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

FORM 10-Q

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 29, 2004

OR

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

Commission file: No. 33-94644

MINN-DAK FARMERS COOPERATIVE
(Exact named of registrant as specified in its charter)

North Dakota   23-7222188  
(State or other jurisdiction of  (I.R.S. Employer 
Incorporation or organization)  Identification No.) 

7525 Red River Road		 
Wahpeton, North Dakota  58075 
(Address of principal  (Zip Code) 
executive offices) 

  (701) 642-8411  
  (Registrant’s telephone number, including area code)  
 
Not Applicable		  
  (Former name, former address and former fiscal year,
if changed since last report)		  

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

YES   ____X____                          NO   __________

Indicate by checkmark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)

YES   _________                          NO   ____X____

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

    Outstanding at  
Class of Common Stock   March 9, 2004  
$250 Par Value  491 


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

MINN-DAK FARMERS COOPERATIVE
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.

The condensed consolidated financial statements for the six-month period ended February 29, 2004 and 2003 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim period. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in the Company’s Annual Report to Stockholders previously submitted in the Company’s Annual 10-K for the fiscal year ended August 31, 2003. The results of operations for the six months ended February 29, 2004 are not necessarily indicative of the results for the entire fiscal year ending August 31, 2004.


2.

In August 2003, the company declared a revolvement of the remaining 17% of the unit retains and allocated patronage for the 1992 crop totaling $1,280,562 and approximately 75% of the 1993 crop unit retains and allocated patronage totaling $2,514,906. These amounts were paid to the stockholders on September 29, 2003.


3.

The Financial Accounting Standards Board has issued an amendment to Financial Accounting Standards No. 132, Employer’s Disclosure about Pensions and Other Postretirement Benefits. Such amendment requires additional disclosures to interim and annual financial statements which are effective for the interim period ending May 31, 2004, but does not change the recognition requirements related to pensions and postretirement benefits. Management is reviewing this pronouncement to determine its impact on the disclosures in the interim and annual financial statements, but does not expect the implementation of this pronouncement to have a significant impact on the interim or annual financial statements.











CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)

ASSETS February 29, 2004
(Unaudited)
 August 31, 2003
(Audited)
 
CURRENT ASSETS:            
     Cash   $ 300   $ 1,584  
     Receivables:  
         Trade accounts    16,756    14,979  
         Growers    0    4,287  
         Other    123    6  
     16,879    19,272  
     Advances to affiliate    568    42  
     Inventories:  
         Refined sugar, pulp and molasses to be sold  
           on a pooled basis    58,617    24,048  
         Nonmember refined sugar    391    4  
         Yeast    83    126  
         Materials and supplies    5,308    6,188  
         Beet and Juice Inventory    27,852    —  
         Other    0    —  
     92,251    30,366  
     Deferred charges    420    1,193  
     Prepaid expenses    328    233  
     Other    436    —  
     Current deferred income tax asset    507    507  
            Total current assets    111,689    53,197  
PROPERTY, PLANT AND EQUIPMENT:  
     Land and land improvements    22,077    22,077  
     Buildings    36,200    36,200  
     Factory equipment    116,155    116,155  
     Other equipment    3,457    3,464  
     Construction in progress    9,702    8,781  
     187,591    186,676  
         Less accumulated depreciation    (86,423 )  (83,020 )
     101,168    103,656  
OTHER ASSETS:  
     Investments restricted for capital lease projects    3,268    3,400  
     Investment in stock of other corporations, unconsolidated  
       marketing subsidiaries and other cooperatives    9,523    9,890  
     Other    2,057    1,103  
     14,849    14,394  
    $ 227,706   $ 171,247  

See Notes to Consolidated Financial Statements.



MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS’ EQUITY
(In Thousands)

LIABILITIES AND MEMBERS' INVESTMENT February 29, 2004
(Unaudited)
 August 31, 2003
(Audited)
 
CURRENT LIABILITIES:            
      Short-term notes payable   $ 48,013   $ 7,250  
      Current portion of long-term debt    3,600    3,600  
      Current portion of long-term lease    960    905  
     4,560    4,505  
 
      Accounts payable:  
           Trade    (4,569 )  4,668  
           Growers    27,735    14,126  
     23,165    18,794  
      Accrued liabilities    5,660    4,850  
                Total current liabilities    81,398    35,399  
 
LONG-TERM DEBT, NET OF CURRENT PORTION    27,100    29,500  
 
OBLIGATION UNDER CAPITAL LEASE    20,955    21,915  
 
LONG TERM DEFERRED TAX LIABILITY    183    783  
 
OTHER    403    403  
 
COMMITTMENTS AND CONTINGENCIES    —    0  
                Total liabilities    130,039    88,000  
MINORITY INTEREST IN EQUITY OF SUBSIDIARY    1,720    1,601  
 
MEMBERS' INVESTMENT:  
      Preferred stock:  
           Class A - 100,000 shares authorized, $105 par value;  
             72,200 shares issued and outstanding    7,581    7,581  
           Class B - 100,000 shares authorized, $75 par value;  
             72,200 shares issued and outstanding    5,415    5,415  
           Class C - 100,000 shares authorized, $76 par value;  
             72,200 shares issued and outstanding    5,487    5,487  
     18,483    18,483  
      Common stock, 600 shares authorized, $250 par value;  
        issued and outstanding, 490 shares at February 29,  
        2004 and 488 shares at August 31, 2003    123    122  
      Paid in capital in excess of par value    32,094    32,094  
      Unit retention capital    4,955    4,959  
      Qualified allocated patronage    2,295    2,296  
      Nonqualified allocated patronage    31,966    18,141  
      Retained earnings (deficit)    6,031    5,550  
     95,947    81,646  
    $ 227,706   $ 171,247  

See Notes to Consolidated Financial Statements.



MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
(Unaudited)

Three Months Ended Six Months Ended
February 29,
 February 28,
 February 29,
 February 28,
2004
 2003
 2004
 2003
 
REVENUE:                    
      From sales of sugar, co-products, and  
        yeast, net of discounts   $ 67,852   $ 65,777   $ 129,414   $ 130,795  
      Other income    (97 )  206    86    400  
     67,754    65,983    129,499    131,195  
 
EXPENSES:  
      Production costs of sugar, co-products,  
        and yeast sold    16,496    16,033    31,214    29,569  
      Marketing (includes freight and storage)    7,545    7,616    14,644    16,541  
      General and administrative    1,686    1,534    3,137    2,937  
      Interest    877    1,057    1,595    1,970  
      (Gain) loss on disposition of property and equipment    0    (2 )  0    67  
     26,604    26,239    50,590    51,085  
 
NET PROCEEDS RESULTING FROM MEMBER AND  
   NONMEMBER BUSINESS   $ 41,150   $ 39,744   $ 78,910   $ 80,110  
 
DISTRIBUTION OF NET PROCEEDS:  
      Credited to members' investment:  
           Components of net income:  
                Income (loss) from non-member business   $ 229   $ 265   $ 481   $ 495  
                Patronage income    7,832    6,427    13,830    12,583  
                      Net income    8,061    6,692    14,311    13,078  
 
           Unit retention capital    0    0    0    0  
                Net credit to members' investment    8,061    6,692    14,311    13,078  
 
      Payments to members for sugarbeets, net of unit  
       retention capital    33,090    33,052    64,600    67,032  
 
NET PROCEEDS RESULTING FROM MEMBER AND  
   NONMEMBER BUSINESS   $ 41,150   $ 39,744   $ 78,910   $ 80,110  

See Notes to Consolidated Financial Statements.



MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

Six Months Ended
February 29,
2004
 February 28,
2003
 
CASH FLOWS FROM OPERATING ACTIVITIES:            
      Income allocated to members' investment   $ 14,311   $ 13,078  
      Add (deduct) noncash items:  
           Depreciation and amortization    3,713    3,546  
           Equipment disposals - loss    0    71  
           Net income allocated from unconsolidated marketing subsidiaries    (6 )  (143 )
           Deferred income taxes    (600 )  0  
           Noncash portion of patronage capital credits    0    0  
           Retention of nonqualified unit retains    0    0  
           Minority interest in equity of subsidiaries    119    0  
           Changes in operating assets and liabilities:  
                Accounts receivable and advances    1,866    2,296  
                Inventory and prepaid expenses    62,415 )  (64,205 )
                Deferred charges and other assets    773    441  
                Accounts payable, accrued liabilities and other liabilities    5,181    9,092  
                      Net cash (used in)/provided by operating activities    37,057 )  (35,823 )
 
CASH FLOWS FROM INVESTING ACTIVITIES:   
      Proceeds from disposition of property, plant and equipment    0    9  
      Capital expenditures and other assets    (2,227 )  (2,562 )
      Investment in stock of other corporations, unconsolidated  
        marketing subsidiaries and other cooperatives    176    (110 )
      Net proceeds from patronage refunds and equity revolvements    196    186  
      Issuance of notes receivable    0    0  
      Proceeds on notes receivable    47    48  
      Restricted bond/lease fund investment    132    1,728  
                      Net cash used in investing activities    (1,676 )  (702 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:   
      Net proceeds from issuance of short-term debt    40,763    39,169  
      Payment of long-term debt    (3,305 )  (3,260 )
      Payment of financing fees    0    0  
      Payment of unit retains and allocated patronage    (10 )  (112 )
      Sale and repurchase of common stock, net    1    1  
      Issuance of stock    0    0  
                      Net cash provided by financing activities    37,449    35,798  
 
NET INCREASE (DECREASE) IN CASH    (1,284 )  (727 )
 
CASH, BEGINNING OF YEAR    1,584    757  
 
CASH, END OF QUARTER   $ 300   $ 30  
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
      Cash payments for:  
           Interest   $ 1,377   $ 1,849  
           Income taxes, net of refunds   $ 1,543   $ 58  

See Notes to Consolidated Financial Statements.



MANAGEMENT’S DISCUSSION AND ANALYSIS

OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION

FOR THE THREE MONTHS ENDED AND SIX MONTHS ENDED FEBRUARY 29, 2004
AND FEBRUARY 28, 2003

The following discussion and analysis relates to the financial condition and results of operations of Minn-Dak Farmers Cooperative (“the Company”) for the three months ended February 29, 2004 (the second quarter of the Company’s 2003-2004 fiscal year) and February 28, 2003 (the second quarter of the Company’s 2002-2003 fiscal year). The Company’s fiscal year runs from September 1 to August 31.

Any statements regarding future market prices, anticipated costs, agricultural results, operating results and other statements that are not historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. The words “expect”, “project”, “estimate”, “believe”, “anticipate”, “plan”, “intend”, “could”, “may”, “predict” and similar expressions are also intended to identify forward-looking statements. Such statements involve risks, uncertainties and assumptions, including, without limitation, market factors, the effect of weather and economic conditions, farm and trade policy, the available supply of sugar, available quantity and quality of sugarbeets and other factors detailed elsewhere in this and other Company filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.

RESULTS FROM OPERATIONS

Comparison of the three months ended February 29, 2004 and February 28, 2003

As a result of sugar storage issues created by weak seasonal demand and lack of rail car availability, the Company held 400,000 cwt of additional equivalent sugar in the form of standard liquor juice when compared to the three-month period ended February 28, 2003. Because the sugar is not in its final form, it is valued at grower delivered cost vs. the company’s normal finished goods net realizable valuation. Had sufficient granulated sugar storage been available, the increased standard liquor juice would have been converted to marketable sugar with an increased value of $3.1 million. The Company anticipates converting this standard liquor juice to sugar during the end of the Company’s third quarter and early fourth quarter.

The 2002 Farm Program that the Company operates under contains allotment / allocation provisions that may restrict the marketing of sugar produced by domestic processors. These Farm Program provisions also allow processors that have more sugar than allocations to sell that sugar without allocation to another processor that has more allocations than domestic sugar produced, and to then repurchase a similar amount of sugar with allocations for the marketing to customers. The Company engaged in $5.3 million of these sales and repurchases during the three months ended February 29, 2004. The dollars associated with these sales and repurchase activities for this purpose have been excluded from current and comparative analysis to the prior periods.



Revenue, from the sale of sugar, co-products, yeast and finished goods inventory valuation changes, for the three months ended February 29, 2004 increased $2.1 million from the 2003 period, an increase of 3%. Revenue from the sale of finished goods decreased $.7 million and Change in Inventories increased $2.8 million.

Revenue from the sales of sugar decreased $.2 million, or .5%, reflecting a .9% increase in volume and a 1.4% decrease in the price for sugar.

Revenue from dried pulp and molasses sales decreased $.9 million or 15.4%, reflecting a 13.6% decrease in sales volume and a 2.8% decrease in the average gross selling price.

Revenue from local sales of beet tailings and pressed pulp increased $.4 million resulting from a new marketing program for these products.

Revenues from yeast sales remain almost unchanged in price and volume from the prior year period.

The other contributing factor to the change in revenues results from the increase in finished goods inventories. The increase in the value of finished goods inventories for the three months ended February 29, 2004 amounted to $20.0 million or $2.8 million more than the increase in the value of finished goods inventories for February 28, 2003. For February 29, 2004 the increase in the value of sugar inventories was $19.6 million or $2.6 million more than the increase in the value of sugar inventory for February 28, 2003. The increase in sugar inventory reflects a higher production level when compared to the prior year. The 2002 Farm Program beet sugar marketing allotment is less than the available sugar in the beet sugar segment, which has increased the need to inventory sugar, however, through a combination of multi-year agreements and single year agreements, MDFC has been able to obtain sufficient allocations to market the 2003 crop.

In the consolidated Statement of Operations, Expenses section, production costs of sugar, co-products and yeast totaled $16.5 million, $.5 million or 2.4% more than the prior year. The increase is mainly attributable to normal operations and expense accrual timings when comparing the three-month period ending February 28, 2003. Marketing costs totaled $7.5 million, $.1 million or .9% more than the prior year. In the section Distribution of Net Proceeds, payments to members for sugarbeets, net of unit retention capital, remained almost unchanged. For fiscal year 2004 the Company is projecting a payment to growers for sugarbeets totaling $92.4 million, which is $8.5 million or 8.4% less than the prior fiscal year. The decrease in payments to members is due to the Company’s initial production and price projections for the 2004 fiscal year payments. These estimates used historical averages for calculating certain production keys and also lower than prior year net selling prices for sugar and co-products. If production continues with the current fiscal year trends, the Company anticipates that actual production of sugar and co-products could exceed estimates, resulting in an increase in the estimate for payment to growers for sugarbeets.



Comparison of the six months ended February 29, 2004 and February 28, 2003

As a result of sugar storage issues created by weak seasonal demand and lack of rail car availability, the Company held 400,000 cwt of additional equivalent sugar in standard liquor juice storage when compared to the six-month period ended February 28, 2003. Because the sugar is not in its final form, it is valued at grower delivered cost vs. the company’s normal finished goods net realizable valuation. Had sufficient granulated sugar storage been available, the increased standard liquor juice would have been converted to salable sugar with an increased value of $3.1 million. The Company anticipates converting this standard liquor juice to sugar during the end of the third quarter and early fourth quarter.

The 2002 Farm Program that the Company operates under contains allotment / allocation provisions that may restrict the marketing of sugar produced by domestic processors. These Farm Program provisions also allow processors that have more sugar than allocations to sell that sugar without allocation to another processor that has more allocations than domestic sugar produced, and to then repurchase a similar amount of sugar with allocations for the marketing to customers. The Company engaged in $5.3 million of these sales and repurchases during the three months ended February 29, 2004. The dollars associated with these sales and repurchase activities for this purpose have been excluded from current and comparative analysis to the prior periods.

Revenue, from the sale of sugar, co-products, yeast and finished goods inventory valuation changes, for the six months ended February 29, 2004 decreased $1.3 million from the 2002 period, a decrease of 1.0%. Revenue from the sale of finished goods increased $4.3 million, while the change in the value of finished goods inventory decreased $5.6 million.

Revenue from the sales of sugar increased $3.3 million or 4.3%, reflecting a 4.9% increase in volume and a 0.6% decrease in the price for sugar.

Revenue from dried pulp and molasses sales remained unchanged, reflecting a 2.0% increase in sales volume and a 2.0% decrease in the average gross selling price.

Revenue from local sales of beet tailings and pressed pulp increased $.6 million resulting from a new marketing program for these products.

Revenues from yeast sales from the Company’s subsidiary yeast production facility, Minn-Dak Yeast Company (“MDYC”) increased $0.4 million or 11.4%, reflecting a 15.9% increase in sales volume and a 4.5% decrease in the average selling price. This increase in volume was anticipated by Sensient Sales and Service, the Company’s sales agent and minority equity partner in MDYC, in their FY 2004 marketing plan and results from added volume from existing customers.

The other contributing factor to the change in revenues results from the increase or decrease in finished goods inventories. The increase in the value of finished goods inventories for the six months ended February 29, 2004 amounted to $34.6 million or $5.7 million less than the increase in the value of finished goods inventories for February 28, 2003.



In the consolidated statements of operations, Expenses section, Production costs of sugar, by-products and yeast sold increased $1.6 million or 5.6%. The increase is mainly attributable to normal operations and expense accrual timings when comparing the six-month period ending February 28, 2003.

In the section Distribution of Net Proceeds, payments to members for sugarbeets (net of unit retention capital and unprocessed sugarbeet inventory) decreased $2.4 million or 3.6% from the prior period. For fiscal year 2004 the Company is projecting a payment to growers for sugarbeets totaling $92.4 million, which is $8.5 million or 8.4% less than the prior fiscal year. The decrease in payments to members is due to the Company’s initial production and price projections for the 2004 fiscal year payments. These estimates used historical averages for calculating certain production keys and also lower than prior year net selling prices for sugar and co-products. If production continues with the current fiscal year trends, the Company anticipates that actual production of sugar and co-products could exceed estimates, resulting in an increase in the estimate for payment to growers for sugarbeets.

ESTIMATED FISCAL YEAR 2004 INFORMATION

The agreements between the Company and its members regarding the delivery of sugarbeets to the Company require payment for members’ sugarbeets in several installments throughout the year. As only the final payment is made after the close of the fiscal year, the first payments to members for their sugarbeets are based upon the Company’s then-current estimates of the financial results to be obtained from processing the crop and the sale of finished products. This discussion contains a summary of the Company’s current estimates of the financial results to be obtained from the Company’s processing of the 2003 sugar beet crop. Given the nature of the estimates required in connection with the payments to members for their sugarbeets, this discussion includes forward-looking statements. These forward-looking statements are based largely upon the Company’s expectations and estimates of future events; as a result, they are subject to a variety of risks and uncertainties. Some of those estimates, such as the selling price for the Company’s products and the quantity of sugar produced from the sugar beet crop are beyond the Company’s control. The actual results experienced by the Company may differ materially from the forward-looking statements contained herein.

The Company’s members harvested 2.3 million tons of sugarbeets from the 2003 crop, the second largest crop ever delivered to the Company. Sugar content of the 2003 crop at harvest was 7% above the average of the five most recent years. Because of the record size and quality of the crop delivered, the Company’s production of sugar from the 2003 crop sugarbeets is expected to set a new record for sugar produced. During early October, unseasonably warm temperatures caused harvest to be halted after main harvest had started. As a result of the Company’s pile management strategy, the beets delivered just prior to the delay of main harvest have either been processed or are considered to be not at risk. The remaining beets as of this report are stored in the sheds and are in good storage condition. This forward-looking material is based on the Company’s expectations regarding the processing of the 2003 sugarbeet crop; the actual production results obtained by processing those sugarbeets could differ from the Company’s current estimate as a result of factors such as changes in production efficiencies and storage conditions for the Company’s sugarbeets.



Currently, the factory is averaging a sugarbeet slice rate of 9,238 tons per day, and the ending slice rate is expected to be just under the targeted rate for the fiscal year 2004 plan of 9,300 tons per day. It is believed that any minor deviation from plan will not have a material detrimental impact to the bottom line of the Company.

Based upon marketing information developed by United Sugars Corporation, the Company currently estimates the average net selling price of the Company’s sugar will be less than that of the prior year because of the volume available for sale (domestic production &foreign imports) relative to the estimated domestic consumption.

The 2002 farm program contains marketing allocation provisions that each year could potentially restrict the company’s ability to market all the sugar it produces. However, for FY 2004 the Company anticipates it will obtain the allocations necessary for the marketing of substantially all of the 2003 crop.

The Company’s initial beet payment estimate totals $40.83 per ton or $.126063 per harvested/bonus pound of sugar, with the final beet payment determined in October of 2004.

ESTIMATED FISCAL YEAR 2005 INFORMATION

The Board of Directors announced that the 2004 crop planted acreage will be reduced 7.6% to an estimated 104,600 acres. This reduction was directly related to the Company’s estimate of available allocations to market the 2004 crop as permitted by the 2002 Farm Program. Sugar sales for non-human consumption uses and for export consumption do not require marketing allocations. This FY 2005 marketing plan assumes no major changes to the provisions of the sugar section of the 2002 Farm Program, and an average size sugarbeet crop.

OTHER INFORMATION

Within the 90 days prior to the date of this report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information required to be included in the Company’s periodic SEC filings relating to the Company (including its consolidated subsidiary).

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these internal controls subsequent to the date of our most recent evaluation.



LIQUIDITY AND CAPITAL RESOURCES

Because the Company operates as a cooperative, payments for member-delivered sugarbeets, the principal raw material used in producing the sugar and agri-products it sells, are subordinated to all member business expenses. In addition, actual cash payments to members are spread over a period of approximately one year following delivery of sugarbeet crops to the Company and are net of unit retains and patronage allocated to them, all three of which remain available to meet the Company’s capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. However, because sugar is sold throughout the year (while sugarbeets are processed primarily between September and April) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The financing has been provided by Co-Bank (the “Bank”). The Company has a short-term line of credit with the Bank for calendar years 2003 and 2004 of $45.0 million, of which $1.0 million is currently available for a letter of credit. The seasonal line of credit is scheduled for renewal in May 2004.

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

•   Maintain working capital of not less than $9.0 million as of August 31, 2004.
•   Maintain a long-term debt and capitalized leases to equity ratio of not greater than .8:1.
•   Maintain available cash to current long-term debt ratio as defined in the agreement of not less than 1.25:1.

As of February 29, 2004 the Company was in compliance with its loan agreement covenants with the Bank.

Working Capital as of February 29, 2004 totals $30.3 million compared to $17.8 million at August 31, 2003, an increase of $12.5 million for the period. Increased working capital is a result of normal financing, operational and capital expenditure activities of the Company.

The targeted working capital for August 31, 2004 is approximately $14.6 million dollars and, in the Company’s opinion, will be attained.



The primary factor for the changes in the Company’s financial condition for the six months ended February 29, 2004 was due to the seasonal needs of the 2003/2004 sugarbeet-processing season. The cash used to provide for operations of $37.1 million and for investing activities of $1.7 million was funded through cash flow financing activities, and a reduction in cash. The net cash provided through financing activities of $37.4 million was primarily provided through proceeds from the issuance of short-term debt of $40.8 million; offset by payment of long term debt of $3.3 million.




Contractual
Obligations		 Total Less
Than 1
Year		 1 - 3
Years		 4 -5
Years		 After 5
Years
Long-Term Debt     $ 30.7MM   $ 03.6MM   $ 14.4MM   $ 09.6MM   $ 03.1MM
Capital Lease Obligations   $ 21.9MM   $ 01.0MM   $ 05.5MM   $ 04.1MM   $ 11.3MM
Operating Leases   $ 00.7MM   $ 00.2MM   $ 00.4MM   $ 00.1MM    0  
Unconditional  
Purchase Obligations   $ 00.5MM   $ 00.5MM    0    0    0  
Other Long-Term  
Obligations    0    0    0    0    0  
Total Contractual Cash  
Obligations   $ 53.8MM   $ 05.3MM   $ 20.3MM   $ 13.8MM   $ 14.4MM

Capital expenditures for the six months ended February 29, 2004 totaled $2.2 million.

The board of directors has approved a $9.3 million capital expenditure project for the installation of a pulp steam dryer. The company obtained tax -exempt bonds to finance this project. The projected physical completion date of this project was August 31, 2003. The new steam dryer has achieved the production capacity guarantee provided by the supplier.







PART II. OTHER INFORMATION

Item 1. Legal Proceedings
None

Item 2. Changes in Securities
None

Item 3. Defaults upon Senior Securities
None

Item 4. Submission of Matters to a Vote of Security Holders
None

Item 5. Other Information
None

Item 6. Exhibits and Reports on Form 8-K

a) Exhibits Item #31.1 Section 302 Certification of the President & Chief Executive Officer
Item #31.2 Section 302 Certification of the Executive Vice President & Chief Financial Officer
Item #31.3 Section 302 Certification of the Controller & Chief Accounting Officer
Item #32.1 Section 906 Certification of the Chief Executive Officer and Chief Financial Officer

b) Reports on Form 8-K

  The Company filed the following Current Reports on Form 8-K during this quarter:

•   Filed on March 9, 2004: On March 5th, 2004, Minn-Dak Farmers Cooperative’s Board of Directors modified the planting level for the 2004 crop to 143% of base acres plus a 2% measuring tolerance for a total planting of 145% of base acres. The Board had first established plantings for the 2004 crop at 155% of base acres plus 2% measuring tolerance in November 2003, the same planting level as the prior two crop years.

  There was no one single reason for this 7.6% reduction in plantings, but rather a number of factors which the Board considered. The principle reasons for the reduction in acreage include reduced demand for sugar due to changing dietary habits of Americans and increased levels of imported sugar containing products, the real prospect of reduced marketing allocations for Minn-Dak Farmers Cooperative for the 2004 crop and the grower payment risk associated with producing quantities of sugar far in excess of a marketing allocation.

•   Filed on December 12th, 2003: The Company announced that at its annual meeting of shareholders, held December 9th, 2003, two new members were elected to Minn-Dak Farmers Cooperative’s board of directors. Alton Theede, representing District #1, was elected to replace outgoing director Jerry Meyer. In District #5, Brent Davison was elected to fill the vacancy left by the resignation of director Jack Lacey. Also re-elected to the board were incumbents Chuck Steiner from District #6 and Doug Etten representing District #8. Both were running unopposed.



SIGNATURES

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

MINN-DAK FARMERS

Date: April 14, 2004
/s/ DAVID H. ROCHE          
David H. Roche
President and Chief Executive Officer

Date: April 14, 2004
/s/ STEVEN M. CASPERS    
Steven M. Caspers
Executive Vice President and Chief Financial Officer