UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

☒    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: November 30, 2010

OR

☐    TRANSITION REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE

 SECURITES EXCHANGE ACT OF 1934

Commission file: No.  33-94644

MINN-DAK FARMERS COOPERATIVE

(Exact named of Registrant as specified in its charter)

(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.

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.

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

Large Accelerated Filer ☐      Accelerated Filer ☐      Non-Accelerated Filer ☒      Smaller Reporting Co ☐

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

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

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

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

PART I.   FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

MINN-DAK FARMERS COOPERATIVE

CONSOLIDATED BALANCE SHEETS

ASSETS

(In Thousands)

MINN-DAK FARMERS COOPERATIVE

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND MEMBERS’ INVESTMENT

(In Thousands)

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands)

(Unaudited)

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

See Notes to Consolidated Financial Statements.

MINN-DAK FARMERS COOPERATIVE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED

NOVEMBER 30, 2010 and 2009

(Unaudited)

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

This Discussion should be read in conjunction with information contained in the Consolidated Financial Statements     and Notes thereto and in the Company’s Annual Report on Form 10-K for fiscal year ended August 31, 2010.

OVERVIEW

The following discussion and analysis relates to the financial condition and results of operations of Minn-Dak Farmers Cooperative (the “Company” or the “Registrant”) for the three-month period ended November 30, 2010 (the first quarter of the Company’s 2011 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 risks, including those set forth in the Company’s reports filed with the Securities and Exchange Commission, including Item 1A of Part I of the Company’s Annual Report on Form 10-K for the year ended August 31, 2010. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. These forward-looking statements are made as of the date of this report and the Company assumes no obligation to update such forward-looking statements, or to update the reasons why actual results could differ materially from those anticipated in such forward-looking statements.

Critical Accounting Policies and Estimates

The only  material changes to the Company’s critical accounting policies and estimates since the filing of its Annual Report on form 10-K for the year ended August 31, 2010 has been the Derivative and Hedging Activities.

The Company’s critical accounting policies and estimate changes include the following:

Derivative and Hedging Activities

FASB ASC 815 (formerly SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities) requires the Company to recognize all derivatives, as defined, on the balance sheet at fair value.

The Company periodically enters into fixed asset purchase contracts with foreign manufacturers and these contracts require portions of the total contract price to be paid in Euros. If the financial exposure is significant, the Company may enter into derivative contracts to reduce its exposure to variability in foreign currency markets associated with a fixed asset purchase.  As of November 30, 2010, the Company held no foreign currency derivatives or hedges.

ESTIMATED FISCAL YEAR 2011/ CROP YEAR 2010 INFORMATION 

This discussion contains a summary of the Company’s current estimates of the financial results to be obtained from the Company’s processing of the 2010 sugarbeet crop. Given the nature of the estimates required in connection with the payments to members for their sugarbeets, this discussion includes forward-looking statements regarding the quantity of sugar to be produced from the 2010 sugarbeet crop, the net selling price for the sugar and co-products produced by the Company and the Company’s operating costs. These forward-looking statements are based largely upon the Company’s expectations and estimates of future events; as a result, they are subject to a variety of risks and uncertainties.  Some of those estimates, such as the selling price for the Company’s products, the quantity of sugar produced from the sugarbeet crop, changes in plant production efficiencies and sugarbeet storage conditions are beyond the Company’s control. The actual results experienced by the Company could differ materially from the forward-looking statements contained herein.

The Company’s members harvested 3.1 million tons of sugarbeets from the 2010-crop, approximately 42 percent more than the most recent 5-year average. Sugar content of the 2010-crop was 1 percent above the average of the five most recent years. Due to the higher harvested tons and sugar content, the Company’s production of sugar from the 2010-crop sugarbeets is expected to be 31 percent more than the average of the five most recent years of sugar production.

The Company’s initial sugarbeet payment estimate totals $56.86 per ton or $0.19369042 per harvested /bonus extractible pound of sugar, with the final sugarbeet payment determined in October of 2011. This projected payment is 20 percent more than the final 2009-crop payment per ton and 5 percent more per pound of extractible sugar. The higher projected 2010-crop payment per ton results from more total tons of beets processed, higher sugar content in the sugarbeets, decreased operating and fixed costs per ton and improved sugar prices versus the prior year. The price per pound of extractible sugar was diluted by 6.5 percent due to bonus sugar for the 2010-crop vs. 2.3 percent for the 2009-crop. Bonus sugar is an incentive payment to growers to deliver sugarbeets prior to main harvest. Harvest for the 2010-crop began on August 18, 2010 vs. September 8, 2009 for the 2009-crop.

As of the date of this report, the Company has taken into consideration key indicators of actual results vs. projections used for the initial sugarbeet payment estimate.  Consideration has been given to beet inventory storage conditions, projected net selling prices, factory operation costs, and sugar, pulp and molasses production. No change in the estimated beet payment has resulted from this review. It is the Company’s policy to update its estimate of yearly crop payments only when a material change is sufficiently certain and the amount of such change is reasonably calculable.

RESULTS OF OPERATIONS 

Comparison of the three-months ended November 30, 2010 and 2009

In the Consolidated Statements of Operations, Distribution of Net Proceeds, allocated costs of sugarbeets paid or payable to growers for production to date totaled $68.0 million, an increase of $36.9 million or 118.5 percent from the prior year. As of November 30, 2010, Management has estimated the Fiscal 2011 payment to growers for sugarbeets at $176.7 million, which is $81.7 million or 85.9 percent more than the prior year.

The increase in payments to members is based upon (i) an average delivered sugar content of 16.8 percent, a 8.7 percent increase from the 2009-crop, (ii) a total member sugarbeet crop to process of 3.1 million tons and (iii) the Company’s projected selling price for its sugar, pulp and yeast being higher, offset by lower molasses prices when compared to the previous year.

Revenues for the quarter ended November 30, 2010 were comprised of Sugar 92 percent, Pulp 4 percent, Yeast 3 percent and Molasses 1 percent. 

Consolidated revenue for the three-month period ended November 30, 2010, increased $52.2 million or 71.9 percent from 2009. Revenue from total sugar sales increased $15.6 million or 33.4 percent reflecting a 18.5 percent increase in cwt. sold, and a 14.8 percent increase as a result of net selling price per cwt. Revenue from pulp increased $1.9 million or 52.0 percent reflecting a 51.0 percent decrease as a result of net selling price per ton and a 103.0 percent increase in tons sold. Revenue from molasses sales increased $0.6 million or 25.0 percent reflecting a 34.4 percent increase in tons sold and a 9.4 percent decrease as a result of net selling price per ton. The increase in volume of sugar sold is attributable a larger 2010 crop, delivered by shareholder/growers coupled with a very high demand from customers. The increase in volume of co-products sold is attributable to a larger 2010-crop causing an earlier start to manufacturing on a pool wide basis.  Pulp sales during the period ended November 30, 2009 included carry-over sales from the record value 2008-crop.

Revenues from yeast sales decreased $0.2 million or 6.7 percent reflecting an increase in average selling price of 2.0 percent and a decrease in volume of 8.7 percent. Sales volume decreased due to existing customers’ decreased demand for yeast. Selling prices increased due to general market conditions.

The value of finished product inventories for the three-month period ended November 30, 2010 increased $50.5 million, $34.3 million more than the prior year increase, mostly the result of a larger crop.  The start of campaign on August 20, 2010 allowed the Company to be manufacturing at full capacity on September 1, 2010 the first day of the three-month period ended November 30, 2010. The change in Sugar and Juice inventories accounted for almost all of the change vs. 2009.

Expenses for the three-month period ended November 30, 2010 increased $10.9 million; $6.7 million increased due to the production costs for a campaign that has incurred nineteen more operating days in 2010 vs. 2009, $3.4 million increased due to Sales and Distribution Costs associated with the larger crop and $0.8 million increased due to General, Administrative, and Interest costs.

LIQUIDITY AND CAPITAL RESOURCES

Because the Company operates as a cooperative, payment for member-delivered sugarbeets, the principal raw material used in producing the sugar and co-products it sells, are subordinated to all member business expenses. In addition, actual cash payments to members are spread over a period of approximately one year following delivery of sugarbeet crops to the Company and are net of unit retains and patronage allocated to them, both of which remain available to meet the Company’s capital requirements. This member financing arrangement may result in an additional source of liquidity and reduced outside financing requirements in comparison to a similar business operated on a non-cooperative basis. However, because sugar is sold throughout the year (while sugarbeets are processed primarily between September and April) and because substantial amounts of equipment are required for its operations, the Company has utilized substantial outside financing on both a seasonal and long-term basis to fund such operations. The short and long-term financing has been primarily provided by CoBank (the “Bank”). As of  November 30, 2010, the Company has a seasonal line of credit totaling $85.0 million through May 31, 2011, and then reduced to $45.0 million through December 31, 2011, of which $18.6 million was available as of November 30, 2010. The Company also had $27.9 million loan capacity from the USDA Sugar Loan Provisions contained in the 2008 Farm Bill, of which $9.5 million was available to provide an additional source of seasonal financing for the current and future crops.

During the three-month period ended November 30, 2010 the Company was reimbursed for qualified capital expenditures in the amount of $4.7 million in accordance with the sale of $7.0 million in tax exempt bonds during fiscal 2010.

On November 30, 2010, the Company sold $8.8 million of new tax exempt bonds resulting from the Federal Government’s economic stimulus legislation.  The proceeds of these bonds are required to be placed in a trust account until the Company makes qualifying capital investments that allow for the use of the proceeds of these bonds. The Company intends to use all of the proceeds from the bond issuance on qualifying capital expenditures within the time period required in the bond indenture.

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

As of November 30, 2010 the Company was in compliance with its loan agreement covenants with the Bank.

Net Cash used for operations totaled $53.2 million for the three-month period ended November 30, 2010, compared to $22.4 million used for the previous period. This increase of $30.7 million in net cash used vs. the  period ended November 30, 2009 was primarily due to the differences in the sugarbeet projected payments recorded liability, actual payments to shareholder/growers , and  the associated additional inventory needs for processing materials from the record 2010-crop.

The net cash acquired in investing activities totaled $1.1 million for the three-month period ended November 30, 2010, compared to $5.9 million used the previous year. The increase of $6.9 million was primarily due to the prior period having $5.0 million used in a change in other assets.  The conversion of $4.7 million in restricted bond assets to cash during the current period was offset by an increase of $2.6 million in capital expenditures vs. the period ended November 30, 2009.

The net cash acquired in financing activities totaled $52.1 million for the three-month period ended November 30, 2010 compared to $28.4 million for the previous year. This increase of $23.7 million was primarily due to a $26.3 million increase in short term debt obligations required for the payment of sugarbeets from the record 2010-crop.  All other factors totaled ($2.3) million.

The Company retained $2.5 million as a non-cash item from the November beet payment in the form of a non-qualified unit retain.

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

Working capital increased $13.9 million for the three-month period ended November 30, 2010. The Company funds its capital expenditure and debt retirement needs primarily from operating activities. The Company anticipates using the majority of the remaining $9.0 million in economic stimulus bonds as a source of funding for the fiscal 2011 capital expenditures.

Cash decreased less than $0.1 million for the three-month period ended November 30, 2010.

Capital expenditures for fiscal year 2011 have been approved at $19.2 million. The capital expenditures are for normal efficiency, improved beet storage, improved rail facilities, safety and replacement activities. Failure by the Company to make capital expenditures over a period of years could result in the Company being less competitive due to its failure to reduce costs, increase operating efficiencies or increase revenues.

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

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

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

OTHER

Estimated Fiscal Year 2012 Information

As of  the date of this filing, the Company’s Board of Directors has not made a determination to modify the planting level for the 2011-crop that would be different from the 2010 crop level.  The 2010-crop level was 150 percent of member preferred shares plus a 10 percent measuring tolerance for a total maximum planting of 160 percent and a total minimum planting of 140 percent of member preferred shares. 

The sugarbeet seed available for the 2011-crop as of the date of this report is still uncertain because of  the legal processes surrounding the use of Round-up Ready sugarbeet seed for the 2011-crop.  If Round-up Ready sugarbeet seed continues to be illegal for planting in the United States, the Company’s growers will only be able to plant conventional sugarbeet seed for the 2011-crop.  See Part II, Item 1 of this report for additional information.

Food, Conservation and Energy Act of 2008

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

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

The Farm Bill incorporates gradual loan rate increases for raw and refined sugar.  For raw sugar, the loan rate will increase three-quarters of a cent per pound, raw value, phased-in in quarter-cent increments over crop years 2009-2011.  Raw cane loan rates will remain at 18.00 cents per lb in 2008 then rise gradually to 18.75 cents by 2011, and they will remain at 18.75 cents per lb for the 2012 crop year.  Refined beet sugar loan rates are set at 23.45 cents per lb for the 2009 crop and thereafter are set at a rate equal to 128.5 percent of the loan rate per pound for raw cane sugar for each of the 2010 through 2012 crop years. The crop year 2010 national beet loan rate is 23.77 cents per lb.

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

The marketing allotments and allocations set forth under the Farm Bill affect the sugar produced from the 2008 crop through the 2012 crop.  On an annual basis, the marketing allotments and the corresponding allocation to the Company will dictate the amount of sugar the Company can sell into the domestic market.  The Company’s marketing allocation for the 2009 crop is currently set at approximately 6.5 million hundredweight.  The Company’s allocation may reduce or increase the amount of sugar the Company can market for a given year, thus affecting the number of acres of sugarbeets required for processing to produce that amount of sugar.

North American Free Trade Agreement

The North American Free Trade Agreement (NAFTA) governs sweetener trade between the United States and Mexico.  Under the NAFTA, tariffs on over-quota imports of sugar from and exports of sugar to Mexico expired on January 1, 2008.  Imports of Mexican sugar could cause material harm to the United States sugar market.  The U.S. Government recently reported that it expects Mexico to export to the United States 1.245 million short tons raw value of sugar, which would represent about 11 percent of U.S. deliveries of sugar for the government’s fiscal year 2011. The Company has no way to predict the extent to which Mexico will take advantage of its export opportunities to the United States.

Regional and Bilateral Free Trade Agreements

The United States government may continue to pursue international trade agreements.  The Company monitors the U.S. government’s international trade policy because it may lead to additional commitments to import sugar into the U.S. market. The primary agreements under consideration that affect sugar, to the Company’s knowledge, are the Columbia Free Trade Agreement; the Thailand Free Trade Agreement; the Panama Free Trade Agreement; the Free Trade Area of the Americas; the South African Customs Union Free Trade Agreement, the Trans Pacific Partnership Trade Agreement and others. The Columbia Free Trade Agreement and the Panama Free Trade Agreement have been completed, signed, but as yet not been ratified by the U.S. Congress. The Company is uncertain when these two trade agreements will be brought before Congress for a vote. Many of the countries included in these agreements are major sugar producers and exporters.

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

The Doha Round negotiations of the World Trade Organization have resumed but it is unclear at this time whether these negotiations will result in an agreement any time soon. If formal negotiations are successful, the outcome of any negotiated arrangement could have adverse consequences for the Company.

Environmental

The Company is subject to extensive federal and state environmental laws and regulations with respect to water and air quality, solid waste disposal and odor control.  The Company conducts an ongoing compliance program designed to meet these environmental laws and regulations.  The Company believes that it is in substantial compliance with applicable environmental laws and regulations.  From time to time, however, the Company may be involved in investigations or determinations regarding matters that may arise in the ordinary course of business.  The Company works closely with all affected government agencies to resolve environmental issues that have arisen and believes such issues will be resolved without any material adverse effect on the Company.

The Company’s sugar manufacturing process is energy intensive and generates carbon dioxide and other “Greenhouse Gases” (GHGs).  Several bills have been passed or introduced in the United States Senate and House of Representatives that would regulate GHGs and carbon dioxide emissions to reduce the impact of global climate change.  The Company believes it is likely that industries generating GHGs, including the Company, will be subject to either federal or state regulation relating to climate change policies in the relatively near future.  These policies, if adopted, will increase the Company’s energy and other operating costs.  Depending on how these policies address imports, the domestic sugar market may have a competitive disadvantage compared with imported sugar.  These policies could have a significant negative impact on the Company’s beet payment to shareholders if the Company is not able to pass the increased costs on to the Company’s customers.

On June 26, 2009, the House of Representatives passed H.R. 2454, the American Clean Energy and Security Act (ACES), a bill that would place a cap on GHG emissions.  Similar legislation may be considered in the U.S. Senate.  Separately, the Environmental Protection Agency (EPA) finalized findings that GHG emissions endanger public health and welfare through their impact on climate change, and that motor vehicles “cause or contribute” to dangerous GHG pollution.  The findings, which respond to the Supreme Court’s 2007 decision in Massachusetts v. EPA, legally obligates the EPA to issue GHG standards for motor vehicles under the Clean Air Act and supports the EPA’s effort to use existing legal authority to regulate GHGs.  As an emitter of GHGs covered by ACES, the Company is watching legislative and regulatory developments carefully yet cannot predict whether new proposed laws or regulations will have a material impact on the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to the Company’s Quantitative and Qualitative Disclosures About Market Risk since the filing of the Company’s Annual Report on Form 10-K for the year ended August 31, 2010.

ITEM 4T. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, the Company conducted an evaluation, under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer (together the “Certifying Officers”), of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of November 30, 2010, the end of the period covered by this report. Based upon that evaluation, the Certifying Officers concluded that the Company’s disclosure controls and procedures were effective.

Inherent Limitations on Effectiveness of Controls

Management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the management and the Board; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Company assets that could have a material effect on the financial statements.

Management personnel, including the Certifying Officers, recognize that the Company’s internal control over financial reporting cannot prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Changes in Internal Control over Financial Reporting

There have been no material changes to the Company’s internal control over financial reporting since the filing of the Company’s Annual Report on Form 10-K for the year ended August 31, 2010 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

In March 2005, the U.S. Department of Agriculture (the “USDA”) made a determination that the Roundup Ready® sugarbeets should be deregulated. On January 23, 2008, a coalition group including the Center for Food Safety, the Sierra Club and two organic seed groups filed a lawsuit challenging the USDA’s determination. On September 21, 2009, the U.S. District Court for the Northern District of California (the “District Court”) ruled that the USDA violated the National Environmental Policy Act by failing to prepare an Environmental Impact Statement (“EIS”) before deregulating Roundup Ready sugarbeets. The District Court also ordered the USDA to complete an EIS. The number of years required to complete the EIS is currently uncertain, but could be as much as three years, with completion in 2013.

On January 19, 2010, the coalition group filed a motion seeking a preliminary injunction to halt the planting and processing of Roundup Ready sugarbeets for both the seed and root crops until the EIS is completed. On March 16, 2010, the District Court denied the plaintiffs’ request for the preliminary injunction. On August 13, 2010, the District Court issued an order allowing harvesting and processing of Roundup Ready sugarbeets planted before August 13, 2010. In that order, the District Court also vacated the USDA’s decision to deregulate Roundup Ready sugarbeets. As a result, the planting of Roundup Ready® sugarbeet seed after August 13, 2010 is prohibited until further action is taken by the USDA, in accordance with applicable environmental laws, to allow planting of Roundup Ready sugarbeet seed.

In September 2010, the USDA, under existing regulatory authority, issued permits to commercial sugarbeet seed companies to plant root crop seed, or stecklings, for the purpose of possible commercial seed availability for the 2012 crop and beyond. That move was immediately challenged in court by the Center for Food Safety along with other groups. On November 30, 2010 the District Court granted the Plaintiffs’ motion for a preliminary injunction and ordered that the stecklings planted pursuant to the permits issued by USDA is removed from the ground. The District Court’s ruling was immediately appealed by USDA and was granted a stay by an emergency panel of the Court of Appeals for the Ninth District Court.

On November 2, 2010 the USDA announced that it has prepared a draft environmental assessment (EA) to address a request from interested chemical and seed companies to partially deregulate or provide for some similar administrative action to allow the continued use of Roundup Ready® sugarbeet seed for sugarbeet crops in the US. The proposed EA evaluates three options, including the USDA’s preferred alternative, which would authorize production of Roundup Ready® sugarbeets under strict USDA permit conditions for the 2011 and future sugarbeet crops. The draft EA was made available for public comment for 30 days following the announcement, with the USDA intending to analyze all comments received by December 6, 2010, and then deciding whether to grant the supplemental request for partial deregulation. The Company believes that as soon as the USDA issues any new approvals for genetically modified sugar beet plantings in 2011, that it will be challenged in court by the same coalition group that has filed previous lawsuits.

According to the USDA, Roundup Ready varieties accounted for about 95 percent of the planted acres in the 2009/10 crop year. The Company’s Board of Directors authorized the planting of Roundup Ready® sugarbeets beginning with the 2008 crop. Of the sugarbeet crop processed by the Company in 2010, the Company estimates that nearly 100 percent was grown with Roundup Ready seed.

Given these actions by the District Court and the uncertain timing or course of USDA action, the Company’s shareholders may not be able to plant Roundup Ready sugarbeets in 2011. The ability of shareholders to plant Roundup Ready sugarbeets in subsequent years will be based upon actions by the USDA, which may be subject to further challenge in the future by the coalition group that filed suit in January 2008 or other groups. Environmental law restrictions on the use of Roundup Ready sugarbeet seeds or other restriction relating to sugarbeet seeds or herbicides could have a significant, negative financial impact on the Company and its shareholders.

Item 1A. Risk Factors

There have been no material changes from risk factors as previously disclosed in the Company’s Form 10-K. For a detailed discussion of certain risk factors that could affect the Company’s operations, financial condition or results for future periods, see Item 1 A, Risk factors in the Company’s 2010 Annual Report on Form 10-K.

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

None

Item 3. Defaults Upon Senior Securities

None

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

None

Item 5.  Other Information

None

Item 6.  Exhibits

a)   Exhibits

Item #31.1  Section 302 Certification of the President and Chief Executive Officer

Item #31.2  Section 302 Certification of the Executive Vice President and Chief Financial Officer

Item #31.3  Section 302 Certification of the Controller and Chief Accounting Officer

Item #32.1  Section 906 Certification of the President and Chief Executive Officer

Item #32.2  Section 906 Certification of the Executive Vice President and Chief Financial Officer

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.