Farmland for a one (1) month period or by any
other purchaser for a six (6) month period immediately following the date of
issue the principal amount of the Demand Loan Certificates will bear interest at
the Certificate Interest Rate (herein referred to as the "CIR"). The CIR is the
interest rate for the Demand Loan Certificates as determined, from time to time,
by Farmland. Except as hereinafter provided, each Demand Loan Certificate shall
earn interest at the CIR in effect on the date of issuance of such Demand Loan
Certificate for a period of six (6) months only; provided, however, that if
during such six (6) month period the CIR is increased to a rate higher than that
currently in effect for the Demand Loan Certificates, then each such Demand Loan
Certificate shall earn interest at the increased rate from the effective date of
the increase to the end of such Demand Loan Certificate's then current six (6)
month period. Six (6) months from the date of issue of each Demand Loan
Certificate and each six (6) month anniversary date thereafter, such Demand Loan
Certificate shall, if not redeemed, earn interest at the CIR in effect on such
anniversary date, but only for a six (6) month period from such anniversary
date, subject to the escalation provisions previously set forth. A decrease in
the CIR will have no effect on any Demand Loan Certificate issued prior to the
decrease until the first day of the next subsequent six (6) month period of such
outstanding Demand Loan Certificate. Holders of Demand Loan Certificates are
notified of the effective date of any change of the CIR which affects the Demand
Loan Certificates held. The Demand Loan Certificates may be redeemed at face
value plus interest to date of redemption at the option of the owner, at any
time. No partial redemptions will be permitted. If redeemed by a Farmland
member cooperative during a one (1) month period or by any other purchaser
during a six (6) month period immediately following the date of issuance, the
Demand Loan Certificates shall bear interest from date of issuance to date of
redemption at a demand rate of 2% below the CIR. Interest on the principal
amount of any Demand Loan Certificate held longer than six (6) months will be
computed at the effective CIR and is payable in one of the following ways at the
option of the owner, made at the time of purchase and irrevocable as to the
purchaser: (i) six (6) months after the date of issuance and at the end of each
and every six (6) month period thereafter until the Demand Loan Certificate is
surrendered for redemption, or (ii) only at the date of redemption compounded
semi-annually at the effective CIR.

The issuance of Demand Loan Certificates is limited to $500,000,000
outstanding at any one time under the Indenture of November 20, 1981 but such
Indenture does not limit the amount of other securities either secured or
unsecured, which may be issued by Farmland. At August 31, 1995, a total of
$13.5 million was outstanding.

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and
Chief Financial Officer, Telephone (816) 459-6201.

See "Risk Factors - Subordination and Additional Debt".

REDEMPTION

Farmland will redeem the Demand Loan Certificates at any time upon written
request of the owner. If the certificate is surrendered for redemption by a
Farmland member cooperative during a one (1) month period or by any other owner
during a six (6) month period immediately following the date of issuance,
interest computed at the applicable demand rate from date of issuance to date of
redemption will be paid at the time of redemption of the Demand Loan
Certificate. If the Demand Loan Certificate is held for a period longer than
six (6) months from date of issuance, interest from the last previous date on
which interest was paid or compounded to the date of redemption computed at the
applicable CIR will be paid upon redemption. Any interest held for compounding
by Farmland in accordance with an interest option made by the purchaser will be
paid upon redemption of the Demand Loan Certificate (Section 3.01).

CONCERNING THE TRUSTEE

The Commerce Bank of Kansas City, National Association, Kansas City,
Missouri, the corporation designated to act as Trustee under the Indenture,
resigned effective January 31, 1989 and UMB Bank, National Association, Kansas
City, Missouri, has been appointed the Trustee under the Indenture of November
20, 1981 and is to perform only such duties as are specifically set forth in
that Indenture. In the case of a default, the owners of a majority in aggregate
principal amount of the Demand Loan Certificates outstanding at the time of the
occurrence of a default have the right to require the Trustee to take action to
remedy such default. Upon the occurrence of a default, the Trustee may, and
upon the written request of a majority in aggregate principal amount of the
Demand Loan Certificates outstanding shall, declare the principal of all Demand
Loan Certificates and interest accrued thereon immediately due and payable
(Sections 6.03 and 7.02).

MODIFICATION OF THE INDENTURE

The Indenture of November 20, 1981 contains provisions permitting
Farmland, with the consent of the Trustee, to execute supplemental indentures
(a) to evidence any succession for another corporation to Farmland and the
assumption by the successor corporation of covenants and obligations of
Farmland, (b) to add further covenants or provisions which Farmland's Board
of Directors and the Trustee consider to be for the protection of the holders
of the Certificates, or (c) to cure any ambiguity in the Indenture
(Section 10.01).

The Indenture of November 20, 1981 contains provisions permitting Farmland
and the Trustee, with the consent of the owners of not less than 66-2/3% in
aggregate principal amount of the Demand Loan Certificates then outstanding, to
execute supplemental indentures adding to or changing any provisions of the
indenture of November 20, 1981, or supplemental indentures, provided that no
such supplemental Indenture shall (1) extend the fixed maturity of any Demand
Loan Certificates, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest, without the consent of the owner of each
Demand Loan Certificate so affected, or (2) reduce the 66-2/3% requirement as to
the consent of the owners of the Demand Loan Certificates for changes in any
supplemental indenture, without the consent of the owner of all Demand Loan
Certificates then outstanding (Section 10.02).

DEFAULTS AND NOTICE THEREOF

The Indenture of November 20, 1981 provides that any of the following shall
constitute a default: (1) failure to pay principal on Demand Loan Certificates
when due; (2) failure to pay interest on Demand Loan Certificates when due,
continued for 60 days; (3) certain events of bankruptcy or insolvency; and (4)
failure to perform any other covenant or agreement contained in the Indenture,
continued for 90 days. Failure to pay either principal or interest when due
during the pendency of any dissolution or liquidation proceeding or action to
endorse payment of indebtedness shall also constitute such a default (Section
6.01).

The Indenture of November 20, 1981 provides that the Trustee shall within
90 days after the occurrence of a default, not including periods of grace, give
to the Demand Loan Certificate owners notice of all such defaults unless such
defaults have been cured; provided that, except in the case of default in the
payment of principal of or interest on any of the Demand Loan Certificates, the
Trustee shall be protected in withholding such notice if and so long as the
Trustee determines that the withholding of such notice is in the interest of the
Demand Loan Certificate owners (Section 6.02).

The Indenture of November 20, 1981 requires Farmland to file with the
Trustee and the Securities and Exchange Commission such additional information,
documents and reports with respect to compliance by Farmland with the conditions
and covenants provided for in said Indenture as may be required from time to
time by the Securities and Exchange Commission. Summaries of any such reports
filed with the Trustee or the Securities and Exchange Commission pursuant to
rules and regulations as prescribed by the Securities and Exchange Commission
shall be transmitted to the owners of Demand Loan Certificates in the manner
and to the extent provided for in said Indenture (Section 5.03).

The Indenture of November 20, 1981 does not require any periodic evidence
to be furnished as to the absence of default or as to compliance with the terms
of the Indenture.

SATISFACTION AND DISCHARGE OF INDENTURE

The Indenture of November 20, 1981 shall be discharged upon payment or
redemption of all Demand Loan Certificates or upon deposit with the Trustee of
funds sufficient therefor (Section 12.01).

LEGAL MATTERS

Robert B. Terry, Vice President and General Counsel of the Registrant, has
given an opinion upon the legality of the securities being registered and upon
certain other legal matters in connection with the registration of these
securities.

THE COMPANY

Farmland is an agricultural farm supply and processing and marketing
cooperative headquartered in Kansas City, Missouri that is primarily owned by
its members and operates on a cooperative basis. Founded originally in 1929,
Farmland has grown from revenues of $310,000 during its first year of operation
to over $7.2 billion during 1995. Members are entitled to receive patronage
refunds distributed by Farmland from its member-sourced annual net earnings.
Unless the context otherwise requires, the term "member" herein means (i) any
voting member, (ii) any associate member, or (iii) any other person with which
Farmland is a party to a currently effective patronage refund agreement (a
"patron"). See "Business - Patronage Refunds and Distribution of Net Earnings".

Farmland was formally incorporated in Kansas in 1931. Its principal
executive offices are at 3315 North Farmland Trafficway, Kansas City,
Missouri 64116 (telephone 816-459-6000).

MEMBERSHIP

Membership requirements are determined by Farmland's Articles of
Incorporation and the Board of Directors of Farmland (the ''Board of
Directors'').

VOTING MEMBERS

As of August 31, 1995, Farmland's requirements for voting membership were
as follows: (1) Voting membership is limited to (a) farmers' and ranchers'
cooperative associations which have purchased farm supplies from or provided
grain to Farmland during Farmland's two most recently completed years, and (b)
producers of hogs and cattle or associations of such producers which have
provided hogs or cattle to Farmland during Farmland's two most recent years. (2)
Voting members must maintain a minimum investment of $1,000 in par value of
Farmland common stock. (3) A cooperative must have open membership (an open
membership cooperative is open to anyone i.e. non-discriminatory) limit voting
to agricultural producers and conduct a majority of its business with voting
producers.

ASSOCIATE MEMBERS

Farmland's associate members have all the rights of membership except that
they do not have voting rights.

As of August 31, 1995, Farmland's requirements for associate membership
were: Associate members must maintain a minimum investment of $1,000 in par
value of Farmland associate member common stock and meet any one of the
following four criteria: (a) be a person meeting the requirements for voting
membership; (b) be a non-cooperative business entity owned 100%, directly or
indirectly, by Farmland or Farmland's members or associate members; (c) be an
association, other than one owned 100% by Farmland or Farmland's voting members
or associate members, which conducts business on a cooperative basis and has a
minimum of 25 active members; and (d) be a hog and/or cattle feeding business
which derives a majority of earned income from such feeding business and agrees
to provide Farmland with the information it needs to pay patronage refunds from
its hog and/or cattle marketing operations to members or other associate members
that are eligible to receive such refunds.

As of August 31, 1995, Farmland's membership, associate membership and
patrons eligible for patronage refunds consisted of approximately 1,800
cooperative associations of farmers and ranchers and 11,500 pork or beef
producers or associations of such producers. See ''Business - Patronage Refunds
and Distribution of Net Earnings''.

In the event the Board of Directors of Farmland shall determine that any
holder of the common stock or associate member common stock of Farmland does not
meet the qualifications as may be established by the Board of Directors for
holders thereof, such person shall have no rights or privileges on account of
such common stock to vote for director(s) or to vote on the management or
affairs of Farmland, and Farmland shall have the right, at its option, (a) to
purchase such common stock at its book or par value, whichever is less, as
determined by the Board of Directors of Farmland, or (b) in exchange for such
common stock or associate member common stock to issue or record on the books of
Farmland capital credits in an equivalent amount. On the failure of any holder,
following any demand by Farmland therefor, to deliver the certificate or
certificates evidencing any common stock or associate member common stock,
Farmland may cancel the same on its books and issue or record on the books of
Farmland an equivalent amount of capital credits in lieu thereof.

BUSINESS

GENERAL

The Company is one of the largest cooperatives in the United States in
terms of revenues. In 1995, Farmland had exports to approximately 72 countries,
and derived 47% of its grain revenues from export sales. Substantially all of
the Company's foreign grain sales are paid in U.S. Dollars.

The Company conducts business primarily in two operating areas:
agricultural inputs and outputs. On the input side of the agricultural
industry, the Company operates as a farm supply cooperative. On the output side
of the agricultural industry, the Company operates as a processing and marketing
cooperative.

The Company's farm supply operations consist of three principal product
divisions - petroleum, crop production and feed. Principal products of the
petroleum division are refined fuels, propane, by-products of petroleum refining
and a complete line of car, truck and tractor tires, batteries and accessories.
Principal products of the crop production division are nitrogen-, phosphate- and
potash-based fertilizers, and, through the Company's ownership in the WILFARM
(a 50%-owned venture formed in 1995) ("WILFARM"), a complete line of
insecticides, herbicides and mixed chemicals. Principal products of the feed
division include swine, dairy, pet, beef, poultry, mineral and specialty feeds,
feed ingredients and supplements, animal health products and livestock services.
Over 50% of the Company's farm supply products sold in 1995 was produced in
plants owned by the Company or operated by the Company under long-term lease
arrangements. Approximately 64% of the Company's farm supply products sold in
1995 were sold at wholesale to farm cooperative associations which are members
of Farmland. These farm cooperatives distribute products primarily to farmers
and ranchers in states which comprise the corn belt and the wheat belt and who
utilize the products in the production of farm crops and livestock.

On the output side, the Company's processing and marketing operations
include the processing of pork and beef, the marketing of fresh pork, processed
pork and fresh beef and the storage and marketing of grain. In December 1995,
the Company plans to commence processing wheat into gluten for use primarily in
the commercial baking and pet food industries and starch for numerous industrial
purposes. In 1995, approximately 68% of the hogs processed and 49% of the grain
marketed were supplied to the Company by its members. Substantially all of the
Company's pork and beef products sold in 1995 were processed in plants owned by
the Company.

No material part of the business of any segment of the Company is dependent
on a single customer or a few customers. Financial information about the
Company's industry segments is presented in Note 12 of the Notes to Consolidated
Financial Statements included herein.

The Company competes for market share with numerous participants with
various levels of vertical integration, product and geographical
diversification, sizes and types of operations. In the petroleum industry,
competitors include major oil companies, independent refiners, other
cooperatives and product brokers. Competitors in the crop production industry
include global producers of nitrogen and phosphate fertilizers (some of which
are cooperatives) and product importers and brokers. The feed, pork and beef
industries are comprised of a large variety of competitive participants.

PETROLEUM

MARKETING

The principal product of this business segment is refined fuels.
Approximately 66% of refined fuels product sales in 1995 resulted from
transactions with Farmland's members. The balance of the Company's refined
fuels product sales were principally through retailing chains in urban areas.
Other petroleum products include lube oil, grease, by-products of petroleum
refining and a complete line of car, truck and tractor tires, batteries and
accessories. Sales of petroleum products as a percent of the Company's
consolidated sales for 1993, 1994 and 1995 were 19%, 13% and 12%, respectively.

Competitive methods in the petroleum industry include service, product
quality and pricing. However, in refined fuel markets, price competition is
most dominant. Many participants in the industry engage in one or more of the
industry's processes (oil production and transportation, refining, wholesale
distribution and retailing). The Company participates in the industry primarily
as a midcontinent refiner and as a wholesale distributor of petroleum products.

PRODUCTION

The Company owns refineries at Coffeyville, Kansas and at Phillipsburg,
Kansas. The refinery at Phillipsburg, Kansas is closed. A loading terminal
located at the refinery remains in operation. The carrying value of this
refinery at August 31, 1995 was approximately $1.6 million. The Company is
evaluating alternative uses for this facility and cannot at this time determine
the extent of losses, if any, related to the closure of the refinery, but such
losses are expected not to be significant.

Production volume for 1993, 1994 and 1995 is as follows:

Barrels of Crude Oil Processed
Daily Average
Based on 365 Days per Year
Location 1993 1994 1995
(barrels)

Coffeyville, Kansas . . . . . . 53,000 64,211 66,965

The Coffeyville refinery produced 20 million barrels of motor fuels and
heating fuels in 1993, 25 million barrels in 1994, and 26 million barrels in
1995. Approximately 67% of petroleum product sales in 1995 represented products
produced at this location.

Management terminated negotiations with a potential purchaser of the
Coffeyville refinery in 1994 when final sale terms were determined not to be in
the Company's best interest. See Note 17 of the Notes to Consolidated Financial
Statements included herein. In July 1994, the Company acquired a mothballed
refinery in Texas which is being reassembled at the Coffeyville refinery site.
When reassembly is complete in 1996, crude oil processing capacity is expected
to increase.

RAW MATERIALS

Farmland's refinery at Coffeyville, Kansas is designed to process high
quality crude oil with low sulfur content ("sweet crude"). Competition for
sweet crude and declining production in proximity of the refinery has increased
its cost of raw material relative to such cost for coastal refineries with the
capacity for processing and access to lower quality crude grades. The Company's
pipeline/trucking gathering system collects approximately 27% of its crude oil
supplies from producers near its refineries. Additional supplies are acquired
from diversified sources. Modifications to the Coffeyville refinery to increase
its capability to process efficiently crude oil streams containing greater
amounts of lower quality crude are continuing.

Crude oil is purchased approximately 45 to 60 days in advance of the time
the related refined products are to be marketed. Certain of these advance crude
oil purchase transactions, as well as fixed price refined products advance sales
contracts, are hedged utilizing petroleum futures contracts.

During periods of volatile crude oil price changes or in extremely short
crude supply conditions, the Company's petroleum operations could be affected to
a greater extent than petroleum operations of more vertically integrated
competitors with crude oil supplies available from owned producing reserves. In
past periods of relatively severe crude oil shortages, various governmental
regulations such as price controls and mandatory crude oil allocating programs
have been implemented to spread the adversity among all industry participants.
There can be no assurance as to what, if any, government action would be taken
if a crude oil shortage were to develop.

CROP PRODUCTION

MARKETING

The Company's crop production business segment includes nitrogen-,
phosphate-, and potash-based fertilizer products ("plant nutrients") and,
through the Company's ownership in the WILFARM joint venture, a complete line of
crop protection products such as insecticides, herbicides and mixed chemicals.
Sales of the crop production business segment as a percent of consolidated sales
for 1993, 1994 and 1995 were 19%, 17% and 16%, respectively.

Competition in the plant nutrient industry is dominated by price
considerations. However, during the spring and fall plant nutrient application
seasons, farming activities intensify and delivery service capacity is a
significant competitive factor. Therefore, the Company maintains a significant
capital investment in distribution assets and a seasonal investment in inventory
to support its manufacturing operations. The Company has plant nutrient custom
dry blending, liquid mixing, storage and distribution facilities at 33 locations
throughout its trade territory.

The Company's sales of crop production products are primarily at wholesale
to local cooperative associations (members and customers of the Company). In
view of this member/customer relationship, management believes that, with
respect to such customers, the Company has a slight competitive advantage.

Domestic competition, mainly from other regional cooperatives and
integrated crop production companies, is intense due to customers' sophisticated
buying tendencies and production strategies that focus on costs and service.
Also, foreign competition exists from producers of crop production products
manufactured in countries with lower cost natural gas supplies (the principal
raw material in nitrogen-based fertilizer products). In certain cases, foreign
producers of fertilizer for export to the United States may be subsidized by
their respective governments.

PRODUCTION

The Company manufactures nitrogen-based crop production products. Based
on total production capacity, the Company is one of the largest producers of
anhydrous ammonia fertilizer in the United States. The Company owns and
produces nitrogen-based products at four anhydrous ammonia plants and operates
three anhydrous ammonia plants under long-term lease arrangements.

The Company owns and produces phosphate-based products at one plant and
has 50% ownership interest in two ventures which produce phosphate-based
products.

Nitrogen fertilizer production information for 1993, 1994 and 1995 is as
follows:

Actual Annual Production
Anhydrous Ammonia
Plant Location 1993 1994 1995
(tons)

Lawrence, Kansas . . . . . . . . . . . . 375,000 443,000 430,000
Dodge City, Kansas . . . . . . . . . . . 241,000 257,000 276,000
Fort Dodge, Iowa . . . . . . . . . . . . 232,000 256,000 258,000
Beatrice, Nebraska . . . . . . . . . . . 243,000 277,000 281,000
Enid, Oklahoma (2 plants)(A) . . . . . . 969,000 985,000 998,000
Pollock, Louisiana(A) . . . . . . . . . . 490,000 526,000 497,000
<FN>
(a) Leased plants

Natural gas is the major raw material used in production of synthetic
anhydrous ammonia. Synthetic anhydrous ammonia is the basic component of other
commercially produced nitrogen-based crop production products including urea,
ammonium nitrate, urea ammonium nitrate solutions and other products. The
Company produces such value-added nitrogen-based products at four plants.
Production of such value-added products from anhydrous ammonia for 1993, 1994
and 1995 is as follows:

Actual Annual Production
Plant Location 1993 1994 1995
(tons)

Lawrence, Kansas . . . . . . . . . . . . 661,000 654,000 719,000
Enid, Oklahoma . . . . . . . . . . . . . 473,000 433,000 473,000
Dodge City, Kansas . . . . . . . . . . . 205,000 163,000 202,000
Beatrice, Nebraska . . . . . . . . . . . 166,000 162,000 165,000

Ammonia also is used to react with phosphoric acid to produce phosphoric
acid products such as liquid mixed fertilizer, diammonium phosphate and
monoammonium phosphate.

The Company owns a phosphate chemical plant located in Joplin, Missouri and
land in Florida which contains an estimated 40 million tons of phosphate rock.
The Joplin plant produces ammonium phosphate which is combined in varying ratios
with muriate of potash to produce 12 different fertilizer grade products. In
addition, feed grade phosphate (dicalcium phosphate) is produced at this
facility.

Production at the Joplin plant for 1993, 1994 and 1995 is as follows:

Actual Annual Production
1993 1994 1995
(tons)

Ammonium Phosphate . . . . . . . . . . . 72,000 75,000 64,000
Feed Grade Phosphate . . . . . . . . . . 141,000 157,000 159,000

The Company and Norsk Hydro a.s. own a joint venture, Farmland Hydro, L.P.
("Hydro"), which is a manufacturer of phosphate fertilizer products for
distribution to international markets. Hydro operates a phosphate plant at
Green Bay, Florida and owns phosphate rock reserves located in Hardee County,
Florida which contain an estimated 40 million tons of phosphate rock. The
Company provides management and administrative services and Norsk Hydro a.s.
provides marketing services to Hydro. The joint venture's plant produces
phosphoric acid products such as super acid, diammonium phosphate and
monoammonium phosphate. Annual production in tons of such products for 1993,
1994 and 1995 was 1,216,000, 1,437,000 and 1,471,000, respectively. The
phosphate rock required to operate the joint venture's plant is presently
purchased from outside suppliers and adequate supplies of sulfur are available
from several producers.

Plans for development of the phosphate reserves owned by the Company and
Hydro have not been established in view of the availability of adequate supplies
of phosphate rock from alternative sources.

The Company and J.R. Simplot Company own a joint venture, SF Phosphates
Limited Company, which operates a phosphate mine located in Vernal, Utah, a
phosphate chemical plant located in Rock Springs, Wyoming and a 96-mile pipeline
connecting the mine to the plant. The plant produces monoammonium phosphate and
super acid with annual production in tons for 1993, 1994 and 1995 of 440,000,
465,000 and 451,000, respectively. Under the joint venture agreement, the
Company and J.R. Simplot Company purchase the production of the joint venture in
proportion to their ownership.

The Company and Mississippi Chemical Company have entered into a letter of
intent to form a joint venture to develop, construct and operate a 1,850 metric
ton per day ammonia production facility at the Brighton Industrial Site, at
LaBrea in the Republic of Trinidad and Tobago. The partners expect the plant to
be funded by a combination of nonrecourse project financing and equity. The
Company expects to fund its equity position in the project (estimated to amount
to approximately $67.0 million) from currently available sources of capital.
Although production start up is expected early in 1998, there can be no
assurance that production will commence at such time. Also, the recent change
in the composition of the national government of the Republic of Trinidad and
Tobago could delay the project; however, this is not expected. See "Business -
Capital Expenditures and Investments in Ventures" included herein.

RAW MATERIALS

Natural gas, the largest single component of nitrogen-based fertilizer
production, is purchased directly from natural gas producers. Natural gas
purchase contracts are generally market sensitive and contract prices change as
the market price for natural gas changes. The Company's management believes
that the flexible pricing attributes of its gas supply contracts, without
relinquishing rights to long-term supplies, are essential to its competitive
position. In addition, the Company has a hedging program which utilizes natural
gas futures and options to reduce risks of market price volatility. See "Risk
Factors - General Factors Affecting the Business" included herein.

Natural gas is delivered to the Company's facilities under pipeline
transportation service agreements which have been negotiated with each plant's
delivering pipeline. Natural gas delivery to the plants could be curtailed
under regulations of the Federal Energy Regulatory Commission if the pipeline's
capacity were required to serve priority users such as residences, hospitals and
schools. In such case, production could be curtailed. No significant
production has been lost because of curtailments in transportation, and no such
curtailment is anticipated.

FEED

Products in the Company's feed line include swine, beef, poultry, dairy,
pet, mineral and specialty feeds, feed ingredients and supplements, animal
health products and livestock services.

This business segment's sales were approximately 10%, 8% and 6% of
consolidated sales for the years 1993, 1994 and 1995, respectively.
Approximately 51% of the feed business segment's sales in 1995 was attributable
to products manufactured in the Company's feed mills. The Company operates feed
mixing plants at 19 locations throughout its territory, an animal protein and
premix plant located in Eagle Grove, Iowa, a premix plant in Marion, Ohio and a
pet food plant in Muncie, Kansas. A new dairy feed mill is under construction
in Artesia, New Mexico.

Feed production is as follows:

Actual Annual Production
1993 1994 1995
(tons)
22 feed mills (combined) . . . . . . 1,030,000 1,118,000 1,112,000

In addition, the Company's feed operations include placement of Company-
owned feeder pigs with individuals who have contractual arrangements with the
Company to feed pigs on a fee basis until weight gain is finished. During 1993,
1994 and 1995, approximately 113,000 pigs, 250,000 pigs and 298,000 pigs,
respectively, were finished under this program. The majority of the finished
pigs were sold to a 99%-owned subsidiary, Farmland Foods, Inc. ("Foods"), for
processing.

The Company owns less than a 50% interest in Alliance Farm Cooperative
Association (formerly Yuma Feeder Pig Limited Liability Company) which operates
swine farrowing facilities.

The Company operates a facility for production of quality swine breeding
stock. These animals are placed with farrowers under contractual arrangements.
In addition, the Company purchases swine breeding stock for placement with such
farrowers.

The Company conducts research in genetic selection, breeding, animal health
and nutrition at its research facility in Bonner Springs, Kansas. Through local
cooperative associations of farmers and ranchers, the Company participates in
livestock and hog services designed to produce lean, feed-efficient animals and
help livestock producers select feed formulations which maximize weight gain.

FOOD PROCESSING AND MARKETING

PORK

PROCESSING

The Company's pork processing and marketing operations are conducted
through Foods which operates eight food processing facilities. Meat processing
facilities at Springfield, Massachusetts, Carey, Ohio, and New Riegel, Ohio
produce Italian-style specialty meats and ham products. A facility at Wichita,
Kansas processes pork into fresh sausage, and pork, beef and chicken into hot
dogs, dry sausage and other luncheon meats. A facility in Denison, Iowa and one
in Crete, Nebraska function as pork abattoirs and have additional capabilities
for processing pork into bacon, ham and smoked meats. An additional facility at
Monmouth, Illinois was purchased February 1993. These facilities also process
fresh pork into primal cuts for additional processing into fabricated meats
which are sold to commercial users and to retail grocery chains, as well as
case-ready and label-branded cuts for retail distribution. The eighth plant
located in Carroll, Iowa is primarily a packaging facility for canned or cook-
in-bag products. A facility at San Leandro, California was closed on September
1, 1993.

Production for 1993, 1994 and 1995 is as follows:

Actual Weekly Production
1993 1994 1995
(pounds)

Crete, Nebraska . . . . . . . . . . . 2,800,000 2,800,000 3,100,000
Denison, Iowa . . . . . . . . . . . . 2,600,000 2,700,000 2,800,000
Wichita, Kansas . . . . . . . . . . . 1,500,000 1,900,000 2,200,000
Monmouth, Illinois (A) . . . . . . . . . 1,400,000 1,400,000 1,900,000
Carroll, Iowa . . . . . . . . . . . . 1,200,000 1,100,000 1,400,000
Springfield, Massachusetts . . . . . . 650,000 750,000 725,000
Carey/Riegel, Ohio . . . . . . . . . . 225,000 275,000 425,000
San Leandro, California (B) . . . . . . 250,000 -0- -0-

(A)Acquired February 1993
(B)Closed September 1, 1993
Actual Weekly Head Slaughtered
1993 1994 1995

Crete, Nebraska . . . . . . . . . . . 45,000 46,000 46,000
Denison, Iowa . . . . . . . . . . . . 37,000 40,000 41,000
Monmouth, Illinois . . . . . . . . . . 25,000 27,000 33,000

MARKETING

Products marketed include fresh pork, fabricated pork, smoked meats, ham,
bacon, fresh sausage, dry sausage, hot dogs, and packing house by-products.
These products are marketed under the Farmland, Maple River, Marco Polo,
Carando, Regal and other brand names. Product distribution is through national
and regional retail food chains, food service accounts, distributors and
international marketing activities.

Pork marketing is a highly competitive industry with many suppliers of live
hogs, fresh pork and processed pork products. Other meat products such as beef,
poultry and fish also compete directly with pork products. Competitive methods
in this segment include price, product quality, product differentiation and
customer service.

BEEF

PROCESSING

The Company's beef processing and marketing operations are conducted
through National Beef Packing Company, L.P. ("NBPC"), which was formed in April
1993, and at August 31, 1995, was 68%-owned by Farmland (such ownership having
increased thereafter to approximately 76%). The processing facilities for these
beef operations are located in Liberal, Kansas and Dodge City, Kansas. These
facilities function as beef abattoirs and have capabilities for processing fresh
beef into primal cuts for additional processing into fabricated or boxed beef.
During 1994 and 1995, the two plants slaughtered 1.7 million and 1.9 million
cattle, respectively.

MARKETING

Products in the Company's beef processing and marketing operations include
fresh beef, boxed beef and packing house by-products. Product distribution is
through national and regional retail and food service customers under the
Farmland Black Angus Beef and other brand names. There is also a limited amount
of international product distribution.

Beef marketing is a highly competitive industry with many suppliers of live
cattle, fresh beef and processed beef. Other meat products such as pork,
poultry and fish also compete directly with beef products. Competitive methods
in this industry include price, product quality and customer service.

GRAIN MARKETING

The Company markets wheat, milo, corn, soybeans, barley and oats, with
wheat constituting the majority of the marketing business. The Company
purchases grain from members and nonmembers located in the Midwestern part of
the United States. Once the grain is purchased, the Company assumes all risks
related to selling such grain. Since grain is a commodity, pricing of grain in
the United States is principally conducted through bids based on the commodity
futures markets.

The Company is exposed to risk of loss in the market value of its grain
inventory and fixed price purchase contracts if grain market prices decrease,
and is exposed to loss on its fixed price sales contracts if grain market prices
increase. To reduce the price change risk associated with holding positions in
grain, the Company takes opposite and offsetting positions by entering into
grain commodity futures contracts. Such contracts have terms of up to one year.
The Company's strategy is to maintain hedged positions on as close to 100% of
its position in grain as is possible. During 1994 and 1995, the Company
maintained hedges on approximately 95.3% and 97.9%, respectively, of its grain
positions. Based on total assets at the beginning and end of 1995, the average
market value of grain positions not hedged during the year amounted to less than
1% of the Company's average total assets. While hedging activities reduce the
risk of loss from changing market values of grain, such activities also limit
the gain potential which otherwise could result from changes in market prices of
grain.

In 1995, approximately 47% of grain revenues were from export sales or
sales to domestic customers for export. The five largest purchasers during 1995
in terms of total revenues from grain operations, were China (15%), Mexico (7%),
Israel (6%), Egypt (6%), and Jordan (2%). In 1993 and 1994, export sales or
sales to domestic customers for export accounted for approximately 60% and 37%,
respectively, of consolidated grain revenues. A majority of the grain export
sales are under price subsidies or credit arrangements guaranteed by the United
States government, primarily through programs administered by the United States
Department of Agriculture ("USDA"). Export-related sales are subject to
international political upheavals and changes in other countries' trade policies
which are not within the control of the United States or the Company. Foreign
sales of grain generally are paid in U.S. Dollars.

As of November 1995, Heartland Wheat Growers, L.P. (79%-owned by Farmland
and 21%-owned by five cooperative members of Farmland) has completed
construction and is in final start-up testing of a wheat processing plant
located in Russell, Kansas. The plant will have capacity to process 4.2 million
bushels of wheat annually and produce gluten for use primarily in the commercial
baking and pet food industries and starch for numerous industrial purposes.

TRADIGRAIN

In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain"). Tradigrain imports, exports and ships all major grains from the
major producing countries to final consumers which are either governmental
entities, private companies or other major grain companies.

Tradigrain's purchases of grain are made on a cash basis against
presentation of documents. Its sales of grain are mostly done against confirmed
letters of credit at sight or on 180/360 days deferred basis. For purposes of
the Company's Consolidated Financial Statements, on Tradigrain transactions, the
Company recognizes as revenues net margin on grain traded rather than the value
of the commodities involved in the trades.

PROPERTY

The Company owns or leases 30 inland elevators and one export elevator with
a total capacity of approximately 177,045,000 bushels of grain. The location,
type, number and aggregate capacity in bushels of the elevators at August 31,
1995 are as follows:
AGGREGATE
LOCATION TYPE NUMBER CAPACITY

Amarillo, Texas . Inland 1 3,226,000
Black, Texas . . Inland 1 1,418,000
Commerce City, Colorado Inland 1 3,234,000
Darrouzett, Texas Inland 1 1,277,000
Enid, Oklahoma . Inland 4 50,300,000
Fairfax, Kansas . Inland 1 10,047,000
Galveston, Texas Export 1 3,253,000
Hutchinson, Kansas Inland 3 25,268,000
Idaho and Utah . Inland 11 9,825,000
Lincoln, Nebraska Inland 1 5,099,000
Omaha, Nebraska . Inland 2 4,266,000
Saginaw, Texas . Inland 2 37,274,000
Topeka, Kansas . Inland 1 12,055,000
Wichita, Kansas . Inland 1 10,503,000

RESEARCH

The Company operates a research and development farm near Bonner Springs,
Kansas where many aspects of animal nutrition are studied. The research is
directed toward improving the nutrition and feeding practices of livestock and
pets.

Expenditures related to Company-sponsored product and process improvements
amounted to $3.3 million, $2.7 million and $2.3 million for the years ended
1993, 1994 and 1995, respectively.

CAPITAL EXPENDITURES AND INVESTMENTS IN VENTURES

In 1995, the Company made capital expenditures of $124.7 million. These
expenditures related principally to the ongoing expansion of the Coffeyville,
Kansas refinery to a production level of 90,000 barrels per day. In addition,
NBPC's facility in Liberal, Kansas was undergoing major expansion as was Foods'
pork processing facility in Crete, Nebraska. Expenditures of the crop
production division included upgrading several existing facilities to improve
gas efficiencies and expanding urea ammonium nutrient ("UAN") facilities in
Lawrence, Kansas and at several storage terminals. As of August 31, 1995, the
Company was also constructing a wheat processing plant in Russell, Kansas.

The Company plans expenditures for capital additions, improvements and
investments in ventures of approximately $379.4 million during the years 1996
and 1997 as described in the following paragraphs. Of this amount, the Company
plans expenditures of $315.1 million for capital additions and improvements and
$64.3 million for investments in ventures.

Capital expenditures and investments planned for the crop production
business segment total $150.3 million and include: an investment in a venture
organized to construct and operate an anhydrous ammonia plant in The Republic of
Trinidad and Tobago, and expenditures for operating efficiencies, environmental
and safety issues and for operating necessities or betterments.

Capital expenditures and investments planned for the feed business segment
total $11.9 million and include an additional investment in a venture with
Alliance Farms and expenditures for feed mill and livestock production
efficiencies, operating necessities and replacements.

Capital expenditures and investments planned for the petroleum business
segment total $94.9 million and are to complete the expansion of daily crude oil
processing capacity at the Coffeyville, Kansas refinery to 90,000 barrels per
day and for operating necessities, increased operating efficiency and for
environmental and safety issues.

Capital expenditures and investments of approximately $85.3 million are
planned for the food processing and marketing business segment. These
expenditures include an expansion of NBPC's facility at Liberal, Kansas, the
Crete, Nebraska and Wichita, Kansas plants and operational improvement and
replacements.

Capital expenditures and investments of approximately $6.7 million planned
for the grain business segment are mainly for expansion and replacements.

Capital expenditures and investments of $30.3 million are planned for the
other operations and corporate groups. These expenditures include upgrades of
management information services. The remaining expenditures are planned for
operating necessities and improvements.

The Company intends to fund its capital program with cash from operations
or through borrowings. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital Resources."

MATTERS INVOLVING THE ENVIRONMENT

The Company is subject to various stringent federal, state and local
environmental laws and regulations, including those governing the use, storage,
discharge and disposal of hazardous materials as the Company uses hazardous
substances and generates hazardous wastes in the ordinary course of its
manufacturing process. The Company recognizes liabilities related to remediation
of contaminated properties when the related costs are probable and can be
reasonably estimated. Estimates of these costs are based upon currently
available facts, existing technology, undiscounted site specific costs and
currently enacted laws and regulations. In reporting environmental liabilities,
no offset is made for potential recoveries. Such liabilities include estimates
of the Company's share of costs attributable to potentially responsible parties
(''PRPs'') which are insolvent or otherwise unable to pay. All liabilities are
monitored and adjusted regularly as new facts or changes in law or technology
occur.

The Company wholly or jointly owns or operates 56 manufacturing properties
and has potential responsibility for environmental conditions at a number of
former manufacturing facilities and at waste disposal facilities operated by
third parties. The Company is investigating or remediating contamination at 24
properties. The Company has also been identified as a PRP under the federal
Comprehensive Environmental Response, Compensation, and Liability Act
(''CERCLA'') at various National Priority List sites and has unresolved
liability with respect to the past disposal of hazardous substances at five such
sites. Such laws may impose joint and several liability on certain statutory
classes of persons for the costs of investigation and remediation of
contaminated properties, regardless of fault or the legality of the original
disposal. These persons include the present and former owners or operators of a
contaminated property, and companies that generated, disposed of, or arranged
for the disposal of hazardous substance found at the property. During 1994 and
1995, the Company paid approximately $1.4 million and $3.2 million,
respectively, for environmental investigation and remediation.

The Company currently is aware of probable obligations for environmental
matters at 32 properties. As of August 31, 1995, the Company has made an
environmental accrual of $18.5 million. The Company periodically reviews and, as
appropriate, revises its environmental accruals. Based on current information
and regulatory requirements, the Company believes that the accruals established
for environmental expenditures are adequate.

The Company's actual final costs of addressing certain environmental
matters are not quantifiable, and therefore have not been accrued, because such
matters are in preliminary stages and the timing, extent and costs of various
actions which governmental authorities may require are currently unknown.
Management also is aware of other environmental matters for which there is a
reasonable possibility that the Company will incur costs to resolve. It is
possible that the costs of resolution of the matters described in this paragraph
may exceed the liabilities which, in the opinion of management, are probable and
which costs are reasonably estimable at August 31, 1995. In the opinion of
management, it is reasonably possible for such costs to be approximately an
additional $19.8 million.

Under the Resource Conservation Recovery Act of 1976 (''RCRA''), the
Company has five closure and five post-closure plans in place for six locations.
Closure and post-closure plans also are in place for three landfills and two
injection wells as required by state regulations. Operations are being conducted
at these locations and the Company does not plan to terminate such operations in
the foreseeable future. Therefore, the Company has not accrued these
environmental exit costs. The Company accrues these liabilities when plans for
termination of plant operations have been made. Such closure and post-closure
costs are estimated to be $5.8 million at August 31, 1995 (and is in addition to
the $19.8 million discussed in the prior paragraph).

The Company is currently involved in three administrative proceedings
brought by Region VII of the Environmental Protection Agency (''EPA'') with
respect to alleged violations under the Clean Air Act, the Emergency Planning
and Community Right-to-Know Act and RCRA at the Coffeyville refinery. The
Company is currently negotiating with the EPA concerning these matters and
believes that such negotiations may result in compromise settlements, including
the possible implementation of a Supplemental Environmental Project in
connection with the Clean Air Act proceeding. Absent such settlements, the
Company intends to contest the EPA's allegations. Accordingly, no provision has
been made in the Company's financial statements for these proposed penalties.
See "Legal Proceedings".

Protection of the environment requires the Company to incur expenditures
for equipment or processes, which expenditures may impact the Company's future
net income. However, the Company does not anticipate that its competitive
position will be adversely affected by such expenditures or by laws and
regulations enacted to protect the environment. Environmental expenditures are
capitalized when such expenditures provide future economic benefits. In 1994 and
1995, the Company had capital expenditures of approximately $2.6 million and
$4.7 million, respectively, to prevent future discharges into the environment.
The majority of such expenditures was for improvements at the Coffeyville
refinery. Management believes the Company currently is in substantial compliance
with existing environmental rules and regulations.

GOVERNMENT REGULATION

The Company's business is conducted within a legal environment created by
numerous federal, state and local laws which have been enacted to protect the
public's interest by promoting fair trade practices, safety, health and welfare.
The Company's operating procedures conform to the intent of these laws and
management believes that the Company currently is in compliance with all such
laws, the violation of which could have a material adverse effect on the
Company.

Certain policies may be implemented from time to time by the USDA, the
Department of Energy or other governmental agencies which may impact the demands
of farmers and ranchers for the Company's products or which may impact the
methods by which certain of the Company's operations are conducted. Such
policies may impact the Company's farm supply and marketing operations.

Management is not aware of any newly implemented or pending policies having
a significant impact or which may have a significant impact on operations of the
Company.

EMPLOYEE RELATIONS

At August 31, 1995, the Company had approximately 12,700 employees.
Approximately 43% of the Company's employees were represented by unions having
national affiliations. The Company's relationship with employees is considered
to be generally satisfactory. No labor strikes or work stoppages within the last
three fiscal years have had a materially adverse effect on the Company's
operating results. Current labor contracts expire on various dates through May
1998. There are no wage re-openers in any of the collective bargaining
agreements.

PATRONAGE REFUNDS AND DISTRIBUTION OF NET EARNINGS

For purposes of this section, (1) annual earnings for 1994 and earlier
years means earnings before income taxes determined in accordance with federal
income tax law, and (2) annual earnings for 1995 and after means earnings before
income taxes determined in accordance with generally accepted accounting
principles.

Farmland operates on a cooperative basis. In accordance with its bylaws,
Farmland returns the member-sourced portion of its annual net earnings to its
members as a patronage refund. Each member's portion of the annual patronage
refund is determined by the quantity or value of business transacted by the
member with Farmland during the year for which the patronage is paid in
comparison with Farmland's total member-sourced earnings for such year in the
patronage allocation unit for which the patronage is paid.

Generally, a portion of the annual patronage refund is returned in cash and
for the balance of the patronage refund (the "non-cash portion") the members
receive Farmland common shares associate member common shares or capital credits
(the equity type received is determined by the membership status). The non-cash
portion of the patronage refund, also referred to herein as "allocated equity
portion", is determined annually by the Board of Directors. The annual
patronage refund is returned to members as soon as practical after the end of
each fiscal year. The Internal Revenue Code of 1986, as amended, allows a
cooperative to deduct from its taxable income the total amount of the patronage
refunds returned, provided that not less than 20% of the total patronage refund
returned is cash. The bylaws of Farmland provide that the Board of Directors
has complete discretion with respect to the handling and ultimate disposition of
any member-sourced losses.

For the years ended 1993, 1994 and 1995, Farmland returned the following
patronage refunds:

Cash or Cash
Equivalent Portion Non-Cash Portion Total Patronage
of Patronage Refunds of Patronage Refunds Refunds
(Amounts in thousands)

1993 . . . . . . . $ -0- $ -0- $ -0-
1994 . . . . . . . $ 26,552 $ 44,032 $ 70,584
1995 . . . . . . . $ 33,038 $ 61,356 $ 94,394

Nonpatronage income or loss (income or loss from activities not directly
related to the cooperative marketing or purchasing activities of Farmland) is
subject to income taxes computed on the same basis as such taxes are computed on
the income or loss of other corporations.

ALLOCATED EQUITY REDEMPTION PLANS

The Allocated Equity Redemption Plans described below, namely the Base
Capital Plan (as defined below), the estate settlement plan and the special
allocated equity redemption plans (collectively, the "Plans") may be changed at
any time or from time to time at the sole and absolute discretion of the Board
of Directors. The Plans are also not binding upon the Board of Directors or the
Company, and the Board of Directors reserves the right to redeem, or not redeem,
any equities of the Company without regard to whether such action or inaction is
in compliance with the Plans. The factors which may be considered by the Board
of Directors in determining when, and under what circumstances, the Company may
redeem equities include, but are not limited to, the terms of the Company's Base
Capital Plan, income and other tax considerations, the Company's results of
operations, financial position, cash flow, capital requirements, long-term
financial planning needs and other relevant considerations. By retaining
discretion to determine the amount, timing and ordering of any equity
redemptions, the Board of Directors believes that it can continue to assure that
the best interests of the Company and thus of its members will be protected.

BASE CAPITAL PLAN

For the purposes of acquiring and maintaining adequate capital to finance
the business of the Company, the Board of Directors has established a base
capital plan ("Base Capital Plan").

The Base Capital Plan provides a mechanism for determining the Company's
total capital requirements and each voting member's and associate member's share
thereof (the base capital requirement). As part of the Base Capital Plan, the
Board of Directors may, in its discretion, provide for redemption of Farmland
common stock or associate member common stock held by voting members or
associate members whose holdings of common shares or associate member shares
exceed the voting members' or associate members' base capital requirement. The
Base Capital Plan provides a mechanism under which the cash portion of the
patronage refund payable to voting members or associate members will depend upon
the degree to which such voting members or associate members meet their base
capital requirements.

ESTATE SETTLEMENT PLAN

The estate settlement plan provides that in the event of the death of an
individual (a natural person) allocated equity holder, the allocated equity
holdings of the deceased will be redeemed at par value with the exception
allocated equity which was purchased and held by the deceased for less than five
years. This provision is subject to a limitation of $1.0 million in any one
fiscal year without further authorization by the Board of Directors.

SPECIAL ALLOCATED EQUITY REDEMPTION PLANS

From time to time, the Company has redeemed portions of its outstanding
allocated equity under various special allocated equity redemption plans.

Each such plan has been designed to return cash to members or former
members of Farmland or Foods by redeeming certain types of outstanding allocated
equity. The order in which each type of allocated equity is redeemed is
determined by the Board of Directors. Except for preferred stock sold through a
public offering in 1984, substantially all the redemptions under these plans
were for allocated equities originally issued as the non-cash portion of the
Company's patronage refunds. See "Patronage Refunds and Distribution of Net
Earnings".

Special allocated equity redemption plans are designed to provide a
systematic method for redemption of outstanding allocated equity which is not
subject to redemption through other Plans, such as the Base Capital Plan or the
estate settlement plan.

As of August 31, 1995, provisions of the current special allocated equity
redemption plan include:

1. No special redemption will be made if the redemption may result in a
violation of covenants in loan agreements and similar instruments; and

2. The targeted amount for special redemptions is a percentage of
consolidated net income (member and nonmember). The percentage is
determined based on the ratio of Funded Indebtedness to Capitalization
(as defined in the special allocated equity redemption plan) before
the special redemption but after giving effect to the distribution of
cash and redemptions under the Base Capital Plan. Calculation for
special redemptions is as follows:

Total Special Allocated Equity
Funded Indebtedness as Redemption
as a Percent of as a Percent of
Capitalization Consolidated Net Income

> 50 % None
48 - 50 % 2.5 %
45 - 47 % 5.0 %
40 - 44 % 7.5 %
< 40 % 10.0 %

The targeted amount may be prorated between these levels.

3. The priority for redeeming equities under the Special Allocated Equity
Redemption Plans is at the sole discretion of the Board of Directors
of Farmland.

Presented below are the amounts of allocated equity approved for redemption
by the Board of Directors under the Base Capital Plan, the estate settlement
plan and the special allocated equity redemption plans for each of the years in
the five-year period ended 1995. The amounts approved for redemptions were paid
in cash in the fiscal year following approval.

Base Capital Estate Special Allocated
Plan Settlement Plan Equity Redemption Total Plan
Redemptions Redemptions Plans Redemptions Redemptions
(AMOUNTS IN THOUSANDS)

1991 2,300 4 5,351 7,655
1992 6,707 234 6,755 13,696
1993 -0- 127 12 139
1994 8,740 126 4,108 12,974
1995 14,159 128 13,451 27,738

LEGAL PROCEEDINGS

In the opinion of Robert B. Terry, Vice President and General Counsel of
Farmland, there is no litigation existing or pending against Farmland or any of
its subsidiaries that, based on the amounts involved or the defenses available
to the Company, would have a material adverse effect on the financial position
of the Company except for the pending tax litigation relating to Terra
Resources, Inc. ("Terra"), a former subsidiary of the Company, as explained in
Note 7 of the Notes to Consolidated Financial Statements. See "Risk Factors -
Income Tax Matters" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Financial Condition, Liquidity and Capital
Resources."

In accordance with the Securities and Exchange Commission's Regulation S-K,
the Company reports that it is currently involved in the following
administrative proceedings in which violations of environmental laws are alleged
and civil penalties in excess of $100,000 are sought.

1. COFFEYVILLE CERCLA/EPCRA FINE. On August 10, 1993, Region VII of the
U.S. Environmental Protection Agency (the "EPA") issued against the Company an
administrative complaint seeking $350,000 in civil penalties for alleged
violations of notification requirements under the Comprehensive Environmental
Response, Compensation and Liability Act and the Emergency Planning and
Community Right to Know Act. The Company has been negotiating with the EPA
concerning this matter, but no resolution has been reached to date.

2. COFFEYVILLE RCRA DOCKET NO. VII-94-H-0018. On August 2, 1994, Region
VII of the EPA issued against the Company an administrative complaint seeking
$1.4 million in civil penalties for alleged violations of the Resource
Conservation and Recovery Act (RCRA) and of regulations issued thereunder. The
Company has been negotiating with the EPA concerning this matter, but no
resolution has been reached to date.

3. COFFEYVILLE CLEAN AIR ACT CIVIL PENALTY. On March 22, 1995, the U.S.
Department of Justice ("DOJ") notified the Company of its intent to bring suit
against the Company for alleged violations of the Clean Air Act. During July
1995, the Company was notified that, if suit is filed, the Government will seek
civil penalties totaling $1.6 million. The Company has been negotiating with
the DOJ and EPA concerning this matter but no resolution has been reached to
date.

EXPERTS

The Consolidated Financial Statements of Farmland as of August 31, 1994 and
1995, and for each of the years in the three-year period ended August 31, 1995
included herein and elsewhere in the Registration Statement, have been included
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
herein and upon the authority of such firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the Consolidated
Financial Statements contains an explanatory paragraph concerning income tax
adjustments proposed by the Internal Revenue Service relating to Terra.

QUALIFIED INDEPENDENT UNDERWRITER

Interstate/Johnson Lane Corporation, a member of the NASD, has participated
as a qualified independent underwriter in the "due diligence" review with
respect to the preparation of this Prospectus. See "Plan of Distribution"
regarding the exception from pricing by the qualified independent underwriter.

MANAGEMENT

The directors of Farmland are as follows:

Total
Expiration Years of
of Service
As of Positions Present as
August 31, Held With Term as Board
Name 1995 Farmland Director Member Business Experience During Last Five Years

Albert J. Shivley 52 Chairman 1995 11 General Manager--American Pride Co-op
of the Association, Brighton, Colorado, a local
Board cooperative association of farmers and ranchers.

H. D. Cleberg 56 President 1997 5 Mr. Cleberg has been with Farmland since 1968.
and Chief He was named as president-elect in February 1991
Executive and became President in April 1991. From
Officer September 1990 to January 1991 he served as
Senior Vice President and Chief Operating
Officer, Agricultural Group. From April 1989 to
August 1990 he served as Executive Vice
President, Operations.

Otis H. Molz 64 Vice 1997 12 Producer--Deerfield, Kansas. Mr. Molz has served
Chairman as Chairman of the Board of the National Bank for
and Vice Cooperatives since January 1993. He served as
President Chairman of the Board of Directors of Farmland
Industries, Inc. from December 1991 to December
1992. He served as First Vice President of the
National Bank for Cooperatives from January 1990
to January of 1993. He was Second Vice Chairman
from January 1, 1989 to January 1, 1990.

Lyman Adams, Jr. 44 1995 3 General Manager--Cooperative Grain and Supply,
Hillsboro, Kansas, a local cooperative
association of farmers and ranchers.

Ronald J. Amundson 51 1997 7 General Manager--Central Iowa Cooperative,
Jewell, Iowa, a local cooperative association of
farmers and ranchers.

Baxter Ankerstjerne 59 1996 5 Producer--Peterson, Iowa. Since December 1988
Mr. Ankerstjerne has served as Chairman of the
Board of Directors of Farmers Cooperative,
Association, Marathon, Iowa, a local cooperative
association of farmers and ranchers.

Jody Bezner 54 1997 4 Producer--Texline, Texas.

Richard L. Detten 61 1996 8 Producer--Ponca City, Oklahoma.

Steven Erdman 45 1995 3 Producer--Bayard, Nebraska.

Warren Gerdes 47 1995 2 General Manager--Farmers Cooperative Elevator
Company, Buffalo Lake, Minnesota, a local
cooperative association of farmers and ranchers.

Ben Griffith 46 1995 6 General Manager--Central Cooperatives, Inc.,
Pleasant Hill, Missouri, a local cooperative
association of farmers and ranchers.

Gail D. Hall 53 1997 7 General Manager--Lexington Cooperative Oil
Company, Lexington, Nebraska, a local cooperative
association of farmers and ranchers.

Jerome Heuertz 54 1997 1 General Manager--Farm Service Cooperative,
Council Bluffs, Iowa, a local cooperative
association of farmers and ranchers.

Barry Jensen 50 1996 5 Producer--White River, South Dakota. Mr. Jensen
currently serves as a Director, and was President
from May 1989 to May 1993, of Farmers Co-op Oil
Association, Winner, South Dakota, a local
cooperative association of farmers and ranchers.

Greg Pfenning 46 1997 3 Producer--Hobart, Oklahoma. Director of Hobart &
Roosevelt Cooperative, a local cooperative
association of farmers and ranchers.

Vonn Richardson 62 1996 8 Producer--Plains, Kansas. President of The
Plains Equity Exchange and Cooperative Union,
Plains, Kansas, a local cooperative association
of farmers and ranchers.

Monte Romohr 42 1996 5 Producer--Gresham, Nebraska. From March 1988 to
March 1991, Mr. Romohr served as President of
Farmers Co-op Business Association, Shelby,
Nebraska, a local cooperative association of
farmers and ranchers.

Joe Royster 43 1996 2 General Manager--Dacoma Farmers Cooperative,
Inc., Dacoma, Oklahoma, a local cooperative
association of farmers and ranchers.

Paul Ruedinger 65 1995 12 Producer--Van Dyne, Wisconsin.

Raymond J. Schmitz 64 1996 8 Producer--Baileyville, Kansas

Theodore J. Wehrbein 50 1995 9 Producer--Plattsmouth, Nebraska. Past Director
of Nehawka Farmers Cooperative Company, Nehawka,
Nebraska, a local cooperative association of
farmers and ranchers.

Robert Zinkula 65 1996 5 Producer--Mount Vernon, Iowa. Secretary and
Treasurer of Linn Cooperative Oil Company,
Marion, Iowa, a local cooperative association of
farmers and ranchers.

Directors are elected for a term of three years by the shareholders of
Farmland at its annual meeting. The expiration dates for such three-year terms
are sequenced so that about one-third of Farmland's Board of Directors is
elected each year. H. D. Cleberg is serving as director-at-large; the remaining
twenty-one directors were elected from nine geographically defined districts in
Farmland's territory. The executive committee consists of Ronald Amundson, Ben
Griffith, Otis Molz, Monte Romohr, Albert Shivley and H. D. Cleberg. With the
exception of H.D. Cleberg, President and Chief Executive Officer, members of the
executive committee serve as chairman of standing committees of the Board of
Directors as follows: Ronald Amundson, corporate responsibility committee; Ben
Griffith, audit committee; Otis Molz, compensation committee; Monte Romohr,
finance committee; and Albert Shivley, nominating committee.

The executive officers of Farmland are:

Age as of
August 31,
Name 1995 Principal Occupation and Other Positions

J. F. Berardi 52 Executive Vice President and Chief Financial Officer - Mr. Berardi
joined Farmland March 1992 to serve in his present position.
Mr. Berardi served as Executive Vice President and Treasurer of
Harcourt Brace Jovanovich, Inc., a diversified Fortune 200 company,
and was a member of its Board of Directors from 1988 until 1990.

H. D. Cleberg 56 President and Chief Executive Officer - Mr. Cleberg has been with
Farmland since 1968. He was appointed to his present position
effective April 1991. From September 1990 to March 1991 he served as
Senior Vice President and Chief Operating Officer. From April 1989
to August 1990 he served as Executive Vice President, Operations.
Prior to April 1989 he held several executive management positions
with Farmland.

S. P. Dees 52 Executive Vice President, Business Development - Mr. Dees joined
Farmland in 1984, serving as Vice President and General Counsel, Law
and Administration. He was appointed to his present position in
September 1995. From September 1993 to September 1995 he served as
Executive Vice President, Farmland and Director General of Farmland
Industrias, S.A. de C.V. From October 1990 to September 1993 he
served as Executive Vice President, Administrative Group and General
Counsel.

G. E. Evans 51 Group Vice President, Meat and Livestock Businesses - Mr. Evans has been
with Farmland since 1971. He was appointed to his present position
in September 1995. From January 1992 to September 1995 he served as
Senior Vice President, Agricultural Production Marketing/Processing.
From April 1991 to January 1992 he served as Senior Vice President,
Agricultural Inputs. He served as Executive Vice President,
Agricultural Marketing from October 1990 to March 1991.

R. W. Honse 52 Group Vice President, Ag Input Businesses - Mr. Honse has been with
Farmland since 1983. He was appointed to his present position in
September 1995. From January 1992 to September 1995, he served as
Executive Vice President, Agricultural Inputs Operations. From
October 1990 to January 1992 he served as Executive Vice President,
Agricultural Operations.

A. H. Lewis 48 Group Vice President, Grain and Grain Processing Businesses - Mr. Lewis
joined Farmland August 1994 to serve as Vice President, Grain
Marketing. He was appointed to his current position in September
1995. From 1985 to 1994, Mr. Lewis worked for CONAGRA as the
President, Klein-Berger Companies in San Francisco, California.

B. L. Sanders 54 Vice President and Corporate Secretary - Dr. Sanders has been with
Farmland since 1968. He was appointed to his present position in
September 1991. From April 1990 to September 1991 he served as Vice
President, Strategic Planning and Development. From October 1987 to
March 1990 he served as Vice President, Planning.

EXECUTIVE COMPENSATION

The following table sets forth the annual compensation awarded to, earned
by, or paid to the Chief Executive Officer and the Company's next four most
highly compensated executive officers for services rendered to the Company in
all capacities during 1993, 1994 and 1995.

Annual Compensation
Employee
Variable
Name and Year Ending Compensation Other Annual
Principal Position August 31 Salary Plan Compensation

H. D. Cleberg, . . . . . . . . . . 1993 $ 433,506
President and . . . . . . . . . . 1994 $ 439,728 $ 338,481
Chief Executive Officer 1995 $ 456,218 $ 346,944

G. E. Evans, . . . . . . . . . . 1993 $ 278,304
Group Vice President, 1994 $ 278,304 $ 217,761
Meat and Livestock 1995 $ 283,988 $ 217,761
Businesses

R. W. Honse, . . . . . . . . . . 1993 $ 231,964
Group Vice President, 1994 $ 251,532 $ 205,206
Ag Input Businesses 1995 $ 280,248 $ 210,337

J. F. Berardi, . . . . . . . . . . 1993 $ 206,016
Executive Vice President 1994 $ 216,252 $ 146,576
and Chief Financial Officer 1995 $ 226,914 $ 150,241

S. P. Dees, . . . . . . . . . . 1993 $ 205,366
Executive Vice President, 1994 $ 205,066 $ 119,093 $ 124,138(A)
Business Development 1995 $ 211,000 $ 122,070 $ 127,878(A)

<FN>
(A) Mr. Dees received a differential remuneration and reimbursements in 1994
and 1995 for taxes in connection with foreign assignments.

An Annual Employee Variable Compensation Plan, a Management Long-Term
Incentive Plan and an Executive Deferred Compensation Plan have been established
by the Company to meet the competitive salary programs of other companies, and
to provide a method of compensation which is based on the Company's performance.

Under the Company's Annual Employee Variable Compensation Plan, all regular
salaried employees total compensation is based on a combination of base and
variable pay. The variable compensation payment is dependent upon the
employee's position, the performance of the Company for the fiscal year or other
performance criteria of the individual's operating unit. Variable compensation
is awarded only in years that the Company achieves a performance level, approved
each year by the Board of Directors. The Company intends for its total cash
compensation (base plus variable) to be competitive, recognizing that in the
event the Company fails to achieve a predetermined threshold level of
performance, the base pay alone will place the employees well under market
rates. This system of variable compensation allows the Company to keep its
fixed costs (base salaries) lower, and only increase payroll costs consistent
with the Company's ability to pay. Amounts accrued under this plan for the
years ended August 31, 1993, 1994 and 1995 amounted to $ -0-, $17.8 million and
$35.5 million, respectively. Distributions under this plan are made annually
after the close of each fiscal year.

Information as to awards made in 1995 under the Company's Management Long-
Term Incentive Plan, which awards relate to the three year period 1995 to 1997,
is set forth below.

Estimated Future Payouts Under Non-Stock Price-Based
Plans
(A) (B) (C) (Amounts in Thousands)
Performance or
Other Period
Number of Until
Shares, Units or Maturation or (D) (E) (F)
Name Other Rights (1) Payout Threshold Target (2) Maximum (2)

H. D. Cleberg 1995 - 1997 $ 234
G. E. Evans 1995 - 1997 $ 117
R. W. Honse 1995 - 1997 $ 117
J. F. Berardi 1995 - 1997 $ 83
S. P. Dees 1995 - 1997 $ 83
<FN>
(1) Rights in the incentive pool are expressed as a minimum percentage of
the total pool. See discussion contained below herein.

(2) Not applicable as payouts are based on a percentage of aggregate income;
the plan does not specify a target or maximum payment.
See discussion contained below herein.

Under the Management Long-Term Incentive Plan, the Company's executive
management employees are paid cash incentive amounts determined by a formula
which takes into account the level of management and the aggregate income of the
Company over a three year period. The Management Long-Term Incentive Plan
provides for three year performance and reward cycles and, in general,
participants must be active employees of the Company at the end of the cycle in
order to receive payment of the award with respect to such cycle. Periods
currently covered by the Management Long-Term Incentive Plan are: 1994 through
1996 ("1996 Plan"); 1995 through 1997 ("1997 Plan"); and, 1996 through 1998
("1998 Plan"). The income threshold ("Threshold") for the three year period of
the 1996 Plan, the 1997 Plan and the 1998 Plan is $192,810,000, $235,043,000 and
$393,481,000, respectively. For each plan, if the aggregate income is less than
the Threshold or if the sum of the cash returned to members during the 1996
Plan, the 1997 Plan and the 1998 Plan, as patronage refunds, redemptions under
the base capital plan, estate settlement plans and special allocated equity
redemption plans is less than $65,030,000, $61,938,000 and $90,000,000,
respectively, subject to the following sentence, no payment will occur with
respect to such plan. The Board of Directors of the Company may, in its sole
discretion, amend or discontinue the Management Long-Term Incentive Plan, adjust
or cancel any awards otherwise payable thereunder should the Company incur a
loss in the final year of any performance cycle or impact the goals and rewards
of the plan by approving for inclusion or exclusion in the calculation of
performance results, the financial results of extraordinary events occurring
during the cycle. Subject to the preceding sentence, if aggregate income equals
or exceeds the Threshold and the cash returned to members equals or exceeds the
specified amounts, then 2.5%, .83% and .83% of aggregate income for the 1996
Plan, the 1997 Plan and the 1998 Plan, respectively, is allocated to an
incentive pool for each such plan from which awards to management will be paid.
Of the amount, if any, allocated to the incentive pools for the 1996 Plan, the
1997 Plan and the 1998 Plan, Messrs. Cleberg, Evans, Honse, Berardi, and Dees,
will receive at least 12%, 6%, 6%, 4.25%, and 4.25%, respectively, absent a
significant change in their status, in which event such percentages may be
adjusted.

The Company's Executive Deferred Compensation Plan permits executive
employees to defer part of their salary and/or part or all of their bonus
compensation. The amount to be deferred and the period for deferral is
specified by an election made semi-annually. Payments of deferred amounts shall
begin at the earlier of the end of the specified deferral period, retirement,
disability or death. The employee's deferred account balance is credited
annually with interest at the highest rate of interest paid by the Company on
any subordinated debt certificate sold during the year. Payment of an
employee's account balance shall, at the employee's election, be a lump sum or
in ten annual installments. Amounts deferred pursuant to the plan for the
accounts of the named individuals during the fiscal years 1993, 1994 and 1995
are included in the cash compensation table.

The Company established the Farmland Industries, Inc. Employee Retirement
Plan ("Plan") in 1986 for all employees whose customary employment is at the
rate of at least 1,000 hours per year. Participation in the Plan is optional
prior to age 34, but mandatory thereafter. Approximately 6,400 active and 6,630
inactive employees were participants in the Plan on August 31, 1995. The Plan
is funded by employer and employee contributions to provide lifetime retirement
income at normal retirement age 65, or a reduced income beginning as early as
age 55. The Plan also contains provisions for death and disability benefits.
The Plan has been determined qualified under the Internal Revenue Code. The
Plan is administered by a committee appointed by the Board of Directors of
Farmland, and all funds of the Plan are held by a bank trustee in accordance
with the terms of the trust agreement. It is the present intent to continue
this plan indefinitely. The Company's funding policy is to make the maximum
annual contributions to the Plan's trust fund that can be deducted for federal
income tax purposes. Company contributions made to the Plan for the years ended
August 31, 1993, 1994 and 1995 were $ -0-, $2.9 million and $5.3 million,
respectively.

Payments to participants in the Plan are based upon length of participation
and compensation reported to the Plan for the four highest of the last ten years
of employment. Compensation for this purpose includes base salary and
compensation earned under the Company's Annual Employee Variable Compensation
Plan discussed above. However, at the present time, the maximum compensation
(per participant) which may be covered by a qualified pension plan is limited to
$150,000 annually and the maximum retirement benefit which may be paid by such
plan is limited to $120,000 annually by the Tax Equity and Fiscal Responsibility
Act (TEFRA).

The Company established the Farmland Industries, Inc. Supplemental
Executive Retirement Plan ("SERP") effective January 1, 1994. The SERP is
intended to supplement the retirement income of executive participants in the
Farmland Industries, Inc. Employee Retirement Plan whose retirement benefit
would otherwise be reduced because of the limitation of the Internal Revenue
Code on the amount of salary which can be included in the computation of
retirement income ($150,000) or the amount of retirement benefit which may be
paid by a qualified retirement plan ($120,000).

The Company's Board of Directors has appointed an Administrative Committee
to administer the SERP. To fund the SERP, the Company purchased cash value life
insurance polices on the lives of plan participants. The Company owns these
insurance policies and has the sole right to name policy beneficiaries. The
total SERP premiums charged to operations for the eight months ended August 31,
1994 and for the year ended August 31, 1995 were $.4 million and $.6 million,
respectively.

The Company's obligation to pay supplemental retirement benefits under the
SERP is limited to the aggregate cash value of the life insurance policies
designated by the Administrative Committee as policies of the SERP. If the
benefits under the plan for a year would exceed the total cash value of the
policies, each participant's payment will be reduced.

The following table sets forth, for compensation levels up to $150,000, the
estimated annual benefits payable at age 65 for members of the Retirement Plan,
which benefits are not reduced by virtue of Social Security payments. The
following table also sets forth, for compensation levels exceeding $150,000, the
combined estimated annual benefits payable under the Retirement Plan and SERP
for each of the first 10 years following retirement (no SERP payouts are to be
made after 10 years) assuming: retirement occurs after age 55; the employer's
portion of the benefit lost (due to TEFRA limitations) by the employee is 85%;
the employee lives for 10 years after retirement; and, the aggregate payments
under the SERP are less than the cash value of life insurance policies
designated (see above) as SERP policies.

Remuneration Years of Service
Salaries 15 20 25 30

$ 100,000. . . . . . . . . $ 26,250 $ 35,000 $ 43,750 $ 52,500
125,000. . . . . . . . . 32,812 43,750 54,687 65,625
150,000. . . . . . . . . 39,375 52,500 65,625 78,750
200,000. . . . . . . . . 46,813 62,417 78,021 93,625
250,000. . . . . . . . . 54,250 72,333 90,417 108,500
300,000. . . . . . . . . 61,688 82,250 102,813 123,375
350,000. . . . . . . . . 69,125 92,167 115,209 138,250
400,000. . . . . . . . . 76,563 102,083 127,604 153,125
450,000. . . . . . . . . 84,000 112,000 140,000 168,000
500,000. . . . . . . . . 91,437 121,917 152,396 182,875
600,000. . . . . . . . . 106,313 141,750 177,188 212,626
700,000. . . . . . . . . 121,188 161,584 201,980 242,376
800,000. . . . . . . . . 136,063 181,417 226,771 272,126
900,000. . . . . . . . . 150,938 201,251 251,564 301,876
1,000,000. . . . . . . . . 165,813 221,083 276,355 331,626

The following table sets forth the credited years of service for the
executive officers of the Company at August 31, 1995.

Name Years of Creditable Service
H. D. Cleberg . . . . . . . . . . . . 30
G. E. Evans . . . . . . . . . . . . . 21
R. W. Honse . . . . . . . . . . . . . 21
J. F. Berardi . . . . . . . . . . . . 2
S. P. Dees . . . . . . . . . . . . . . 10

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The following persons, none of whom, except as indicated below, is either
currently or formerly an officer or employee of the Company or any of its
subsidiaries, served as members of the Company's compensation committee during
1995: Messrs. Jody Bezner, Warren Gerdes, Gail Hall, Greg Pfenning and Otis
Molz. Mr. Molz was Chairman of the Board of the Company from December 1991 to
December 1992. No executive officer of the Company (i) served as a member of a
compensation committee (or other board committee performing equivalent functions
or, in the absence of such committee, the entire board of directors) of another
entity, one of whose executive officers served on the compensation committee of
the Company, (ii) served as a director of another entity, one of whose executive
officers served on the compensation committee of the Company, or (iii) served as
a member of a compensation committee (or other board committee performing
equivalent functions or, in the absence of such committee, the entire board of
directors) of another entity, one of whose executive officers served as a
director of the Company.

COMPENSATION OF DIRECTORS

Directors' compensation consists of payment of three hundred dollars
($300.00) per day of attendance at the Board of Directors or committee meetings,
plus reimbursement of necessary expenses incurred in connection with their
official duties.

CERTAIN TRANSACTIONS

The Company transacts business in the ordinary course with its directors
and with its local cooperative members with which the directors are associated
on terms no more favorable than those available to its other local cooperative
members.
INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets, August 31, 1994 and 1995 . . . 72

Consolidated Statements of Operations for
each of the years in
the three-year period ended August 31, 1995 . . . . . . . . 74

Consolidated Statements of Cash Flows for each
of the years in
the three-year period ended August 31, 1995 . . . . . . . . 75

Consolidated Statements of Capital
Shares and Equities for
each of the years in the three-year
period ended August 31, 1995 . . . . . . . . . . . . . . . . 77

Notes to Consolidated Financial Statements . . . . . . . . . 78

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Farmland Industries, Inc.:

We have audited the accompanying consolidated balance sheets of Farmland
Industries, Inc. and subsidiaries as of August 31, 1994 and 1995, and the
related consolidated statements of operations, cash flows and capital shares and
equities for each of the years in the three-year period ended August 31, 1995.
These Consolidated Financial Statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these Consolidated
Financial Statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 of Farmland Industries,
Inc. and subsidiaries as of August 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended August 31, 1995, in conformity with generally accepted accounting
principles.

As discussed in Note 7 to the Consolidated Financial Statements, the Internal
Revenue Service ("IRS") has examined the Company's tax returns for the years
ended August 31, 1983 and 1984, and has proposed certain adjustments. Should
the IRS ultimately prevail, the federal and state income taxes and statutory
interest thereon could be significant. Farmland believes it has meritorious
positions with respect to such claims and, based upon the opinion of special tax
counsel, management believes it is more likely than not that the courts will
ultimately conclude that Farmland's treatment of such items was substantially,
if not entirely, correct. The ultimate outcome of this matter can not presently
be determined. Therefore, no provision for such income taxes and interest has
been made in the accompanying Consolidated Financial Statements.

KPMG PEAT MARWICK LLP

Kansas City, Missouri
October 20, 1995

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

August 31
1994 1995
(Amounts in Thousands)

Current Assets:
Cash and cash equivalents . . . . . . . . . . . $ 44,084 $ -0-
Accounts receivable - trade . . . . . . . . . . 360,560 446,232
Inventories (Note 3) . . . . . . . . . . . . . 572,660 772,528
Other current assets . . . . . . . . . . . . . 119,139 60,883

Total Current Assets . . . . . . . . . . . $ 1,096,443 $ 1,279,643

Investments and Long-Term Receivables
(Notes 4 and 14) . . . . . . . . . . . . . . . $ 189,601 $ 185,687

Property, Plant and Equipment (Notes 5 and 6):
Property, plant and equipment, at cost . . . . $ 1,202,159 $ 1,334,849
Less accumulated depreciation and amortization 700,869 742,704

Net Property, Plant and Equipment . . . . . . . $ 501,290 $ 592,145

Other Assets . . . . . . . . . . . . . . . . . . . $ 139,297 $ 128,468

Total Assets . . . . . . . . . . . . . . . . . . . $ 1.926,631 $ 2,185,943
<FN>
See accompanying Notes to Consolidated Financial Statements.

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND EQUITIES

August 31
1994 1995
(Amounts in Thousands)

Current Liabilities:
Demand loan certificates . . . . . . . . . . . . $ 23,158 $ 13,524
Short-term notes payable (Note 6) . . . . . . . 279,137 346,133
Current maturities of long-term debt (Note 6) . 27,840 42,394
Accounts payable - trade . . . . . . . . . . . . 246,181 245,905
Accrued payroll . . . . . . . . . . . . . . . . 52,816 50,337
Other current liabilities . . . . . . . . . . . 176,607 261,837

Total Current Liabilities . . . . . . . $ 805,739 $ 960,130

Long-Term Debt (excluding current
maturities) (Note 6) . . . . . . . . . . . . . . $ 517,806 $ 506,033

Deferred Income Taxes (Note 7) . . . . . . . . . . $ 6,340 $ 12,501

Minority Owners' Equity in Subsidiaries (Note 8) . $ 11,733 $ 19,992

Capital Shares and Equities (Note 9):
Preferred shares, $25 par value--Authorized
8,000,000 shares, 98,113 shares issued
and outstanding (148,069 shares in 1994) . . . $ 3,702 $ 2,453
Common shares, $25 par value -- Authorized
50,000,000 shares, 15,416,370 shares
issued and outstanding
(14,542,478 shares in 1994) . . . . . . . . . 363,562 385,409
Associate member common shares (nonvoting),
$25 par value -- Authorized 2,000,000
shares, 445,323 shares issued and
outstanding (370,707 shares in 1994) . . . . . 9,268 11,133
Earned surplus and other equities . . . . . . . 208,481 288,292

Total Capital Shares and Equities . . . $ 585,013 $ 687,287

Contingent Liabilities and Commitments (Notes 6, 7 and 10)

Total Liabilities and Equities . . . . . . . . . . $ 1,926,631 $ 2,185,943
<FN>
See accompanying Notes to Consolidated Financial Statements.

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Year Ended August 31
1993 1994 1995
(Amounts in Thousands)

Sales . . . . . . . . . . . . . . $ 4,722,940 $ 6,677,933 $ 7,256,869
Cost of sales . . . . . . . . . . . . . 4,470,290 6,284,084 6,699,178

Gross income . . . . . . . . . . . . . $ 252,650 $ 393,849 $ 557,691

Selling, general and administrative
expenses . . . . . . . . . . . . . $ 223,792 $ 305,279$ 344,364

Other income (deductions):
Interest expense . . . . . . . . . $ (36,764) $ (51,485) $ (53,862)
Interest income . . . . . . . . . . 4,189 6,170 8,334
Other, net (Note 16) . . . . . . . 9,536 20,111 11,600
Provision for loss and disposition
of assets (Note 17) . . . . . . (29,430) -0- -0-
Total other income (deductions) . . . . $ (52,469) $ (25,204) $ (33,928)

Income (loss) before income
taxes and equity in net income
(loss) of investees and minority
owners' interest in
net (income) loss of subsidiaries . $ (23,611) $ 63,366 $ 179,399

Income tax (expense) benefit (Note 7) . 6,433 (4,890) (29,628)

Income (loss) before equity in net
income (loss) of
investees and minority
owners' interest in
net (income) loss of subsidiaries . $ (17,178) $ 58,476 $ 149,771

Equity in net income (loss) of
investees (Note 4) . . . . . . . . (12,394) 10,878 22,785

Minority owners' interest in net (income)
loss of subsidiaries (Note 8) . . . (828) 4,522 (9,757)

Net income (loss) . . . . . . . . . . $ (30,400) $ 73,876 $ 162,799

Distribution of net income (Note 9):
Patronage refunds:
Farm supply patrons . . . . . . $ -0- $ 59,685 $ 74,557
Pork marketing patrons . . . . -0- 10,927 16,087
Beef marketing patrons . . . . -0- -0- 2,488
Grain marketing patrons . . . . -0- -0- 1,285
The Cooperative Finance
Association's patrons . . . 1,650 -0- -0-
$ 1,650 $ 70,612 $ 94,417
Earned surplus and other equities
(Note 9) . . . . . . . . . . . . . (32,050) 3,264 68,382
$ (30,400) $ 73,876 $ 162,799
<FN>
See notes to Consolidated Financial Statements

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended August 31
1993 1994 1995
(Amounts in Thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ (30,400) $ 73,876 $ 162,799
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . 57,730 62,960 69,138
Provision for loss on disposition of assets . . . 29,430 -0- -0-
(Gain) loss on disposition of fixed assets . . . (385) (1,794) 1,882
Patronage refunds received in equities . . . . . (2,241) (2,171) (2,025)
Proceeds from redemption of patronage equities . 1,731 573 1,026
Equity in net (income) loss of investees . . . . 12,394 (10,878) (22,785)
Deferred income tax (benefit) expense . . . . . . (3,463) (5,034) 6,161
Minority owners' equity in
income (loss) of subsidiaries . . . . . . . 828 (4,522) 9,757
Other . . . . . . . . . . . . . . . . . . . 6,776 5,292 412
Changes in assets and liabilities (exclusive
of assets and liabilities of businesses acquired):
Accounts receivable . . . . . . . . . . . . (92,024) (12,079) (70,413)
Inventories . . . . . . . . . . . . . . . . (65,402) (4,692) (186,570)
Other assets . . . . . . . . . . . . . . . . (30,154) (45,990) 38,889
Accounts payable . . . . . . . . . . . . . . 19,630 17,884 782
Other liabilities . . . . . . . . . . . . . (17,981) 32,617 35,684

Net cash provided by (used in) operating activities . . $ (113,531) $ 106,042 $ 44,737

CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to borrowers by finance companies . . . . . . $ (624,618) $ -0- $ -0-
Collections from borrowers by finance companies . . . . 631,668 -0- -0-
Acquisition of businesses . . . . . . . . . . . . . . . (10,500) (35,790) -0-
Proceeds from disposal of investments and
notes receivable . . . . . . . . . . . . . . . . 12,115 34,577 42,530
Acquisition of investments and notes receivable . . . . (50,378) (22,117) (26,789)
Capital expenditures . . . . . . . . . . . . . . . . . (98,238) (69,776) (124,722)
Proceeds from sale of fixed assets . . . . . . . . . . 10,900 14,785 3,828
Distribution from joint venture, net . . . . . . . . . -0- -0- -0-
Proceeds from sale of assets to
joint venture partner . . . . . . . . . . . . . . -0- 2,310 -0-
Proceeds from disposition of subsidiary (Note 2) . . . 87,227 -0- -0-
Other . . . . . . . . . . . . . . . . . . . (2,140) 5,547 (1,628)

Net cash used in investing activities . . . . . . . . . $ (43,964) $ (70,464) $ (106,781)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease of demand loan certificates . . . . . . . $ (13,224) $ (6,702) $ (9,634)
Proceeds from bank loans and notes payable . . . . . . 916,799 888,088 522,916
Payments of bank loans and notes payable . . . . . . . (777,268) (924,731) (513,672)
Proceeds from issuance of subordinated
debt certificates . . . . . . . . . . . . . . . 72,423 57,636 46,715
Payments for redemption of subordinated
debt certificates . . . . . . . . . . . . . . . (16,490) (33,034) (26,866)
Checks and drafts outstanding . . . . . . . . . . . . . -0- 37,088
Payments for redemption of equities . . . . . . . . . . (13,505) (3,244) (12,431)
Payments of patronage refunds and dividends . . . . . . (17,946) -0- (26,648)
Other . . . . . . . . . . . . . . . . . . . . . . . . . 340 2,120 492

Net cash provided by (used in) financing activities . . $ 151,129 $ (19,867) $ 17,960

Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . $ (6,366) $ 15,711 $ (44,084)
Cash and cash equivalents at beginning of year . . . . 34,739 28,373 44,084
Cash and cash equivalents at end of year . . . . . . . $ 28,373 $ 44,084 $ -0-

SUPPLEMENTAL SCHEDULE OF CASH PAID
FOR INTEREST AND INCOME TAXES:
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 41,136 $ 43,645 $ 49,885

Income taxes (net of refunds) . . . . . . . . . . . . . $ 1,479 $ 9,746 $ 30,006

SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Equities and minority owners' interest
called for redemption . . . . . . . . . . . . . . $ -0- $ 12,935 $ 27,738
Transfer of assets in exchange for
investment in joint ventures . . . . . . . . . . $ -0- $ 309 $ 2,061
Appropriation of current year's net income
as patronage refunds . . . . . . . . . . . . . . $ -0- $ 70,612 $ 94,417
Acquisition of businesses:
Fair value of net assets acquired . . . . . . . $ 114,519 $ 131,847 $ -0-
Goodwill . . . . . . . . . . . . . . . . . . . . 16,086 1,094 -0-
Minority owners' investment . . . . . . . . . . . (7,000) (843) -0-
Cash Paid . . . . . . . . . . . . . . . . . . . . (10,500) (35,790) -0-
Liabilities Assumed . . . . . . . . . . . . . . . . . . $ 113,105 $ 96,308 $ -0-
<FN>
See accompanying Notes to Consolidated Financial Statements.

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL SHARES AND EQUITIES

Years Ended August 31, 1993, 1994 and 1995
Earned Total
Associate Surplus Capital
Member And Shares
Preferred Common Common Other And
Shares Shares Shares Equities Equities
(Amounts in Thousands)

BALANCE AT AUGUST 31, 1992 . . . . . . . . . $ 3,713 $ 376,383 $ 8,176 $ 199,857 $ 588,129
Issue, redemption and cancellation of equities (5) 6,740 (49) (1,058) 5,628
Appropriation of current year's net loss . . -0- -0- -0- (30,400) (30,400)
Transfers to current liabilities . . . . . . -0- -0- -0- (1,650) (1,650)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (3,127) 69 3,058 -0-

BALANCE AT AUGUST 31, 1993 . . . . . . . . . $ 3,708 $ 379,996 $ 8,196 $ 169,807 $ 561,707
Issue, redemption and cancellation of equities -0- (355) 17 (3,397) (3,735)
Appropriation of current year's net income . -0- -0- -0- 73,876 73,876
Patronage refund payable in cash transferred
to current liabilities . . . . . . . . -0- -0- -0- (26,552) (26,552)
Base capital redemptions transferred
to current liabilities . . . . . . . . -0- (8,628) (112) -0- (8,740)
Other equity redemptions transferred
to current liabilities . . . . . . . . (6) (9) -0- (3,440) (3,455)
Transferred to liabilities . . . . . . . . . -0- -0- -0- (8,084) (8,084)
Dividends on preferred stock . . . . . . . . -0- -0- -0- (4) (4)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (7,442) 1,167 6,275 -0-

BALANCE AT AUGUST 31, 1994 . . . . . . . . . $ 3,702 $ 363,562 $ 9,268 $ 208,481 $ 585,013
Issue, redemption and cancellation of equities -0- (51) 332 (990) (709)
Appropriation of current year's net income . -0- -0- -0- 162,799 162,799
Patronage refund payable in cash transferred
to current liabilities . . . . . . . . -0- -0- -0- (33,061) (33,061)
Base capital redemptions transferred
to current liabilities . . . . . . . . -0- (13,939) (220) -0- (14,159)
Other equity redemptions transferred
to current liabilities . . . . . . . . (1,249) (30) -0- (11,477) (12,756)
Prior year patronage refund allocation . . . -0- 35,940 1,508 (37,284) 164
Dividends on preferred stock . . . . . . . . -0- -0- -0- (4) (4)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (73) 245 (172) -0-

BALANCE AT AUGUST 31, 1995 . . . . . . . . . $ 2,453 $ 385,409 $ 11,133 $ 288,292 $ 687,287
<FN>
See accompanying Notes to Consolidated Financial Statements.

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Farmland Industries, Inc., a Kansas corporation, is organized and operated
as a cooperative and its mission is to be a producer-driven and profitable
agricultural supply to consumer foods cooperative system.

Principles of Consolidation -- The Consolidated Financial Statements
include the accounts of Farmland Industries, Inc. and all its majority-owned
subsidiaries ("Farmland" or the "Company", unless the context requires
otherwise). All significant intercompany accounts and transactions have been
eliminated. The Company's fiscal year ends August 31. Accordingly, all
references to "year" or "years" are to fiscal years ended August 31.

Cash and Cash Equivalents -- Investments with maturities of less than three
months are included in "Cash and cash equivalents."

Investments -- Investments in companies over which the Company exercises
significant influence (20% to 50% voting control) are accounted for by the
equity method. Other investments are stated at cost, less provision for
impairment (other than temporary impairment).

Accounts Receivable -- The Company uses the allowance method to account for
doubtful accounts and notes. Uncollectible accounts and notes receivable from
members are written off against the common shares held by members before such
uncollectible accounts are charged to operations.

Inventories -- Grain inventories are valued at market adjusted for net
unrealized gains or losses on open commodity contracts. Crude oil, refined
petroleum products, cattle and beef inventories are valued at the lower of
last-in, first-out cost or market. Other inventories are valued at the lower of
first-in, first-out cost or market. Supplies are valued at cost.

Property, Plant and Equipment -- Assets, including assets under capital
leases, are stated at cost. Depreciation and amortization are computed
principally using the straight-line method over the estimated useful lives of
the assets and the remaining terms of the capital leases, respectively.

Goodwill -- The excess of cost over the fair market value of assets of
businesses purchased is amortized on a straight-line basis over a period of 15
to 25 years. The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows. Goodwill is
reflected in the accompanying Consolidated Balance Sheets net of accumulated
amortization of $3.3 million and $6.9 million, respectively at August 31, 1994
and 1995.

Sales -- The Company's policy is to recognize sales at the time product is
shipped. Net margins on international grain merchandised, rather than the value
of such products, are included in net sales. The gross value of international
grain merchandised in 1994 and 1995 was $590.2 million and $1,552.4 million,
respectively.

Environmental Costs -- Liabilities related to remediation of contaminated
properties are recognized when the related costs are considered probable and can
be reasonably estimated. Estimates of these costs are based upon currently
available facts, existing technology, undiscounted site specific costs, and
currently enacted laws and regulations. In reporting environmental liabilities,
no offset is made for potential recoveries. All liabilities are monitored and
adjusted regularly as new facts or changes in law or technology occur.
Environmental expenditures are capitalized when such costs provide future
economic benefits.

Federal Income Taxes -- Farmland is subject to income taxes on all income
not distributed to patrons as patronage refunds. Farmland files consolidated
federal and state income tax returns. Effective September 1, 1993, Farmland
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." Farmland accounted for income taxes using the deferred method
under APB Opinion 11 for the year ended August 31, 1993.

Reclassification -- Certain prior-year amounts have been reclassified to
conform with the current year presentations.

(2) ACQUISITIONS AND DISPOSITIONS

During 1993, the Company and partners organized National Beef Packing
Company, L.P. ("NBPC"). Farmland retained a 58% ownership interest (having
increased to 68% effective March 31, 1995 and, subsequent to August 31, 1995,
such interest having increased to 76%) in NBPC by investing $10.5 million in
cash. On April 15, 1993, NBPC acquired the business of Idle Wild Foods, Inc.
("Idle Wild"), a beef packing plant and feedlot located in Liberal, Kansas.
NBPC acquired the assets by assuming liabilities of Idle Wild with a fair value
of approximately $130.6 million (including bank loans which are nonrecourse to
NBPC's partners). The acquisition has been accounted for as a purchase and,
accordingly, the results of operations of NBPC have been included in the
Company's Consolidated Financial Statements from April 15, 1993. The
liabilities assumed over the fair value of the net identifiable assets acquired
has been recorded as goodwill.

To establish The Cooperative Finance Association ("CFA") as an independent
finance association for its members, on August 30, 1993 CFA purchased 10.1
million shares of its voting common stock from the Company for a purchase price
comprised of $1.5 million in cash, equities of Farmland Industries, Inc. (with a
par value of $2.4 million) held by CFA and a $6.2 million subordinated
promissory note payable to the Company bearing interest of 5.3%. In addition,
during 1993, CFA: 1) repaid its operating loan from the Company
($25.2 million); and, 2) purchased the lending operations and assets of Farmland
Financial Services Company for a cash payment of $60.5 million and a $2.1
million, 6.0% subordinated note payable to the Company. The Company repaid
$87.2 million of its borrowings from the National Bank for Cooperatives with the
proceeds received from CFA. As a result of CFA's stock purchase and amendments
to CFA's bylaws, The Company's voting control in CFA decreased to 25%.
Accordingly, effective August 31, 1993, CFA is not included in the consolidated
balance sheet of the Company.

The following unaudited financial information, for 1993, presents pro forma
results of operations of the Company as if the disposition of CFA and the
acquisitions of NBPC had occurred at the beginning of the period presented. The
pro forma financial information includes adjustments for amortization of
goodwill, additional depreciation expense and increased interest expense on debt
assumed in the acquisitions. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred had the
Company been a single entity which excluded CFA and included NBPC for the full
year 1993.

August 31, 1993
(Unaudited)
(Amounts in Thousands)

Net sales . . . . . . . . . . . . . $ 5,357,867

Income (loss) before
extraordinary item . . . . . . . $ (44,040)

During 1994, the Company acquired approximately 79% of the common stock of
National Carriers, Inc. ("NCI") for a cash purchase price of $4.4 million. NCI
is a trucking company located in Liberal, Kansas. NCI provides substantially
all the trucking service needs of National Beef Packing Company, L.P. ("NBPC").

In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as
"Tradigrain"). The purchase price for Tradigrain ($31.4 million) was paid in
cash.

The acquisitions of NCI and Tradigrain have been accounted for by the
purchase method of accounting and, accordingly, the operating results of each
enterprise have been included in the Company's Consolidated Financial Statements
from the respective dates of acquisition. The excess of the cash paid over the
fair value of the net assets acquired has been recorded as goodwill. The pro
forma effects of acquisitions of NCI and Tradigrain on the Consolidated
Financial Statements are not significant.

(3) INVENTORIES

Major components of inventories are as follows:

August 31
1994 1995
(Amounts in Thousands)

Grain . . . . . . . . . . . . . . . . . . $ 170,699 $ 312,202
Beef . . . . . . . . . . . . . . . . . . 21,116 30,179
Materials . . . . . . . . . . . . . . . . . 51,428 39,399
Supplies . . . . . . . . . . . . . . . . . 43,036 50,328
Finished and in-process products . . . . . 286,381 340,420
$ 572,660 $ 772,528

The carrying values of crude oil and refined petroleum inventories stated
under the lower of last-in, first-out ("LIFO") cost or market at August 31, 1994
and 1995 were $86.2 million and $82.6 million, respectively. If the lower of
first-in, first-out ("FIFO") cost or market had been used to value these
products, the carrying values of inventories at August 31, 1994 and 1995 would
have been lower by $4.1 million and $7.9 million, respectively.

The carrying values of beef inventories stated under LIFO at August 31,
1994 and 1995 were $21.1 million and $30.2 million, respectively. The LIFO
method of accounting for beef inventories had no effect on the carrying value of
inventories or on the results of operations reported in 1993, 1994 and 1995, as
market value of these inventories was lower than LIFO and approximated FIFO
cost.

(4) INVESTMENTS AND LONG-TERM RECEIVABLES

Investments and long-term receivables are as follows:

August 31
1994 1995
(Amounts in Thousands)

Investments accounted for by the equity method $ 52,478 $ 88,786
Investments in and advances to other cooperatives 42,744 47,320
National Bank for Cooperatives . . . . . . . . 28,786 26,999
Other investments and long-term receivables . . 16,638 18,363
Notes receivable from ventures, 20% to 50% owned 48,955 4,219
$ 189,601 $ 185,687

National Bank for Cooperatives ("CoBank") requires borrowers from the bank
to maintain an investment in stock of the bank. The amount of investment
required is based on the average amount borrowed from CoBank during the previous
five years. At August 31, 1994 and 1995, Farmland's investment in CoBank
approximated its requirement. This investment is pledged to secure borrowings
from CoBank. See Note 14.

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

August 31
1994 1995
(Amounts in Thousands)
Current Assets . . . . . . . . . . . . $ 105,981 $ 243,259
Long-Term Assets . . . . . . . . . . . 252,704 238,297
Total Assets . . . . . . . . . . . . $ 358,685 $ 481,556

Current Liabilities . . . . . . . . . . $ 111,077 $ 205,713
Long-Term Liabilities . . . . . . . . . 144,255 94,029
Total Liabilities . . . . . . . . . $ 255,332 $ 299,742

Net Assets . . . . . . . . . . . . . . $ 103,353 $ 181,814

Year Ended August 31
1993 1994 1995
(Amounts in Thousands)

Net sales . . . . . . . . . . . $ 601,194 $ 803,516 $ 1,212,592
Net income (loss) . . . . . . . $ (22,755) $ 24,285 $ 46,803
Farmland's equity in net
income (loss) . . . . . . . . $ (12,394) $ 10,878 $ 22,785

The Company's investments accounted for by the equity method consist
principally of 50% equity interests in two phosphate fertilizer manufacturing
ventures (Farmland Hydro, L.P. and SF Phosphates Limited Company) and, through
March 31, 1995, a 50% interest in Hyplains Beef, L.C. (such interest being
contributed to NBPC in return for an additional 10% ownership interest by the
Company in NBPC).

Effective September 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The cumulative effect of this change in the use of fair
value accounting and reporting for certain investments in debt and equity
securities was immaterial.

(5) PROPERTY, PLANT AND EQUIPMENT

A summary of cost for property, plant and equipment is as follows:

August 31
1994 1995
(Amounts in Thousands)
Land and improvements . . . . . . . . . . . . . $ 42,261 $ 42,355
Buildings . . . . . . . . . . . . . . . . . . . 224,767 245,460
Machinery and equipment . . . . . . . . . . . . 716,683 765,383
Automotive equipment . . . . . . . . . . . . . 65,986 67,124
Furniture and fixtures . . . . . . . . . . . . 48,613 54,888
Capital leases . . . . . . . . . . . . . . . . 50,956 49,241
Leasehold improvements . . . . . . . . . . . . 15,085 21,763
Other . . . . . . . . . . . . . . . . . . . . 7,045 7,124
Construction in progress . . . . . . . . . . . 30,763 81,511
$ 1,202,159 $ 1,334,849

During 1993, 1994 and 1995, the Company capitalized construction period
interest of $1.6 million, $.4 million and $.7 million, respectively.

(6) BANK LOANS, SUBORDINATED DEBT CERTIFICATES AND NOTES PAYABLE

Bank loans, subordinated debt certificates and notes payable are as
follows:

August 31
1994 1995
(Amounts in Thousands)

Subordinated certificates of investment
and capital investment certificates
--6% to 9.5%, maturing 1996 through 2014 . . . $ 210,054 $ 225,132
Subordinated monthly interest certificates
--6.25% to 12%, maturing 1996 through 2014 . . 70,057 74,863
National Bank for Cooperatives
--6.22% to 9.2%, maturing 1996 through 2001 . . 74,278 68,444
Other bank notes--6.1% to 8.75%,
maturing 1996 through 2001 . . . . . . . . . . 117,813 88,054
Industrial revenue bonds--5.75% to 8%,
maturing 1996 through 2007 . . . . . . . . . . 25,055 21,750
Promissory notes--7% to 10%,
maturing 1996 through 2002 . . . . . . . . . . 18,684 14,794
Other--5% to 13% . . . . . . . . . . . . . . . . . 29,705 55,390
$ 545,646 $ 548,427
Less current maturities . . . . . . . . . . . . . . 27,840 42,394
$ 517,806 $ 506,033

The Company has a $650.0 million Credit Agreement. The Credit Agreement
provides short-term credit of up to $450.0 million to finance seasonal
operations and inventory, and revolving term credit of up to $200.0 million. At
August 31, 1995, the Company had $250.8 million of short-term borrowings under
the Credit Agreement, $85.0 million of revolving term borrowings and $35.8
million was being utilized to support letters of credit issued on behalf of the
Company by participating banks.

The Company pays commitment fees under the Credit Agreement of 1/10 of 1%
annually on the unused portion of the short-term commitment and 1/4 of 1%
annually on the unused portion of the revolving term commitment. In addition,
the Company must maintain consolidated working capital of not less than $150.0
million, consolidated net worth of not less than $475.0 million and funded
indebtedness and senior funded indebtedness of not more than 52% and 43% of
Combined Total Capitalization (as defined in the Credit Agreement),
respectively. All computations are based on consolidated financial data adjusted
to exclude nonrecourse subsidiaries (as defined in the Credit Agreement). At
August 31, 1995, the Company was in compliance with all covenants under the
Credit Agreement. The short-term provisions of the Credit Agreement are reviewed
and/or renewed annually. The next review date is in May 1996. The revolving
term provisions of this agreement expire in May 1997.

The Company maintains other borrowing arrangements with banks and financial
institutions. At August 31, 1995, $47.2 million was borrowed under such
agreements. Financial covenants of these arrangements generally are not more
restrictive than under the Credit Agreement.

NBPC maintains a $90.0 million borrowing agreement with a group of banks
which provides financing support for its beef packing operations. Such
borrowings are nonrecourse to Farmland or Farmland's other affiliates. At
August 31, 1995, $32.0 million was borrowed under this agreement and $1.0
million was utilized to support letters of credit. In addition, NBPC has
incurred certain long-term borrowings from Farmland. NBPC has pledged certain
assets to Farmland and such group of banks to support its borrowings.

Tradigrain, which is comprised of seven international grain trading
subsidiaries of Farmland, has borrowing agreements with various international
banks which provide financing and letters of credit to support current
international grain trading transactions. At August 31, 1995, such short-term
borrowings totaled $70.3 million. Obligations of Tradigrain under these loan
agreements are nonrecourse to Farmland or Farmland's other affiliates.

Subordinated debt certificates have been issued under several different
indentures. The Company may redeem subordinated certificates of investments and
capital investment certificates in advance of scheduled maturities.
Additionally, the Company may redeem subordinated certificates of investments,
capital investment certificates and subordinated monthly interest certificates
upon death of the holder.

Outstanding subordinated debt certificates are subordinated to senior
indebtedness. At August 31, 1995, senior indebtedness included $441.7 million
for money borrowed, and additional financings (principally long-term operating
leases) require aggregate payments over 15 years of approximately
$115.7 million.

Under industrial revenue bonds and other agreements, property, plant and
equipment with a carrying value of $23.9 million have been pledged.

Bank loans, subordinated debt certificates and notes payable mature during
the fiscal years ending August 31 in the following amounts:

(Amounts in Thousands)
1996 . . . . . . . . . . . . . . . . . . $ 42,394
1997 . . . . . . . . . . . . . . . . . . 146,131
1998 . . . . . . . . . . . . . . . . . . 81,429
1999 . . . . . . . . . . . . . . . . . . 27,465
2000 . . . . . . . . . . . . . . . . . . 31,719
2001 and after . . . . . . . . . . . . . 219,289
$ 548,427

At August 31, 1994 and 1995, the Company had demand loan certificates and
short-term bank debt outstanding of $305.0 million (weighted average interest
rate of 5.1%) and $365.3 million (weighted average interest rate of 6.4%),
respectively.

(7) INCOME TAXES

A. TERRA RESOURCES, INC.

In July 1983, Farmland sold the stock of Terra Resources, Inc. ("Terra"), a
wholly owned subsidiary engaged in oil and gas exploration and production
operations, and exited its oil and gas exploration and production activities.
The gain from the sale of Terra amounted to $237.2 million for tax reporting
purposes.
On March 24, 1993, the Internal Revenue Service ("IRS") issued a statutory
notice to Farmland asserting deficiencies in federal income taxes (exclusive of
statutory interest thereon) in the aggregate amount of $70.8 million. The
asserted deficiencies relate primarily to the Company's tax treatment of the
$237.2 million gain resulting from its sale, in July 1983, of the stock of Terra
and the IRS's contention that Farmland incorrectly treated the Terra sale gain
as income against which certain patronage-sourced operating losses could be
offset. The statutory notice further asserts that Farmland incorrectly
characterized for tax purposes gains aggregating approximately $14.6 million,
and a loss of approximately $2.3 million, from dispositions of certain other
assets.

No provision has been made in the Consolidated Financial Statements for
federal or state income taxes (or interest thereon) in respect of the IRS claims
described above. The Company believes that it has meritorious positions with
respect to all of these claims.

In the opinion of Bryan Cave, the Company's special tax counsel, it is more
likely than not that the courts will ultimately conclude that the Company's
treatment of the Terra sale gain was substantially, if not entirely, correct.
Such counsel has further advised, however, that none of the issues involved in
this dispute is free from doubt, and there can be no assurance that the courts
will ultimately rule in favor of the Company on any of these issues.

B. OTHER INCOME TAX MATTERS

Income tax expense (benefit) attributable to income from continuing
operations is comprised of the following:

Year Ended August 31
1993 1994 1995
(Amounts in Thousands)

Federal:
Current . . . . . . . . . . $ (2,502) $ 10,076 $ 18,533
Deferred . . . . . . . . . (2,944) (3,217) 4,255
$ (5,446) $ 6,859 $ 22,788
State:
Current . . . . . . . . . . $ (468) $ 1,965 $ 3,356
Deferred . . . . . . . . . (519) (755) 665
$ (987) $ 1,210 $ 4,021
Foreign:
Current . . . . . . . . . . $ -0- $ (2,117) $ 1,578
Deferred . . . . . . . . . -0- (1,062) 1,241
$ -0- $ (3,179) $ 2,819

$ (6,433) $ 4,890 $ 29,628

Income (loss) before income tax expense from foreign sources amounted to
($14.3 million) and $19.3 million for 1994 and 1995, respectively.

Income tax expense (benefit) attributable to income from continuing
operations differs from the "expected" income tax expense (benefit) using
statutory rate of 35% (34% for 1993), as follows:

Year Ended August 31
1993 1994 1995

Computed "expected" income tax expense (benefit)
on income (loss) before income taxes . . . . . .(34.0) % 35.0 % 35.0 %

Increase (reduction) in income tax expense (benefit)
attributable to:
Patronage refunds . . . . . . . . . . . . . . . . (4.0) (33.3) (18.3)
Patronage-sourced items for
which no benefit is available . . . . . . . 26.5 -0- -0-
State income tax expense (benefit) net of
federal income tax effect . . . . . . . . . (2.2) 1.1 2.2
Benefit associated with exempt income of
foreign sales corporation . . . . . . . . . (1.4) -0- -0-
Other, net . . . . . . . . . . . . . . . . . . . (2.7) 3.8 (2.4)
Income tax expense (benefit) . . . . . . . . . . . . .(17.8) % 6.6 % 16.5 %

The tax effect of temporary differences that give rise to significant
portions of deferred tax liabilities and deferred tax assets at August 31, 1994
and 1995 are as follows:
August 31
1994 1995
(Amounts in Thousands)
Deferred tax liabilities:
Property, plant and equipment, principally
due to differences in depreciation . $ 20,242 $ 26,009
Prepaid pension cost . . . . . . . . . 21,124 19,807
Other . . . . . . . . . . . . . . . . . 14,021 15,065
Total gross deferred liabilities . . $ 55,387 $ 60,881

Deferred tax assets:
Safe harbor leases . . . . . . . . . . $ 5,391 $ 5,096
Accrued expenses . . . . . . . . . . . 27,017 29,394
Accounts receivable, principally due to
allowance for doubtful accounts . . 4,394 2,300
Other . . . . . . . . . . . . . . . . . 12,245 11,590
Total gross deferred assets . . . . $ 49,047 $ 48,380

Net deferred tax liability . . . . . . . . $ 6,340 $ 12,501

A valuation allowance for deferred tax assets was not necessary at August
31, 1994 or 1995.

The significant components of deferred income tax expense (benefit)
attributable to income from continuing operations for the years ended August 31,
1994 and 1995 are as follows:

August 31
1994 1995
(Amounts in Thousands)

Deferred tax expense (benefit) . . . . . . $ (8,044) $ 6,161

Charge in lieu of taxes resulting from
initial recognition
of acquired tax benefits that
are allocated to reduce
goodwill related to the
acquired entity . . . . . . . . . . . . 3,010 -0-
$ (5,034) $ 6,161

Deferred income taxes for the year ended August 31, 1993 result from timing
differences in the recognition of income and expenses for financial reporting
and income tax reporting purposes. The sources of these timing differences and
their tax effect are as follows:
Year Ended
1993
(Amounts in Thousands)

Depreciation . . . . . . . . . . . . . . . $ 473
Safe harbor lease rentals . . . . . . . . . (378)
Provision for loss on proposed sale of assets (3,454)
Unfunded pension expense . . . . . . . . . (355)
Other, net . . . . . . . . . . . . . . . . 251
$ (3,463)

The tax benefit for the year ended August 31, 1993 resulted from the
carryback of nonpatronage-sourced losses to reduce the amount of federal and
state income taxes paid during prior years.

During the year ended August 31, 1994, Farmland utilized nonmember-sourced
loss carryforwards amounting to $7.5 million to reduce goodwill for financial
reporting purposes by $3.0 million. No such carryforwards were available at
August 31, 1995. At August 31, 1994, the Company had alternative minimum tax
credit carryforwards of approximately $7.0 million which were utilized during
1995.

(8) MINORITY OWNERS' EQUITY IN SUBSIDIARIES

A summary of the equity of subsidiaries owned by others is as follows:

August 31
1994 1995
(Amounts in Thousands)

National Beef Packing Company, L.P. and G.P. . . $ 2,925 $ 12,473
Farmland Foods, Inc. . . . . . . . . . . . . . . 5,618 4,682
Heartland Wheat Growers, L.P. and G.P. . . . . . 2,100 2,295
Other subsidiaries . . . . . . . . . . . . . . . 1,090 542
$ 11,733 $ 19,992

(9) PREFERRED STOCK, EARNED SURPLUS AND OTHER EQUITIES

A summary of preferred stock is as follows:

August 31
1994 1995
(Amounts in Thousands)

Preferred shares, $25 par value - Authorized
8,000,000 shares:
6% - 608 shares issued and outstanding
(608 shares in 1994) . . . . . . . . . . . . $ 15 $ 15
5-1/2% - 2,436 shares issued and outstanding
(2,592 shares in 1994) . . . . . . . . . . . 65 61
Series F - 95,069 shares issued and outstanding
(144,869 shares in 1994) . . . . . . . . . . 3,622 2,377
$ 3,702 $ 2,453

The 5-1/2% and 6% preferred stocks have preferential liquidation rights
over the Series F nondividend bearing preferred stock. Dividends on the 5-1/2%
and 6% preferred stock are cumulative if declared by the Farmland Board of
Directors and only to the extent earned each year. Upon liquidation, holders of
all preferred stock are entitled to the par value thereof and, with respect to
the 5-1/2% and 6% preferred stock, any declared or unpaid earned dividends.

A summary of earned surplus and other equities is as follows:

August 31
1994 1995
(Amounts in Thousands)

Earned surplus . . . . . . . . . . . . . . . . $ 130,250 $ 197,666
Patronage refund payable in equities . . . . . 44,032 61,356
Nonmember capital . . . . . . . . . . . . . . . 103 -0-
Capital credits . . . . . . . . . . . . . . . . 32,547 27,645
Additional paid-in surplus . . . . . . . . . . 1,603 1,603
Currency translation adjustment . . . . . . . . (54) 22
$ 208,481 $ 288,292

In accordance with the bylaws of Farmland, the member-sourced portion of
its net income or loss and the resulting patronage refund payable to members and
patrons are determined annually.

Farmland maintains a base capital plan. The plan's objectives are as
follows: 1) to achieve proportionality between the dollar amount of business a
member or associate member of Farmland ("Participant") transacts with Farmland
and the equity of Farmland which the Participant should hold (hereinafter
referred to as the Participants' "Base Capital Requirement"); and, 2) provide a
method for the Board of Directors, in its discretion, to redeem equities held by
a Participant when the Participant's allocated equity exceeds the Participant's
Base Capital Requirement. This plan provides that the relationship between the
Participant's allocated equity and the Participant's Base Capital Requirement
shall influence the cash portion of any patronage refund paid to the
Participant.

The Base Capital Requirement shall be determined annually by the Farmland
Board of Directors at its sole discretion. At August 31, 1994 and 1995, common
stock and associate member common stock with an aggregate par value of $8.7
million and $14.2 million, respectively, were approved for redemption by the
Board of Directors under the base capital plan and such amounts have been
included in "Other current liabilities" in the Consolidated Balance Sheet at
August 31, 1994 and 1995, respectively.

Farmland maintains an estate settlement plan for redemption of equities
held by estates of deceased individuals (except equities purchased and held less
than five years) and special allocated equity redemption plans to redeem
equities of holders who do not participate in the Farmland base capital plan.
Under these plans, the Board of Directors, in its discretion, may redeem
equities based on certain factors, including the financial position and
consolidated net income of the Company. A priority for redeeming equities under
these plans has been established.

At August 31, 1994 and 1995, certain equities of Farmland with a face
amount of $3.5 million and $12.8 million, respectively, and capital equity fund
certificates held by certain members of Farmland Foods, Inc. in the amount of
$.7 million and $.8 million, respectively, have been approved by the Board of
Directors for redemption under the estate settlement and special allocated
equity redemption plans and such amounts have been included in "Other current
liabilities" in the Consolidated Balance Sheet at August 31, 1994 and 1995.

Capital credits are issued: 1) for payment of patronage refunds to patrons
who do not satisfy requirements for membership or associate membership; and,
2) upon conversion of common stock or associate member common stock held by
persons who do not meet qualifications for membership or associate membership in
Farmland.

Additional paid-in surplus results from members donating Farmland equity to
Farmland.

None of the aforementioned equities are held by or for the account of
Farmland or in any sinking or other special fund of Farmland and none have been
pledged by Farmland.

(10) CONTINGENT LIABILITIES AND COMMITMENTS

The Company leases various equipment and real properties under long-term
operating leases. For 1993, 1994 and 1995, rental expenses totaled $41.1
million, $41.8 million and $44.6 million, respectively. Rental expense is
reduced for mileage credits received on leased railroad cars ($1.9 million in
1993, $1.9 million in 1994 and $1.8 million in 1995).

The leases have various remaining terms ranging from one year to fifteen
years. Some leases are renewable, at the Company's option, for additional
periods. The minimum required payments for these leases during the fiscal years
ending August 31 are as follows:

(Amounts in Thousands)
1996 . . . . . . . . . . . . $ 48,126
1997 . . . . . . . . . . . . 44,302
1998 . . . . . . . . . . . . 35,493
1999 . . . . . . . . . . . . 27,529
2000 . . . . . . . . . . . . 22,313
2001 and after . . . . . . . 86,391
$ 264,154

The Company is involved in various lawsuits incidental to the businesses.
In the opinion of management, the ultimate resolution of these litigation issues
will not have a material adverse effect on the Company's Consolidated Financial
Statements.

The Company has been designated by the Environmental Protection Agency as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), at various National
Priority List ("NPL") sites. In addition, the Company is aware of possible
obligations associated with environmental matters at other sites, including
sites where no claim or assessment has been made. The Company's accrued
liability for probable and reasonably determinable obligations for resolution of
environmental matters at NPL and other sites was $7.2 million and $18.5 million
at August 31, 1994 and 1995, respectively.

The ultimate costs of resolving environmental matters are not quantifiable
because many such matters are in preliminary stages and the timing and extent of
actions which governmental authorities may ultimately require are unknown. It
is possible that the costs of such resolution may be greater than the
liabilities which, in the opinion of management, are probable and reasonably
determinable at August 31, 1995. In the opinion of management, it is reasonably
possible for such costs to approximate an additional $19.8 million.

The Cooperative Finance Association has loans receivable from customers
engaged in pork production operations and from cooperative associations which
are guaranteed by the Company. At August 31, 1995, such guarantees amounted to
$8.7 million.

Farmland has issued letters of credit totaling $15.5 million to support
nonrecourse borrowing arrangements of subsidiaries.

(11) EMPLOYEE BENEFIT PLANS

The Farmland Industries, Inc. Employee Retirement Plan ("the Plan") is a
defined benefit plan covering substantially all employees of the Company who
meet minimum age and length-of-service requirements. Benefits payable under the
Plan are based on years of service and the employee's average compensation
during the highest four of the employee's last ten years of employment.

The assets of the Plan are maintained in a trust fund. The majority of the
Plan's assets are invested in common stocks, corporate bonds, United States
Government securities and short-term investment funds.

The Company's funding policy is to make the maximum annual contribution to
the Plan's trust fund that can be deducted for federal income tax purposes. The
Company charges pension cost as accrued based on actuarial valuation of the
Plan.

Components of the Company's pension cost are as follows:

August 31
1993 1994 1995
(Amounts in Thousands)

Service cost - benefits earned during the period . . . $ 7,449 $ 8,663 $ 10,336
Interest cost on projected benefit obligation . . . . 12,134 15,292 16,707
Actual return on Plan assets . . . . . . . . . . . . . (15,842) (10,949) (27,422)
Net amortization and deferral . . . . . . . . . . . . (374) (7,860) 8,677
Pension expense . . . . . . . . . . . . . . . . . . $ 3,367 $ 5,146 $ 8,298

The discount rate and the rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligations were 8.5% and 5.0% at August 31, 1993, and 8.0% and 4.5% at both
August 31, 1994 and 1995. At August 31, 1993, 1994 and 1995, the expected
long-term rate of return on assets was 8.5%.

The following table sets forth the Plan's funded status and amounts
recognized in the Company's consolidated balance sheet at August 31, 1994 and
1995. Such prepaid pension cost is based on the Plan's funded status as of May
31, 1994 and 1995.

August 31
1994 1995
(Amounts in Thousands)

Actuarial present value of benefit obligations:
Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,648 $ 170,105
Nonvested benefits . . . . . . . . . . . . . . . . . . . . . . . . 9,163 11,584
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . $ 157,811 $ 181,689
Increase in benefits due to future compensation increases . . . . . 53,533 56,353
Projected benefit obligation . . . . . . . . . . . . . . . . . . . $ 211,344 $ 238,042
Estimated fair value of Plan assets . . . . . . . . . . . . . . . . 226,681 259,262
Plan assets in excess of projected benefit obligation . . . . . . . $ 15,337 $ 21,220
Unrecognized net loss from past experience different
from that assumed and effects of changes
in assumptions . . . . . . . . . . . . . . . . . . . . . . . . 37,332 27,750
Unrecognized net transition asset being
recognized over 10 years . . . . . . . . . . . . . . . . . . . (933) -0-
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . 1,308 1,089
Prepaid pension cost at end of year . . . . . . . . . . . . . . . . . . . $ 53,044 $ 50,059

Effective September 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 112, "Employer's Accounting for Postemployment
Benefits." The cumulative effect of this change in accounting for the estimated
cost of benefits provided to former or inactive employees was immaterial. Prior
years' financial statements have not been restated to apply the provisions of
Statement 112.

In 1994, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", and the effect was insignificant.

(12) INDUSTRY SEGMENT INFORMATION

The Company conducts business primarily in two operating areas:
agricultural inputs and outputs. On the input side of the agricultural
industry, the Company operates as a farm supply cooperative. On the output side
of the agricultural industry, the Company operates as a processing and marketing
cooperative.

Other operations include farm supply stores and services such as computer
services, accounting, financial, management and transportation.

The operating income (loss) of each industry segment includes the revenue
generated on transactions involving products within that industry segment less
identifiable and allocated expenses. In computing operating income (loss) of
industry segments, none of the following items have been added or deducted:
interest expense, interest income, other income (deductions), or corporate
expenses (included in the statements of operations as selling, general and
administrative expenses), which cannot practicably be identified or allocated by
industry segment, equity in net income (loss) of investees, and income taxes
Corporate assets include cash, investments in other cooperatives, the Company's
corporate headquarters and certain other assets.

Following is a summary of industry segment information as of and for the
years ended August 31, 1993, 1994 and 1995. Export sales to unaffiliated
customers from U.S. operations for the years ended August 31, 1993, 1994 and
1995 were $690.2 million, $842.5 million and $1,287.8 million, respectively.

Unallocated
Cooperative Corporate
Cooperative Farm Supply Marketing and Items and
Crop Processing Other Inter-Segment
Petroleum Production Feed Foods Grain Operations Eliminations Consolidated
(Amounts in Thousands)

1993
Sales to unaffiliated customers $887,389 $ 884,811 $479,205 $1,412,634 $ 953,521 $105,380 $ -0- $4,722,940
Transfers between segments 5,591 7,970 2,330 3,496 -0- -0- (19,387) -0-
Total sales and transfers $892,980 $ 892,781 $481,535 $1,416,130 $ 953,521 $105,380 $(19,387) $4,722,940
Operating income (loss) of
industry segments . . . $ (4,602) $ 51,654 $ 20,676 $ 16,485 $ 104 $ 2,262 $ 86,579
Equity in net income (loss)
of investees (Note 4) . $ 2 $ (8,223) $ (35) $ (3,306) $ -0- $ (832) $ (12,394)
Provision for loss on disposition
of assets (Note 17) . . (20,022) (6,155) -0- (3,253) -0- -0- (29,430)
General corporate expenses (57,721)
Other corporate income . 13,725
Interest expense . . . . (36,764)
Minority interest . . . . (828)
Income tax benefit . . . 6,433
Net (loss) . . . . . . . $ (30,400)
Identifiable assets at
August 31, 1993 . . . . $308,731 $ 324,956 $ 94,948 $ 391,152 $ 254,734 $ 35,986 $1,410,507
Investment in and advances to
investees . . . . . . . $ 526 $ 72,166 $ 1,572 $ 18,686 $ -0- $ 3,553 $ 1,606 $ 98,109
Corporate assets . . . . 211,365
Total assets . . . . . . $1,719,981
Provision for depreciation and
amortization . . . . . $ 13,546 $ 13,843 $ 4,487 $ 10,807 $ 2,637 $ 3,369 $ 9,041 $ 57,730
Capital expenditures (including
$48.4 million of capital assets
of business acquired) . $ 35,629 $ 17,972 $ 6,590 $ 73,561 $ 1,894 $ 3,613 $ 7,341 $ 146,600

1994
Sales to unaffiliated customers $855,479 $1,163,357 $527,864 $2,355,599 $1,627,156 $148,478 $ -0- $6,677,933
Transfers between segments 4,843 9,513 2,072 3,007 -0- 19,467 (38,902) -0-
Total sales and transfers $860,322 $1,172,870 $529,936 $2,358,606 $1,627,156 $167,945 $(38,902) $6,677,933
Operating income (loss) of
industry segments . . . $ 27,172 $ 126,047 $ 17,019 $ 20,608 $ (33,637) $ (2,410) $ 154,799
Equity in net income (loss)
of investees (Note 4) . $ (41) $ 15,466 $ 155 $ (4,404) $ -0- $ (298) $ 10,878
General corporate expenses (66,229)
Other corporate income . 26,281
Interest expense . . . . (51,485)
Minority interest . . . . 4,522
Income tax expense . . . (4,890)
Net income . . . . . . . $ 73,876
Identifiable assets at
August 31, 1994 . . . . $306,366 $ 357,178 $ 92,767 $ 395,159 $ 341,367 $ 62,301 $1,555,138
Investment in and advances to
investees . . . . . . . $ 746 $ 76,439 $ 1,761 $ 13,927 $ -0- $ 8,560 $ 101,433
Corporate assets . . . . 270,060
Total assets . . . . . . $1,926,631
Provision for depreciation and
amortization . . . . . $ 9,911 $ 14,700 $ 3,815 $ 16,776 $ 4,011 $ 7,982 $ 5,765 $ 62,960
Capital expenditures (including
$16.9 million of capital assets
of businesses acquired) $ 14,399 $ 14,136 $ 4,508 $ 19,040 $ 6,256 $ 26,051 $ 2,274 $ 86,664

1995
Sales to unaffiliated customers $876,776 $1,171,389 $467,695 $2,692,892 $1,906,191 $141,926 $ -0- $7,256,869
Transfers between segments 2,877 6,547 940 3,100 -0- 29,100 (42,564) -0-
Total sales and transfers $879,653 $1,177,936 $468,635 $2,695,992 $1,906,191 $171,026 $(42,564) $7,256,869
Operating income (loss) of
industry segments . . . $ (8,029) $ 198,720 $ 10,061 $ 77,060 $ 17,942 $ (2,373) $ 293,381
Equity in net income (loss)
of investees (Note 4) . $ 168 $ 22,096 $ 130 $ 823 $ 688 $ (1,120) $ 22,785
General corporate expenses (80,054)
Other corporate income . 19,934
Interest expense . . . . (53,862)
Minority interest . . . . (9,757)
Income tax expense . . . (29,628)
Net income . . . . . . . $ 162,799
Identifiable assets at
August 31, 1995 . . . . $313,478 $ 410,979 $ 93,438 $ 491,257 $ 525,032 $ 59,108 $1,893,292
Investment in and advances to
investees . . . . . . . $ 953 $ 80,805 $ 1,497 $ 325 $ 120 $ 9,305 $ 93,005
Corporate assets . . . . 199,646
Total assets . . . . . . $2,185,943
Provision for depreciation and
amortization . . . . . $ 9,858 $ 15,530 $ 4,319 $ 21,891 $ 5,156 $ 5,308 $ 7,076 $ 69,138
Capital expenditures . . $ 27,638 $ 23,845 $ 5,766 $ 32,219 $ 905 $ 7,504 $ 26,845 $ 124,722

(13) SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK

The Company extends credit to its customers on terms no more favorable than
standard terms of the industries it serves. A substantial portion of the
Company's receivables are concentrated in the agricultural industry.
Collections on these receivables may be dependent upon economic returns from
farm crop and livestock production. The Company's credit risks are continually
reviewed and management believes that adequate provisions have been made for
doubtful accounts.

The Company maintains investments in and advances to cooperatives,
cooperative banks and joint ventures from which it purchases products or
services. A substantial portion of the business of these investees is dependent
upon the agribusiness economic sector. See Note 4.

(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimates of fair values are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could affect the estimates. Except as
follows, the fair market value of the Company's financial instruments
approximates the carrying value:

August 31, 1994 August 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
(Amounts in Thousands)

FINANCIAL ASSETS:
Investments and long-term receivables:
Notes receivable from investees,
20% to 50% owned . . . . . . . $ 48,955 $ 45,414 $ 4,519 $ 4,047
National Bank for Cooperatives . 28,786 **** 26,999 ****
Other cooperatives:
Equities . . . . . . . . . . 28,214 **** 27,720 ****
Notes receivable . . . . . . 14,530 13,385 19,600 17,327
FINANCIAL LIABILITIES:
Long-term debt:
Subordinated certificates of investment,
capital investment certificates and
subordinated monthly
interest certificates . . . . . $ (280,111) $ (284,523) $ (299,994) $ (304,450)
<FN>
****Investments in National Bank for Cooperatives and other cooperatives'
equities which have been purchased are carried at cost and equities received as
patronage refunds are carried at par value, less provisions for other than
temporary impairment. The Company believes it is not practicable to estimate
the fair value of these equities because there is no established market for
these equities and estimated future cash flows, which are largely dependent on
the future redemptions policy of each cooperative, are not determinable.

The estimated fair value of notes receivable has been determined by
discounting future cash flows using a market interest rate.

The estimated fair value of the subordinated debt certificates was
calculated using the discount rate for subordinated debt certificates with
similar maturities currently offered for sale.

(15) RELATED PARTY TRANSACTIONS

The Company has a 50% interest in Farmland Hydro, L.P. and SF Phosphates
Limited Company. Both ventures are manufacturers and distributors of phosphate
products. During 1993, 1994 and 1995, the Company purchased $66.5 million,
$83.1 million and $106.2 million, respectively, of product from these ventures.
Accounts payable includes $1.4 million and $4.8 million due to these ventures at
August 31, 1994 and 1995, respectively. The Company also has notes receivable
from these ventures in the amount of $29.6 million and $6.6 million at August
31, 1994 and 1995, respectively.

(16) OTHER INCOME

In June 1993, the Company filed a lawsuit against 43 insurance carriers and
other parties (the "Defendants") seeking declaratory judgments regarding the
Defendants' insurance coverage obligations for environmental remediation costs.
The Company negotiated settlements with 20 and 2 insurance companies in 1994
and 1995, respectively. As part of the settlements, the Company provided the
Defendants with releases of various possible environmental obligations. As a
result of these settlements, the Company received cash payments in 1994 and 1995
of $13.6 million and $.3 million, respectively, and included such amounts in the
caption "Other income (deductions): Other, net" in the Consolidated Statement of
Operations for the years then ended.

(17) PROVISION FOR LOSS ON DISPOSITION OF ASSETS

At August 31, 1993, management was negotiating to sell the Company's
refinery at Coffeyville, Kansas. Based on the progress of negotiation and the
transactions contemplated, operations for the year ended August 31, 1993
included a $20.0 million for loss on the sale of the refinery. Accordingly, the
net carrying value of property, plant and equipment was reduced by $20.0 million
in the consolidated balance sheets at August 31, 1993. The transactions
contemplated were subject to certain conditions, including negotiation of final
agreements. During 1994, management determined that final sale terms
anticipated by the potential purchaser were not in the Company's best interest.
Accordingly, negotiations were terminated and the sale was not consummated.

In 1993, the Company entered discussions with a potential purchaser of a
dragline. Based on these discussions, the Company estimated a loss of $6.2
million from the sale. Accordingly, at August 31, 1993, the carrying value of
the dragline was written down by $6.2 million and a provision for this loss was
included in the Company's consolidated statement of operations for the year then
ended. In 1994, this sale was consummated on terms substantially as expected.

At August 31, 1993, the carrying value of a pork processing plant at Iowa
Falls, Iowa was written down by $3.3 million to an estimated disposal value.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The expenses (excluding commissions) to be incurred in connection with the
issuance and distribution of the securities to be offered are estimated as
follows and will be borne by the Company:

Estimated
Item Expense
Federal and state registration fees . . . . . . . . $ 89,000
State taxes and fees . . . . . . . . . . . . . . . 7,000
Printing and engraving . . . . . . . . . . . . . . 119,000
Accounting and legal . . . . . . . . . . . . . . . 55,000
Trustee fee . . . . . . . . . . . . . . . . . . . . 3,000
Advertising and administration . . . . . . . . . . 983,000
$ 1,256,000

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 6002(b) of Chapter 17 of the Kansas Statutes (1987), permits the
following provision to be included in the articles of incorporation of the
Company: a provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders, policyholders or members for
monetary damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (A) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
policyholders or members, (B) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (C) under the
provision of K.S.A. 17-6424 and amendments thereto or (D) for any transaction
from which the director derived an improper personal benefit. No such provision
shall eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective. All
references in this subsection to a director shall be deemed also to refer to a
member of the governing body of a corporation which is not authorized to issue
capital stock. Section 6002(c) provides that "It shall not be necessary to set
forth in the articles of incorporation any of the powers conferred on
corporations by this act."

Article VII of the Articles of Incorporation of Farmland reads as follows:

ARTICLE VII - INDEMNIFICATION

Section 1. Indemnification. The Association may agree to the
terms and conditions upon which any director, officer, employee or
agent accepts his office or position and in its bylaws, by contract or
in any other manner may agree to indemnify and protect any director,
officer, employee or agent of the Association, or any person who
serves at the request of the Association as a director, officer,
employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, to the fullest extent permitted by the laws
of the State of Kansas.

Section 2. Limitation of Liability. Without limiting the
generality of the foregoing provisions of this ARTICLE VII, to the
fullest extent permitted or authorized by the laws of the State of
Kansas, including, without limitation, the provisions of subsection
(b)(8) of Kan. Stat. Ann. Sec. 17-6002 (1981) as now in effect and as
it may from time to time hereafter be amended, no person who is
currently or shall hereinafter become a director of the Association
shall have personal liability to the Association for monetary damages
for breach of fiduciary duty as a director for any act or omission
occurring subsequent to the date this provision becomes effective. If
the Kansas General Corporation Code is amended after approval of this
provision by the shareholders of the Association, to authorize
corporate action further limiting or eliminating the personal
liability of directors, then the liability of a director of the
Association shall be limited or eliminated to the fullest extent
permitted by the Kansas General Corporation Code, as so amended.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Company did not sell any unregistered securities during the three years
ended August 31, 1995.

ITEM 16. EXHIBITS; FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

The following exhibits are filed as a part of this Registration Statement.

Exhibit No. Description of Exhibits

UNDERWRITING AGREEMENT:

1.A Underwriting Agreement between Farmland Industries, Inc. and Farmland
Securities Company, dated December 6, 1989. (Incorporated by Reference
- Form S-1 No. 33-56821 filed December 12, 1994)

1.A(1) Amendment, dated December 5, 1994, to the agreement, dated
December 6, 1989 between Farmland Industries, Inc. and
Farmland Securities Company. (Incorporated by Reference -
Form S-1 No. 33-56821, filed December 12, 1994)

1.B Sales Agency Agreement between Farmland Industries, Inc. and American
Heartland Investment, Inc., dated December 29, 1993. (Incorporated by
Reference - Form S-1 No. 33-56821, filed December 12, 1994)

ARTICLES OF INCORPORATION AND BYLAWS:
3.A Articles of Incorporation and Bylaws of Farmland Industries, Inc.
effective December 1, 1994. (Incorporated by Reference - Form 10-K,
filed November 28, 1995)

INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:

4.(i)A Trust Indenture dated November 20, 1981, as amended January 4,
1982, including specimen of Demand Loan Certificates.
(Incorporated by Reference - Form S-1, No.2-75071, effective
January 7, 1982)

4.(i)B Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 10-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)

4.(i)B(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3,
1985 covering Farmland Industries, Inc.'s 10-Year
Subordinated Capital Investment Certificates.
(Incorporated by Reference - Form SE, dated December 3,
1991)

4.(i)C Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 5-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)

4.(i)C(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3,
1985 covering Farmland Industries, Inc.'s 5-Year
Subordinated Capital Investment Certificates.
(Incorporated by Reference - Form SE, dated December 3,
1991)

4.(i)D Trust Indenture dated November 8, 1984, as amended January 3, 1985
and November 20, 1985, including specimen of 10-year Subordinated
Monthly Income Capital Investment Certificates. (Incorporated by
Reference - Form S-1, No. 2-94400, effective December 31, 1984)

4.(i)E Trust Indenture dated November 11, 1985 including specimen of the
5-year Subordinated Monthly Income Capital Investment Certificates.
(Incorporated by Reference - Form S-1, No. 33-1970, effective
December 31, 1985)

4.(ii)A Trust Indenture dated November 8, 1984, as amended January 3, 1985,
including specimen of 20-year Subordinated Capital Investment
Certificates. (Incorporated by Reference - Form S-1, No. 2-94400,
effective December 31, 1984)

4.(ii)A(1) Amendment Number 2, dated December 3, 1991, to Trust
Indenture dated November 8, 1984 as amended January 3,
1985 covering Farmland Industries, Inc.'s 20-Year
Subordinated Capital Investment Certificates.
(Incorporated by Reference - Form SE, dated December 3,
1991)

4.(ii)B Credit Agreement among Farmland Industries, Inc., as Borrower, ABN
Amro Bank N.V., The Bank of Nova Scotia, Boatmen's First National
Bank of Kansas City, The Chase Manhattan Bank, N.A., Commerce Bank
of Kansas City, N.A., NBD Bank, N.A., as Banks and The National
Bank for Cooperatives, Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A. "Rabobank Nederland", New York Branch, as Banks
and as Co-Agents, dated May 19, 1994, (the "Syndicated Credit
Facility"). (Incorporated by Reference - Form 10-Q filed July 14,
1994)

4.(ii)B(1) List identifying contents of all omitted schedules
referenced in and not filed with, the Syndicated Credit
Facility, dated May 19, 1994. (Incorporated by Reference
- Form 10-Q, filed July 14, 1994)

5 Opinion of Robert B. Terry, Vice President and General Counsel of
Farmland Industries, Inc. re Legality

MATERIAL CONTRACTS:

LEASE CONTRACTS:

10.(i)A Leveraged lease dated September 6, 1991, among the First National
Bank of Chicago, not individually but solely as Trustee for AT&T
Commercial Finance Corporation, The Boatmen's National Bank of
St.Louis, Firstier Bank, N.A. and Norwest Bank Minnesota, National
Association and Farmland Industries, Inc. in the amount of
$73,153,000. (Incorporated by Reference - Form SE, filed December
3, 1991)

10.(i)B Leveraged lease dated March 17, 1977, among the First National Bank
of Commerce as Trustee for General Electric Credit Corporation as
Beneficiary and Farmland Industries, Inc. in the amount of
$51,909,257.90. (Incorporated by Reference - Form S-1, No.2-60372,
effective December 22, 1977)

MANAGEMENT REMUNERATIVE PLANS:

10.(iii)A Annual Employee Variable Compensation Plan (September 1, 1995-
August 31, 1996) (Incorporated by Reference - Form 10-K, filed
November 28, 1995)

10.(iii)B Farmland Industries, Inc. Management Long-Term Incentive Plan
(Effective September 1, 1995) (Incorporated by Reference - Form 10-
K, filed November 28, 1995)

10.(iii)C Farmland Industries, Inc. Supplemental Executive Retirement Plan
(Effective January 1, 1994) (Incorporated by Reference - Form 10-K,
filed November 28, 1995)

12 Computation of Ratios

21 Subsidiaries of the Registrant

CONSENTS OF EXPERTS AND COUNSEL:

23.A Independent Auditors' Consent

23.B Consent of Special Tax Counsel

23.C Consent of Qualified Independent Underwriter

23.D Consent of Robert B. Terry, Vice President and General Counsel
of Farmland Industries, Inc. (included in Exhibit 5)

24 Power of Attorney

25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association Trustee, Form T-1.

25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank
of Kansas City, National Association as Trustee, Form T-1.

(B) FINANCIAL STATEMENT SCHEDULES

All schedules are omitted as the required information is inapplicable or
the information is presented in the Consolidated Financial Statements or related
notes included herein.

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the registration statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed
in the registration statement or any material
change to such information in the registration
statement;

(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(c) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.

(d) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, FARMLAND
INDUSTRIES, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED,
IN THE CITY OF KANSAS CITY, STATE OF MISSOURI ON DECEMBER 4, 1995.

FARMLAND INDUSTRIES, INC.

BY JOHN F. BERARDI
John F. Berardi
Executive Vice President and
Chief Financial Officer

BY ROBERT B. TERRY
Robert B. Terry
Vice President and General Counsel

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT ON FORM S-1 HAS BEEN SIGNED FOR THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.

Signature Title Date

* Chairman of Board, December 4, 1995
Albert J. Shivley Director

* President, Chief Executive December 4, 1995
H. D. Cleberg Officer and Director
(Principal Executive Officer)

* Vice Chairman of Board December 4, 1995
Otis H. Molz Vice President and Director

* Director December 4, 1995
Lyman Adams, Jr.

* Director December 4, 1995
Ronald J. Amundson

* Director December 4, 1995
Baxter Ankerstjerne

* Director December 4, 1995
Jody Bezner

* Director December 4, 1995
Richard L. Detten

* Director December 4, 1995
Steven Erdman

* Director December 4, 1995
Warren Gerdes

* Director December 4, 1995
Ben Griffith

* Director December 4, 1995
Gail D. Hall

* Director December 4, 1995
Jerome Heuertz

* Director December 4, 1995
Barry Jensen

* Director December 4, 1995
Greg Pfenning

* Director December 4, 1995
Vonn Richardson

* Director December 4, 1995
Monte Romohr

* Director December 4, 1995
Joe Royster

* Director December 4, 1995
Paul Ruedinger

* Director December 4, 1995
Raymond J. Schmitz

* Director December 4, 1995
Theodore J. Wehrbein

* Director December 4, 1995
Robert Zinkula

JOHN F. BERARDI Executive Vice President December 4, 1995
John F. Berardi and Chief Financial Officer
(Principal Financial Officer)

MERL DANIEL Vice President and Controller December 4, 1995
Merl Daniel (Principal Accounting Officer)

*BY JOHN F. BERARDI
John F. Berardi
Attorney-In-Fact