FARMLAND INDUSTRIES INC, S-1/A, 1995-02-08

FARMLAND INDUSTRIES INC
S-1/A, 1995-02-08
MEAT PACKING PLANTS

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Registration Statement No. 33-56821

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

AMENDMENT NO. 2
TO
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 N. Oak 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
Chief Financial Officer
Farmland Industries, Inc.
3315 N. Oak 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:
FEBRUARY 9, 1995

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 )

<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
PROPOSED PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF BEING OFFERING PRICE OFFERING OR REGISTRATION
SECURITY BEING REGISTERED REGISTERED PER UNIT EXCHANGE PRICE FEE
<S> <C> <C> <C> <C>
Demand Loan Certificates $ 13,600,000 100% $ 13,600,000 $ 4,690
Subordinated Capital
Investment Certificates
-Ten Year $ 44,100,000 100% $ 44,100,000 $ 15,207
-Five Year $ 44,000,000 100% $ 44,000,000 $ 15,172
Subordinated Monthly Income
Capital Investment Certificates
-Ten Year $ 26,700,000 100% $ 26,700,000 $ 9,207
-Five Year $ 13,100,000 100% $ 13,100,000 $ 4,517

Total $ 141,500,000 $ 48,793
</TABLE>

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
Statement No. 33-49253 and No. 33-51319.

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 Description of the Ten-Year
Registered 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. Interest of Named Experts and Counsel Interest of Named Experts
and Counsel

11. Information with Respect to the Registrant

(a) 1. General Development of
Business The Company
Business - General
2. Financial Information About Note 12 of Notes to Consolidated
Industry Segments Financial Statements

3. Description of Business Business

(b) Description of Properties Business

(d) Market Price of and
Dividends on the Not Applicable
Registrant's Common Equity
and Related
Stockholder Matters
(e) Financial Statements 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 Analysis of Financial
and Results of Operations 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
FARMLAND INDUSTRIES, INC.
<TABLE>
<CAPTION>
AMOUNTS OFFERED TO:
THE GENERAL EXISTING
PUBLIC SECURITY HOLDERS
<S> <C> <C>
SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
TEN-YEAR $ 40,000,000 $ 20,000,000
FIVE-YEAR $ 45,000,000 $ 25,000,000
SUBORDINATED MONTHLY INCOME CAPITAL
INVESTMENT CERTIFICATES
TEN-YEAR $ 20,000,000 $ 20,000,000
FIVE-YEAR $ 12,000,000 $ 10,000,000
DEMAND LOAN CERTIFICATES $ 60,000,000 $ -0-
</TABLE>

CERTAIN RISK FACTORS CONNECTED WITH THE PURCHASE OF THESE SECURITIES ARE
DISCUSSED ON PAGE 10. IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE PERSON OR 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.

Farmland Industries, Inc. ("Farmland") is offering: (1) to the owners of
its Subordinated Capital Investment Certificates ("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, 1995, unless terminated prior to such date.

The date of this Prospectus is February 9, 1995

(Continued on following pages)

(Continued from preceding page)
<TABLE>
<CAPTION>
Underwriting
Price to Discounts Proceeds to
Public(1) Commissions(2) Farmland(2)
<S> <C> <C> <C>
Subordinated Capital Investment Certificates*
--$100 minimum
Ten-Year Total $ 40,000,000 $ 40,000,000
Five-Year Total $ 45,000,000 $ 45,000,000
Subordinated Monthly Income Capital
Investment Certificates*
--$5,000 minimum (additional units in
incremental amounts of $1,000 or more)
Ten-Year Total $ 20,000,000 $ 20,000,000
Five-Year Total $ 12,000,000 $ 12,000,000
Demand Loan Certificates*
--$100 minimum
Total $ 60,000,000 $ 60,000,000

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

(1) Farmland's offering of 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 and American
Heartland Investments, Inc. 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 $5,272,000 and $1,365,000, respectively, assuming that all
securities offered hereby are sold.

AVAILABLE INFORMATION

Farmland is subject to certain of the informational requirements of the
Securities and Exchange Act of 1934, as amended, and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Information filed by Farmland can be inspected and copied
at the offices of the Commission at the Commission's Public Reference Room at
450 Fifth Street, N.W., Washington, D.C.; Room 1100, Federal Building, 26
Federal Plaza, New York, New York 10278; and Room 1228, Everett McKinley Dirksen
Building, 219 South Dearborn Street, Chicago, Illinois 60604. Copies of such
material may be obtained at prescribed rates from the Public Reference Section
of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.

REPORTS TO SECURITY HOLDERS

Farmland intends to make available to holders of its 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DETERMINATION OF THE CERTIFICATE INTEREST RATE . . . . . . . . . . . . 26
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . 27
EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
HOW TO ACCEPT EXCHANGE OFFER . . . . . . . . . . . . . . . . . . . . . 29
HOW TO TRANSFER OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . 29
DESCRIPTION OF THE TEN-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES 29
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES 33
DESCRIPTION OF THE TEN-YEAR SUBORDINATED MONTHLY INCOME CAPITAL
INVESTMENT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 37
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED MONTHLY INCOME CAPITAL
INVESTMENT CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 40
DESCRIPTION OF THE DEMAND LOAN CERTIFICATES . . . . . . . . . . . . . . 43
INTEREST OF NAMED EXPERTS AND COUNSEL . . . . . . . . . . . . . . . . . 46
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
PATRONAGE REFUNDS AND DISTRIBUTION OF NET INCOME . . . . . . . . . . . 55
EQUITY REDEMPTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . 56
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
QUALIFIED INDEPENDENT UNDERWRITER . . . . . . . . . . . . . . . . . . . 63
INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 64
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 102
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 104

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and related notes appearing
elsewhere in this Prospectus.

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

Business Farmland Industries, Inc. ("Farmland") is a regional farm supply and
marketing cooperative. Farmland is owned by its members and only
its members are eligible to vote for directors or for the management
or affairs of Farmland. Members are entitled to receive patronage
refunds distributed by Farmland from its member-sourced annual net
income. See "Business and Properties - Patronage Refunds and
Distribution of Net Income." Farmland and subsidiaries (the
"Company") conducts business primarily in two operating areas -
cooperative farm supply operations and cooperative processing and
marketing operations.

Cooperative farm supply operations consists of three product
divisions--petroleum, crop production and feed. The Company
distributes farm supply products at wholesale. Approximately 65%
of the Company's sales of farm supply products in 1994 were to
farm cooperative associations (members and owners of Farmland).
These farm cooperatives distribute products primarily to farmers
and ranchers in states which comprise the corn belt and the wheat
belt who utilize the products in the production of farm crops and
livestock.

Cooperative marketing operations include the storage and marketing
of grain, processing pork and beef, and marketing fresh pork,
processed pork, fresh beef and boxed beef. In 1994, approximately
61% of the hogs processed and 46% of the grain marketed were
supplied to the Company by its members. Cattle are purchased from
producers in the proximity of beef plants at Liberal and Dodge
City, Kansas.

A substantial portion of the Company's farm supply, pork and beef
products are produced in facilities owned by the Company or
operated by the Company under long-term lease arrangements. 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 regional cooperatives) with various levels of vertical
integration, product diversification, sizes and types of
operations.

THE OFFERING
<TABLE>
<CAPTION>
OFFERED AT 100% OF
AGGREGATE FACE AMOUNT
FOR FOR
CASH EXCHANGE
<S> <C> <C>
Description of Securities* (see pages 29 to 43):
Subordinated Capital Investment Certificates - $100 Minimum
Interest payable or compounded semiannually at the
Certificate Interest Rate
10-year maturity $ 40,000,000 $ 20,000,000
5-year maturity $ 45,000,000 $ 25,000,000
Subordinated Monthly Income Capital Investment Certificates
- $5,000 Minimum
Interest payable monthly at the Certificate Interest Rate (additional
units may be purchased in increments of $1,000 or more)
10-year maturity $ 20,000,000 $ 20,000,000
5-year maturity $ 12,000,000 $ 10,000,000
Demand Loan Certificates - $100 minimum $ 60,000,000 $ -0-

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

PLAN OF DISTRIBUTION
Offered on a best efforts basis by Farmland Securities Company ("FSC") and
American Heartland Investments, Inc. ("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 securities.

METHOD OF TRANSACTING AN EXCHANGE
The exchange offer may be accepted by delivering any of the 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. The
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
which are estimated to be approximately $289.9 million through August 31,
1996, or to redeem any of the $43.3 million of outstanding Subordinated
Debt Certificates, which mature at various times prior to August 31, 1996,
or to redeem any outstanding Subordinated Debt Certificates prior to
maturity at the request of owners to the extent provided in each
Subordinated Debt Certificates respective trust indenture. Any proceeds in
excess of amounts required for these purposes would be used to reduce bank
or other borrowings with rates of interest higher than the Certificate
Interest Rate of the securities offered hereby. If proceeds from sales of
the securities offered hereby are less than amounts required for these
purposes, additional funds may be obtained from operations or from bank
borrowings. Farmland has reserved the right to change the use of the
proceeds from this offering. 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 Certificates respective trust
indenture.

A. 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 Certificates outstanding under
such trust indenture.

B. 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.

FARMLAND INDUSTRIES, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Three Months Ended
November 30 November 30 Year Ended August 31
1994 1993 1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF
OPERATIONS(1)(2)(3):
Sales . . . . . . $ 1,616,167 $ 1,473,992 $ 6,677,933 $ 4,722,940 $ 3,429,307 $ 3,638,072 $ 3,377,603
Income (Loss) before
Income Taxes,
Patronage Refunds and
Extraordinary Item . . . $ 56,713 $ 11,494 $ 78,766 $ (36,833)$ 70,504 $ 50,166 $ 58,184
Income (Loss) before
Patronage Refunds . . . . $ 47,945 10,735 $ 73,876 $ (30,400)$ 62,313 $ 42,693 $ 48,580

Ratio of Earnings
to Fixed Charges (4) . . . 4.4 1.6 2.1 Note 4 2.5 1.9 2.2

BALANCE SHEETS:
Working Capital . . . . . . . $ 300,890 $ 258,527 $ 290,704 $ 260,519 $ 208,629 $ 122,124 $ 121,518
Property, Plant and
Equipment, Net . . . . . . $ 506,992 $ 506,282 $ 501,290 $ 504,378 $ 446,002 $ 490,712 $ 469,710
Total Assets . . . . . . $ 1,920,378 $ 1,834,401 $ 1,926,631 $ 1,719,981 $ 1,526,392 $ 1,369,231 $ 1,352,889
Long-Term Debt . . . . . . $ 493,161 $ 473,134 $ 517,806 $ 485,861 $ 322,377 $ 291,192 $ 273,071
Capital Shares and Equities . $ 584,860 $ 561,648 $ 585,013 $ 561,707 $ 588,129 $ 497,364 $ 476,011
<FN>
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" for details.
</TABLE>

(1)On July 28, 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
$237,200,000 for tax reporting purposes. During 1983, and prior to the
sale of the Terra stock, Farmland received certain distributions from
Terra totaling $24,800,000. For tax purposes, Farmland claimed
intercorporate dividends-received deductions for the entire amount of
such distributions.

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 $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to
the sale. The IRS asserts that Farmland incorrectly treated the Terra sale
gain as income against which certain patronage-sourced operating losses
could be offset, and that, as a nonexempt cooperative, Farmland was not
entitled to an intercorporate dividends-received deduction in respect of the
1983 distribution by Terra. It further asserts that Farmland incorrectly
characterized gains for tax purposes aggregating approximately $14,600,000,
and a loss of approximately $2,300,000, from the disposition 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.
Discovery and other pre-trial phases of the case have been substantially
completed. The originally scheduled trial date of March 6, 1995 has been
vacated. It is presently contemplated that a limited court hearing, if
necessary, will be held in June 1995, and that briefs in the case will be
filed by late fall of 1995.

If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income
tax liabilities aggregating approximately $85,800,000 plus accumulating
statutory interest thereon through December 31, 1994, of approximately
$159,668,000 (before tax benefits of the interest deduction). In addition,
such adjustments 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 $5,000,000 plus
applicable statutory interest thereon.

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. Farmland believes that it has meritorious positions
with respect to all of these claims and will continue to vigorously pursue
their favorable resolution through the pending litigation.

In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely,
correct; and (ii) Farmland properly claimed a dividends-received deduction
in respect of the 1983 distributions which it received from Terra prior to
the sale of the Terra stock. Counsel has further advised, however, that
none of the issues involved in these disputes is free from doubt, and that
there can be no assurance that the courts will ultimately rule in favor of
Farmland on any of these issues.

Should the IRS ultimately prevail on all of its asserted claims, all claimed
federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale
of assets.

(2) During the year ended August 31, 1991, the Company changed its method for
inventory pricing of certain petroleum inventories from the first-in,
first out (FIFO) method previously used to the last-in, first out (LIFO)
method because the LIFO method better matches current costs with current
revenues. Pro forma effects of retroactive application of the LIFO
method are not determinable.

(3) Acquisitions and Dispositions:
(a) In October 1993, the Company acquired approximately 53% of the common
stock of National Carriers, Inc. ("NCI") and increased its ownership
of NCI to 79% in August 1994. NCI is a trucking company located in
Liberal, Kansas. NCI provides substantially all the trucking service
needs of NBPC. The purchase price of NCI ($4,423,000) was paid in
cash. See note 2 of the notes to consolidated financial statements.

(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 ($31,367,000) was
paid in cash. See note 2 of the notes to consolidated financial
statements.

(c) During 1993, Farmland obtained a 58% interest in National Beef
Packing Company, L.P. ("NBPC"), a limited partnership. Effective
April 15, 1993, NBPC acquired Idle Wild Food's beef packing plant and
feedlot located in Liberal, Kansas. See note 2 of the notes to
consolidated financial statements.

(d) On August 30, 1993, 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) Effective June 30, 1992, the Company acquired the grain marketing
assets of Union Equity Co-Operative Exchange ("Union Equity"). See
note 2 of the notes to consolidated financial statements.
<TABLE>
(f) The following unaudited financial information for the year ended
August 31, 1993 and 1992 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 each 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 Union Equity and NBPC for the full years
1993 and 1992. See note 2 of the notes to consolidated financial
statements.
<CAPTION>
August 31 (Unaudited)
1993 1992
(Amounts in Thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 5,357,867 $ 5,441,303

Income (loss) before extraordinary item . . . . $ (44,040) $ 47,225
</TABLE>

(4) In computing the ratio of earnings to fixed charges, income (loss)
represents pretax income (loss) for the enterprise as a whole including
100% of such income (loss) of minority-owned subsidiaries which have
fixed charges, the registrant's share of 50%-owned persons and any
distributed earnings (but not losses or undistributed earnings) of
less-than-fifty percent-owned persons 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 $36,609,000.

RISK FACTORS

Prospective investors in the Demand Loan Certificates and Subordinated Debt
Certificates offered hereby are advised to consider the following risk factors:

INCOME TAX MATTERS

The Internal Revenue Services ("IRS") has asserted that Farmland
incorrectly treated as patronage-sourced income a gain for income tax purposes
of $237,200,000 which resulted from the sale of the stock of Terra Resources,
Inc. ("Terra") and that Farmland, as a nonexempt cooperative, was not entitled
to intercorporate dividends-received deductions with respect to distributions of
$24,800,000 received in 1983 from Terra.

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 $70,775,000. The asserted deficiencies relate
primarily to the Company's tax treatment of the sale of the Terra stock and the
distributions received from Terra prior to the sale. It further asserts that
Farmland incorrectly characterized gains for tax purposes aggregating
approximately $14,600,000, and a loss of approximately $2,300,000, 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. Discovery and other pre-trial phases of the case have been
substantially completed. The originally scheduled trial date of March 6,
1995 has been vacated. It is presently contemplated that a limited court
hearing, if necessary, will be held in June 1995, and that briefs in the case
will be filed by late fall of 1995.

If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through December 31, 1994, of approximately $159,668,000
(before tax benefits of the interest deduction). In addition, such adjustments
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 $5,000,000 plus applicable statutory interest
thereon.

Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets. See note 7 of the notes to consolidated financial statements.

GENERAL FACTORS AFFECTING THE COMPANY'S BUSINESS

The Company's revenues 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 or exports. In addition, various federal and
state regulations to protect the environment encourage farmers to reduce the
amount of fertilizer and other chemicals applications. Global variables which
affect supply, demand and price of crude oil and refined fuels impact the
Company's petroleum operations. 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."

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.

SUBORDINATION AND ADDITIONAL DEBT

The Subordinated Debt Certificates offered by this Prospectus for sale and
for exchange are unsecured and subordinated to "senior indebtedness." Such
"senior indebtedness" includes 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." At November 30,
1994, such money borrowed aggregated approximately $369,035,000. In addition,
such other instruments (principally long-term leases) then in effect provided
for aggregate payments over nine years of approximately $120,293,000. There is
no limitation on the amount of additional senior debt for which Farmland may
become liable, except that, 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 Discussion and Analysis of Financial Condition and Results of
Operations" and the subcaption "Subordination" within the description of each
type of certificate. The Demand Loan Certificates are unsecured general
obligations of Farmland Industries, Inc.

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 CERTIFICATES 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.

LACK OF AN ESTABLISHED MARKET FOR THE SECURITIES TO BE OFFERED

There is no secondary market for Farmland's Subordinated Debt Certificates
or Demand Loan Certificates presently outstanding and there likely will be no
secondary market for these securities.

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."

POTENTIAL TAXABLE GAINS OR LOSSES FROM THE EXCHANGE

An exchange of 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 Certificates. See "Exchange Offer."

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, 1994 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 1993 and for each of the years in the three-year period
ended August 31, 1994, and the independent auditors' report thereon, are
included elsewhere herein. The selected consolidated financial data as of and
for the three-month periods ended November 30, 1994 and November 30, 1993 are
derived from unaudited condensed consolidated financial statements of the
Company included elsewhere herein. The information set forth below should be
read in conjunction with information included 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 Internal Revenue Service on the gain on sale of and
certain distributions by Terra Resources, Inc.

<TABLE>
<CAPTION>
Three Months Ended
November 30 November 30 Year Ended August 31
1994 1993 1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATION: (1)(2)(3)
Net Sales . . . . $ 1,616,167 $ 1,473,992 $ 6,677,933 $ 4,722,940 $ 3,429,307 $ 3,638,072 $ 3,377,603
Interest Expense (net of
interest capitalized) $ 13,443 $ 13,133 $ 51,485 $ 36,764 $ 27,965 $ 36,951 $ 30,090
Income (Loss) Before
Income Taxes,
Patronage Refunds and
Extraordinary Item . $ 56,713 $ 11,494 $ 78,766 $ (36,833) $ 70,504 $ 50,166 $ 58,184

Income (Loss) before
Patronage Refunds . . $ 47,945 $ 10,735 $ 73,876 $ (30,400) $ 62,313 $ 42,693 $ 48,580

DISTRIBUTION OF NET INCOME:
Patronage Refunds:
Equity Reinvestments . N/A N/A $ 44,032 $ 1,155 $ 1,038 $ 17,837 $ 24,403
Cash or Equivalent . . . N/A N/A 26,580 495 17,918 12,571 8,800
Earned Surplus and
Other Equities . . . . N/A N/A 3,264 (32,050) 43,357 12,285 15,377
. . . . $ N/A $ N/A $ 73,876 $ (30,400) $ 62,313 $ 42,693 $ 48,580
Ratio of Earnings (Loss) to
Fixed Charges (4) . . 4.4 1.6 2.1 Note 4 2.5 1.9 2.2

BALANCE SHEETS:
Working Capital . . . . . $ 300,890 $ 258,527 $ 290,704 $ 260,519 $ 208,629 $ 122,124 $ 121,518
Property, Plant and
Equipment, Net . . . . $ 506,992 $ 506,282 $ 501,290 $ 504,378 $ 446,002 $ 490,712 $ 469,710
Total Assets . . . . $ 1,920,378 $ 1,834,401 $ 1,926,631 $ 1,719,981 $ 1,526,392 $ 1,369,231 $ 1,352,889
Long-Term Debt . . . . $ 493,161 $ 473,134 $ 517,806 $ 485,861 $ 322,377 $ 291,192 $ 273,071
Capital Shares
and Equities . . . . . . $ 584,860 $ 561,648 $ 585,013 $ 561,707 $ 588,129 $ 497,364 $ 476,011
<FN>
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for details.
</TABLE>

(1) On July 28, 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
$237,200,000 for tax reporting purposes. During 1983, and prior to the
sale of the Terra stock, Farmland received certain distributions from Terra
totaling $24,800,000. For tax purposes, Farmland claimed intercorporate
dividends-received deductions for the entire amount of such distributions.

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
$70,775,000. The asserted deficiencies relate primarily to the Company's
tax treatment of the sale of the Terra stock and the distributions received
from Terra prior to the sale. The IRS asserts that Farmland incorrectly
treated the Terra sale gain as income against which certain
patronage-sourced operating losses could be offset, and that, as a
nonexempt cooperative, Farmland was not entitled to an intercorporate
dividends-received deduction in respect of the 1983 distribution by Terra.
It further asserts that Farmland incorrectly characterized gains for tax
purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition 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. Discovery and other pre-trial
phases of the case have been substantially completed. The originally
scheduled trial date of March 6, 1995 has been vacated. It is presently
contemplated that a limited court hearing, if necessary, will be held in
June 1995, and that briefs in the case will be filed by late fall of 1995.

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. Farmland believes that it has meritorious
positions with respect to all of these claims and will continue to
vigorously pursue their favorable resolution through the pending
litigation.

In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i)
Farmland's treatment of the Terra sale gain was substantially, if not
entirely, correct; and (ii) Farmland properly claimed a dividends-received
deduction in respect of the 1983 distributions which it received from Terra
prior to the sale of the Terra stock. Counsel has further advised,
however, that none of the issues involved in these disputes is free from
doubt, and that there can be no assurance that the courts will ultimately
rule in favor of Farmland on any of these issues.

Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest would
become immediately due and payable, and would be charged to current
operations. In such case, the Company would be required to renegotiate
agreements with its banks to maintain compliance with various requirements
of such agreements, including working capital and funded indebtedness
provisions. However, no assurance can be given that such renegotiation
would be successful. Alternatives could include other financing
arrangements or the possible sale of assets.

(2) During the year ended August 31, 1991, the Company changed its method for
inventory pricing of certain petroleum inventories from the first-in, first
out (FIFO) method previously used to the last-in, first out (LIFO) method
because the LIFO method better matches current costs with current revenues.
Pro forma effects of retroactive application of the LIFO method are not
determinable.

(3) Acquisitions and Dispositions:

(a) In October 1993, the Company acquired approximately 53% of the common
stock of National Carriers, Inc. ("NCI") and increased its ownership
of NCI to 79% in August 1994. NCI is a trucking company located in
Liberal, Kansas. NCI provides substantially all the trucking service
needs of NBPC. The purchase price of NCI ($4,423,000) was paid in
cash. See note 2 of the notes to consolidated financial statements.

(c) During 1993, Farmland obtained a 58% interest in National Beef Packing
Company, L.P. ("NBPC"), a limited partnership. Effective April 15,
1993, NBPC acquired Idle Wild Food's beef packing plant and feedlot
located in Liberal, Kansas. See note 2 of the notes to consolidated
financial statements.

(d) On August 30, 1993, 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.

Income (loss) before extraordinary item . . . . $ (44,040) $ 47,225
</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

The Company maintains two primary sources for debt capital: a continuous
public offering of its debt securities and bank lines of credit.

The Company's debt securities are offered on a best-efforts basis by
Farmland Securities Company and American Heartland Investments, Inc. and may be
offered by selected broker-dealers. The types of securities offered 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 this public offering is 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, 1994, and
the three months ended November 30, 1994, the outstanding balance of demand loan
and subordinated debt certificates increased $17.6 million and $9.4 million,
respectively.

Farmland has a $650.0 million syndicated credit facility provided by eight
domestic and international banking institutions. This 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 November 30,
1994, short-term borrowings under this facility were $139.0 million, revolving
term borrowings were $80.0 million and $59.1 million was being utilized to
support letters of credit issued on behalf of Farmland by participating banks.

Farmland pays commitment fees of 1/8 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 capitalization, respectively. All computations
are based on consolidated financial data adjusted to exclude nonrecourse
subsidiaries (as defined in the credit agreement). At November 30, 1994,
Farmland was in compliance with all covenants.

The Company maintains other borrowing arrangements with banks and financial
institutions. Under such agreements, at November 30, 1994, $48.3 million was
borrowed and letters of credit issued by banks amounted to $2.2 million.
Financial covenants of these arrangements are not more restrictive than the
Company's syndicated credit facility.

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.

National Beef Packing Company ("NBPC"), 58%-owned by Farmland, maintains
borrowing agreements with a bank which provides financing support for its beef
packing operations. Borrowings under this credit agreement are nonrecourse to
Farmland or Farmland's other affiliates. At November 30, 1994, $82.6 million
was available under this agreement of which $59.4 million was borrowed and $8.5
million was utilized to support letters of credit. All assets of NBPC (carried
at $152.4 million) are pledged 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.

Leveraged leasing has been utilized to finance railcars and a substantial
portion of crop production equipment. Under the most restrictive covenants of
its leases, the Company has agreed to maintain working capital of at least $75
million, consolidated funded indebtedness not greater than 65% of consolidated
capitalization, and consolidated senior funded indebtedness not greater than 50%
of consolidated capitalization.

As a cooperative, a portion of Farmland's annual net income is distributed
to its members, associate members and patrons with which it is a party to a
currently effective patronage refund agreement. For this purpose, annual net
income or loss shall be determined in accordance with income tax regulations in
1994 and in accordance with generally accepted accounting principles in 1995 and
after. Such income is identified to transactions with members eligible to
receive patronage refunds ("member-sourced income") or to transactions with
parties not entitled to receive patronage refunds ("nonmember-sourced income").
The annual nonmember-sourced income or loss is adjusted for the amount of
applicable income tax expense or benefit thereon and the amount remaining is
transferred to retained earnings. The member-sourced income is distributed to
members as patronage refunds unless the earned surplus account, after such
distribution, would be lower than 30% of the sum of the prior year-end balance
of outstanding common stock, associate member stock, capital credits, nonmember
capital and patronage refunds for reinvestment. In such cases, member-sourced
income shall be 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 ended August 31, 1994, 1993 and 1992, the earned surplus account
exceeded the required amount by $2.3 million, $3.8 million and $49.5 million,
respectively.

Generally, a portion of the patronage refund is distributed in cash and the
balance (the "invested 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
invested portion in any other form or forms of equities. The invested portion
of the patronage refund is determined annually by the Board of Directors but
such invested portion shall not, for any year, exceed 80% of the total patronage
refunds. The invested 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 representing the
invested portion of patronage refunds 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 Farmland Foods, Inc. may be
redeemed under other equity redemptions. The base capital plan and other equity
redemption plans are explained under the heading "Equity Redemption Plans."

In 1994, operations generated a net cash inflow of $106.0 million. Other
major cash sources include $34.6 million from dispositions of investments and
notes receivables, $17.6 million (net) from investors in demand loan and
subordinated debt certificates and $17.1 million from sales of property, plant
and equipment.

The primary uses of cash include $69.8 million for capital additions or
improvements, $36.6 million (net) for repayment of bank loans and other notes
payable, $35.8 million for acquisition of businesses (Tradigrain and National
Carriers, Inc.) and $22.1 million for investments and notes receivables.

Major uses of cash during the three months ended November 30, 1994 include
net payments of $109.1 million to decrease the balance of bank loans and other
notes outstanding, $26.2 million for patronage refunds and dividends
distributed from income of the 1994 fiscal year, $20.8 million for capital
expenditures, $12.1 million for the redemption of equities under the Farmland
base capital plan and special redemption plan and $9.2 million for acquisition
of investments. Major sources of cash include $58.7 million from
operations, $57.5 million from an increase in the balance of checks and drafts
outstanding and $9.4 million from an increase in the balance of demand loan
and subordinated debt outstanding.

On July 28, 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 $237,200,000 for tax
reporting purposes. During 1983, and prior to the sale of the Terra stock,
Farmland received certain distributions from Terra totaling $24,800,000. For
tax purposes, Farmland claimed intercorporate dividends-received deductions for
the entire amount of such distributions.

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 $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to the
sale. The IRS asserts that Farmland incorrectly treated the Terra sale gain as
income against which certain patronage-sourced operating losses could be offset,
and that, as a nonexempt cooperative, Farmland was not entitled to an
intercorporate dividends-received deduction in respect of the 1983 distribution
by Terra. It further asserts that Farmland incorrectly characterized gains for
tax purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition 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. Discovery and other pre-trial phases of the
case have been substantially completed. The originally scheduled trial date
of March 6, 1995 has been vacated. It is presently contemplated that a
limited court hearing, if necessary, will be held in June 1995, and that
briefs in the case will be filed by late fall of 1995.

If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through December 31, 1994, of approximately $159,668,000
(before tax benefits of the interest deduction). In addition, such adjustments
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 $5,000,000 plus applicable statutory interest
thereon.

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. Farmland believes that it has meritorious positions with
respect to all of these claims and will continue to vigorously pursue their
favorable resolution through the pending litigation.

In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely, correct;
and (ii) Farmland properly claimed a dividends-received deduction in respect of
the 1983 distributions which it received from Terra prior to the sale of the
Terra stock. Counsel has further advised, however, that none of the issues
involved in these disputes is free from doubt, and that there can be no
assurance that the courts will ultimately rule in favor of Farmland on any of
these issues.

Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest thereon would
become immediately due and payable, and would be charged to current operations.
In such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets.

RESULTS OF OPERATIONS

YEARS ENDED AUGUST 31, 1994, 1993 AND 1992

The Company's revenues 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 direct imports or exports. In addition, global variables
which affect supply, demand and price of crude oil and refined fuels impact the
Company's petroleum operations. Management cannot determine the extent to which
future operations of the Company may be impacted by these factors. 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.
<TABLE>
The increase (decrease) in sales and operating profit by business segment
in each of the years in the three-year period ended August 31, 1994, compared
with the prior year is presented in the table below. Management's discussion of
business segment sales, operating profit or loss and other factors affecting the
Company's income before income taxes and extraordinary item during 1994, 1993
and 1992 follows the table.
<CAPTION>
Income Before Income Taxes and
Sales-Increase (Decrease) Extraordinary Item-Increase (Decrease)
1994 1993 1992 1994 1993 1992
Compared Compared Compared Compared Compared Compared
with 1993 with 1992 with 1991 with 1993 with 1992 with 1991
(Amounts in Millions) (Amounts in Millions)
<S> <C> <C> <C> <C> <C> <C>
Sales and Operating Profit of
Business Segments:
Petroleum . . . . . . . . . . . . . $ (32) $ (92) $ (210) $ 32 $ (13) $ 17
Crop Production . . . . . . . . . . 278 (13) (138) 74 (60) (13)
Feed . . . . . . . . . . . . . . . 49 34 (21) (4) (1) (3)
Food Processing and Marketing . . 943 563 21 4 (8) 14
Grain Marketing* . . . . . . . . . 674 798 155 (34) 1 (1)
Other . . . . . . . . . . . . . . . 43 4 (16) (4) 7 (10)
$ 1,955 $ 1,294 $ (209) $ 68 $ (74) $ 4
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Corporate Expenses and Other:
General corporate expenses (increase) decrease . . . . . . . . . . . . (9) 9 13
Other income and deductions (net) increase (decrease) . . . . . . . . 14 7 (5)
Interest expense (increase) decrease . . . . . . . . . . . . . . . . . (14) (9) 9
Equity in income (loss) of investees . . . . . . . . . . . . . . . . . 23 (10) (1)
Minority owners' interest in loss
(income) of subsidiaries . . . . . . . . . . . . . . . . . . . . . 5 (1) -0-
Provision for (loss) on disposition of assets . . . . . . . . . . . . 29 (29) -0-
Income before income taxes and extraordinary item . . . . . . . . . . $ 116 $ (107) $ 20

* Grain marketing operations were acquired in 1992
</TABLE>
In computing the operating profit (loss) of a business segment, none of the
following have been added or deducted: corporate, general and administrative
expenses which cannot practicably be identified or allocated to a business
segment, interest expense, equity in income (loss) of investees, and
miscellaneous income or deductions.

PETROLEUM

SALES

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
of refined fuels and propane unit sales.

Sales of the petroleum segment decreased $92.2 million in 1993 compared
with 1992, primarily a result of 12% lower unit sales of refined fuels
(gasoline, diesel and distillates) and a 2% decline of the average selling
price. 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 27%
higher unit sales and 18% higher prices.

In 1992, sales of petroleum products declined $209.7 million compared with
1991. This decrease resulted primarily because unit sales of refined products
(gasoline, distillate and diesel) and the average price of these products were
lower in 1992 than 1991 by 19% and 16%, respectively. The unit sales and price
declines reduced sales of these products by approximately $37.3 million and
$154.2 million, respectively. In addition, propane prices in 1992 averaged
approximately 82% of the prior year's level, which reduced sales by
approximately $13.5 million.

OPERATING PROFIT

Results from petroleum operations increased $31.7 million primarily because
unit margins on diesel fuels with low levels of sulfur (required by the
Environmental Protection Agency for diesel fuel sold after September 30, 1993)
were higher than the corresponding period of the prior year. These margins were
significantly higher immediately after the crossover to the low sulfur level
diesel. In addition, margins on other refined fuels improved 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. Unit margins
on diesel fuels with low sulfur levels have decreased to, and are expected to
remain, near normal levels.

Operating profit 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.

Operating profit of the petroleum segment was $8.2 million in 1992 compared
with a loss of $9.3 million loss in 1991. Most of this improvement resulted
from elimination in 1992 of losses experienced in 1991 on petroleum futures
contracts. The Company changed its hedging practice in March 1991.

CROP PRODUCTION

SALES

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 $67.1 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.

The crop production segment's sales declined $137.7 million in 1992
compared with 1991. Substantially all of this decrease resulted from lower unit
sales and prices for phosphate fertilizers. The Company reported 30% lower
phosphate unit sales in 1992 which reduced sales approximately $117.3 million.
This decrease resulted principally from the sale on November 15, 1991 of the
Green Bay, Florida phosphate plant to a 50%-owned joint venture. In addition,
sales of phosphate fertilizer decreased approximately $18.2 million, because
the average price was 7% lower. Sales of turf and garden products were
approximately $2.9 million lower.

OPERATING PROFIT

Operating profits 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 profit in this segment approximately $66.8 million.
Unit sales increased over one million tons (18%) which increased operating
profit 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 profit of the crop production segment decreased $60.3 million in
1993 compared with 1992, primarily because of 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 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 statement of operations in the caption, "Equity in loss of
investees"), was $8.2 million in 1993 compared with a loss of $1.3 million in
1992.

The crop production segment's operating profit of $111.9 million decreased
$13.4 million in 1992 compared with 1991. The decrease resulted primarily from
lower phosphate fertilizer selling prices and from realignment of the Company's
phosphate fertilizer production operations into two 50%-owned ventures.

FEED

SALES

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 $18.0 million. In
addition, sales of animal health products increased $2.5 million. Lower formula
feed selling prices partly offset the effect of higher unit sales.

The feed segment's sales for 1992 decreased $20.9 million compared with
1991, principally because feed ingredients unit sales decreased 22%. Unit sales
of feed ingredients decreased because sales efforts were directed from products
with near break-even margins to products with higher margins. Feed ingredient
sales decreased approximately $41.7 million because of the unit sales decline.
Feed ingredient prices increased an average of 8% which increased sales by
approximately $11.2 million and formula feed sales increased $6.8 million,
principally due to higher unit sales.

OPERATING PROFIT

Operating profit 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, sales marketing and feed administration expenses
increased $3.2 million primarily due to higher commissions and other variable
compensation plans.

Operating profit 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.

Operating profit of the feed segment for 1992 of $21.3 million decreased
$3.2 million compared with 1991. The decrease resulted from $1.3 million lower
patronage refund income on purchases from other cooperatives and from $2.2
million higher expenses partly offset by $.4 million higher gross margins.

FOOD PROCESSING AND MARKETING

SALES

Sales of the food marketing and processing business increased $943.0
million in 1994 compared with 1993. Sales of beef increased $735.5 million
principally because National Beef Packing Company, L.P. ("NBPC") has been
included in the Company's 1994 results for the full year. NBPC was acquired in
April 1993. Pork sales increased $207.5 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 Carando division increased $13.0 million.

Food marketing sales increased $562.5 million in 1993 compared with 1992,
primarily due to business acquisitions. In April 1993, the Company and partners
organized National Beef Packing Company, L.P. ("NBPC"). Farmland obtained a 58%
ownership interest in NBPC 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, a
99%-owned subsidiary, 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.

Sales of the food marketing segment in 1992 increased $21.1 million
compared with 1991. Sales of specialty meats increased $50.3 million primarily
because these products were not included in sales for 1991 prior to April 1,
when the Company acquired three specialty meats plants. Fresh and processed
pork sales were lower than in 1991 because the effect of lower wholesale prices
was greater than the effect of higher unit sales.

OPERATING PROFIT

Operating profit in the Food Marketing and Processing business 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 profit of the pork business
partly offset by an $8.9 million decrease of operating profit of the beef
business. Operating profit from pork marketing and processing operations
increased primarily due to higher volume and higher margins on fresh pork,
branded pork, hams and specialty meats of the Carando division. Operating
profit of the beef business decreased owing to weak consumer demands for beef
and industry price competition.

Operating profit of the food marketing segment decreased $8.7 million in
1993 compared with 1992. The decrease is primarily due to 4.6% higher live hog
cost. 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 4.6% higher cost of live hogs which
could not be fully recovered through increased wholesale prices of fresh and
processed pork products and by higher selling and administrative expenses.

Operating profits of the food marketing segment for 1992 increased $13.8
million compared with 1991. The improvement includes higher gross margins of
approximately $26.8 million, partially offset by approximately $13.4 million
higher selling, general and administrative expenses. The gross margin increase
includes $9.9 million higher margins on specialty meats attributable to
ownership of specialty meats plants during all of 1992, compared with only five
months of 1991. Additional improvements of gross margins resulted from a more
favorable spread between the costs of live hogs and wholesale pork prices, from
higher unit sales, and from a shift of sales to value-added products with higher
unit margins. Selling, general and administrative expenses of this segment
increased, primarily due to expenses incurred in connection with the specialty
meats plants which were operated by the Company for only five months in the
prior year.

GRAIN MARKETING

SALES AND OPERATING PROFIT

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 Union Equity
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 profit 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 assets 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 $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 National Carriers,
Inc. 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 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 $6.3 million in 1993
compared with 1992.

In 1992, corporate general and administrative expenses not identified to
business segments decreased $5.2 million compared with 1991. This decrease was
mostly lower retirement plan costs, reduced corporate advertising and reduced
coverage and cost of liability insurance.

OTHER INCOME (DEDUCTIONS)

INTEREST EXPENSE

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 National Carriers, Inc. 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. Interest expense decreased $8.9 million in 1992 compared with 1991. The
decrease results from lower borrowings and 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 the year ended August 31, 1993
included a $20,022,000 provision for loss on the sale of the refinery.
Accordingly, the net carrying value of property, plant and equipment has been
reduced by $20,022,000 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
$6,155,000 from the sale. Accordingly, at August 31, 1993, the carrying value
of the dragline was written down by $6,155,000 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 $3,253,000 to an estimated disposal value.

OTHER, NET

In June 1993, the Company filed a lawsuit against 43 insurance carriers and
other parties (the "Defendants") seeking declaratory judgments regarding
Defendants' insurance coverage obligations for environmental remediation costs.
In fiscal year 1994, the Company negotiated settlements with 20 insurance
companies and as part of the settlements, the Company provided Defendants with
releases of various possible environmental obligations. As a result of these
settlements, the Company received cash payments of $13,566,000 in 1994 and has
included such amount in the caption "Other income" in the consolidated statement
of operations for the year then ended.

THREE MONTHS ENDED NOVEMBER 30, 1994 COMPARED WITH THREE MONTHS ENDED NOVEMBER
30, 1993

Operating results for any quarter are not necessarily indicative of the
results expected for the full year. The principal businesses of the Company are
highly seasonal. The majority of sales of farm supply products historically
occur in the spring months, revenues in the beef business and in grain marketing
historically are concentrated in the summer months and summer is the lowest
sales period for pork products. In view of the seasonality of the Company's
businesses, it must be emphasized that the results for the three months ended
November 30, 1994 should not be annualized to project a full year's results.

SALES

Sales for the three months ended November 30, 1994 increased $142.2 million
or 9.6% compared with the corresponding period of the prior year. The increase
includes $117.0 million higher sales of agricultural output products, $22.1
million higher sales of farm production input products and $3.1 million higher
sales of other products and services.

Sales of agricultural output products increased principally because grain
sales reported in the three months ended November 30, 1994 (which reflect an
increase of $95.6 million) include operations of a grain trading company
acquired in May 1994 and sales at elevators in Utah and Idaho which Farmland
leased in February 1994. These operations were not included in financial
reports of the Company for the first quarter of the prior year. In addition,
sales of beef and pork increased $15.1 million and $6.3 million, respectively.
This increase resulted from higher unit sales of beef and pork partly offset by
lower unit prices of pork.

The increased sales of farm production input products includes $52.9
million higher sales of crop production products, $17.2 million in lower sales
of petroleum products and $13.6 million lower feed sales. Sales of crop
production products increased because unit prices of plant nutrients increased
approximately 19% and unit sales of these products increased approximately 4%.
Sales of petroleum products decreased because of lower refined fuel and propane
prices and lower propane unit sales. Feed sales decreased because of lower
formula feed unit sales and because of lower prices of formula feed and feed
ingredients.

INCOME BEFORE PATRONAGE REFUNDS

Income before patronage refunds of $47.9 million for the three months
ended November 30, 1994 increased $37.2 million compared with the
corresponding period of the prior year. Operating profit in the Company's
crop production and food marketing businesses increased $33.2 million and $
23.1 million, respectively. In addition, the Company's share of net income
from joint ventures engaged in crop production and beef packing operations
increased $5.5 million and $4.5 million, respectively. These increases were
partially offset by decreased operating profits of $13.8 million in petroleum,
$2.8 million higher general corporate expenses and by an $8.0 million
increase of the provision for income taxes.

Operating profit of the crop production business increased in the three
months ended November 30, 1994 as a result of higher prices of nitrogen-based
products coupled with decreased per unit costs of natural gas (the principal
raw material used in production of nitrogen-based plant nutrients). Income of
crop production joint ventures increased because of 15% higher market prices
of phosphate fertilizers.

Operating profit of the food marketing business increased in the three
months ended November 30, 1994 compared with the corresponding period of the
prior year with improved results in pork and beef. Pork processing and
marketing operating profit increased $19.0 million primarily due to increased
margins on fresh pork products partially offset by slightly higher
promotional expenses. Operating profits in the beef business were $2.0
million in the three months ended November 30, 1994 compared with a loss of
$2.1 million in the corresponding period of the prior year. This increase
is attributable to higher market prices for beef and the availability of
cattle at more favorable cost levels. In addition, the income of Hyplains
Beef, a 50%-owned joint venture, increased due to higher unit production and
sales of boxed beef products.

The increase of operating profits of the crop production and food marketing
businesses in the three months ended November 30, 1994 (as described above)
are attributable to favorable spreads between selling prices and raw material
costs (natural gas in the case of nitrogen-based fertilizers and live hogs and
cattle in the food marketing business). These price and cost factors are
beyond the control of the Company's management and have been volatile in the
past. Accordingly, management cannot determine the extent to which these
factors will continue to favorably affect the Company's business. The
Company's cash flow and income may continue to be volatile as conditions
affecting agriculture, costs and markets for the Company's products change.

Results from petroleum operations decreased due to lower unit sales of
refined fuels and propane coupled with lower prices for refined fuels.

Selling, general and administrative expenses increased $9.4 million in the
three months ended November 30, 1994 compared with the corresponding period the
prior year. Approximately $6.6 million of the increase was directly connected
to business segments, primarily the output businesses (grain, beef and pork) and
related to increased sales. Corporate general expenses, not identified to
business segments, increased $2.8 million ensuing primarily from higher cost of
variable compensation plans and employee pension expenses.

The estimated effective tax rate for the three months ended November 30,
1994 is based on historical effective rates. The actual effective tax rate
may be subject to subsequent refinement or revision. The effective tax rate
for fiscal year 1994 has been used to provide income taxes for the three
months ended November 30, 1993.

RECENT ACCOUNTING PRONOUNCEMENTS

Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," was issued by the Financial
Accounting Standards Board ("FASB") in May 1993 and is effective for fiscal
years beginning after December 15, 1993 (the Company's 1995 fiscal year).
Statement 115 expands the use of fair value accounting and the reporting for
certain investments in debt and equity securities. Management expects the
adoption of Statement 115 will not have a significant impact on the Company's
consolidated financial statements.

Statement of Financial Accounting Standards No. 112, "Employer's Accounting
for Postemployment Benefits," was issued by the FASB in November 1992 and is
effective for fiscal years beginning after December 15, 1993 (the Company's 1995
fiscal year). Statement 112 establishes standards of accounting and reporting
for the estimated cost of benefits provided to former or inactive employees.
Management expects that the adoption of Statement 112 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
Certificates as determined by of 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. Any change in the CIR will not affect
the CIR on any Subordinated Capital Investment Certificates or Subordinated
Monthly Income Capital Investment Certificates for which the full purchase price
was received prior to the change. With respect to the Demand Loan Certificates,
the CIR is the interest rate for Demand Loan Certificates as determined, from
time to time, by the President of Farmland, in his sole discretion. 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 7.75% on Five-Year and 8.25% on
Ten-Year Subordinated Capital Investment Certificates; 7.75% on Five-Year, and
8.25% on Ten-Year Subordinated Monthly Income Capital Investment Certificates;
and 4.75% 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 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 $170,363,000 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 which are expected to be
approximately $289.9 million through the two-year period ending August 31, 1996;
2) to refinance approximately $43.3 million of Subordinated Debt Certificates
which mature at various times prior to August 31, 1996; 3) to fund call options
which, subject to provisions in each respective trust indenture, may be
exercised by Farmland; or 4) 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 Certificates respective trust
indenture. See "Other Matters - Capital Expenditures" and the subcaption
"Redemptions" within the description of each type of certificate.

Any proceeds in excess of amounts required for the above purposes would be
applied to reduce bank or other borrowings being used to finance inventories,
operations or facilities provided that such borrowings have interest rates
higher than the CIR of the securities offered hereby. 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.

At November 30, 1994, under a syndicated credit facility provided by eight
domestic and international banking institutions, additional borrowings of
approximately $371,937,000 were available to Farmland. A summary of the terms
and conditions of these credit agreements is set out in "Management's Discussion
and Analysis of Financial Condition and Results of Operations." Farmland has
reserved the right to obtain funds in any manner deemed advisable. Farmland
intends to maintain a continuous offering of securities as it has done in the
past. Farmland has reserved the right to change the use of the proceeds of this
offering due to contingencies related to the volatile nature of the Company's
cash flows as discussed elsewhere herein. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - General."

PLAN OF DISTRIBUTION

The securities offered by this Prospectus for cash and for exchange are
offered by Farmland Securities Company ("FSC"), American Heartland Investments,
Inc. ("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 Oak 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 National Association
of Securities Dealers, Inc. (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, 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.

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 $45,000 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, 1995, 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 Farmland Securities Company or American Heartland
Investments, Inc. 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
"Order and Receipt for Investment" form supplied by Farmland Securities
Company. The U.S. Treasury Form W-9 Backup Withholding Certificate included
on the order 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
referred to as "Certificates," bearing an interest rate hereinafter described
and referred to as the "Certificate Interest Rate," 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 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. Interest on the principal sum at the Certificate
Interest Rate 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 offers acceptable to Farmland and accompanied by payment of the
full purchase price have been received by Farmland in Kansas City, Missouri.
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 November 30, 1994, a total of $112,224,000 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 Certificate Interest Rate is the rate per annum stated on the face of
the Certificate. The Certificate Interest Rate will be such as Farmland may
from time to time determine but any change of the Certificate Interest Rate will
not affect the Certificate Interest Rate 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 Certificate Interest Rate 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 Certificate Interest
Rate 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
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. At November 30, 1994, senior
indebtedness included $369,065,000 for borrowed money and other instruments
(principally long-term operating leases) provided for payments over
approximately nine years of $120,293,000. 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)).

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 (Section
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 (Section 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 to, (a)
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 this 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
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 FIVE-YEAR SUBORDINATED CAPITAL INVESTMENT CERTIFICATES

The Five-Year Subordinated Capital Investment Certificates, hereinafter
referred to as "Certificates," bearing an interest rate herein after described
and referred to as the "Certificate Interest Rate," 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 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. Interest on the principal sum at the Certificate
Interest Rate 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 offers
acceptable to Farmland and accompanied by payment of the full purchase price
have been received by Farmland in Kansas City. 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

Interest at the Certificate Interest Rate 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 Certificate Interest
Rate 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
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. At November 30, 1994, senior
indebtedness included $369,065,000 for borrowed money and other instruments
(principally long-term operating leases) provided for payments over
approximately nine years of $120,293,000. 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)).

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, 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 (Section 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 (Section 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 referred to as "Certificates," bearing an interest rate hereinafter
described and referred to as the "Certificate Interest Rate," are issued under
an indenture (the "Indenture of November 8, 1984") dated November 8, 1984, as
amended January 3, 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 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
offers acceptable to Farmland and accompanied by payment of the full purchase
price have been received by Farmland in Kansas City, Missouri. The Certificates
mature ten years from date of issue. Interest on the principal sum at the
Certificate Interest Rate 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 statement
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
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. At November 30, 1994, senior
indebtedness included $369,065,000 for borrowed money and other instruments
(principally long-term operating leases) provided for payments over
approximately nine years of $120,293,000. 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)).

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 (Section 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 or
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 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 FIVE-YEAR SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT
CERTIFICATES

The Five-Year Subordinated Monthly Income Capital Investment Certificates,
hereinafter referred to as "Certificates," bearing an interest rate hereinafter
described and referred to as the "Certificate Interest Rate," 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
the 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
offers acceptable to Farmland and accompanied by payment of the full purchase
price have been received by Farmland in Kansas City, Missouri. The Certificates
mature five years from date of issue. Interest on the principal sum at the
Certificate Interest Rate 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 November 30, 1994 a total of $19,457,000 was outstanding.

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
subordinate in right of payment to the extent set forth in the Indenture to the
prior payment in full of all Senior Indebtedness. At November 30, 1994, senior
indebtedness included $369,065,000 for borrowed money and other instruments
(principally long-term operating leases) provided for payments over
approximately nine years of $120,293,000. 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.

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 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 (Section 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 to, (a)
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 or
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 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 this 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 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 the 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. 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 effects 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 November 30, 1994, a total of
$26,926,000 was outstanding.

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.

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
(Section 6.03 and 7.02).

MODIFICATION OF THE INDENTURE

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 this 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 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).

INTEREST OF NAMED EXPERTS AND COUNSEL

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 Industries, Inc. ("Farmland") is a regional farm supply and
marketing cooperative. Farmland is owned by its members and only its members
are eligible to vote for directors or for the management or affairs of Farmland.
Members are entitled to receive patronage refunds distributed by Farmland from
its member-sourced annual net income. See "Business and Properties - Patronage
Refunds and Distribution of Net Income."

Farmland was incorporated in Kansas in 1931. Its principal executive
offices are at 3315 North Oak Trafficway, Kansas City, Missouri 64116 (telephone
816-459-6000). Unless otherwise noted, references to years are to fiscal years
ended August 31.

MEMBERSHIP

Farmland's membership includes voting members and associate members.
Membership requirements are determined by the Farmland Board of Directors.

VOTING MEMBERS

The current requirements for membership are 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 limit voting to agricultural producers and conduct a
majority of their business with voting producers.

ASSOCIATE MEMBERS

Associate members have all the rights of membership except that they do not
have the right to vote at a meeting of the shareholders.

Associate membership requirements in Farmland are as follows: 1) Any
person meeting the requirements for voting membership can be an associate
member. 2) Associate members must maintain a minimum investment of $1,000 in
par value of Farmland associate member common stock. 3) Associations other than
those owned 100% by members, associate members or Farmland must conduct business
on a cooperative basis. 4) Hog and/or cattle feeding businesses must derive a
majority of earned income from such feeding business and agree to provide the
information Farmland 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.

At August 31, 1994, Farmland's membership consisted of 1,480 cooperative
associations of farmers and ranchers and 1,365 pork or beef producers or
associations of such producers. See "Patronage Refunds and Distribution of Net
Income."

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

Farmland and subsidiaries (the "Company") conducts business primarily in
two operating areas. 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.

Cooperative farm supply operations consist of three product
divisions--petroleum, crop production and feed. Products of the petroleum
division are principally 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 fertilizers and a complete line of insecticides, herbicides
and mixed chemicals. Feed division products include swine, dairy, pet, beef,
poultry, mineral and specialty feeds, feed ingredients and supplements, animal
health products and livestock services.

Geographically, the Company's markets are mid-western states which comprise
the corn belt and the wheat belt. The Company distributes products at
wholesale. Approximately 65% of the Company's farm supply sales in 1994 were to
local farm cooperative associations which are members and owners of Farmland.
These cooperatives distribute products primarily to farmers and ranchers who
utilize the products in the production of farm crops and livestock.

Cooperative marketing operations include the storage and marketing of
grain, processing pork and beef, and marketing fresh pork, processed pork, fresh
beef and boxed beef. In 1994, approximately 61% of the hogs processed and 46%
of the grain marketed were supplied to the Company by members. Cattle are
purchased from producers in the proximity of the beef plants at Liberal and
Dodge City, Kansas.

A substantial portion of the Company's farm supply, pork and beef products,
is produced in facilities owned by the Company or operated by the Company under
long-term lease arrangements. No material part of the business of any segment
of the Company is dependent on a single customer or a few customers.
Information regarding the Company's property and its business is presented
below. Financial information about the Company's industry segments is presented
in note 12 of the notes to consolidated financial statements.

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 an infinite variety of competitive participants.
Approximately 57% of the Company's supply product sales are manufactured by the
Company. See "Cooperative Farm Supply Business and Properties - Petroleum, Crop
Production and Feed" for information regarding the Company's manufacturing
properties by business segment.

COOPERATIVE FARM SUPPLY BUSINESS AND PROPERTIES

PETROLEUM

MARKETING

The principal product of this business segment is refined fuels.
Approximately 68% of refined product sales in 1994 resulted from transactions
with Farmland's members. The balance of the Company's refined product sales
were principally through retailing chains in urban areas. Based on total volume
of refined fuels withdrawn at terminal storage facilities along pipelines which
serve most of the Company's trade territory, the Company estimates its market
share in rural markets is approximately 8%. 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 1994, 1993 and 1992 were
13%, 19% and 29%, 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 a refinery at Coffeyville, Kansas and at Phillipsburg,
Kansas. Prior to June 30, 1992 the Company owned approximately 30% of the
National Cooperative Refinery Association ("NCRA"). As a 30% owner, Farmland
was required to purchase 30% of the production of this refinery. On June 30,
1992, the Company sold its ownership interest in NCRA.

The Company owns a refinery at Phillipsburg, Kansas which is closed. A
loading terminal located at the refinery remains in operation. The carrying
value of this refinery at August 31, 1994 was approximately $2,400,000. The
Company is evaluating alternative uses for this facility and cannot at this time
determine the extent of any losses related to the closure of the refinery, but
such losses are expected not to be significant. During the four months of 1992
in which it operated, sales associated with products of the Phillipsburg
refinery amounted to approximately $20,900,000 and the barrels processed by the
refinery were 871,000.

<TABLE>
Production volume for 1994, 1993 and 1992 is as follows:
<CAPTION>
Barrels of Crude Oil Processed
Daily Average
Based on 365 Days per Year
(barrels)
Location 1994 1993 1992
<S> <C> <C> <C>
Coffeyville, Kansas 64,211 53,000 57,000

</TABLE>
The Coffeyville refinery produced 25 million barrels of motor fuels and
heating fuels in 1994, 20 million barrels in 1993, and 23 million barrels in
1992. Approximately 68% of petroleum product sales in 1994 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. 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. See "Business -
Capital Expenditures."

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 which
increase its capability to efficiently process 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 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
in the event a crude oil shortage developed.

CROP PRODUCTION

MARKETING

The Company's crop production business segment includes nitrogen-,
phosphate-, and potash-based fertilizer products and 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
1994, 1993 and 1992 were 17%, 19% and 26%, 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 15 locations
throughout its trade territory.

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

Domestic competition, mainly from other regional cooperatives, major
petroleum companies with chemical divisions and integrated chemical companies,
is very aggressive 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 supplied (the principal raw material in
nitrogen-based fertilizer products). In certain cases, foreign producers of
fertilizer for export to the U.S. may be subsidized by their governments.

PRODUCTION

The Company manufacturers nitrogen-based crop production products. Based
on total production capacity, the Company is one of the largest producers of
anhydrous ammonia fertilizer in the U.S. The Company owns and produces
nitrogen-based products at four anhydrous ammonia plants, four urea ammonium
nitrate plants and two urea plants. In addition, the Company 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.
<TABLE>
Nitrogen fertilizer production information for 1994, 1993 and 1992 is as
follows:

Actual Annual Production
Anhydrous Ammonia
Plant Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Lawrence 443,000 375,000 450,000
Dodge City 257,000 241,000 254,000
Fort Dodge 256,000 232,000 240,000
Beatrice 277,000 243,000 250,000
Enid (2 plants)* 985,000 969,000 1,017,000
Pollock* 526,000 490,000 501,000
<FN>
* Indicates leased plants
</TABLE>
Synthetic anhydrous ammonia is the basic component of other commercially
produced nitrogen-based crop production products and uses natural gas as the
major raw material.

Ammonia is used as the principal raw material in the production of value-
added nitrogen-based products such as urea, ammonium nitrate, urea ammonium
nitrate solutions and other products.
<TABLE>
Production of urea, ammonium nitrate, urea ammonium nitrate solutions and
other nitrogen-based products from anhydrous ammonia, as a raw material, for
1994, 1993 and 1992 is as follows:
<CAPTION>
Actual Annual Production
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Lawrence 654,000 661,000 691,000
Enid 433,000 473,000 452,000
Dodge City 163,000 241,000 217,000
Beatrice 162,000 166,000 177,000
</TABLE>
Ammonia is also 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.

<TABLE>
Production at the Joplin plant for 1994, 1993 and 1992 is as follows:
<CAPTION>
Actual Annual Production
Product 1994 1993 1992
(tons)
<S> <C> <C> <C>
Ammonium Phosphate 75,000 72,000 88,000
Feed Grade Phosphate 157,000 141,000 129,000

</TABLE>
Prior to November 15, 1991, the Company owned and operated a phosphate
chemical plant located in Green Bay, Florida. Effective November 15, 1991, the
Company and Norsk Hydro a.s. formed Farmland Hydro, L.P. ("Hydro") to
manufacture 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 short tons of such products for 1994, 1993 and for the ten months in 1992
during which the venture operated is 1,437,000, 1,216,000 and 880,000,
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 formed a joint venture in April 1992,
SF Phosphates, Limited, to own and operate 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 of 465,000 tons for 1994,
440,000 tons for 1993 and 131,000 tons for the five months of operations in
1992. Under the venture agreement, the Company and J.R. Simplot Company
purchase the production of the venture in proportion to their ownership.

The Company and Mississippi Chemical Company have entered into an agreement
to form a joint venture to develop, construct and operate a 1,750 metric ton per
day ammonia production facility at the Brighton Industrial Site, at LaBrea in
the Republic of Trinidad and Tobago. Production start up is expected early in
1997. The partners expect the plant to be nonrecourse project financed. The
Company's equity position of the project will be provided from general funds.

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.

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 was required to serve priority users such as residential, hospitals and
schools. In such case, production could be curtailed. No significant
production has been lost because of curtailments in transportation and none 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 8%, 10% and 13% of
consolidated sales for the years 1994, 1993 and 1992, respectively.
Approximately 45% of the feed business segment's sales in 1994 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 and a pet food plant in Muncie,
Kansas.
<TABLE>
Feed production is as follows:
<CAPTION>
Actual Annual Production
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
22 feed mills (combined) 1,118,000 1,030,000 954,000
</TABLE>
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 1994, 1993 and 1992, approximately 250,100 pigs, 113,000 pigs and 46,300
pigs, respectively, were finished under this program. The majority of the
finished pigs were sold to Farmland Foods, Inc. ("Foods") for processing.

The Company owns a 45% interest in Alliance Farm Cooperative Association
(formerly Yuma Feeder Pig Limited Liability Company) which operates 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.

COOPERATIVE PROCESSING AND MARKETING BUSINESS AND PROPERTIES

PORK PROCESSING AND MARKETING

PRODUCTION

The Company's pork processing and marketing operations are conducted
through a 99%-owned subsidiary, Farmland Foods, Inc. ("Foods"). Foods 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 and beef into hot dogs, dry sausage and other luncheon meats.
A facility at San Leandro, California was closed on September 1, 1993. 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 on February
15, 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 previously closed pork
processing plant at Iowa Falls, Iowa is currently held for sale.
<TABLE>
Production for 1994, 1993 and 1992 is as follows:
<CAPTION>
Actual Weekly Production
On a One-Shift Basis
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Wichita 1,884,000 1,514,000 1,618,000
San Leandro** -0- 243,000 269,000
Carroll 1,111,000* 1,204,000* 1,131,000*
Springfield 622,000 666,000 560,000
Carey/Riegel 257,000 231,000 220,000
<FN>
* All ham products were produced on 2 shifts during 1994, 1993
and 1992.
** Closed September 1, 1993
</TABLE>
<TABLE>
<CAPTION>
Actual Weekly Production
On a One-Shift Basis
Location 1994 1993 1992
(tons)
<S> <C> <C> <C>
Denison 40,000 37,000 39,000
Crete 47,000 45,000 47,000
Monmouth 28,000 25,000 -0-*

<FN>
*The Company did not own the Monmouth facility in 1992.
</TABLE>
MARKETING

The Company's pork marketing operations include meat processing, primarily
pork, and 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 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 AND MARKETING

PRODUCTION

The Company's beef processing and marketing operations are conducted
through two ventures. National Beef Packing Company, L.P., formed in April
1993, is located in Liberal, Kansas and is 58%-owned by Farmland. Hyplains
Beef, L.C., formed in July 1992, is located in Dodge City, Kansas and is
50%-owned by Farmland. 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 the year ended August 31,
1994, the two plants operated at 97% of capacity and slaughtered 1,708,00
cattle.

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 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

Effective June 30, 1992, the Company acquired substantially all the business
and assets of Union Equity Co-Operative Exchange ("Union Equity"). The grain
marketing and storage operations of the Company as described herein are
substantially the same as the grain operations previously conducted by Union
Equity.

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, associate 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 in the event grain market prices
decrease, and is exposed to loss on its fixed price sales contracts in the
event 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 the year ended August 31, 1994, the Company maintained
hedges on approximately 95.3% of its grain positions. Based on total assets
at the beginning and end of 1994, the average market value of grain positions
not hedged during the year amounted to approximately 1/5 of one percent 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 1994, approximately 37% of grain revenues have been from export sales.
The five largest purchasers in terms of total revenues from grain operations
were Mexico (6%), Jordan (5%), Egypt (4%), Israel (4%) and South Africa (2%).
In 1993 and 1992, export sales or sales to domestic customers for export
accounted for approximately 60% and 55%, 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 are required to be
paid in U.S. Dollars.

TRADIGRAIN

In December 1993, the Company acquired all the common stock of seven
international grain trading companies (collectively referred to as "Tradigrain")
formerly owned by B.P. Nutrition B.V. 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. The volume of
grain traded by Tradigrain varies from seven to ten million metric tons per year
and represents total sales of between U.S. $800 million to U.S. $1.2 billion per
year.

PROPERTY
<TABLE>
The Company owns or leases thirty-one (31) inland elevators, and one (1)
export elevator with a total licensed capacity of approximately 177,157,000
bushels of grain. The location, type, number and aggregate licensed capacity in
bushels of the elevators at August 31, 1994 are as follows:
<CAPTION>
Aggregate
Location Type Number Capacity
<S> <C> <C> <C>
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 1 4,266,000
Saginaw, Texas . . . . . . . . . . . . . . Inland 2 37,274,000
Stratford, Texas . . . . . . . . . . . . . Inland 1 112,000
Topeka, Kansas . . . . . . . . . . . . . . Inland 1 12,055,000
Wichita, Kansas . . . . . . . . . . . . . Inland 1 10,503,000
</TABLE>

Storage of grain has declined due, in part, to two policy changes the U.S.
Government implemented in late 1987: (i) the Export Enhancement Program ("EEP")
was established when the U.S. Government determined that it was cheaper to
support domestic grain prices through subsidizing export sales of grain than to
support domestic grain prices through policies which resulted in the U.S.
Government paying for grain storage, and (ii) the Conservation Reserve Program
("CRP") which was established to control erosion on environmentally sensitive
land by reducing planted acres. The carrying value of closed elevators was
adjusted in a purchase accounting acquisition of Union Equity in June 1992 and
is the estimated fair market value.

The underutilization of other elevators was due to the reduced harvest
in 1993; the 1994 harvest increased utilization of these elevators and there
is now no underutilization.

PATRONAGE REFUNDS AND DISTRIBUTION OF NET INCOME

For purposes of this section, annual income for 1994 means income before
income taxes determined in accordance with federal income tax regulations. For
1995 and after, annual income means income before income taxes determined in
accordance with generally accepted accounting principles. For this purpose, the
term "member," means any member, associate member or any other person with which
Farmland is a party to a currently effective patronage refund agreement.

Farmland operates on a cooperative basis. In accordance with its bylaws,
Farmland returns the member-sourced portion of its annual income to its members.
Each member's portion of the annual patronage refund is determined by the
quantity or value of business transacted by the member with Farmland and
Farmland's income from such transactions. Such returns are referred to as
patronage refunds.

Generally, a portion of the patronage refund is returned in cash and for
the balance of the patronage refund (the "invested portion") the members
receive, Farmland common stock, associate member common stock or capital credits
(the equity type received is determined by the membership status). The invested
portion of the patronage refund is determined annually by Farmland's 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 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 its Board of Directors
has complete discretion with respect to the handling and ultimate disposition of
any member-sourced losses.
<TABLE>
For the years ended 1994, 1993 and 1992, Farmland returned the following
patronage refunds.
<CAPTION>
Cash Portion Invested Portion Total Patronage
of Patronage Refunds of Patronage Refunds Refunds
(Amounts in thousands)
<S> <C> <C> <C>
1994 $ 26,552 $ 44,032 $ 70,584
1993 $ -0- $ -0- $ -0-
1992 $ 17,449 $ -0- $ 17,449
</TABLE>
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for a discussion of the reasons for changes in the
Company's income for 1994, 1993 and 1992.

Income or loss from transactions with patrons not eligible to receive
patronage refunds and extraneous income or loss (income from sources unrelated
to the type of transactions conducted by the cooperative with its members) is
subject to income taxes computed on the same basis as such tax is computed on
the income or loss of other corporations.

EQUITY REDEMPTION PLANS

The Equity Redemption Plans described below (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 to not
redeem, any equities of the Company without regard to whether such action or
inaction is in compliance with the Plans. Equity holders should therefore not
rely to their detriment on the current terms of the Plans because they are
subject to change without advance notice and may be deviated from in the sole
and absolute discretion of the Board of Directors. 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 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 ("Plan"). The Plan provides a mechanism for determining the
Company's total capital requirements and each member's or patron's share thereof
(the base capital requirement). As part of the Plan, the Board of Directors
may, in its discretion, provide for redemption of Farmland common stock or
associate member common stock held by members or associate members who have an
investment in Farmland common stock or associate member common stock which
exceeds the members' or associate members' base capital requirement. The Plan
may provide a mechanism under which the cash portion of the patronage refund
payable to members or patrons will depend upon the degree to which such members
or associate members meet their base capital requirements.

ESTATE SETTLEMENT PLAN

The "Estate Settlement Plan" is subject to paragraph one above under the
heading, "Equity Redemption Plans."

The estate settlement plan provides that in the event of the death of an
individual (a natural person) equity holder, the equity holdings of the deceased
will be redeemed at par value with the exception of purchased equity holdings
owned by the decreased 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 REDEMPTION PLANS

The current "Special Redemption Plan" is subject to paragraph one above
under the heading "Equity Redemption Plans."

From time to time and for all profitable years following 1987, the Company
has redeemed portions of its outstanding equity under various special equity
redemption plans. Each such plan has been designed to return cash to members or
former members of Farmland or Farmland Foods, Inc. by redeeming certain types of
outstanding equity. The order in which each type of equity is redeemed is
determined by the Farmland Board of Directors. Except for preferred stock sold
through a public offering in 1984, substantially all of the equity redeemed
under these plans was originally issued to pay patronage refunds. (See
"Patronage Refunds and Distribution of Net Income").

The current special equity redemption plan is designed to provide a
systematic method for redemption of outstanding equity which is not subject to
redemption through other equity redemption plans such as the base capital plan
or the estate settlement plan.

Provisions of the current special redemption plan are as follows:

1. No special redemption will be made if the redemption of equities may
result in a violation of the lending covenants; 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
before the special redemption but after giving effect to the
distribution of cash and the redemption of equities under the base
capital plan. The calculation for special redemption is as follows:

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

> 50 % None
48 - 50 % 2.5 %
44 - 47 % 5.0 %
40 - 43 % 7.5 %
< 40 % 10.0 %

3. The priority for redeeming equities under the Special Redemption
Program will be as follows listed in order of first to be redeemed.

a. Capital Credits (Series of Ten) which, on or before August 31,
1992, were issued to and which are currently held by, any
dissolved cooperative for the benefit of its membership. One-
third of the total outstanding amount of such Capital Credits,
Series of Ten to be redeemed pro rata to such holders following
each of the next three fiscal year-ends.

b. Capital Credits (Series of Ten) outstanding ten years or longer --
paid in order of lowest numbered series first.

c. Capital Credits held by individual livestock producers age 70 or
older who have been held for five years or longer -- paid in
descending order of age of the individual (oldest person first).
Holders of equities in Farmland Foods, Inc. will have their
equities redeemed on the same basis as holders of Farmland equity.
Former Farmland Foods equity holders who accepted the exchange
offer for Farmland Industries' equities in 1991 will be deemed to
have met the five-year holding requirement for those equities
involved in the exchange.

d. Capital Credits (Series of Ten) outstanding five years or longer -
- paid in order of lowest numbered series first.

e. Capital Credits held by individual livestock producers age 65 or
older that have been held for five years or longer -- paid in
descending order of age of the individual (oldest person first).
Holders of equities in Farmland Foods, Inc. will have their
equities redeemed on the same basis as holders of Farmland equity.
Former Farmland Foods equity holders who accepted the exchange
offer for Farmland Industries' equities in 1991 will be deemed to
have met the five-year holding requirement for those equities
involved in the exchange.

f. Any Capital Credits outstanding for twenty years or more -- paid
in order of year issued, oldest first. Holders of equities in
Farmland Foods, Inc. will have their equities redeemed on the same
basis as holders of Farmland equity. Former Farmland Foods equity
holders who accepted the exchange offer for Farmland Industries'
equities in 1991 will be deemed to have met the five-year holding
requirement for those equities involved in the exchange.
Nonmember capital will participate on the same bassi as capital
credits in the redemption.

g. Capital Credits (Series of Ten) remaining balance -- paid in order
of lowest numbered series first.

h. Minority held equities in Farmland Foods, Inc. remaining balance -
- paid in descending order of years outstanding, oldest first.

i. Any Capital Credits outstanding for ten years or more -- paid in
order of year issued, oldest first. Nonmember capital will
participate on the same bassi as capital credits in the
redemption.

j. Any Common Stock or Associate Member Common Stock outstanding for
twenty years or more -- in order of year issued, oldest first.

k. Any Capital Credit outstanding for five years or more -- paid in
order of year issued, oldest first. Nonmember capital will
participate on the same bassi as capital credits in the
redemption.

l. Any Common Stock or Associate Member Common Stock outstanding for
five years or more -- paid in order of year issued, oldest first.

<TABLE>
Presented below are the amounts approved for redemption of equity by the
Farmland Board of Directors under the base capital plan, estate redemption
plan and special redemption plans for all years following 1987 when the
Company returned to profitability following the loss years of the mid-1980's.
The amounts approved for redemption of equity were paid in cash in the fiscal
year following approval.
<CAPTION>
Base Estate
Capital Settlement Special Total
Redemptions* Redemptions Redemptions Redemptions
(Amounts in Thousands)
<S> <C> <C> <C> <C>
1994 . $ 8,740 $ 126 $ 4,108 $ 12,974
1993 . . -0- 127 12 139
1992 . . 6,707 234 6,755 13,696
1991 . . 2,300 4 5,365 7,669
1990 . . -0- 78 20,024 20,102
1989 . . -0- 13 15,518 15,531
1988 . . -0- 16 5,368 5,384
<FN>
*The base capital plan became effective in 1991.
</TABLE>

OTHER MATTERS

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.

Research related to commercialization of a wheat processing plant to
produce wheat gluten as a replacement source for raw material used in certain
consumer products has been completed and technology for an economically viable
plant has been developed. Farmland has formed Heartland Wheat Growers, L.P., a
joint venture with local cooperatives, and is currently building a wheat
processing plant in Russell, Kansas that will process approximately 4.25 million
bushels of wheat a year. See "Capital Expenditures."

Expenditures related to Company-sponsored product and process improvements
amounted to $2,702,000, $3,303,000 and $3,338,000 for the years ended 1994, 1993
and 1992, respectively.

CAPITAL EXPENDITURES

The Company plans capital expenditures of approximately $289.9 million
during its two fiscal years ending August 31, 1995 and 1996.

Capital expenditures of approximately $111.8 million are planned for the
crop production business segment (excluding costs for construction of an
anhydrous ammonia plant in Trinidad which is being evaluated at this time). A
new urea ammonium nitrate ("UAN") facility is planned at the Fort Dodge, Iowa
anhydrous ammonium plant. The new facility is expected to cost approximately
$30.0 million of which $21.0 million are to be expended during this period.
This facility will upgrade anhydrous ammonium to produce approximately 115,000
tons of UAN per year. A UAN plant at the Lawrence, Kansas facility is being
expanded to increase production by approximately 128,000 tons per year. An
estimated $2.5 million will be expended in fiscal 1995 to complete the project.
Expenditures at the Dodge City, Kansas facility of approximately $6.0 million
are expected to increase anhydrous ammonia and UAN production capacity by 52,500
tons and 10,500 tons, respectively. Capital expenditures of $66.4 million are
planned for operating efficiency improvements, necessities and replacements, and
$15.9 million is for environmental and safety issues, predominately at nitrogen
fertilizer plants.

Capital expenditures in the feed business segment are estimated to be $23.4
million. A feed mill in southeast New Mexico is being constructed at an
approximate cost of $1.3 million. The remaining projected expenditures of $22.1
million are for feed mill and livestock production efficiencies, operating
necessities and replacements.

Capital expenditures in the petroleum business segment are expected to be
$87.4 million and include approximately $32.9 million to increase daily crude
oil processing capacity at the Coffeyville, Kansas refinery of which $27.9
million is to be expended during this period. The remaining projected
expenditures of the petroleum business segment are as follows: $23.6 million
for operating necessities; $20.7 million for increased operating efficiency;
and, $10.2 million for environmental and safety issues.

Capital expenditures of approximately $32.6 million are planned in the pork
marketing business segment. A waste water expansion project at the Crete,
Nebraska facility is expected to cost approximately $2.4 million. A 10,000
square foot loading dock and storage facility will be constructed at the
Monmouth, Illinois plant for an estimated $1.5 million. The remaining
expenditures are mostly for operational improvements and replacements.

Capital expenditures of approximately $7.3 million planned for the grain
business segment are mainly for expansion and replacements.

Heartland Wheat Growers, L.P. (a partnership between the Company and local
cooperatives) located in Russell, Kansas, was formed for the purpose of
constructing and operating a wheat processing facility, to produce wheat gluten,
wheat starch and derivative products and to market and distribute such
products. The Company has a seventy-nine percent (79%) interest in the
partnership. The Company's planned investment to finance construction of the
wheat gluten plant amounts to approximately $25.5 million of which $21.5
million will be expended during the period.

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

MATTERS INVOLVING THE ENVIRONMENT

The Company's farm supply manufacturing and distribution operations, its
food processing and marketing operations and its grain marketing operations
continue to be affected to some extent by federal, state and local regulations
regarding the environment. 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 has been designated as a PRP under the Comprehensive
Environmental Response, Compensation and Liability Act, at 17 sites. The
Company's responsibilities at nine sites appear to be de minimis. The Company
is aware of probable obligations for environmental matters at 30 other sites.
At certain of these sites no claim or assessment has been made. In the opinion
of management, the probable and reasonably determinable costs related to PRP and
other sites are $7,164,000 and such amount has been accrued.

The costs of resolving environmental matters are not quantifiable because
many such matters are in preliminary stages and the timing, extent and costs of
various actions which governmental authorities may require are unknown. It is
possible that costs of such resolution may be greater than the liabilities
which, in the opinion of management, are probable and reasonably determinable at
August 31, 1994. In the opinion of management, it is reasonably possible for
such costs to approximate $39,000,000 and to extend over 30 years.

Under the Resource Conservation Recovery Act of 1976 ("RCRA"), the company
has four closure and five post-closure plans in place for six locations.
Closure and post-closure plans are also 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 care costs are estimated to be $5.4 million at August 31, 1994.

The Company has been notified by the Environmental Protection Agency
("EPA") of proposed civil penalties totaling approximately $1,715,000 for
alleged violations of environmental regulations at the Coffeyville refinery.
The Company is negotiating with the EPA concerning these matters and believes
that such negotiations may result in compromise settlements. Absent such
settlements, the Company may contest these matters. Accordingly, no provision
has been made in the accompanying financial statements for these proposed
penalties.

Protection of the environment requires the Company to incur expenditures
for equipment or processes, which 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
costs provide future economic benefits. In 1994, the Company had capital
expenditures of approximately $2,592,000 to prevent future discharges into the
environment. The majority of such expenditures was for improvements at the
Coffeyville refinery. Management believes the Company is currently 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 is currently in compliance with
all such laws, the violation of which could have a material effect on the
Company.

Certain policies may be implemented from time to time by the U.S.
Department of Agriculture, the Department of Energy, or by 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, 1994, the Company had approximately 11,000 employees.
Approximately 41% 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
March 1997. There are no wage re-openers in any of the collective bargaining
agreements.

RECENT ACCOUNTING PRONOUNCEMENTS

See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

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, which if determined adversely, would have a material adverse
effect on the financial position of the Company, and with respect to income tax
matters as explained in note 7 of the notes to consolidated financial
statements, he has no knowledge which would result in a different conclusion
than the opinion of special tax counsel to the Company which is cited in note 7
of the notes to consolidated financial statements.

The Company is involved in two environmental regulatory matters with the
government involving potential monetary sanctions as follows:

1) The Company is a party to an administrative enforcement action
brought by the U.S. Environmental Protection Agency ("EPA") which
alleges violations of the Emergency Planning and Community
Right-to-Know Act and the release reporting requirements of the
Comprehensive Environmental Response, Compensation, and Liability
Act, as amended, at its Coffeyville, Kansas refinery. This action
involves alleged violations of release reporting requirements and
seeks a civil fine in the amount of $350,000.

2) The Company is a party to an administrative enforcement action
brought by the EPA which alleges violations of the Resource
Conservation Recovery Act of 1976, as amended, at its Coffeyville,
Kansas refinery. In this action, the government has proposed a
civil penalty in the amount of $1,365,000.

EXPERTS

The consolidated financial statements and schedules of Farmland and
subsidiaries as of August 31, 1994 and 1993 and for each of the years in the
three-year period ended August 31, 1994 included herein and elsewhere in the
Registration Statement, have been included herein and in the Registration
Statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said 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 on the gain on sale of and certain
distributions by Terra Resources, Inc.

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.

INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheet, November 30, 1994 (unaudited) . 65

Consolidated Statements of Operations for the three months
ended November 30, 1994 and November 30, 1993 (unaudited) . 67

Consolidated Statement of Cash Flows for the three months
ended November 30, 1994 and November 30, 1993 (unaudited) . 68

Notes to Unaudited Interim Consolidated Financial Statements 69

Independent Auditors' Report . . . . . . . . . . . . . . . . 72

Consolidated Balance Sheets, August 31, 1994 and 1993 . . . 73

Consolidated Statements of Operations for each
of the years in
the three-year period ended August 31, 1994 . . . . . . . . 75

Consolidated Statements of Cash Flows
for each of the years in
the three-year period ended August 31, 1994 . . . . . . . . 76

Consolidated Statements of Capital Shares
and Equities for
each of the years in the three-year
period ended August 31, 1994 78

Notes to Consolidated Financial Statements . . . . . . . . . 79

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
November 30
1994
(Amounts in Thousands)
<S> <C>
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . $ -0-
Accounts receivable . . . . . . . . . . . . . . 380,854
Inventories (note 2) . . . . . . . . . . . . . . 590,826
Prepaid expenses . . . . . . . . . . . . . . . . 10,769
Other current assets . . . . . . . . . . . . . . 95,060

TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . $ 1,077,509

INVESTMENTS AND LONG-TERM RECEIVABLES . . . . . . . $ 197,094

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost . . . . . $ 1,218,935
Less accumulated depreciation and amortization. . 711,943

NET PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . $ 506,992

OTHER ASSETS . . . . . . . . . . . . . . . . . . . . $ 138,783

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . $ 1,920,378
<FN>
See Accompanying notes to condensed consolidated financial statements.

</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

LIABILITIES AND EQUITIES

<TABLE>
<CAPTION>
November 30
1994
(Amounts in Thousands)
<S> <C>
CURRENT LIABILITIES
Accounts and notes payable . . . . . . . . . $ 442,479
Current maturities of long-term debt . . . . 34,943
Customers' advances on product purchases . . 74,466
Other current liabilities . . . . . . . . . 224,731

TOTAL CURRENT LIABILITIES . . . . . . . . . . . . $ 776,619

LONG-TERM DEBT (excluding current maturities) . . $ 493,161

DEFERRED INCOME TAXES . . . . . . . . . $ 6,340

MINORITY OWNERS' EQUITY IN SUBSIDIARIES . . . . . $ 11,453

INTERIM INCOME BEFORE PATRONAGE REFUNDS AND
APPROPRIATION FOR EARNED SURPLUS (note 1) . $ 47,945

CAPITAL SHARES AND EQUITIES
Common shares, $25 par value - Authorized
50,000,000 shares . . . . . . . . . . . $ 399,361
Other equities . . . . . . . . . . . . . . . 185,499

TOTAL CAPITAL SHARES AND EQUITIES . . . . . . . . $ 584,860

TOTAL LIABILITIES AND EQUITIES . . . . . . . . . . $ 1,920,378
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
Three Months Ended
November 30 November 30
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . . . . $ 1,616,167 $ 1,473,992

Cost of sales . . . . . . . . . . . . . . . . . . 1,481,889 1,383,764

Gross income . . . . . . . . . . . . . . . . $ 134,278 $ 90,228

Selling, general & administrative expenses . . . $ 75,346 $ 65,905

Other income (deductions):
Interest expense . . . . . . . . . . . . . $ (13,443) $ (13,133)
Equity in income (loss) of investees . . . 6,370 (4,067)
Other, net . . . . . . . . . . . . . . . . 4,642 2,930

Total other income (deductions) . . . . . . . . . $ (2,431) $ (14,270)

Income before income taxes, minority owners' interest
and patronage refunds (note 1) . . . . . . . $ 56,501 $ 10,053

Minority owners' interest in net loss of subsidiaries 212 1,441

Income before income taxes and patronage
refunds (note 1) . . . . . . . . $ 56,713 $ 11,494

Income tax expense 8,768 795

Income before patronage refunds (note 1) $ 47,945 $ 10,735

<FN>
See Accompanying notes to condensed consolidated financial statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
November 30 November 30
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Cash flows from operating activities:
Income before patronage refunds . . . . . . . . . $ 47,945 $ 10,735
Adjustments to reconcile income before patronage
refunds to net cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . 16,435 16,625
Equity in (income) loss of investee . . . . . . . . . . . . . (6,370) 4,067
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . (628) (1,616)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . 12,724 (15,518)
Inventories . . . . . . . . . . . . . . . . . . . . . . . (52,512) (56,782)
Other assets . . . . . . . . . . . . . . . . . . . . . . 14,036 (51,809)
Accounts payable . . . . . . . . . . . . . . . . . . . . (23,860) 29,795
Advances on product purchases . . . . . . . . . . . . . . 50,028 28,461
Accrued interest and other liabilities . . . . . . . . . 856 9,348
Net cash provided by (used in) operating activities . . . . . . . . . . . $ 58,654 $ (26,694)

Cash flows from investing activities:
Proceeds from disposal of investments and notes receivable . . . . $ 6,502 $ 2,829
Acquisition of investments and notes receivable . . . . . . . . . . (9,232) (10,038)
Acquisition of businesses . . . . . . . . . . . . . . . . . . . . -0- (2,223)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (20,764) (21,407)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . 1,312 8,504
Net cash used in investing activities . . . . . . . . . . . . . . . . . . $ (22,182) $ (22,335)

Cash flows from financing activities:
Net increase of demand loan certificates . . . . . . . . . . . . . $ 3,768 $ 7,999
Proceeds from bank loans and notes payable . . . . . . . . . . . . 191,610 256,530
Payments on bank loans and notes payable . . . . . . . . . . . . . (300,727) (295,803)
Proceeds from issuance of subordinated debt certificates . . . . . 9,092 14,472
Payments for redemption of subordinated debt certificates . . . . . (3,433) (3,857)
Increase of checks and drafts outstanding . . . . . . . . . . . . . 57,536 40,063
Payments for redemption of equities . . . . . . . . . . . . . . . . (12,166) (16)
Payments of patronage refunds and dividends . . . . . . . . . . . . (26,236) -0-
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- 1,268
Net cash provided by (used in) financing activities . . . . . . . . . . . $ (80,556) $ 20,656

Net decrease in cash and cash equivalents . . . . . . . . . . . . . . . . $ (44,084) $ (28,373)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . 44,084 28,373

Cash and cash equivalents at end of period . . . . . . . . . . . . . . . $ -0- $ -0-

<FN>
See accompanying notes to condensed consolidated financial statements
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

(1) INTERIM FINANCIAL STATEMENTS

The information included in these condensed consolidated financial
statements of Farmland and its subsidiaries (the "Company") reflects all
adjustments (consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair statement of the results
for the interim periods presented.

(2) INVENTORIES

Major components of inventories at November 30, 1994, and August 31, 1994,
are as follows:
<TABLE>
<CAPTION>
November 30 August 31
1994 1994
(Amounts in Thousands)
<S> <C> <C>
Finished and in-process products . . $ 313,956 $ 286,381
Materials . . . . . . . . . . . . . 46,586 51,428
Supplies . . . . . . . . . . . . . . 41,602 39,885
Beef . . . . . . . . . . . . . . . 25,451 24,267
Grain . . . . . . . . . . . . . . . 163,231 136,353

$ 590,826 $ 538,314
</TABLE>

All inventories, other than supplies, grain and certain beef and petroleum
inventories, are valued at the lower of first-in, first-out (FIFO) cost or
market. Supplies are valued at cost. The Company follows a policy of hedging
its grain inventories which are valued at market adjusted for the net unrealized
gains or losses on open grain contracts. Crude oil, refined petroleum products,
beef and beef by-products are valued at the lower of last-in, first-out (LIFO)
cost or market. In applying the lower of cost or market valuation method in the
case of petroleum LIFO inventory, the general practice is modified to conform to
the integral view of interim financial statements. Accordingly, a seasonal
market value decline below cost of LIFO inventories, at an interim date, which
is reasonably expected to be restored by year-end, is not recognized in interim
results of operations since no loss is expected to be incurred in the annual
period. At November 30, 1994, the carrying value of petroleum inventories
stated under the LIFO method was $100,654,000. This exceeded the market value
of such inventory by $18,034,000. However, based on historical prices of energy
products and seasonal market price variations, the market value decline below
cost is expected to be a temporary seasonal price fluctuation.

Had the lower of first-in, first-out (FIFO) cost or market been used to
value these petroleum products, inventories at November 30, 1994 would have been
lower by $8,689,000.

The carrying value of beef inventories stated under the LIFO method was
$25,451,000 at November 30, 1994. The LIFO method of accounting for beef
inventories had no effect on the carrying value of inventories or on the income
reported for the three months ended November 30, 1994 because market value of
these inventories was lower than LIFO or FIFO cost.

(3) CONTINGENCIES

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 $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to the
sale. The IRS asserts that Farmland incorrectly treated the Terra sale gain as
income against which certain patronage-sourced operating losses could be offset,
and that, as a nonexempt cooperative, Farmland was not entitled to an
intercorporate dividends-received deduction in respect of the 1983 distribution
by Terra. It further asserts that Farmland incorrectly characterized gains for
tax purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition 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. Discovery and other pre-trial phases of the
case have been substantially completed. The originally scheduled trial date
of March 6, 1995 has been vacated. It is presently contemplated that a
limited court hearing, if necessary, will be held in June 1995, and that
briefs in the case will be filed by late fall of 1995.

If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through December 31, 1994, of approximately $159,668,000
(before tax benefits of the interest deduction). In addition, such adjustments
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 $5,000,000 plus applicable statutory interest
thereon.

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. Farmland believes that it has meritorious positions with
respect to all of these claims and will continue to vigorously pursue their
favorable resolution through the pending litigation.

In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely, correct;
and (ii) Farmland properly claimed a dividends-received deduction in respect of
the 1983 distributions which it received from Terra prior to the sale of the
Terra stock. Counsel has further advised, however, that none of the issues
involved in these disputes is free from doubt, and that there can be no
assurance that the courts will ultimately rule in favor of Farmland on any of
these issues.

Should the IRS ultimately prevail on all of its asserted claims, the
claimed federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate its agreements with its
banks to maintain compliance with various provisions of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets.

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 probable and
reasonably determinable obligations for resolution of environmental matters at
NPL and other sites are estimated to be $8,562,000 and such amount has been
accrued at November 30, 1994.

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 November 30, 1994. In the opinion of management, it is
reasonably possible for such costs to approximate up to $37,600,000 and to
extend over 30 years.

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 1993, 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, 1994.
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 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended August 31, 1994, 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, 1984 and 1983, 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 21, 1994

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 44,084 $ 28,373
Accounts receivable - trade . . . . . . . . . . . . . . . . . . . . 394,906 320,980
Inventories (note 3) . . . . . . . . . . . . . . . . . . . . . . . 538,314 496,690
Other current assets . . . . . . . . . . . . . . . . . . . . . . . 119,139 69,357

Total Current Assets . . . . . . . . . . . . . . . . . . . . . $ 1,096,443 $ 915,400

Investments and Long-Term Receivables (note 4) . . . . . . . . . . . . . $ 189,601 $ 183,312

Property, Plant and Equipment (notes 5 and 6):
Property, plant and equipment, at cost . . . . . . . . . . . . . . $ 1,202,159 $ 1,154,343
Less accumulated depreciation and amortization . . . . . . . . . . 700,869 649,965

Net Property, Plant and Equipment . . . . . . . . . . . . . . . . . $ 501,290 $ 504,378

Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 139,297 $ 116,891

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.926,631 $ 1,719,981
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

LIABILITIES AND EQUITIES
<TABLE>
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Current Liabilities:
Demand loan certificates . . . . . . . . . . . . . . . . . . . . . . $ 23,158 $ 29,860
Short-term notes payable (note 6) . . . . . . . . . . . . . . . . . . 279,137 256,655
Current maturities of long-term debt (note 6) . . . . . . . . . . . . 27,840 31,947
Accounts payable - trade . . . . . . . . . . . . . . . . . . . . . . 246,181 217,982
Other current liabilities (note 9) . . . . . . . . . . . . . . . . . 229,423 118,437

Total Current Liabilities . . . . . . . . . . . . . . . . $ 805,739 $ 654,881

Long-Term Debt (excluding current maturities) (note 6) . . . . . . . . . $ 517,806 $ 485,861

Deferred Income Taxes (note 7) . . . . . . . . . . . . . . . . . . . . . $ 6,340 $ 2,169

Minority Owners' Equity in Subsidiaries (note 8) . . . . . . . . . . . . $ 11,733 $ 15,363

Capital Shares and Equities (note 9):
Preferred shares, $25 par value--Authorized 8,000,000 shares,
148,069 shares issued and outstanding (148,325 shares in 1993) . . . $ 3,702 $ 3,708
Common shares, $25 par value -- Authorized 50,000,000 shares,
14,542,478 shares issued and outstanding
(15,199,833 shares in 1993) . . . . . . . . . . . . . . . . . . . 363,562 379,996
Associate member common shares (nonvoting), $25 par value --
Authorized 2,000,000 shares, 370,707 shares issued and
outstanding (327,828 shares in 1993) . . . . . . . . . . . . . . . 9,268 8,196
Earned surplus and other equities . . . . . . . . . . . . . . . . . . 208,481 169,807

Total Capital Shares and Equities . . . . . . . . . . . . $ 585,013 $ 561,707

Contingent Liabilities and Commitments (notes 4, 6, 7, 10 and 11)

Total Liabilities and Equities . . . . . . . . . . . . . . . . . . . . . $ 1,926,631 $ 1,719,981
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . . . . . $ 6,677,933 $ 4,722,940 $ 3,429,307
Cost of sales . . . . . . . . . . . . . . . . . . . 6,284,084 4,470,290 3,099,316

Gross income . . . . . . . . . . . . . . . . . . $. 393,849 $ 252,650 $ 329,991

Selling, general and administrative expenses . . . . . $ 305,279 $ 223,792 $ 236,065

Other income (deductions):
Interest expense . . . . . . . . . . . . . . . . $ (51,485) $ (36,764) $ (27,965)
Interest income . . . . . . . . . . . . . . . . . 6,170 4,189 2,667
Equity in income (loss) of investees (note 4) . . 10,878 (12,394) (2,341)
Provision for loss on disposition of assets
(note 17) . . . . . . . . . . . . . . . . . -0- (29,430) -0-
Other, net (note 16) . . . . . . . . . . . . . . 20,111 9,536 4,217
$ (14,326) $ (64,863) $ (23,422)

Income (loss) before income taxes, minority
owners' interest and extraordinary item . . . . . $ 74,244 $ (36,005) $ 70,504
Income tax (expense) benefit (note 7) . . . . . . . . . (4,890) 6,433 (9,458)
Minority owners' interest in loss (income)
of subsidiaries . . . . . . . . . . . . . . . . . 4,522 (828) -0-
Income (loss) before extraordinary item . . . . . . . . $ 73,876 $ (30,400) $ 61,046
Extraordinary item - Utilization of loss
carryforward (note 7) . . . . . . . . . . . . . . -0- -0- 1,267
Net income (loss) . . . . . . . . . . . . . $ 73,876 $ (30,400) $ 62,313

Distribution of net income (note 9):
Patronage refunds:
Farm supply patrons . . . . . . . . . . . . $ 59,685 $ -0- $ 16,229
Pork marketing patrons . . . . . . . . . . . 10,927 -0- 1,245
The Cooperative Finance
Association's patrons . . . . . . . . . -0- 1,650 1,482
$ 70,612 $ 1,650 $ 18,956
Earned surplus and other equities . . . . . . . . . . . 3,264 (32,050) 43,357
$ 73,876 $ (30,400) $ 62,313
<FN>
See notes to consolidated financial statements
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 73,876 $ (30,400) $ 62,313
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization . . . . . . . . . . 62,960 57,730 50,784
Provision for loss on disposition of assets . . . -0- 29,430 -0-
(Gain) on disposition of fixed assets . . . . . . (1,794) (385) (1,181)
Patronage refunds received in equities . . . . . (2,171) (2,241) (2,320)
Proceeds from redemption of patronage equities . 573 1,731 7,727
Equity in (income) loss of investees . . . . . . (10,878) 12,394 2,341
Deferred income tax (benefit) expense . . . . . . (5,034) (3,463) 1,752
Other . . . . . . . . . . . . . . . . . . . 770 7,604 3,786
Changes in assets and liabilities (exclusive
of assets and liabilities of businesses acquired):
Accounts receivable . . . . . . . . . . . . (12,079) (92,024) 9,095
Inventories . . . . . . . . . . . . . . . . (4,692) (65,402) (27,483)
Other assets . . . . . . . . . . . . . . . . (45,990) (30,154) 11,490
Accounts payable . . . . . . . . . . . . . . 17,884 19,630 (48,425)
Other liabilities . . . . . . . . . . . . . 32,617 (17,981) 10,722

Net cash provided by (used in) operating activities . . $ 106,042 $ (113,531) $ 80,601

CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to borrowers by finance companies . . . . . . $ -0- $ (624,618) $ (733,403)
Collections from borrowers by finance companies . . . . -0- 631,668 685,383
Acquisition of businesses . . . . . . . . . . . . . . . (35,790) (10,500) -0-
Proceeds from disposal of investments and
notes receivable . . . . . . . . . . . . . . . . 34,577 12,115 71,582
Acquisition of investments and notes receivable . . . . (22,117) (50,378) (58,979)
Capital expenditures . . . . . . . . . . . . . . . . . (69,776) (98,238) (79,954)
Proceeds from sale of fixed assets . . . . . . . . . . 14,785 10,900 8,191
Distribution from joint venture, net . . . . . . . . . -0- -0- 29,324
Proceeds from sale of assets to
joint venture partner . . . . . . . . . . . . . . 2,310 -0- 62,104
Proceeds from disposition of subsidiary (note 2) . . . -0- 87,227 -0-
Other . . . . . . . . . . . . . . . . . . . 5,547 (2,140) -0-

Net cash used in investing activities . . . . . . . . . $ (70,464) $ (43,964) $ (15,752)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease of demand loan certificates . . . . . . . $ (6,702) $ (13,224) $ (13,712)
Proceeds from bank loans and notes payable . . . . . . 888,088 916,799 669,608
Payments of bank loans and notes payable . . . . . . . (924,731) (777,268) (711,101)
Proceeds from issuance of subordinated
debt certificates . . . . . . . . . . . . . . . 57,636 72,423 57,780
Payments for redemption of subordinated
debt certificates . . . . . . . . . . . . . . . (33,034) (16,490) (22,557)
Payments for redemption of equities . . . . . . . . . . (3,244) (13,505) (8,046)
Payments of patronage refunds and dividends . . . . . . -0- (17,946) (12,204)
Other . . . . . . . . . . . . . . . . . . . 2,120 340 (3,853)

Net cash provided by (used in) financing activities . . $ (19,867) $ 151,129 $ (44,085)

Net increase (decrease) in cash and
cash equivalents . . . . . . . . . . . . . . . . $ 15,711 $ (6,366) $ 20,764
Cash and cash equivalents at beginning of year . . . . 28,373 34,739 13,975
Cash and cash equivalents at end of year . . . . . . . $ 44,084 $ 28,373 $ 34,739

SUPPLEMENTAL SCHEDULE OF CASH PAID
FOR INTEREST AND INCOME TAXES:

Interest . . . . . . . . . . . . . . . . . . . $ 38,425 $ 41,136 $ 35,626

Income taxes (net of refunds) . . . . . . . . . . . . . $ 9,746 $ 1,479 $ 12,181

SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:

Equities and minority owners' interest
called for redemption . . . . . . . . . . . . . . $ 12,935 $ -0- $ 13,365
Transfer of assets in exchange for
investment in joint ventures . . . . . . . . . . $ 309 $ -0- $ 63,911
Issuance of Farmland equities to minority owners'
of Foods . . . . . . . . . . . . . . . . . . . $ -0- $ -0- $ 16,680
Appropriation of current year's net income
as patronage refunds . . . . . . . . . . . . . . $ 70,612 $ -0- $ 18,956
Acquisition of businesses:
Fair value of net assets acquired . . . . . . . . $ 35,539 $ 1,414 $ 30,321
Goodwill . . . . . . . . . . . . . . . . . . . 1,094 16,086 20,976
Minority owners' investment . . . . . . . . . . . (843) (7,000) -0-

$ 35,790 $ 10,500 $ 51,297

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CAPITAL SHARES AND EQUITIES

<TABLE>
<CAPTION>
Years Ended August 31, 1994, 1993 and 1992
Earned Total
Associate Surplus Capital
Member And Shares
Preferred Common Common Other And
Shares Shares Shares Equities Equities
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
BALANCE AT AUGUST 31, 1991 . . . . . . . . . $ 3,733 $ 330,646 $ 7,680 $ 155,305 $ 497,364
Issue, redemption and cancellation of equities (20) 44,297 (15) 13 44,275
Appropriation of current year's net income . -0- -0- -0- 62,313 62,313
Transfers to current liabilities . . . . . . -0- (12,045) (6) (19,329) (31,380)
Transfers from minority owners' equity . . . -0- 5,570 -0- 10,072 15,642
Dividends on preferred stock . . . . . . . . -0- -0- -0- (5) (5)
Distribution to farm supply patrons in common
stock, associate member common stock
and other equities . . . . . . . . . . -0- 15,807 873 (16,760) (80)
Exchange of common stock, associate member
common stock and other equities . . . . -0- (7,892) (356) 8,248 -0-

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 (6) (364) 17 (3,475) (3,828)
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 . . . . . . . . -0- -0- -0- (3,362) (3,362)
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
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Farmland Industries, Inc. ("Farmland"), 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.
Approximately 65% of the Company's farm supply sales in 1994 were to local farm
cooperative associations which are members and owners of Farmland and
approximately 61% of the hogs processed and 46% of the grain marketed were
supplied to the Company by members.

Principles of Consolidation -- The consolidated financial statements
include the accounts of Farmland and all its majority-owned subsidiaries (the
"Company"). All significant intercompany accounts and transactions have been
eliminated.

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

Investments -- Investments in companies 20% to 50% owned are accounted for
by the equity method. Other investments are stated at cost.

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 Farmland common stock 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 -- These assets are stated at cost and
depreciated principally on a straight-line basis over the estimated useful life
of the individual assets (3 to 40 years). Leasehold improvements are amortized
on a straight-line basis over the terms of the individual leases (15 to 21
years).

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.

Sales -- The Company's policy is to recognize sales at the time product is
shipped. Net margins on international grain merchandised and sales commissions
on brokered agricultural chemicals, rather than the value of such products, are
included in net sales. The gross amount of international grain merchandised in
1994 was $590,159,000. See note 2 of the notes to consolidated financial
statements. The gross amount of agricultural chemicals brokered in the years
ended August 31, 1994, 1993 and 1992 was $172,650,000, $156,067,000 and
$143,314,000, 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.

Research and Development Costs -- Total research and development costs for
the Company for the years ended August 31, 1994, 1993 and 1992 were $2,702,000,
$3,303,000 and $3,338,000, respectively.

Federal Income Taxes -- Farmland and its cooperative subsidiaries are
subject to income taxes on all income not distributed to patrons as patronage
refunds. Farmland and all its subsidiaries file consolidated federal and state
income tax returns. Effective September 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." The
Company accounted for income taxes using the deferred method under APB Opinion
11 for the year ended August 31, 1993 and 1992.

(2) ACQUISITIONS AND DISPOSITIONS

Effective June 30, 1992, Farmland acquired substantially all the business
and assets of Union Equity Co-Operative Exchange ("Union Equity") in exchange
for 2,051,880 shares of Farmland common stock with a par value of $51,297,000
and Farmland's assumption of substantially all of Union Equity's liabilities.
The acquisition has been accounted for as a purchase and, accordingly, the
results of operations of Union Equity have been included in the Company's
consolidated financial statements from June 30, 1992. The excess of the
purchase price over the fair value of the net identifiable assets acquired
($20,976,000) has been recorded as goodwill and is being amortized on a
straight-line basis over 25 years.

During 1993, Farmland and partners organized NBPC. Farmland retained a 58%
ownership interest in NBPC by investing $10,500,000 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
$130,605,000 (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 10,113,000
shares of its voting common stock from Farmland for a purchase price comprised
of $1,541,000 in cash, equities of Farmland (with a par value of $2,406,000)
held by CFA and a $6,166,000 subordinated promissory note payable to Farmland
bearing interest of 5.3%. In addition, during 1993, CFA: 1) repaid its
operating loan from Farmland ($25,181,000); and, 2) purchased the lending
operations and assets of Farmland Financial Services Company for a cash payment
of $60,505,000 and a $2,128,000, 5.3% subordinated note payable to Farmland.
Farmland repaid $87,227,000 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, 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.

The following unaudited financial information, for the years ended August
31, 1993 and 1992, presents pro forma results of operations of the Company as if
the disposition of CFA and the acquisitions of Union Equity and NBPC had
occurred at the beginning of each 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 Union Equity and NBPC for the full years
1993 and 1992.
<TABLE>
<CAPTION>
August 31 (Unaudited)
1993 1992
(Amounts in Thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . $ 5,357,867 $ 5,441,303

Income (loss) before extraordinary item . $ (44,040) $ 47,225
</TABLE>

In October 1993, the Company acquired approximately 53% of the common stock
of National Carriers, Inc. ("NCI") and increased its ownership of NCI to 79% in
August 1994. NCI is a trucking company located in Liberal, Kansas. NCI
provides substantially all the trucking service needs of NBPC. The purchase
price of NCI ($4,423,000) was paid in cash.

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 ($31,367,000) 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
<TABLE>
Major components of inventories are as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Grain . . . . . . . . . . . . .$ 136,353 $ 91,990
Beef . . . . . . . . . . . . . 24,267 27,754
Materials . . . . . . . . . . . . . 51,428 43,857
Supplies . . . . . . . . . . . . . 39,885 41,388
Finished and in-process products . . 286,381 291,701
$ 538,314 $ 496,690
</TABLE>
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 1993 were $86,179,000 and $84,088,000, respectively. Had the lower of
first-in, first-out ("FIFO") cost or market been used to value these products,
the carrying values of inventories at August 31, 1994 and 1993 would have been
lower by $4,145,000 and $5,754,000, respectively.

Net income for 1994, 1993 and 1992 was $1,609,000 lower, $4,119,000 higher
and $1,953,000 lower, respectively, as a result of using LIFO as compared with
FIFO, including a $3,164,000 recovery in 1994 of an $8,346,000 lower of cost or
market adjustment in 1993. Liquidation of prior year inventory layers in 1992
reduced income before income taxes and patronage refunds by $3,302,000.

The carrying values of beef inventories stated under LIFO at August 31,
1994 and 1993 were $24,267,000 and $27,754,000, respectively. The LIFO method
of accounting for beef inventories had no effect on the carrying value of
inventories or on the results reported in 1994 and 1993, as market value of
these inventories was lower than LIFO or FIFO cost.

(4) INVESTMENTS AND LONG-TERM RECEIVABLES
<TABLE>
Investments and long-term receivables are as follows:
<CAPTION> August 31
1994 1993
(Amounts in Thousands)
<S> <C> . . . . . . . .<C>
Investments accounted for by the equity method $ 52,478 $ 37,456
Notes receivable from ventures, 20% to 50% owned . . . . . . 48,955 60,204
National Bank for Cooperatives . . . . . . . . . . . . . . . 28,786 31,824
Investments in and advances to other cooperatives . . . . . . 42,662 37,690
Other investments and long-term receivables . . . . . . . . . 16,720 16,138

$ 189,601 $ 183,312

</TABLE>
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, Farmland's investment in CoBank approximated
its requirement. This investment has been pledged to secure borrowings from
CoBank under the syndicated loan agreement.
<TABLE>
Summarized financial information of investees accounted for by the equity
method is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Current Assets . . . . . . . . . . . . . . . . . . . . $ 105,981 $ 66,532
Long-Term Assets . . . . . . . . . . . . . . . . . . . 252,704 223,937
Total Assets . . . . . . . . . . . . . . . . . . $ 358,685 $ 290,469

Current Liabilities . . . . . . . . . . . . . . . . . $ 111,077 $ 79,224
Long-Term Liabilities . . . . . . . . . . . . . . . . 144,255 141,991
Total Liabilities . . . . . . . . . . . . . . . . $ 255,332 $ 221,215

Net Assets . . . . . . . . . . . . . . . . . . . . . . $ 103,353 $ 69,254
</TABLE>
<TABLE>
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . $ 803,516 $ 601,194 $ 218,913
Net income (loss) . . . . . . . . . . . . . . . $ 24,285 $ (22,755) $ (5,046)
Farmland's equity in net income (loss) . . . . $ 10,878 $ (12,394) $ (2,341)
</TABLE>

The Company's investments accounted for by the equity method consist
principally of 50% equity interests in Hyplains Beef, L.L.C. and in two
phosphate fertilizer manufacturing ventures (Farmland Hydro, L.P. and
SF Phosphates Limited Company).

On November 15, 1991, Farmland and Norsk Hydro a.s. ("Hydro") formed a
joint venture company, Farmland Hydro, to manufacture phosphate fertilizer
products for distribution to international markets. As part of the joint
venture agreement, Farmland sold a 50% interest in its Green Bay, Florida
phosphate fertilizer plant and certain phosphate rock reserves located in Hardee
County, Florida to Hydro for an amount approximately equal to Farmland's
carrying value of the assets. Subsequently, Farmland and Hydro contributed the
assets to the joint venture. Farmland operates the plant under a management
agreement with the joint venture and Hydro provides international marketing
services. See note 15 of the notes to consolidated financial statements.

Farmland and J. R. Simplot formed a joint venture (SF Phosphates, Limited
Company) to operate a phosphate mine located in Vernal, Utah, a fertilizer plant
located in Rock Springs, Wyoming, and a 96-mile pipeline that connects the mine
with the fertilizer plant. The purchase of the mine, plant and pipeline from
Chevron Corporation was completed in April 1992.

Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities," was issued by the Financial
Accounting Standards Board ("FASB") in May 1993 and is effective for fiscal
years beginning after December 15, 1993 (the Company's 1995 fiscal year).
Statement 115 expands the use of fair value accounting and the reporting for
certain investments in debt and equity securities. In the opinion of
management, the adoption of Statement 115 will not have a significant impact on
the Company's consolidated financial statements.

(5) PROPERTY, PLANT AND EQUIPMENT
<TABLE>
A summary of cost for property, plant and equipment is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Land and improvements . . . $ 13,614 $ 11,825
Site improvements . . . . . 28,647 26,877
Buildings . . . . . . . . 224,767 215,420
Machinery and equipment . . 716,683 678,784
Automotive equipment . . . 65,986 46,807
Furniture and fixtures . . 48,613 45,405
Livestock . . . . . . . . 3,926 4,373
Mining properties . . . . . 3,119 3,119
Leasehold improvements . . 15,085 12,149
Capital lease . . . . . . . 50,956 52,342
Construction in progress . 30,763 57,242
$ 1,202,159 $ 1,154,343
</TABLE>
For the years ended August 31, 1994, 1993 and 1992, the Company capitalized
construction period interest of $357,000, $1,611,000 and $330,000,
respectively.

(6) BANK LOANS, SUBORDINATED DEBT CERTIFICATES AND NOTES PAYABLE
<TABLE>
Bank loans, subordinated debt certificates and notes payable are as
follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
National Bank for Cooperatives
--5.61% to 9.2%, maturing 1995 through 2001 . $ 74,278 $ 66,098
Other bank notes--5.74% to 7.75%,
maturing 1995 through 2001 . . . . . . . . . 117,813 138,244
Capital investment certificates
--6% to 9.5%, maturing 1995 through 2014 . . 210,054 192,857
Subordinated monthly interest certificates
--6.25% to 12%, maturing 1995 through 2014 . 70,057 62,913
Industrial revenue bonds--5.75% to 8.0%,
maturing 1995 through 2007 . . . . . . . . . 25,055 27,880
Promissory notes--7% to 10%,
maturing 1995 through 2001 . . . . . . . . . 18,684 13,805
Other--5% to 13% . . . . . . . . . . . . . . . . . 29,705 16,011
$ 545,646 $ 517,808
Less current maturities . . . . . . . . . . . . . . 27,840 31,947
$ 517,806 $ 485,861
</TABLE>
In 1994, Farmland entered into a $650,000,000 syndicated credit facility
provided by eight domestic and international banking institutions. This
agreement provides short-term credit of up to $450,000,000 to finance seasonal
operations and inventory, and revolving term credit of up to $200,000,000. At
August 31, 1994, short-term borrowings under this facility were $217,399,000,
revolving term borrowings were $95,000,000 and $62,600,000 was being utilized to
support letters of credit issued on behalf of Farmland by participating banks.

Farmland pays commitment fees of 1/8 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 $150,000,000, consolidated net worth of not
less than $475,000,000 and funded indebtedness and senior funded indebtedness of
not more than 52% and 43% of capitalization, respectively. All computations are
based on consolidated financial data adjusted to exclude nonrecourse
subsidiaries (as defined in the credit agreement). Computed in accordance with
the agreement, at August 31, 1994, working capital was $207,383,000, net worth
was $585,013,000 and funded indebtedness and senior funded indebtedness were
47.03% and 23.34% of capitalization, respectively.

Farmland and subsidiaries maintain other borrowing arrangements with banks
and financial institutions. Under such agreements, at August 31, 1994,
$35,495,000 was borrowed from banks and letters of credit issued by banks
amounted to $2,200,000. Financial covenants of these arrangements are not more
restrictive than the Company's syndicated credit facility.

NBPC, 58%-owned by Farmland, maintains borrowing agreements with a bank
which provides financing support for its beef packing operations. Borrowings
under this credit agreement are nonrecourse to Farmland or Farmland's other
affiliates. At August 31, 1994, NBPC's available bank credit of $61,596,000 had
been borrowed. All assets of NBPC (carried at $150,409,000) are pledged to
support its borrowings. At August 31, 1994, Farmland had issued letters of
credit in the amount of $15,000,000 to support NBPC's bank credit agreements.

Tradigrain 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 the Company.

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

The outstanding subordinated debt certificates are subordinated to senior
indebtedness. At August 31, 1994, senior indebtedness included $450,827,000 for
money borrowed, and other instruments (principally long-term operating leases)
provide for aggregate payments over nine years of approximately $126,505,000.

Under industrial revenue bonds and other agreements, property, plant and
equipment with a carrying value of $29,267,000 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)
1995 . . . . . . . . . . . . . . . . . . $ 27,840
1996 . . . . . . . . . . . . . . . . . . 44,884
1997 . . . . . . . . . . . . . . . . . . 182,996
1998 . . . . . . . . . . . . . . . . . . 54,057
1999 . . . . . . . . . . . . . . . . . . 32,921
2000 and after . . . . . . . . . . . . . 202,948
$ 545,646

(7) INCOME TAXES

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 $70,775,000. The
asserted deficiencies relate primarily to the Company's tax treatment of the
sale of the Terra stock and the distributions received from Terra prior to the
sale. The IRS asserts that Farmland incorrectly treated the Terra sale gain as
income against which certain patronage-sourced operating losses could be offset,
and that, as a nonexempt cooperative, Farmland was not entitled to an
intercorporate dividends-received deduction in respect of the 1983 distribution
by Terra. It further asserts that Farmland incorrectly characterized gains for
tax purposes aggregating approximately $14,600,000, and a loss of approximately
$2,300,000, from the disposition 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. Discovery and other pre-trial phases of the
case have been substantially completed. The originally scheduled trial date
of March 6, 1995 has been vacated. It is presently contemplated that a
limited court hearing, if necessary, will be held in June 1995, and that
briefs in the case will be filed by late fall of 1995.

If the IRS ultimately prevails on all of the adjustments asserted in the
statutory notice, Farmland would have additional federal and state income tax
liabilities aggregating approximately $85,800,000 plus accumulating statutory
interest thereon through October 31, 1994, of approximately $154,900,000 (before
tax benefits of the interest deduction). In addition, such adjustments 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 $5,000,000 plus applicable statutory interest thereon.

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. Farmland believes that it has meritorious positions with
respect to all of these claims and will continue to vigorously pursue their
favorable resolution through the pending litigation.

In the opinion of Bryan Cave, Farmland's special tax counsel, it is more
likely than not that the courts will ultimately conclude that (i) Farmland's
treatment of the Terra sale gain was substantially, if not entirely, correct;
and (ii) Farmland properly claimed a dividends-received deduction in respect of
the 1983 distributions which it received from Terra prior to the sale of the
Terra stock. Counsel has further advised, however, that none of the issues
involved in these disputes is free from doubt, and that there can be no
assurance that the courts will ultimately rule in favor of Farmland on any of
these issues.

Should the IRS ultimately prevail on all of its asserted claims, all
claimed federal and state income taxes as well as accrued interest would become
immediately due and payable, and would be charged to current operations. In
such case, the Company would be required to renegotiate agreements with its
banks to maintain compliance with various requirements of such agreements,
including working capital and funded indebtedness provisions. However, no
assurance can be given that such renegotiation would be successful.
Alternatives could include other financing arrangements or the possible sale of
assets.

The Company adopted FASB Statement 109 effective September 1, 1993. The
cumulative effect of this change in accounting for income taxes was immaterial.
Prior years' financial statements have not been restated to apply the provisions
of Statement 109.
<TABLE>
Income tax expense (benefit) attributable to income from continuing
operations is comprised of the following:
<CAPTION>
Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Federal:
Current . .. . . $ 10,076 $ (2,502) $ 6,600
Deferred . .. . . (3,217) (2,944) 1,490
$ 6,859 $ (5,446) $ 8,090
State:
Current . .. . . $ 1,965 $ (468) $ 1,106
Deferred . .. . . (755) (519) 262
$ 1,210 $ (987) $ 1,368
Foreign:
Current . .. . . $ (2,117) $ -0- $ -0-
Deferred . .. . . (1,062) -0- -0-
$ (3,179) $ -0- $ -0-
$ 4,890 $ (6,433) $ 9,458
</TABLE>
<TABLE>

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 and 1992), as follows:
<CAPTION>
Year Ended August 31
1994 1993 1992
<S> <C> <C> <C>
Computed "expected" income tax expense (benefit)
on income (loss) before income taxes . . . . . . . . . 35.0 % (34.0) % 34.0 %

Increase (reduction) in income tax expense (benefit)
attributable to:
Patronage refunds . . . . . . . . . . . . . . . . . . . (33.3) (4.0) (9.2)
Utilization of member-sourced losses . . . . . . . . . -0- -0- (11.4)
Patronage-sourced items for
which no benefit is available . . . . . . . . . . -0- 26.5 -0-
State income tax expense (benefit) net of
federal income tax effect . . . . . . . . . . . . 1.1 (2.2) 1.2
Benefit associated with exempt income of
foreign sales corporation . . . . . . . . . . . . -0- (1.4) (1.5)
Other, net . . . . . . . . . . . . . . . . . . . . . . 3.8 (2.7) .3
Income tax expense (benefit) . . . . . . . . . . . . . . . . 6.6 % (17.8) % 13.4 %
</TABLE>

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

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

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

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

The significant components of deferred income tax benefit attributable to
income from continuing operations for the year ended August 31, 1994 are as
follows:
August 31, 1994
(Amounts in Thousands)
Deferred tax benefit . . . . . . . . . . . . . $ (8,044)

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
$ (5,034)

Deferred income taxes for the year ended August 31, 1993 and 1992 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 August 31
1993 1992
(Amounts in Thousands)

Depreciation . . . . . . . . . . . . . . . . . . $ 473 $ 1,562
Safe harbor lease rentals . . . . . . . . . . . . (378) (478)
Provision for loss on proposed sale of assets . . (3,454) -0-
Unfunded pension expense . . . . . . . . . . . . (355) (129)
Reinstatement of deferred income taxes previously
offset by net operating loss carryforward
for financial reporting purposes . . . . . -0- 1,294
Other, net . . . . . . . . . . . . . . . . . . 251 (497)
$(3,463) $ 1,752

At August 31, 1994, Farmland and its consolidated subsidiaries have
alternative minimum tax credit carryforwards of approximately $7,025,000.

The tax benefit for the year ended August 31, 1993 results 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 $7,525,000 to reduce goodwill for financial
reporting purposes by $3,010,000.

During the year ended August 31, 1992, all of Foods' nonmember-sourced loss
carryforwards were utilized and deferred income taxes amounting to $1,294,000
were reinstated. During the year ended August 31, 1992, Farmland utilized
nonmember-sourced loss carryforwards amounting to $3,168,000 to reduce income
tax expense for financial reporting purposes by $1,267,000. Utilization of
these loss carryforwards has been presented as an extraordinary item in the
accompanying consolidated statement of operations for the year ended August 31,
1992.

In connection with the acquisition of Union Equity, Farmland acquired
member-sourced and nonmember-sourced loss carryforwards from Union Equity
amounting to approximately $18,600,000 and $10,600,000, respectively. For the
year ended August 31, 1992, Farmland was able to utilize member-sourced and
nonmember-sourced loss carryforwards amounting to $18,600,000 and $2,800,000,
respectively. The benefit of the utilization of the nonmember-sourced loss
carryforward amounting to $1,134,000 was recorded as a reduction of goodwill.
See note 2 of the notes to consolidated financial statements.

(8) MINORITY OWNERS' EQUITY IN SUBSIDIARIES

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

August 31
1994 1993
(Amounts in Thousands)
Farmland Foods, Inc. . . . . . . . . . . . . $ 5,618 $ 6,401
National Beef Packing Company, L.P. and G.P. 2,925 7,865
Heartland Wheat Growers, L.P. and G.P. . . . 2,100 -0-
Other subsidiaries . . . . . . . . . . . . . 1,090 1,097
$ 11,733 $ 15,363

(9) PREFERRED STOCK, EARNED SURPLUS AND OTHER EQUITIES

<TABLE>
A summary of preferred stock is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Preferred shares, $25 par value - Authorized 8,000,000 shares:
6% - 608 shares issued and outstanding
(624 shares in 1993) . . . . . . . . . . . . . . . . . . . . . . $ 15 $ 15
5-1/2% - 2,592 shares issued and outstanding
(2,832 shares in 1993) . . . . . . . . . . . . . . . . . . . . . 65 71
Series F - 144,869 shares issued and outstanding
(144,869 shares in 1993) . . . . . . . . . . . . . . . . . . . . 3,622 3,622
$ 3,702 $ 3,708
</TABLE>
The 5-1/2% and 6% preferred stocks have preferential liquidation rights
over the Series F 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. Series F preferred stock is nondividend bearing.
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.

<TABLE>
A summary of earned surplus and other equities is as follows:
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)

<S> <C> <C>
Earned surplus . . . . . . . . . . . . $ 130,250 $ 123,974
Patronage refund payable in equities . 44,032 -0-
Nonmember capital . . . . . . . . . . . 103 104
Capital credits . . . . . . . . . . . . 32,547 38,105
Unallocated equity . . . . . . . . . . -0- 6,021
Additional paid-in surplus . . . . . . 1,603 1,603
Currency translation adjustment . . . . (54) -0-
$ 208,481 $ 169,807
</TABLE>
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. The bylaws provide that the amount of the
patronage refund payable be reduced if immediately after the payment of such
patronage refund, the amount of earned surplus would be less than 30% of the
previous year-end balance of members' equity accounts (defined for this purpose
as the sum of common stock, associate member common stock, capital credits,
nonmember capital and patronage refunds payable in equities). The reduction of
patronage refunds is limited to the lesser of 15% or the amount required to
increase the balance of the earned surplus account to the required 30%. As of
August 31, 1994 and 1993, earned surplus exceeded the required amount by
approximately $2,329,000 and $3,874,000, respectively. The patronage refund
payable for 1994 is $70,584,000. The cash portion is $26,552,000 and is
included in "Other current liabilities" in the consolidated balance sheet at
August 31, 1994. The balance ($44,032,000) of the patronage refund is payable
in equities of Farmland and is included in the consolidated balance sheet as
"Earned surplus and other equities." No patronage refunds were paid by Farmland
for 1993. The patronage refund for 1992 was $17,449,000, all of which was paid
in cash.

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 par value of Farmland equity 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 par value of the Participant's
investment exceeds the Participant's Base Capital Requirement. This plan
provides that the relationship between the par value of a Participant's
investment in Farmland 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, common stock and
associate member common stock with a par value of $8,740,000 have been 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.

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 a special equity redemption plan 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, certain equities of Farmland with a face amount of
$3,448,000 and capital equity fund certificates held by certain members of
Farmland Foods, Inc. in the amount of $747,000 have been approved by the Board
of Directors for redemption under the estate settlement and special equity
redemption plan. Accordingly, such amounts have been included in "Other current
liabilities" in the consolidated balance sheet at August 31, 1994.

Nonmember capital represents patronage refunds distributed in the form of
book credits.

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.

Unallocated equity represents the cumulative difference between the amount
of member-sourced income for financial reporting and income tax reporting
purposes.

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 the years ended August 31, 1994, 1993 and 1992, rental
expenses totaled $41,794,000, $41,104,000 and $43,300,000, respectively. Rental
expense is reduced for mileage credits received on leased railroad cars
($1,866,000 in 1994, $1,939,000 in 1993 and $663,000 in 1992).

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

(Amounts in Thousands)
1995 . . . . . . . . . . $ 49,883
1996 . . . . . . . . . . 40,275
1997 . . . . . . . . . . 36,154
1998 . . . . . . . . . . 29,440
1999 . . . . . . . . . . 22,209
2000 and after . . . . . 69,008
$ 246,969

Farmland and its subsidiaries are 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 certain throughput agreements, take-or-pay agreements,
minimum quantity agreements, and minimum charge agreements for various raw
material supplies and services through 1996. The Company's minimum obligations
under such agreements are $1,248,000 in 1995 and $924,000 in 1996.

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, 1994. In the opinion of management, it is reasonably
possible for such costs to approximate $39,000,000 and to extend over 30 years.

CFA has loans receivable from customers engaged in pork production
operations and from cooperative associations which are guaranteed by Farmland.
At August 31, 1994, such guarantees amounted to $5,868,000. In addition,
Farmland has issued letters of credit to support borrowing arrangements of a
subsidiary as described in note 6.

At August 31, 1994, the Company was committed to expenditures for
acquisition and completion of construction of plant and equipment aggregating
approximately $19,000,000.

(11) EMPLOYEE BENEFIT PLANS

The Farmland Industries, Inc. Employee Retirement Plan ("the Plan") is a
defined benefit plan covering substantially all employees of Farmland and its
subsidiaries 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.
<TABLE>
The Company charges pension cost as accrued based on actuarial valuation of
the Plan.

Components of the Company's pension cost are as follows:
<CAPTION>
August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period . . . $ 8,663 $ 7,449 $ 6,519
Interest cost on projected benefit obligation . . . . 15,292 12,134 11,332
Actual return on Plan assets . . . . . . . . . . . . . (10,949) (15,842) (20,591)
Net amortization and deferral . . . . . . . . . . . . (7,860) (374) 4,027
Pension expense . . . . . . . . . . . . . . . . . . $ 5,146 $ 3,367 $ 1,287
</TABLE>
The discount rate and the rate of increase in future compensation levels
used in determining the actuarial present value of the projected benefit
obligations at August 31, 1994 were 8.0% and 4.5%, respectively (8.5% and 5% at
August 31, 1993, and 9% and 5% at August 31, 1992, respectively). The expected
long-term rate of return on assets at August 31, 1994, 1993 and 1992 were 8.5%,
8.5% and 9%, respectively.
<TABLE>
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
1993. Such prepaid pension cost is based on the Plan's funded status as of May
31, 1994 and 1993.
<CAPTION>
August 31
1994 1993
(Amounts in Thousands)
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . $ 148,648 $ 123,061
Nonvested benefits . . . . . . . . . . . . . . . . . . . . . . . . 9,163 7,102
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . $ 157,811 $ 130,163
Increase in benefits due to future compensation increases . . . . . 53,533 51,633
Projected benefit obligation . . . . . . . . . . . . . . . . . . . $ 211,344 $ 181,796
Estimated fair value of Plan assets . . . . . . . . . . . . . . . . 226,681 212,647
Plan assets in excess of projected benefit obligation . . . . . . . $ 15,337 $ 30,851
Unrecognized net loss from past experience different
from that assumed and effects of changes
in assumptions . . . . . . . . . . . . . . . . . . . . . . . . 37,332 21,754
Unrecognized net transition asset being
recognized over 10 years . . . . . . . . . . . . . . . . . . . (933) (1,866)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . 1,308 2,590
Prepaid pension cost at end of year . . . . . . . . . . . . . . . . . . . $ 53,044 $ 53,329
</TABLE>
The Company provides group life insurance benefits for retired
employees who were hired before January 1, 1988 and reach normal retirement
age while working for the Company. Prior to 1994, the Company charged
operations for the amount of an annual insurance premium paid for group life
insurance covering both retired and active employees. In 1994, the cost of
providing group life insurance for retired employees was not separable from
the cost of providing group life insurance for active employees. For the
years ended August 31, 1993 and 1992, such insurance premium were $1,178,000
and $783,000, respectively.

In fiscal year 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's business is conducted within three general operating areas:
cooperative farm supply operations, cooperative marketing operations and other
operations. As a farm supply cooperative, the Company engages in manufacturing
and wholesale distribution of input products of agricultural production. The
Company's principal farm supply products are petroleum, crop production and
feed.

Petroleum products include gasoline, distillate, diesel fuel, propane, lube
oils, grease and automotive parts and accessories. Products in the crop
production area include nitrogen, phosphate and potash fertilizers, herbicides,
insecticides and other farm chemicals. Feed products include a complete line of
formulated feeds. Supply products are sold primarily at wholesale to local farm
cooperatives.

Marketing operations include pork and beef processing, marketing and the
distribution of fresh meat products, ham, bacon, sausage, deli meats, Italian
specialty meats and boxed beef, and the marketing and storage of grain.

Other operations include convenience fuel and food stores, farm supply
stores, finance company operations and services such as accounting, financial,
management, environmental and safety, and transportation. See note 2 of the
notes to consolidated financial statements.

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 has 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. Operating income (loss) of industry segments for the years
ended August 31, 1993 and 1992 have been restated for comparative purposes to
exclude certain costs which were not identified to business segments in 1994 but
which were identified to business segments in 1993 and 1992. Corporate assets
include cash, investments in other cooperatives, the corporate headquarters of
Farmland and certain other assets.

<TABLE>

Following is a summary of industry segment information as of and for the
years ended August 31, 1994, 1993 and 1992. Export sales to unaffiliated
customers from U.S. operations for the years ended August 31, 1994, 1993 and
1992 were $842,476,000, $690,215,000 and $188,710,000, respectively.

<CAPTION>
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)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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- -0- (19,435) -0-
Total sales and transfers $ 860,322 $1,172,870 $ 529,936 $2,358,606 $1,627,156 $ 148,478 $ (19,435) $6,677,933
Operating income (loss) of
industry segments . . . $ 27,172 $ 126,047 $ 17,019 $ 20,634 $ (33,455) $ (2,368) $ 155,049
Equity in income (loss)
of investees (note 4) . $ (41) $ 15,466 $ 155 $ (4,404) $ -0- $ (298) $ 10,878
General corporate expenses (66,479)
Other corporate income . 26,281
Interest expense . . . . (51,485)
Minority interest . . . . 4,522
Income before income
taxes and
extraordinary item . . $ 78,766
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 $ -0- $ 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
ncluding $16,888,000
of capital assets
of business acquired) . $ 14,399 $ 14,136 $ 4,508 $ 19,040 $ 6,256 $ 26,051 $ 2,274 $ 86,664

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 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) (3,253) (29,430)
General corporate expenses (57,721)
Other corporate income . 13,725
Interest expense . . . . (36,764)
Minority interest . . . . (828)
(Loss) before income
taxes and
extraordinary item . . $ (36,833)
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 - $ 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
$48,362,000 of capital
assets
of business acquired) . $ 35,629 $ 17,972 $ 6,590 $ 73,561 $ 1,894 $ 3,613 $ 7,341 $ 146,600

1992
Sales to unaffiliated
customers $ 979,542 $ 897,820 $ 445,338 $ 850,103 $ 155,169 $ 101,335 $ -0- $3,429,307
Transfers between segments 5,727 9,744 2,531 4,064 -0- -0- (22,066) -0-
Total sales and transfers $ 985,269 $ 907,564 $ 447,869 $ 854,167 $ 155,169 $ 101,335 $ (22,066) $3,429,307
Operating income (loss)
of industry segments . $ 8,241 $ 111,907 $ 21,346 $ 25,162 $ (726) $ (5,018) $ 160,912
Equity in loss of investees
(note 4) . . . . . . . $ (31) $ (1,362) $ 15 $ (963) $ (2,341)
General corporate expenses (66,982)
Other corporate income . 6,880
Interest expense . . . . (27,965)
Income before income taxes
and extraordinary item $ 70,504
Identifiable assets at
August 31, 1992 . . . . $ 289,021 $ 313,943 $ 76,300 $ 201,726 $ 173,376 $ 207,274 $1,261,640
Investment in and advances
to investees . . . . . $ 139 $ 66,899 $ 1,143 $ 6,004 $ 1,197 $ 4,408 $ 79,790
Corporate assets . . . . 184,962
Total assets . . . . . . $1,526,392
Provision for depreciation
and amortization . . . $ 12,269 $ 14,888 $ 3,013 $ 9,051 $ 613 $ 4,513 $ 6,437 $ 50,784
Capital expenditures
(including
$47,977,000 of capital
assets
of business acquired) . $ 25,089 $ 17,119 $ 5,115 $ 14,862 $ 48,440 $ 11,141 $ 6,165 $ 127,931
</TABLE>

(13) SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK

Farmland extends credit to its customers on terms no more favorable than
standard terms of the industries it serves. A substantial portion of Farmland'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.

Farmland 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 of the notes to consolidated financial
statements.

(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
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:
<CAPTION>
August 31, 1994 August 31, 1993
Carrying Fair Carrying Fair
Amount Value Amount Value
(Amounts in Thousands)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Investment and long-term receivables:
Notes receivable from investees,
20% to 50% owned . . . . . . . $ 48,955 $ 45,414 $ 60,204 $ 58,111
National Bank for Cooperatives . 28,786 **** 31,824 ****
Other cooperatives:
Equities . . . . . . . . . . 28,132 **** 22,877 ****
Notes receivable . . . . . . 14,530 13,385 14,813 13,408
FINANCIAL LIABILITIES:
Long-term debt:
Subordinated certificates of investment,
capital investment certificates and
subordinated monthly
interest certificates . . . . . $ 280,111 $ 284,523 $ 255,770 $ 287,168
</TABLE>
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.

****Investments in National Bank for Cooperatives and other cooperatives'
equities which have been purchased are carried at cost and securities 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 securities because there is no established market for
these securities and it is inappropriate to estimate future cash flows which are
largely dependent on future patronage earnings of the cooperatives.

(15) RELATED PARTY TRANSACTIONS

Farmland Hydro, L.P., Hyplains Beef, L.C. (50%-owned investees) and
National Beef Packing Company, L.P. (a 58%-owned consolidated limited
partnership) have credit agreements with various banks. Borrowings under these
agreements are nonrecourse to Farmland and its other affiliates. Cash
distributions by these entities to their owners are restricted by these credit
agreements. To support the efforts of these entities to meet compliance
provisions of their credit agreements, Farmland advances funds and provides
management and administrative services to these entities, in certain instances,
on terms less advantageous to Farmland than transactions conducted by Farmland
in the ordinary course of its business. At August 31, 1994, Farmland's equity
investments in and advances to these entities amounted to $132,613,000.

(16) OTHER INCOME

(17) PROVISION FOR LOSS ON DISPOSITION OF ASSETS

At August 31, 1993, the carrying value of a pork processing plant at Iowa
Falls, Iowa was written down by $3,253,000 to an estimated disposal value.

MANAGEMENT

The directors of Farmland are as follows:<TABLE>
<CAPTION>
Expirati Total
on Years of
Age as of of Service
August 31 Positions Present as
, Held With Term as Board
Name 1994 Farmland Director Member Business Experience During Last Five Years
<S> <C> <C> <C> <C> <C>

Albert J. Shivley 51 Chairman 1995 10 General Manager--American Pride Co-op
of the Association, Brighton, Colorado, a local
Board cooperative association of farmers and ranchers.
H. D. Cleberg 55 President 1997 4 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 63 Vice 1997 11 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. 43 1995 2 General Manager--Cooperative Grain and Supply,
Hillsboro, Kansas, a local cooperative
association of farmers and ranchers.
Ronald J. Amundson 50 1997 6 General Manager--Central Iowa Cooperative,
Jewell, Iowa, a local cooperative association of
farmers and ranchers.

Baxter Ankerstjerne 58 1996 4 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 53 1997 3 Producer--Texline, Texas.

Richard L. Detten 60 1996 7 Producer--Ponca City, Oklahoma.

Steven Erdman 44 1995 2 Producer--Bayard, Nebraska
Warren Gerdes 46 1995 1 General Manager--Farmers Cooperative Elevator
Company, Buffalo Lake, Minnesota, a local
cooperative association of farmers and ranchers.

Ben Griffith 45 1995 5 General Manager--Central Cooperatives, Inc.,
Pleasant Hill, Missouri, a local cooperative
association of farmers and ranchers.
Gail D. Hall 52 1997 6 General Manager--Lexington Cooperative Oil
Company, Lexington, Nebraska, a local cooperative
association of farmers and ranchers.

Jerome Heuertz 53 1997 * General Manager--Farm Service Cooperative,
Council Bluffs, Iowa, a local cooperative
association of farmers and ranchers.

Barry Jensen 49 1996 4 Producer--White River, South Dakota. Since May
1989 Mr. Jensen has served as President of
Farmers Co-op Oil Association, Winner, South
Dakota, a local cooperative association of
farmers and ranchers.
Greg Pfenning 45 1997 2 Producer--Hobart, Oklahoma. Director of Hobart &
Roosevelt Cooperative, a local cooperative
association of farmers and ranchers.

Vonn Richardson 61 1996 7 Producer--Plains, Kansas. President of The
Plains Equity Exchange and Cooperative Union,
Plains, Kansas, a local cooperative association
of farmers and ranchers.

Monte Romohr 41 1996 4 Producer--Gresham, Nebraska. In March 1988,
Mr. Romohr became President of Farmers Co-op
Business Association, Shelby, Nebraska, a local
cooperative association of farmers and ranchers.
Joe Royster 42 1996 1 General Manager--Dacoma Farmers Cooperative,
Inc., Dacoma, Oklahoma, a local cooperative
association of farmers and ranchers.

Paul Ruedinger 64 1995 11 Producer--Van Dyne, Wisconsin.

Raymond J. Schmitz 63 1996 7 Producer--Baileyville, Kansas

Theodore J. Wehrbein 49 1995 8 Producer--Plattsmouth, Nebraska. Past Director
of Nehawka Farmers Cooperative Company, Nehawka,
Nebraska, a local cooperative association of
farmers and ranchers.

Robert Zinkula 64 1996 4 Producer--Mount Vernon, Iowa. Secretary and
Treasurer of Linn Cooperative Oil Company,
Marion, Iowa, a local cooperative association of
farmers and ranchers.
<FN>
*Mr. Heuertz was elected to the Farmland Industries, Inc. Board of Directors in
December 1994.
</TABLE>
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:
<TABLE>
<CAPTION>
Age as of
August 31,
Name 1994 Principal Occupation and Other Positions

<S> <C> <C>
J. F. Berardi 51 Executive Vice President and Chief Financial Officer - Mr. Berardi
joined Farmland March 1, 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.
From 1986 to 1989 Mr. Berardi served as Senior Vice President and
Chief Financial Officer of Harcourt Brace Jovanovich, Inc.

H. D. Cleberg 55 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.
From October 1987 to March 1989 he served as Vice President and
General Manager, Fertilizer and Ag Chemicals Operations, and from
July 1986 to September 1987 he served as President, Farmland Foods.
Prior to July 1986 he held several executive management positions,
most recently Vice President, Field Services and Operations Support.

S. P. Dees 51 Executive Vice President, Farmland and Director General of Farmland
Industrias, S.A. de C.V. - Mr. Dees was appointed to his present
position in September 1993. From October 1990 to September 1993 he
served as Executive Vice President, Administrative Group and General
Counsel. Mr. Dees joined Farmland in October 1984, serving as Vice
President and General Counsel, Law and Administration until September
1990. He was a partner in the law firm of Stinson, Mag and Fizzell,
Kansas City, Missouri, from 1971 until his employment by Farmland.

G. E. Evans 50 Senior Vice President, Agricultural Production Marketing/Processing -
Mr. Evans has been with Farmland since 1971. He was appointed to his
present position in January 1992. 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. He served as Executive Vice President, Operations from
January 1990 to September 1990. He served as Vice President,
Farmland Industries and President, Farmland Foods from October 1987
to December 1989. He served as Vice President and General Manager,
Feed Operations from June 1986 to September 1987, and from May 1983
to June 1986 he served as Vice President, Feed Operations.

R. W. Honse 51 Executive Vice President, Agricultural Inputs Operations - Mr. Honse has
been with Farmland since September 1983. He was appointed to his
present position in January 1992, and served as Executive Vice
President, Agricultural Operations from October 1990 to January 1992.
From April 1989 to September 1990, he served as Vice President and
General Manager, Crop Production Operations. From July 1986 to March
1989 he served as General Manager of the Florida phosphate fertilizer
complex.

B. L. Sanders 53 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. From July 1986 to
September 1987 he served as Director, Management Information
Services. From July 1984 to June 1986 he served as Executive
Director, Corporate Strategy and Research and from 1968 to June 1984,
as Executive Director, Economic and Market Research.

</TABLE>

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 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Annual Compensation
Employee
Year Variable Other
Name and Ending Compensation Annual
Principal Position August 31 Salary Plan Compensation
<S> <C> <C> <C> <C>
H. D. Cleberg, . . . . . . . . . . 1994 $ 439,728 $ 338,481
President and . . . . . . . . . . 1993 $ 433,506
Chief Executive Officer 1992 $ 408,972 $ 185,745

G. E. Evans, . . . . . . . . . . 1994 $ 278,304 $ 217,761
Senior Vice President 1993 $ 278,304
Agricultural Production 1992 $ 255,900 $ 114,257
Marketing/Processing

R. W. Honse, . . . . . . . . . . 1994 $ 251,532 $ 205,206
Executive Vice President 1993 $ 231,964
Agricultural Inputs Operations 1992 $ 204,686 $ 94,433

J. F. Berardi, . . . . . . . . . . 1994 $ 216,252 $ 146,576
Executive Vice President 1993 $ 206,016
and Chief Financial Officer 1992 $ 100,008 $ 28,075

S. P. Dees, . . . . . . . . . . 1994 $ 205,066 $ 119,093 $ 124,138(a)
Executive Vice President 1993 $ 205,366
Farmland and Director 1992 $ 195,738 $ 51,521
General of Farmland
Industrias, S.A. de C.V.
<FN>
(a) Mr. Dees received a differential remuneration and reimbursements for
taxes in connection with foreign assignments.
</TABLE>
An Annual Employee Variable Compensation Plan, a Long-Term Management
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, 1994, 1993 and 1992 amounted to $17,779,000, $-0- and
$10,033,000, respectively. Distributions under this plan are made annually
after the close of each fiscal year.

Under the Long-Term Management Incentive Plan, the Company's executive
management employees are paid cash bonus amounts determined by a formula which
takes into account the level of management and the average annual net income of
the Company over a three-year period. The current Long-Term Management
Incentive Plan is effective September 1, 1994 through August 31, 1996. For the
year ended August 31, 1994, the Company accrued $1,607,000 under this plan. The
Company's performance did not reach a level where incentive was earned under the
Long-Term Management Incentive Plan that covered the three-year period ended
August 31, 1993. As a result, operations in 1993 were credited by $2,463,000 to
reverse provisions for management incentive awards previously charged against
operations in 1992 and 1991 ($1,171,000 and $1,292,000, respectively).

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 1994, 1993 and 1992
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 1000 hours per year. Participation in the Plan is optional
prior to age 34, but mandatory thereafter. Approximately 6,560 active and 6,540
inactive employees were participants in the Plan on August 31, 1994. 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 year ended
August 31, 1994 were $2,885,000. No contributions were made to the Plan in 1993
and 1992.

Payments to participants in the Plan are based upon length of participation
and compensation (limited to $150,000 annually for any employee) reported to the
Plan for the four highest of the last ten years of employment. See note 11 of
the notes to consolidated financial statements.

In 1982, the Tax Equity and Fiscal Responsibility Act (TEFRA) imposed a
maximum retirement benefit which may be paid by a qualified retirement plan. At
the present time, that limit is $118,000.

The following table sets forth 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:
<TABLE>
<CAPTION>
Remuneration Years of Service
Salaries 15 20 25 30
<S> <C> <C> <C> <C>
$ 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
175,000. . . . . . . . . 45,937 61,250 76,562 91,875
200,000. . . . . . . . . 52,500 70,000 87,500 105,000
225,000. . . . . . . . . 59,062 78,750 98,437 118,125*
250,000. . . . . . . . . 65,625 87,500 109,375 131,250*
275,000. . . . . . . . . 72,187 96,250 120,312* 144,375*
300,000. . . . . . . . . 78,750 105,000 131,250* 157,500*
<FN>
*Exceeds the actual amount which can be paid pursuant
to the present limitations of TEFRA.
</TABLE>
Subject to the $150,000 maximum limit on annual compensation which may be
covered by a qualified pension plan, amounts included in the cash compensation
table do not vary substantially from the compensation covered by the pension
plan.

The following table sets forth the credited years of service for the
executive officers of the Company at August 31, 1994.
Name Years of Creditable Service

H. D. Cleberg . . . . . . . . . . . . 29
G. E. Evans . . . . . . . . . . . . . 20
R. W. Honse . . . . . . . . . . . . . 20
J. F. Berardi . . . . . . . . . . . . 1
S. P. Dees . . . . . . . . . . . . . . 9

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 ($118,000).

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 for all participants for the eight months ended August 31,
1994 was $621,012 of which $383,736 was charged to operations.

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.

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.

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 . . . . . . . . $ 106,000
State taxes and fees . . . . . . . . . . . . . . . 8,000
Printing and engraving . . . . . . . . . . . . . . 211,000
Accounting and legal . . . . . . . . . . . . . . . 54,000
Trustee fee . . . . . . . . . . . . . . . . . . . . 13,000
Advertising and administration . . . . . . . . . . 973,000
$ 1,365,000

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."

Farmland Industries, Inc.'s Board of Directors, and shareholders at their
regularly scheduled meeting on September 15, 1987 and December 4, 1987,
respectively, adopted the following resolution:

RESOLVED, That the Board of Directors hereby approves and
recommends for adoption by the members, the amendment of Article VII
of the Association by the addition thereto of a new section to read 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

Unregistered equities issued by Farmland during each of the years in the
three-year period ended August 31, 1994 were as follows:
<TABLE>
<CAPTION>
Associate Member
Common Stock Common Stock
(Nondividend Bearing) (Nondividend Bearing) Capital
Year Ended Par Value $25 Par Value $25 Credits
August 31 Shares Amount Shares Amount Amount
<S> <C> <C> <C> <C> <C>
1994 32,202 $ 805,050 83,273 $ 2,081,825 $ 7,740,453
1993 46,993 $ 1,174,825 11,348 $ 283,700 $ 1,947,119
1992 50,614 $ 1,265,350 25,829 $ 645,725 $ 12,967,039
</TABLE>
Farmland issues common stock, associate member common stock and capital
credits: 1) to satisfy one of the requirements of eligible persons for
membership in the cooperative; 2) as the form of payment of the portion of
patronage refunds not paid with cash; and, 3) upon conversion (to common stock,
associate member common stock or capital credits) by holders of other types
of these equities. Such conversions result from a change of membership status.

See "The Company - Membership."

In addition, in 1992, capital credits, exceeding the amount registered by
$4,610,653 were issued in accordance with provisions of an exchange offer to
other owners of Farmland Foods, Inc.

Registration of such common stock, associate member common stock and
capital credits issued to qualify eligible persons for membership in the
cooperative and for payment of patronage refunds is not required under the
Securities Act of 1933 (the "Act") under the provisions of Section 2(3)
thereof, as there is "no sale" or "offer to sell" a security for value as
those terms are used in Section 2(3).

An exemption from registration under the Act of common stock, associate
member common stock and capital credits issued upon conversion of other types
of these equities is claimed under Section 3(a) 9 thereof for an exchange of
securities by an issuer with its own security holders exclusively where no
commission or other remuneration is paid or given directly or indirectly for
soliciting such exchange.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

The following exhibits and financial statement schedules are filed as a part of
this Registration Statement.

Exhibit No. Exhibit

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, 1993. (Incorporated by
Reference - Form 10-K, filed November 29, 1994)

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 of10-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)

INSTRUMENTS DEFINING RIGHTS OF OWNERS OF INDEBTEDNESS NOT
REGISTERED:

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 re Legality

MATERIAL CONTRACTS:

LEASE CONTRACTS:
10.(i)A 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. consummated a leveraged lease in the
amount of $73,153,000 dated September 6, 1991.
(Incorporated by Reference - Form SE, filed December 3, 1991)

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

MANAGEMENT REMUNERATIVE PLANS:

10.(ii)(A)(1) Annual Employee Variable Compensation Plan (September 1,
1994 - August 31, 1995). (Incorporated by Reference -
Form 10-K, filed November 29, 1994)

10.(ii)(A)(2) Farmland Industries, Inc. Management Long-Term Incentive
Plan (Effective September 1993) (Incorporated by
Reference - Form 10-K, filed November 29, 1993).

12. Computation of Ratios

21. Subsidiaries of the Registrant

CONSENTS OF EXPERTS AND COUNSEL:

23.A Independent Auditors' Consent and Report on Schedules
23.B Consent of Legal Counsel

23.C Consent of Special Tax Counsel

23.D Consent of Qualified Independent Underwriter

24 Power of Attorney (Incorporated by Reference - Form 10-K,
filed November 29, 1994)

25.A Statement of Eligibility of Trustee and Qualification of UMB
Bank, National Association Trustee, Form T-1.
(Incorporated by Reference - Form S-1 No. 33-56821, filed
December 12, 1994)

25.B Statement of Eligibility of Trustee and Qualification of
Commerce Bank of Kansas City, National Association as
Trustee, Form T-1. (Incorporated by Reference - Form S-1
No. 33-56821, filed December 12, 1994)

27. Financial Data Schedule

EXHIBIT 5

Farmland Industries, Inc.
3315 North Oak Trafficway
Kansas City, Missouri 64116

Gentlemen:

I have reviewed your Demand Loan Certificates bearing the Certificate Interest
Rate; your 10-year Subordinated Capital Investment Certificates and your 5-
year Subordinated Capital Investment Certificates each bearing the Certificate
Interest Rate; your 10-year Subordinated Monthly Income Capital Investment
Certificates and your 5-year Subordinated Monthly Income Capital
Investment Certificates each bearing the Certificate Interest Rate. It is
my opinion that all such Demand Loan Certificates,
Subordinated Capital Investment Certificates and Subordinated Monthly Income
Capital Investment Certificates, and the issuance
thereof, have been duly authorized; that said Demand Loan Certificates are
covered by that certain Trust Indenture dated November
20, 1981, between your Association and UMB Bank, National Association, as
successor trustee to Commerce Bank of Kansas City,
National Association; that said 10-year and 5-year Subordinated Capital
Investment Certificates bearing the Certificate Interest
Rate are covered by those certain Trust Indentures dated November 8, 1984,
between your Association and Commerce Bank of Kansas
City, National Association; that said 10-year Subordinated Monthly Income
Capital Investment Certificates bearing interest at the
Certificate Interest Rate are covered by that certain Trust Indenture dated
November 8, 1984, between your Association and
Commerce Bank of Kansas City, National Association, and that said 5-year
Subordinated Monthly Income Capital Investment
Certificates bearing interest at the Certificate Interest Rate are covered
by that certain Trust Indenture dated November 11, 1985
between your Association and Commerce Bank of Kansas City, National
Association. That said Certificates, when issued and sold in
accordance with Registration Statement No. 033-56821, presently to be filed
with the Securities and Exchange Commission,
Washington, D.C., and registered in accordance with the laws of the States
in which the Certificates are and will be sold, will
constitute valid and binding obligations according to their tenor and effect.

Respectfully submitted,

Robert B. Terry
Vice President,
and General Counsel
February 8, 1995
EXHIBIT 12

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
Three Months Ended
November 30 November 30 Year Ended August 31
1994 1993 1994 1993 1992 1991 1990
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income (Loss) before
Extraordinary Item . . . . $ 47,945 $ 10,735 $ 73,876 $ (30,400) $ 61,046 $ 42,693 $ 48,580

Income Tax Expense (Benefit) $ 8,768 $ 759 $ 4,890 $ (6,433) $ 9,458 7,473 9,604

Minority Interest in Income of
Subsidiary that has
Fixed Charges . . . . . . 34 66 333 865 -0- -0- -0-

Minority Interest in
Loss of Subsidiary
that has fixed costs . . . (246) (1,507) (4,855) (37) -0- -0- -0-

Equity Interest in Loss
(Earnings) of
Less-than-fifty
Percent Owned
Investees . . . . . . 199 (212) (603) 1,007 2,341 856 113

Total Fixed Charges
(excluding interest
capitalized) . . . . . . 16,537 15,976 64,383 55,268 47,719 54,443 47,000

Earnings . . . . . . $ 73,237 $ 25,817 $ 138,024 $ 20,270 $ 120,564 $ 105,465 $ 105,297

Fixed Charges:
Interest (including
amounts
capitalized) . . . . . $ 13,544 $ 13,151 $ 51,842 $ 43,873 $ 34,426 $ 42,481 $ 37,226
Estimated Interest
Component
of Rentals . . . . . . 3,094 2,843 12,898 13,006 13,293 12,290 11,652

Total Fixed Charges . . $ 16,638 $ 15,994 $ 64,740 $ 56,879 $ 47,719 $ 54,771 $ 48,878

Ratio of Earnings to
Fixed Charges . . . . . . 4.4 1.6 2.1 0.4 2.5 1.9 2.2

Earnings Inadequate
to Cover
Fixed Charges . . . . . . $ 36,609
</TABLE>
Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Farmland Foods, Inc., a 99%-owned subsidiary, was incorporated under the laws
of the State of Kansas. Farmland Foods, Inc. has been included in the
consolidated financial statements filed in this registration.

Farmland Insurance Agency, a wholly-owned subsidiary, was incorporated under
the laws of the State of Missouri. Farmland Insurance Agency has been
included in the consolidated financial statements filed in this registration.

Farmers Chemical Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Kansas. Farmers Chemical Company has been included
in the consolidated financial statements filed in this registration.

Farmland Securities Company, a wholly-owned subsidiary, was incorporated
under the laws of the State of Delaware. Farmland Securities Company has been
included in the consolidated financial statements filed in this registration.

Cooperative Service Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Nebraska. Cooperative Service Company has been
included in the consolidated financial statements filed in this registration.

Double Circle Farm Supply Company, a wholly-owned subsidiary, was incorporated
under the laws of the State of Nevada. Double Circle Farm Supply Company has
been included in the consolidated financial statements filed in this
registration.

National Beef Packing Company, L.P., a 58%-owned subsidiary, was formed under
the laws of the State of Delaware. National Beef Packing Company has been
included in the consolidated financial statements filed in this registration.

NBPCo, L.L.C., a wholly-owned subsidiary, was formed under the laws of the
State of Kansas. NBPCo has been included in the consolidated financial
statements filed in this registration.

Farmland Financial Services Company, a wholly-owned subsidiary, was
incorporated under the laws of the State of Kansas. Farmland Financial
Services Company has been included in the consolidated financial statements
filed in this registration.

Farmland Transportation, Inc., a wholly-owned subsidiary, was incorporated
under the laws of the State of Missouri. Farmland Transportation, Inc. has
been included in the consolidated financial statements filed in this
registration.

Environmental and Safety Services, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Missouri. Environmental and Safety
Services, Inc. has been filed in the consolidated financial statements
included in this registration.

Penterra, Inc., a 81%-owned subsidiary, was incorporated under the laws of
the State of Kansas. Penterra, Inc. has been included in the consolidated
financial statements filed in this registration.

Farmland Industries, Ltd., a wholly-owned subsidiary, was incorporated under
the laws of the United States Virgin Islands. Farmland Industries, Ltd. has
been included in the consolidated financial statements filed in this
registration.

Heartland Data Services, Inc., a wholly-owned subsidiary, was incorporated
under the laws of the State of Kansas. Heartland Data Services, Inc. has
been included in the consolidated financial statements filed in this
registration.

Yuma Feeder Pig, Inc., a 72%-owned subsidiary, was incorporated under the laws
of the state of Colorado. Yuma Feeder Pig, Inc. has been included in the
consolidated financial statements filed in this registration.

Equity Country, Inc., a wholly-owned subsidiary, was incorporated under the
laws of the State of Delaware. Equity Country, Inc. has been included in the
consolidated financial statements filed in this registration.

Equity Export Oil and Gas Company, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Oklahoma. Equity Export Oil and
Gas Company, Inc. has been included in the consolidated financial statements
filed in this registration.

Ceres Realty Corporation, a wholly-owned subsidiary, was incorporated under
the laws of the State of Missouri. Ceres Realty Corporation has been included
in the consolidated financial statements filed in this registration.

Heartland Wheat Growers, L.P., a 79%-owned subsidiary, was formed under the
laws of the State of Kansas. Heartland Wheat Growers has been included in
the consolidated financial statements filed in this registration.

Heartland Wheat Growers, Inc., a 79%-owned subsidiary, was incorporated under
the laws of the State of Kansas. Heartland Wheat Growers has been included
in the consolidated financial statements filed in this registration.

Farmland Industrias S.A. de C.V., a wholly-owned subsidiary, was formed under
the laws of Mexico. Farmland Industrias has been included in the consolidated
financial statements filed in this registration.

National Carriers, Inc., a 79%-owned subsidiary, was incorporated under the
laws of the State of Kansas. National Carriers has been included in the
consolidated financial statements filed in this registration.

Supreme Land, Inc., a wholly-owned subsidiary, was incorporated under the
laws of the State of Kansas. Supreme Land has been included in the
consolidated financial statements filed in this registration.

Tradigrain, Inc., a wholly-owned subsidiary, was incorporated under the laws
of the State of Tennessee. Tradigrain, Inc. has been included in the
consolidated financial statements filed in this registration.

Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Switzerland. Tradigrain S.A. of Switzerland has been included in the
consolidated financial statements filed in this registration.

Tradigrain Shipping S.A., a wholly-owned subsidiary, was formed under the laws
of Switzerland. Tradigrain Shipping S.A. has been included in the
consolidated financial statements filed in this registration.

Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
France. Tradigrain S.A. of France has been included in the consolidated
financial statements filed in this registration.

Tradigrain GmbH, a wholly-owned subsidiary, was formed under the laws of
Germany. Tradigrain GmbH has been included in the consolidated financial
statements filed in this registration.

Tradigrain LTD., a wholly-owned subsidiary, was formed under the laws of
Great Britain. Tradigrain LTD. has been included in the consolidated
financial statements filed in this registration.

Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Argentina. Tradigrain S.A. of Argentina has been included in the
consolidated financial statements filed in this registration.

EXHIBIT 23.A

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

The Board of Directors
Farmland Industries, Inc.:

The audits referred to in our report dated October 21, 1994 included the
related financial statement schedules as of August 31, 1994, and for each of
the years in the three-year period ended August 31, 1994, included in the
Registration Statement in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.

Our report dated October 21, 1994 contains an explanatory paragraph
concerning income tax adjustments proposed by the Internal Revenue Service
on the gain on sale of and certain distributions by Terra Resources, Inc.

We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data", and
"Experts" in the Prospectus.

KPMG PEAT MARWICK LLP

Kansas City, Missouri
February 8, 1995
EXHIBIT 23.B

CONSENT OF LEGAL COUNSEL

Farmland Industries, Inc.:

The undersigned consents to the use herein of his opinion, dated
December 12, 1994, relating to the legality of Subordinated Capital Investment
Certificates, Subordinated Monthly Income Capital Investment Certificates, and
Demand Loan Certificates being registered, and of all other statements and
opinions attributed to him appearing in this Registration Statement
No. 033-56821.

Robert B. Terry
Vice President,
and General Counsel
Kansas City, Missouri
February 8, 1995
EXHIBIT 23.C

CONSENT OF SPECIAL TAX COUNSEL

Farmland Industries, Inc.:

We consent to the references to our firm in the Prospectus filed as part of
this Registration Statement.

BRYAN CAVE

February 8, 1995

EXHIBIT 23.D

CONSENT OF QUALIFIED INDEPENDENT UNDERWRITER

Farmland Industries, Inc.:

We consent to the references to our firm under the caption "Qualified
Independent Underwriter" in the Prospectus.

James H. Glen, Jr.
INTERSTATE/JOHNSON LANE CORPORATION

February 8, 1995

(B) FINANCIAL STATEMENT SCHEDULES

Farmland Industries, Inc. and Subsidiaries for each of the years in
the three-year period ended August 31, 1994:
Page

II--Amounts Receivable from Related Parties . . . .. . S-14

V--Property, Plant and Equipment . . . . . . . . . . S-15

VI--Accumulated Depreciation and Amortization of
Property, Plant and Equipment . . . . . . . . . S-18

IX--Short-term Borrowings . . . . . . . . . . . . .. . S-21

X--Supplementary Income Statement Information . . . . S-21

All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related notes.

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES

FOR THE YEARS ENDED AUGUST 31, 1994, 1993 AND 1992
<TABLE>
<CAPTION>

Balance at Deductions Balance at
the Beginning Amounts Amounts the End
Name of Debtor of the Period Additions Collected Written Off of the Period
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
AUGUST 31, 1994
S.F. Industries (a) . . . . . . . . . $ 450 $ 2,000 $ 2,450 $ -0- $ -0-
Hyplains Beef (b) . . . . . . . . . . $ 6,126 $ 17,744 $ -0- $ -0- $ 23,870

AUGUST 31, 1993
S.F. Industries . . . . . . . . . . . $ 950 $ -0- $ 500 $ -0- $ 450
Hyplains Beef . . . . . . . . . . . . $ 4,348 $ 1,778 $ -0- $ -0- $ 6,126

AUGUST 31, 1992
S.F. Industries . . . . . . . . . . . $ -0- $ 3,950 $ 3,000 $ -0- $ 950
Hyplains Beef . . . . . . . . . . . . $ -0- $ 4,348 $ -0- $ -0- $ 4,348

<FN>
(a) Farmland has a $5,000,000 commitment to S.F. Industries, L.L.C. to fund
working capital requirements, interest on the working capital loan,
calculated at the LIBOR rate plus .50% is payable on the last day
of September, December, March and June.

(b) Farmland purchases cattle for the day-to-day operations of its 50% owned
venture, Hyplains Beef L.C. This receivable is non-interest bearing.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT

FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
Other
Balance Charges Balance
September 1, Additions Retirements Add/ August 31,
Classification 1993 at Cost or Sales (Deduct) 1994
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land and Land Improvements . . . . . . . $ 11,825 $ 2,214 $ 16 $ (409) $ 13,614
Site Improvements . . . . . . . . . . . . 26,877 1,524 129 375 28,647
Buildings . . . . . . . . . . . . 215,420 7,814 1,523 3,056 224,767
Machinery and Equipment . . . . . . . . . 678,784 61,997 12,976 (11,122) 716,683
Automotive Equipment . . . . . . . . . . 46,807 8,349 8,617 19,447 65,986
Furniture and Fixtures . . . . . . . . . 45,405 7,982 4,236 (538) 48,613
Livestock . . . . . . . . . . . . 4,373 1,968 1,639 (776) 3,926
Mining Properties . . . . . . . . . . . . 3,119 -0- -0- -0- 3,119
Leasehold Improvements . . . . . . . . . 12,149 2,716 -0- 220 15,085
Capital Lease . . . . . . . . . . . . 52,342 1,691 2,955 (122) 50,956
Construction and Acquisitions
in Progress (a) . . . . . . . . . . 57,242 (26,479) -0- -0- 30,763

Total Property, Plant
and Equipment . . . . . . . . $ 1,154,343 $ 69,776 $ 32,091 $ 10,131 $ 1,202,159
<FN>

(a) Construction and acquisitions in progress reflects the net change for
the period after transfers to other classifications.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT

FOR THE YEAR ENDED AUGUST 31, 1993
<TABLE>
<CAPTION>
Other
Balance Charges Balance
September 1, Additions Retirements Add/ August 31,
Classification 1992 at Cost or Sales (Deduct) 1993
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land and Land Improvements . . . . . . . $ 11,437 $ 880 $ 1,043 $ 551 $ 11,825
Site Improvements . . . . . . . . . . . . 15,308 10,087 96 1,578 26,877
Buildings . . . . . . . . . . . . 193,215 34,531 9,806 (2,520) 215,420
Machinery and Equipment . . . . . . . . . 593,014 77,998 11,409 19,181 678,784
Automotive Equipment . . . . . . . . . . 46,324 6,459 2,032 (3,944) 46,807
Furniture and Fixtures . . . . . . . . . 37,850 7,251 1,491 1,795 45,405
Livestock . . . . . . . . . . . . -0- -0- -0- 4,373 4,373
Mining Properties . . . . . . . . . . . . 26,569 217 -0- (23,667) 3,119
Leasehold Improvements . . . . . . . . . 10,215 5,745 158 (3,653) 12,149
Fertilizer Properties . . . . . . . . . . 48,695 -0- -0- (48,695) -0-
Capital Lease . . . . . . . . . . . . -0- -0- -0- 52,342 52,342
Construction and Acquisitions
in Progress(a) . . . . . . . . . . 53,812 3,432 -0- (2) 57,242
Total Property, Plant
and Equipment . . . . . . . . $ 1,036,439 $ 146,600 $ 26,035 $ (2,661) $ 1,154,343
<FN>

(a) Construction and acquisitions in progress reflects the net change for
the period after transfers to other classifications.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT

FOR THE YEAR ENDED AUGUST 31, 1992
<TABLE>
<CAPTION>
Other
Balance Charges Balance
September 1, Additions Retirements Add/ August 31,
Classification 1991 at Cost or Sales (Deduct) 1992
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land and Land Improvements . . . . . . . $ 12,560 $ 2,618 $ 3,534 $ (207) $ 11,437
Site Improvements . . . . . . . . . . . . 19,751 425 6,146 1,278 15,308
Buildings . . . . . . . . . . . . 154,062 50,132 10,217 (762) 193,215
Machinery and Equipment . . . . . . . . . 711,751 35,653 151,368 (3,022) 593,014
Automotive Equipment . . . . . . . . . . 44,328 8,071 5,852 (223) 46,324
Furniture and Fixtures . . . . . . . . . 37,166 5,462 5,264 486 37,850
Mining Properties . . . . . . . . . . . . 82,672 -0- 54,826 (1,277) 26,569
Leasehold Improvements . . . . . . . . . 9,465 749 -0- 1 10,215
Fertilizer Properties . . . . . . . . . . 49,544 -0- 849 -0- 48,695
Construction and Acquisitions
in Progress(a) . . . . . . . . . . 35,207 24,821 4,574 (1,642) 53,812

Total Property, Plant
and Equipment . . . . . . . . $ 1,156,506 $ 127,931 $ 242,630 $ (5,368) $ 1,036,439
<FN>
(a) Construction and acquisitions in progress reflects the net change for
the period after transfers to other classifications.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT
AND EQUIPMENT

FOR THE YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION> Additions
Charged to Other
Balance Profit and Retirements, Charges Balance
September 1, Loss of Renewals and Add/ August 31,
Classification 1993 Income Replacements (Deduct) 1994
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land Improvements . . . . . . . . . . . . $ 154 $ 1 $ -0- $ -0- $ 155
Site Improvements . . . . . . . . . . . . 12,707 1,337 91 (7) 13,946
Buildings . . . . . . . . . . . . 76,426 8,950 820 2,740 87,296
Machinery and Equipment . . . . . . . . . 453,705 28,449 4,472 (2,215) 475,467
Automotive Equipment . . . . . . . . . . 36,062 4,356 3,623 9,626 46,421
Furniture and Fixtures . . . . . . . . . 27,855 7,361 3,227 162 32,151
Livestock . . . . . . . . . . . . 1,768 1,396 1,013 (362) 1,789
Mining Properties . . . . . . . . . . . . 192 19 -0- -0- 211
Leasehold Improvements . . . . . . . . . 3,847 1,323 -0- 213 5,383
Capital Lease . . . . . . . . . . . . 37,249 3,350 2,429 (120) 38,050
Construction and Acquisitions
in Progress (a) . . . . . . . . . . -0- -0- -0- -0- -0-

Totals . . . . . . . . . . . . $ 649,965 $ 56,542 $ 15,675 $ 10,037 $ 700,869
<FN>

(a) Construction and acquisitions in progress reflects the net change for
the period after transfers to other classifications.
</TABLE>

NOTE: The following percentages are used for computing
depreciation:

Land Improvements . . . . . . . . 6 to 10%
Site Improvements . . . . . . . . 3 to 30%
Buildings . . . . . . . . . . . . 2 to 10%
Machinery and Equipment . . . . . 3 to 20%
Automotive Equipment . . . . . . . 10 to 33%
Furniture and Fixtures . . . . . . 10 to 20%
Livestock . . . . . . . . . . . . 25 to 50%
Mining Properties . . . . . . . . 4 to 21%
Leasehold Improvements . . . . . . . 4 to 6%
Capital Lease . . . . . . . . . . . 6 to 7%

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT

FOR THE YEAR ENDED AUGUST 31, 1993
<TABLE>
<CAPTION> Additions
Charged to Other
Balance Profit and Retirements, Charges Balance
September 1, Loss of Renewals and Add/ August 31,
Classification 1992 Income Replacements (Deduct) 1993
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land Improvements . . . . . . . . . . . . $ 153 $ 1 $ -0- $ -0- $ 154
Site Improvements . . . . . . . . . . . . 10,377 2,439 94 (15) 12,707
Buildings . . . . . . . . . . . . 69,907 7,832 875 (438) 76,426
Machinery and Equipment(a) . . . . . . . 418,331 28,720 10,499 17,153 453,705
Automotive Equipment . . . . . . . . . . 32,827 4,366 1,474 343 36,062
Furniture and Fixtures . . . . . . . . . 21,537 6,398 1,333 1,253 27,855
Livestock . . . . . . . . . . . . 1,768 1,768
Mining Property . . . . . . . . . . . . . 192 192
Leasehold Improvements . . . . . . . . . 3,211 872 11 (225) 3,847
Fertilizer Properties . . . . . . . . . . 34,094 3,199 78 (37,215) -0-
Capital Lease . . . . . . . . . . . . 37,249 37,249
Construction and Acquisitions
in Progress (b) . . . . . . . . . . -0- -0- -0- -0- -0-

Totals . . . . . . . . . . . . $ 590,437 $ 53,827 $ 14,364 $ 20,065 $ 649,965
<FN>

(a) Based on negotiations with potential purchasers, the carrying values
of the Coffeyville, Kansas refinery and a dragline were
reduced by adjusting accumulated depreciation by $17,622,000
and $6,155,000, respectively.

(b) Construction and acquisitions in progress reflects the net change for
the period after transfers to other classifications.
</TABLE>
NOTE: The following percentages are used for computing depreciation:

Land Improvements . . . . . 6 to 10%
Site Improvements . . . . . 3 to 30%
Buildings . . . . . . . . . 2 to 10%
Machinery and Equipment . . 3 to 20%
Automotive Equipment . . . . 10 to 33%
Furniture and Fixtures . . . 10 to 20%
Livestock . . . . . . . . . 25 to 50%
Mining Properties . . . . . 4 to 21%
Leasehold Improvements . . . . 4 to 6%
Fertilizer Properties . . . . 6 to 7%
Capital Lease . . . . . . . . 6 to 7%

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT

FOR THE YEAR ENDED AUGUST 31, 1992
<TABLE>
<CAPTION> Additions
Charged to Other
Balance Profit and Retirements, Charges Balance
September 1, Loss of Renewals and Add/ August 31,
Classification 1991 Income Replacements (Deduct) 1992
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Land Improvements . . . . . . . . . . . . $ 153 $ 1 $ -0- $ (1) $ 153
Site Improvements . . . . . . . . . . . . 13,666 676 3,968 3 10,377
Buildings . . . . . . . . . . . . 72,369 5,810 8,261 (11) 69,907
Machinery and Equipment . . . . . . . . . 488,684 29,592 98,262 (1,683) 418,331
Automotive Equipment . . . . . . . . . . 32,293 3,149 2,626 11 32,827
Furniture and Fixtures . . . . . . . . . 22,075 3,738 5,486 1,210 21,537
Leasehold Improvements . . . . . . . . . 2,375 836 -0- -0- 3,211
Fertilizer Properties . . . . . . . . . . 34,066 3,591 3,563 -0- 34,094
Construction and Acquisitions in
Progress(a) . . . . . . . . . . . 113 -0- -0- (113) -0-

Totals . . . . . . . . . . . . $ 665,794 $ 47,393 $ 122,166 $ (584) $ 590,437
<FN>

(a) Construction and acquisitions in progress reflects the net change for
the period after transfers to other classifications.
</TABLE>

NOTE: The following percentages are used for computing depreciation:

Land Improvements . . . . . . 6 to 10%
Site Improvements . . . . . . 3 to 30%
Buildings . . . . . . . . . 2 to 10%
Machinery and Equipment . . . 3 to 20%
Automotive Equipment . . . . 10 to 33%
Furniture and Fixtures . . . 10 to 20%
Leasehold Improvements . . . . 4 to 6%
Fertilizer Properties . . . . 6 to 7%

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

SCHEDULE IX--SHORT-TERM BORROWINGS

<TABLE>
<CAPTION>
Weighted
Maximum Average Average
Amount Amount Interest
Balance Weighted Outstanding Outstanding Rate
Category of Aggregate End of Average During During During the
Short-Term Borrowings Period Interest Rate the Period the Period Period (1)
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
August 31, 1994:
Demand Loan Certificates . . . . . . . . $ 23,158 4.3% $ 39,873 $ 28,299 3.9%
Bank Debt $ 281,886 5.2% $ 417,446 $ 302,500 4.2%

August 31, 1993:
Demand Loan Certificates . . . . . . . . $ 29,860 3.8% $ 46,403 $ 35,002 4.3%
Bank Debt $ 268,783 4.1% $ 370,726 $ 348,230 4.2%

August 31, 1992:
Demand Loan Certificates . . . . . . . . $ 43,084 5.5% $ 58,684 $ 50,516 6.3%
Bank Debt $ 200,072 4.5% $ 200,822 $ 174,397 5.3%
<FN>

(1)The weighted average interest rate was calculated by dividing an
interest amount on short-term borrowings by the average
daily balance of short-term borrowings during the period.
</TABLE>

SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION

<TABLE>
<CAPTION>
Charged to Costs and Expenses
For the Year Ended August 31
1994 1993 1992
(Amounts in Thousands)
<S> <C> <C> <C>
1. Maintenance and repairs . . . . . . . . $ 58,730 $ 61,273 $ 50,252

<FN>
NOTE: All other items required by Schedule X are excluded as such
items are less than one (1) percent of total sales for
each of the years presented.
</TABLE>

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 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 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 February 8, 1995.

FARMLAND INDUSTRIES, INC.

BY H. D. CLEBERG
H. D. Cleberg
President and Chief Executive Officer

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

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED FOR THE FOLLOWING PERSONS ON THE DATE INDICATED
PURSUANT TO VALID POWER OF ATTORNEY EXECUTED ON OCTOBER 19, 1994.

Signature Title Date

ALBERT J. SHIVLEY Chairman of Board, February 8, 1995
Albert J. Shivley Director

OTIS H. MOLZ Vice Chairman of Board, February 8, 1995
Otis H. Molz Director

LYMAN ADAMS Director February 8, 1995
Lyman Adams

RONALD J. AMUNDSON Director February 8, 1995
Ronald J. Amundson

BAXTER ANKERSTJERNE Director February 8, 1995
Baxter Ankerstjerne

JODY BEZNER Director February 8, 1995
Jody Bezner

RICHARD L. DETTEN Director February 8, 1995
Richard L. Detten

STEVEN ERDMAN Director February 8, 1995
Steven Erdman

WARREN GERDES Director February 8, 1995
Warren Gerdes

BEN GRIFFITH Director February 8, 1995
Ben Griffith

GAIL D. HALL Director February 8, 1995
Gail D. Hall

Director February 8, 1995
Jerome Heuertz

BARRY JENSEN Director February 8, 1995
Barry Jensen

GREG PFENNING Director February 8, 1995
Greg Pfenning

VONN RICHARDSON Director February 8, 1995
Vonn Richardson

MONTE ROMOHR Director February 8, 1995
Monte Romohr

Director February 8, 1995
Joe Royster

PAUL RUEDINGER Director February 8, 1995
Paul Ruedinger

RAYMOND J. SCHMITZ Director February 8, 1995
Raymond J. Schmitz

THEODORE J. WEHRBEIN Director February 8, 1995
Theodore J. Wehrbein

ROBERT ZINKULA Director February 8, 1995
Robert Zinkula

EXHIBIT 99

Exhibits Index

The following exhibits and financial statement schedules are filed as a part of
this Amendment No. 1 of the Form S-1 Registration Statement. Certain of these
exhibits are incorporated by reference as indicated. Items marked with an
asterisk (*) are filed herewith.

Exhibit No. Exhibit

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, 1993. (Incorporated by Reference - Form 10-K,
filed November 29, 1994)

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)

INSTRUMENTS DEFINING RIGHTS OF OWNERS OF INDEBTEDNESS NOT REGISTERED:

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 re Legality

MATERIAL CONTRACTS:
LEASE CONTRACTS:

10.(i)A 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.
consummated a leveraged lease in the amount of $73,153,000 dated
September 6, 1991. (Incorporated by Reference - Form SE, filed
December 3, 1991)

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

MANAGEMENT REMUNERATIVE PLANS:

10.(ii)(A)(1) Annual Employee Variable Compensation Plan (September 1,
1994 - August 31, 1995). (Incorporated by Reference - Form
10-K, filed November 29, 1994)

10.(ii)(A)(2) Farmland Industries, Inc. Management Long-Term Incentive
Plan (Effective September 1993) (Incorporated by Reference -
Form 10-K, filed November 29, 1993).

*12. Computation of Ratios

*21. Subsidiaries of the Registrant

CONSENTS OF EXPERTS AND COUNSEL:
*23.A Independent Auditors' Consent and Report on Schedules

*23.B Consent of Legal Counsel

*23.C Consent of Special Tax Counsel

*23.D Consent of Qualified Independent Underwriter

24 Power of Attorney (Incorporated by Reference - Form 10-K, filed November
29, 1994)

25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association Trustee, Form T-1. (Incorporated by Reference -
Form S-1 No. 33-56821, filed December 12, 1994)

25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank of
Kansas City, National Association as Trustee, Form T-1. (Incorporated by
Reference - Form S-1 No. 33-56821, filed December 12, 1994)

*27. Financial Data Schedule

EXHIBIT 5

Farmland Industries, Inc.
3315 North Oak Trafficway
Kansas City, Missouri 64116

Gentlemen:

I have reviewed your Demand Loan Certificates bearing the Certificate
Interest Rate; your 10-year Subordinated Capital Investment Certificates and
your 5-year Subordinated Capital Investment Certificates each bearing the
Certificate Interest Rate; your 10-year Subordinated Monthly Income Capital
Investment Certificates and your 5-year Subordinated Monthly Income Capital
Investment Certificates each bearing the Certificate Interest Rate. It is my
opinion that all such Demand Loan Certificates, Subordinated Capital Investment
Certificates and Subordinated Monthly Income Capital Investment Certificates,
and the issuance thereof, have been duly authorized; that said Demand Loan
Certificates are covered by that certain Trust Indenture dated November 20,
1981, between your Association and UMB Bank, National Association, as successor
trustee to Commerce Bank of Kansas City, National Association; that said 10-year
and 5-year Subordinated Capital Investment Certificates bearing the Certificate
Interest Rate are covered by those certain Trust Indentures dated November 8,
1984, between your Association and Commerce Bank of Kansas City, National
Association; that said 10-year Subordinated Monthly Income Capital Investment
Certificates bearing interest at the Certificate Interest Rate are covered by
that certain Trust Indenture dated November 8, 1984, between your Association
and Commerce Bank of Kansas City, National Association, and that said 5-year
Subordinated Monthly Income Capital Investment Certificates bearing interest at
the Certificate Interest Rate are covered by that certain Trust Indenture dated
November 11, 1985 between your Association and Commerce Bank of Kansas City,
National Association. That said Certificates, when issued and sold in
accordance with Registration Statement No. 033-56821, presently to be filed with
the Securities and Exchange Commission, Washington, D.C., and registered in
accordance with the laws of the States in which the Certificates are and will be
sold, will constitute valid and binding obligations according to their tenor and
effect.

Respectfully submitted,

Robert B. Terry
Vice President,
and General Counsel

February 8, 1995

EXHIBIT 12

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES

Income Tax Expense (Benefit) $ 8,768 $ 759 $ 4,890 $ (6,433) $ 9,458 7,473 9,604

Minority Interest in Income of
Subsidiary that has
Fixed Charges . . . . . . 34 66 333 865 -0- -0- -0-

Minority Interest in
Loss of Subsidiary
that has fixed costs . . . (246) (1,507) (4,855) (37) -0- -0- -0-

Equity Interest in Loss
(Earnings) of
Less-than-fifty
Percent Owned
Investees . . . . . . 199 (212) (603) 1,007 2,341 856 113

Total Fixed Charges
(excluding interest
capitalized) . . . . . . 16,537 15,976 64,383 55,268 47,719 54,443 47,000

Earnings . . . . . . $ 73,237 $ 25,817 $ 138,024 $ 20,270 $ 120,564 $ 105,465 $105,297

Total Fixed Charges . . $ 16,638 $ 15,994 $ 64,740 $ 56,879 $ 47,719 $ 54,771 $ 48,878

Ratio of Earnings to
Fixed Charges . . . . . . 4.4 1.6 2.1 0.4 2.5 1.9 2.2

Earnings Inadequate
to Cover
Fixed Charges . . . . . . $ 36,609
</TABLE>

Exhibit 21

SUBSIDIARIES OF THE REGISTRANT

Farmland Foods, Inc., a 99%-owned subsidiary, was incorporated under the laws of
the State of Kansas. Farmland Foods, Inc. has been included in the consolidated
financial statements filed in this registration.

Farmland Insurance Agency, a wholly-owned subsidiary, was incorporated under the
laws of the State of Missouri. Farmland Insurance Agency has been included in
the consolidated financial statements filed in this registration.

Farmers Chemical Company, a wholly-owned subsidiary, was incorporated under the
laws of the State of Kansas. Farmers Chemical Company has been included in the
consolidated financial statements filed in this registration.

Farmland Securities Company, a wholly-owned subsidiary, was incorporated under
the laws of the State of Delaware. Farmland Securities Company has been
included in the consolidated financial statements filed in this registration.

NBPCo, L.L.C., a wholly-owned subsidiary, was formed under the laws of the State
of Kansas. NBPCo has been included in the consolidated financial statements
filed in this registration.

Farmland Financial Services Company, a wholly-owned subsidiary, was incorporated
under the laws of the State of Kansas. Farmland Financial Services Company has
been included in the consolidated financial statements filed in this
registration.

Farmland Transportation, Inc., a wholly-owned subsidiary, was incorporated under
the laws of the State of Missouri. Farmland Transportation, Inc. has been
included in the consolidated financial statements filed in this registration.

Penterra, Inc., a 81%-owned subsidiary, was incorporated under the laws of the
State of Kansas. Penterra, Inc. has been included in the consolidated financial
statements filed in this registration.

Farmland Industries, Ltd., a wholly-owned subsidiary, was incorporated under the
laws of the United States Virgin Islands. Farmland Industries, Ltd. has been
included in the consolidated financial statements filed in this registration.

Heartland Data Services, Inc., a wholly-owned subsidiary, was incorporated under
the laws of the State of Kansas. Heartland Data Services, Inc. has been
included in the consolidated financial statements filed in this registration.

Equity Country, Inc., a wholly-owned subsidiary, was incorporated under the laws
of the State of Delaware. Equity Country, Inc. has been included in the
consolidated financial statements filed in this registration.

Equity Export Oil and Gas Company, Inc., a wholly-owned subsidiary, was
incorporated under the laws of the State of Oklahoma. Equity Export Oil and Gas
Company, Inc. has been included in the consolidated financial statements filed
in this registration.

Ceres Realty Corporation, a wholly-owned subsidiary, was incorporated under the
laws of the State of Missouri. Ceres Realty Corporation has been included in
the consolidated financial statements filed in this registration.

Heartland Wheat Growers, L.P., a 79%-owned subsidiary, was formed under the laws
of the State of Kansas. Heartland Wheat Growers has been included in the
consolidated financial statements filed in this registration.

Heartland Wheat Growers, Inc., a 79%-owned subsidiary, was incorporated under
the laws of the State of Kansas. Heartland Wheat Growers has been included in
the consolidated financial statements filed in this registration.

National Carriers, Inc., a 79%-owned subsidiary, was incorporated under the laws
of the State of Kansas. National Carriers has been included in the consolidated
financial statements filed in this registration.

Supreme Land, Inc., a wholly-owned subsidiary, was incorporated under the laws
of the State of Kansas. Supreme Land has been included in the consolidated
financial statements filed in this registration.

Tradigrain, Inc., a wholly-owned subsidiary, was incorporated under the laws of
the State of Tennessee. Tradigrain, Inc. has been included in the consolidated
financial statements filed in this registration.

Tradigrain Shipping S.A., a wholly-owned subsidiary, was formed under the laws
of Switzerland. Tradigrain Shipping S.A. has been included in the consolidated
financial statements filed in this registration.

Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of France.
Tradigrain S.A. of France has been included in the consolidated financial
statements filed in this registration.

Tradigrain GmbH, a wholly-owned subsidiary, was formed under the laws of
Germany. Tradigrain GmbH has been included in the consolidated financial
statements filed in this registration.

Tradigrain LTD., a wholly-owned subsidiary, was formed under the laws of Great
Britain. Tradigrain LTD. has been included in the consolidated financial
statements filed in this registration.

Tradigrain S.A., a wholly-owned subsidiary, was formed under the laws of
Argentina. Tradigrain S.A. of Argentina has been included in the consolidated
financial statements filed in this registration.

EXHIBIT 23.A

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULES

The Board of Directors
Farmland Industries, Inc.:

The audits referred to in our report dated October 21, 1994 included the
related financial statement schedules as of August 31, 1994, and for each of
the years in the three-year period ended August 31, 1994, included in the
Registration Statement in the accompanying index. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.

Our report dated October 21, 1994 contains an explanatory paragraph
concerning income tax adjustments proposed by the Internal Revenue Service on
the gain on sale of and certain distributions by Terra Resources,
Inc.

We consent to the use of our reports included herein and to the references
to our firm under the headings "Selected Consolidated Financial Data", and
"Experts" in the Prospectus.

KPMG PEAT MARWICK LLP

Kansas City, Missouri
February 8, 1995

Exhibit 23.B

CONSENT OF LEGAL COUNSEL

Farmland Industries, Inc.:

The undersigned consents to the use herein of his opinion, dated December
12, 1994, relating to the legality of Subordinated Capital Investment
Certificates, Subordinated Monthly Income Capital Investment Certificates, and
Demand Loan Certificates being registered, and of all other statements and
opinions attributed to him appearing in this Registration Statement No. 033-
56821.

Robert B. Terry
Vice President,
and General Counsel

Kansas City, Missouri
February 8, 1995

EXHIBIT 23.C

CONSENT OF SPECIAL TAX COUNSEL

Farmland Industries, Inc.:

We consent to the references to our firm in the Prospectus filed as part of
this Registration Statement.

BRYAN CAVE

February 8, 1995

EXHIBIT 23.D

CONSENT OF QUALIFIED INDEPENDENT UNDERWRITER

Farmland Industries, Inc.:

We consent to the references to our firm under the caption "Qualified
Independent Underwriter" in the Prospectus.

James H. Glen, Jr.
INTERSTATE/JOHNSON LANE CORPORATION

February 8, 1995

<ARTICLE> 5
<LEGEND>
TO REFLECT QUARTERLY INFORMATION AS INCLUDED IN AMENDMENT NO. 2 TO
REGISTRATION STATEMENT NO. 33-56821
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> NOV-30-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 380,854
<ALLOWANCES> 0
<INVENTORY> 590,826
<CURRENT-ASSETS> 1,077,509
<PP&E> 1,218,935
<DEPRECIATION> 711,943
<TOTAL-ASSETS> 1,920,378
<CURRENT-LIABILITIES> 776,619
<BONDS> 493,161
<COMMON> 399,361
0
3,701
<OTHER-SE> 181,799
<TOTAL-LIABILITY-AND-EQUITY> 1,920,378
<SALES> 1,592,037
<TOTAL-REVENUES> 1,616,167
<CGS> 1,469,098
<TOTAL-COSTS> 1,481,889
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,443
<INCOME-PRETAX> 56,501
<INCOME-TAX> 8,768
<INCOME-CONTINUING> 47,945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,945
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>