FARMLAND INDUSTRIES INC, S-1/A, 1996-12-24

FARMLAND INDUSTRIES INC
S-1/A, 1996-12-24
MEAT PACKING PLANTS

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Registration Statement No. 333-16945

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM S-1/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FARMLAND INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
KANSAS 44-0209330
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2011
(PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER)

3315 NORTH FARMLAND TRAFFICWAY, KANSAS CITY, MISSOURI 64116-0005
816-459-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

TERRY M. CAMPBELL
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FARMLAND INDUSTRIES, INC.
3315 NORTH FARMLAND TRAFFICWAY, KANSAS CITY, MISSOURI 64116-0005
816-459-6348
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement, as determined by
market conditions.

IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933 CHECK THE FOLLOWING BOX. [ X ]

IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]

IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]

IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE

PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITY BEING REGISTERED OR EXCHANGE PRICE REGISTRATION FEE

<S> <C> <C>
DEMAND LOAN CERTIFICATES $ 100,000,000 $ 30,303
SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
--TEN YEAR $ 120,000,000 $ 36,364
--FIVE YEAR $ 80,000,000 $ 24,242
SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES
--TEN YEAR $ 40,000,000 $ 12,121
--FIVE YEAR $ 25,000,000 $ 7,576

TOTAL $ 365,000,000 $ 110,606(1)

</TABLE>

(1) PURSUANT TO RULE 429, THE COMBINED PROSPECTUS FILED AS A PART OF THIS
REGISTRATION STATEMENT RELATES AS WELL TO REGISTRANT'S FORM S-1
REGISTRATION STATEMENTS NO. 33-56821 AND NO. 33-64741. THE AMOUNT OF
SECURITIES REGISTERED AND FEES PAID IN CONNECTION WITH EARLIER
REGISTRATION STATEMENTS ARE: REGISTRATION STATEMENT NO. 33-56821 -
$42,144,989 AND $14,533, RESPECTIVELY; REGISTRATION STATEMENT
NO. 33-64741 - $36,855,011 AND $12,709, RESPECTIVELY.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

PART I
FARMLAND INDUSTRIES, INC.

CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS

<S> <C>
1. Forepart of Registration Statement and Outside Cover of Registration Statement
Front Cover Page of Prospectus Cross Reference Sheet
Front Page of Prospectus

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

4. Use of Proceeds Use of Proceeds

5. Determination of Offering Price Not Applicable

6. Dilution Not Applicable

7. Selling Security Holders Not Applicable

8. Plan of Distribution Plan of Distribution

9. Description of Securities to be Registered Description of the Ten-Year Subordinated Capital
Investment Certificates
Description of the Five-Year Subordinated Capital
Investment Certificates
Description of the Ten-Year Subordinated Monthly Income
Capital Investment Certificates
Description of the Five-Year Subordinated Monthly Income
Capital Investment Certificates
Description of the Demand Loan Certificates

10.Interests of Named Experts and Counsel Legal Matters

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

2) Financial Information about Note 12 of Notes to Consolidated Financial Statements
Industry Segments
3) Narrative Description of Business Business

4) Foreign and Domestic Operations Note 12 of Notes to Consolidated Financial Statements

b)Description of Properties Business

c)Legal Proceedings Legal Proceedings

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

e)Financial Statement Schedules 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 Analysis of Financial
Financial Condition and Results of Operations Condition and Results of Operations

i)Changes in and Disagreements with Accountants Changes in and Disagreements with Accountants on Accounting
on Accounting and Financial Disclosure and Financial Disclosure

j)Directors and Executive Officers Management

k)Executive Compensation Executive Compensation

l)Security Ownership of Certain Beneficial Security Ownership of Certain Beneficial Owners and
Owners and Management Management

m)Certain Relationships and Related Certain Transactions
Transactions

12.Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act Liabilities
</TABLE>

PROSPECTUS
FARMLAND INDUSTRIES, INC.
<TABLE>
<CAPTION>
AMOUNT OFFERED TO:

EXISTING SECURITY
THE GENERAL PUBLIC HOLDERS

<S> <C> <C>
SUBORDINATED CAPITAL INVESTMENT CERTIFICATES
TEN-YEAR $ 75,000,000 $ 45,000,000
FIVE-YEAR $ 50,000,000 $ 30,000,000
SUBORDINATED MONTHLY INCOME CAPITAL INVESTMENT
CERTIFICATES
TEN-YEAR $ 20,000,000 $ 20,000,000
FIVE-YEAR $ 15,000,000 $ 10,000,000
DEMAND LOAN CERTIFICATES $ 100,000,000 $ -0-
</TABLE>

SEE "RISK FACTORS" ON PAGE 18 FOR A DESCRIPTION OF CERTAIN RISK FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THESE SECURITIES.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED.

The indentures under which the Demand Loan Certificates and Subordinated
Debt Certificates are issued do not contain any provisions that would limit the
ability of the Company or any of its affiliates to incur indebtedness (secured
or unsecured; non-subordinated or subordinated) or that would afford holders of
the Demand Loan Certificates and Subordinated Debt Certificates protection in
the event of a highly leveraged transaction, restructuring, change in control,
merger, sale of substantially all the Company's assets or similar transaction
involving the Company that may adversely affect holders of the Demand Loan
Certificates and Subordinated Debt Certificates and in the event of such
transactions, no assurances can be given as to whether or not the Company or any
successor thereto would be able to repay, from continuing operations or from any
such proceeds, holders of its Demand Loan Certificates and Subordinated Debt
Certificates.

Demand Loan Certificates are non-subordinated indebtedness of Farmland.
Demand Loan Certificates are subordinated to obligations of the Company's
subsidiaries.

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" or the "Company") is offering: (1)
to the owners of its Subordinated Capital Investment Certificates the right to
exchange (see "Exchange Offer") such certificates for an equivalent principal
amount of any Subordinated Monthly Income Capital Investment Certificate ($5,000
minimum) which, at the time of the exchange, is being offered by this
Prospectus, and (2) to the owners of its Subordinated Capital Investment
Certificates, which have been held until eligible for redemption prior to
maturity at the option of the owner, the right to exchange such certificates for
an equivalent principal amount of any Subordinated Capital Investment
Certificate which, at the time of the exchange, is being offered by this
Prospectus. This offer will expire at 12:00 P.M. Eastern Standard Time on
December 31, 1997, unless terminated prior to such date.

THE DATE OF THIS PROSPECTUS IS DECEMBER 31, 1996

(Continued on following pages)
(Continued from preceding page)
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO PUBLIC(1) DISCOUNTS PROCEEDS TO
COMMISSIONS(2) FARMLAND(2)

<S> <C> <C>
SUBORDINATED CAPITAL INVESTMENT CERTIFICATES*
--$100 MINIMUM
TEN-YEAR TOTAL $ 75,000,000 $ 75,000,000
FIVE-YEAR TOTAL $ 50,000,000 $ 50,000,000
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 $ 15,000,000 $ 15,000,000
DEMAND LOAN CERTIFICATES*
$100 MINIMUM $ 100,000,000 $ 100,000,000

*For information concerning the Certificate Interest Rate call Farmland
Securities Company, 1-800-821-8000, extension 6360. See
"Determination of the Certificate Interest Rate."
</TABLE>

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

(2) The Debt Certificates offered hereby for cash and for exchange are offered
on a "best efforts" basis by Farmland Securities Company ("FSC") and
American Heartland Investments, Inc. ("AHI") and may be offered by other
broker-dealers selected by Farmland. 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. Farmland has not and does not
intend to establish special cash reserves, escrow accounts or trusts for
payment of principal or interest on its Demand Loan Certificates and
Subordinated Debt Certificates. FSC, AHI and other brokers-dealers, if any,
selected by Farmland have or will agree to deliver a current prospectus
relating to the Demand Loan Certificates and Subordinated Debt Certificates
to prospective investors at the time of or prior to any offering of such
certificates for sale or for exchange. The Company does not intend to apply
for listing of any of its Demand Loan Certificates and Subordinated Debt
Certificates on any securities exchange or NASDAQ. The proceeds to Farmland
are before deducting estimated commissions and expenses to be paid by
Farmland of $7.8 million and $1.5 million, respectively, assuming that all
securities offered hereby are sold. See "Plan of Distribution."

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the following Regional Offices of the Commission: Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade
Center, 13th Floor, New York, NY 10048. Copies of such material can also be
obtained from the Public Reference Section of the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
materials also may be accessed electronically by means at the Commission's home
page on the Internet (http://www.sec.gov).

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

REPORTS TO SECURITY HOLDERS

Farmland intends to make available to holders of its Debt Certificates,
upon written request from any such holder to the address stated on page 10, 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.........................................10
RISK FACTORS...............................................18
SELECTED CONSOLIDATED FINANCIAL DATA.......................28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..........34
DETERMINATION OF THE CERTIFICATE INTEREST RATE.............60
USE OF PROCEEDS............................................63
PLAN OF DISTRIBUTION.......................................63
EXCHANGE OFFER.............................................65
HOW TO ACCEPT EXCHANGE OFFER...............................68
HOW TO TRANSFER OWNERSHIP..................................68
DESCRIPTION OF THE TEN-YEAR SUBORDINATED
CAPITAL INVESTMENT CERTIFICATES........................69
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED
CAPITAL INVESTMENT CERTIFICATES........................78
DESCRIPTION OF THE TEN-YEAR SUBORDINATED
MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES.........87
DESCRIPTION OF THE FIVE-YEAR SUBORDINATED
MONTHLY INCOME CAPITAL INVESTMENT CERTIFICATES........95
DESCRIPTION OF THE DEMAND LOAN CERTIFICATES...............103
LEGAL MATTERS.............................................108
THE COMPANY...............................................109
BUSINESS..................................................111
PATRONAGE REFUNDS AND DISTRIBUTION OF ANNUAL EARNINGS.....135
EQUITY REDEMPTION PLANS...................................137
LEGAL PROCEEDINGS.........................................141
EXPERTS...................................................142
QUALIFIED INDEPENDENT UNDERWRITER.........................142
MANAGEMENT................................................143
EXECUTIVE COMPENSATION....................................155
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.......................................166
CERTAIN TRANSACTIONS......................................166
INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS.......167

PROSPECTUS SUMMARY

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

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

Business Farmland is an agricultural farm supply and processing and
marketing cooperative headquartered in Kansas City, Missouri that is
primarily owned by its members and operates on a cooperative basis. As of
August 31, 1996, Farmland's membership consisted of 1,800 cooperative
associations of farmers and ranchers and 11,800 pork or beef producers or
associations of such producers. Founded originally in 1929, Farmland has
grown from revenues of $310,000 during its first year of operation to
over $9.7 billion during 1996.

The Company is one of the largest cooperatives in the United States in
terms of revenues. In 1996, Farmland had exports to approximately 70
countries, and derived approximately 42% of its grain revenues from
export sales. Substantially all of the Company's foreign grain sales are
paid in U.S. Dollars.

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

The Company's farm supply operations consist of three principal product
divisions: petroleum, crop production and feed. Each division conducts
manufacturing operations and distributes farm supply products principally
at wholesale. Over 50% of the Company's farm supply products sold in
1996 was produced in plants owned by the Company or operated by the
Company under long-term lease arrangements. Approximately 60% of the
Company's farm supply products sold in 1996 were sold at wholesale to
farm cooperative associations which are members of Farmland. These farm
cooperatives distribute products primarily to farmers and ranchers in
states which comprise the corn belt and the wheat belt and who utilize
the products in the production of farm crops and livestock.

On the output side, the Company's operations include the processing of
pork and beef, the marketing of fresh pork, processed pork and fresh beef
and the storage, marketing and processing of grain. In 1996,
approximately 66% of the hogs processed, 14% of the beef cattle processed
and 45% of the grain marketed by the Company were supplied to the Company
by its members. Substantially all of the Company's pork and beef
products sold in 1996 were processed in plants owned by the Company.

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

THE OFFERING
<TABLE>
<CAPTION>
OFFERED AT 100% OF
AGGREGATE FACE AMOUNT

FOR CASH FOR EXCHANGE

<S> <C> <C>
Description of Securities* (see pages 69, 78, 87, 95 and 103):
Subordinated Capital Investment Certificates--$100 Minimum Interest
payable or compounded semiannually at the Certificate Interest Rate
10-year maturity $ 75,000,000 $ 45,000,000
5-year maturity $ 50,000,000 $ 30,000,000

Subordinated Monthly Income Capital Investment Certificates
$5,000 Minimum (additional units may be purchased in
increments of $1,000 or more)
Interest payable monthly at the Certificate Interest Rate
10-year maturity $ 20,000,000 $ 20,000,000
5-year maturity $ 15,000,000 $ 10,000,000
Demand Loan Certificates - $100 minimum $ 100,000,000 $ -0-

</TABLE>

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

Plan of Distribution
Offered on a best efforts basis by Farmland Securities Company ("FSC") and
American Heartland Investments ("AHI") and may be offered by selected
broker-dealers. See "Plan of Distribution" included herein.

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"
included herein.

Purpose of the Exchange Offer
The purpose of the exchange offer is to extend the period of time for which
Farmland may utilize funds borrowed from an investor in its Subordinated
Debt Certificates.

Method of Transacting an Exchange
The exchange offer may be accepted by delivering any of the Subordinated
Debt Certificates which are eligible for exchange, to Farmland Securities
Company, P.O. Box 7305, Kansas City, Missouri 64116, Dept. 79 or to American
Heartland Investments, Inc., P. O. Box 1303, Salina, Kansas 67402. Such
certificates should be assigned to Farmland in the transfer section (on the
reverse side of the certificate) and endorsed by all persons whose names
appear on the face of the certificate. For additional information regarding
the exchange, see "How to Accept Exchange Offer" included herein, 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 additions,
improvements and investments in ventures which are estimated to be
approximately $278.3 million during the two-year period ending August 31,
1998, or to redeem any of the $58.3 million of outstanding Subordinated Debt
Certificates, which mature at various times prior to August 31, 1998, or to
redeem any outstanding Subordinated Debt Certificates prior to maturity at
the request of owners to the extent provided in each Subordinated Debt
Certificate's trust indenture. See "Use of Proceeds," "Business - Capital
Expenditures and Investments in Ventures," "Description of the Ten-Year
Subordinated Capital Investment Certificates," "Description of the Five-Year
Subordinated Capital Investment Certificates," "Description of the Ten-Year
Subordinated Monthly Income Capital Investment Certificates," "Description
of the Five-Year Subordinated Monthly Income Capital Investment
Certificates" and "Description of the Demand Loan Certificates" included
herein.

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 more
fully stated in each of the Subordinated Debt Certificate's respective trust
indenture.

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

(i)upon death of an owner; or,

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

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

(i)upon death of an owner; or,

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

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

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

RISK FACTORS

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

INCOME TAX MATTERS - LITIGATION

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

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

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

If the United States Tax Court decides in favor of the IRS on all
unresolved issues raised in the statutory notice, Farmland would have additional
federal and state income tax liabilities aggregating approximately $85.8 million
plus accumulating statutory interest thereon (approximately $209.2 million,
before tax benefits of the interest deduction, through August 31, 1996), or
$295.0 million in the aggregate at August 31, 1996. In addition, such a
decision would affect the computation of Farmland's taxable income for its 1989
tax year and, as a result, could increase Farmland's federal and state income
taxes for that year by approximately $5.0 million plus accumulating statutory
interest thereon (approximately $6.6 million), or $11.6 million in the aggregate
at August 31, 1996. The asserted federal and state income tax liabilities and
accumulated interest thereon would become immediately due and payable unless the
Company appealed the decision and posted the requisite bond to stay assessment
and collection.

The liability resulting from an adverse decision by the United States Tax
Court would be charged to current earnings and would have a material adverse
effect on the Company. In the event of such an adverse determination of the
Terra tax issue, certain financial covenants of the Company's Credit Agreement
(the "Agreement"), dated May 15, 1996, become less restrictive. Had the United
States Tax Court decided in favor of the IRS on all unresolved issues, and had
all related additional federal and state income taxes and accumulated interest
thereon been due and payable on August 31, 1996, Farmland's borrowing capacity
under the Agreement was adequate at that time to finance the liability.
However, Farmland's ability to finance such an adverse decision depends
substantially on the financial effects of future operating events on its
borrowing capacity under the Agreement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Financial Condition,
Liquidity and Capital Resources" included herein.

SUBORDINATION AND ADDITIONAL DEBT

The Subordinated Debt Certificates offered by this Prospectus for sale and
for exchange are unsecured obligations of Farmland and are subordinated in right
of payment to all existing and future Senior Indebtedness. Senior Indebtedness
of Farmland includes the Demand Loan Certificates, money borrowed from time to
time from certain financial institutions (including without limitation pursuant
to the five year Credit Agreement; see "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Condition, Liquidity
and Capital Resources" included herein) and amounts due and payable under any
instrument which provides that such amounts are to be Senior Indebtedness. The
indentures under which the Demand Loan Certificates and Subordinated Debt
Certificates are issued do not contain any provisions that would limit the
ability of the Company or any of its affiliates to incur indebtedness (secured
or unsecured; non-subordinated or subordinated) or that would afford holders of
the Demand Loan Certificates and Subordinated Debt Certificates protection in
the event of a highly leveraged transaction, restructuring, change in control,
merger, sale of substantially all the Company's assets or similar transaction
involving the Company that may adversely affect holders of the Demand Loan
Certificates and Subordinated Debt Certificates, and in the event of such
transactions, no assurances can be given as to whether or not the Company or any
successor thereto would be able to repay, from continuing operations or from any
such proceeds, holders of its Demand Loan Certificates and Subordinated Debt
Certificates. See "Description of the Ten-Year Subordinated Capital Investment
Certificates," "Description of the Five-Year Subordinated Capital Investment
Certificates," "Description of the Ten-Year Subordinated Monthly Income Capital
Investment Certificates," "Description of the Five-Year Subordinated Monthly
Income Capital Investment Certificates" and "Description of the Demand Loan
Certificates" included herein. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Condition, Liquidity
and Capital Resources" and the subcaption "Subordination" within the description
of each type of Subordinated Debt Certificate.

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

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

As of August 31, 1996, (i) the Company had outstanding $543.5 million of
Senior Indebtedness, including the Demand Loan Certificates, (ii) the Company
had outstanding $324.1 million aggregate principal amount of subordinated
indebtedness, including the Subordinated Debt Certificates, (iii) certain of the
Company's subsidiaries had outstanding $151.5 million aggregate principal amount
of indebtedness, of which $128.0 million was nonrecourse to the Company, and
(iv) the Company had outstanding other instruments (principally long-term
leases) which provide for aggregate payments of approximately $308.8 million
over 14 years.

EVENT OF DEFAULT OF SENIOR INDEBTEDNESS

Certain of the Company's borrowing and lease agreements contain financial
covenants regarding working capital, the ratio of certain debts to average cash
flow and the ratio of equity to total capitalization. If an event of default
occurs for any reason, including but not limited to violation of financial
covenants, on any Senior Indebtedness, then no payment on account of principal
of or interest on the Subordinated Debt Certificates shall be made until such
event of default on Senior Indebtedness has been remedied.

RESTRICTED REDEMPTION RIGHTS OF HOLDERS OF SUBORDINATED DEBT CERTIFICATES

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

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

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

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

PAY AMOUNT OF INTEREST AND PRINCIPAL FROM GENERAL CORPORATE FUNDS

Farmland has not and does not intend to establish special cash reserves,
escrow accounts or trusts for payment of principal or interest on its Demand
Loan Certificates 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.

EXTERNAL FACTORS MAY AFFECT THE COMPANY'S BUSINESS

The Company's revenues, margins, net income and cash flow depend, to a
large extent, on conditions in agriculture and may be volatile due to factors
beyond the Company's control. Management cannot determine the extent to which
these factors may impact future operations of the Company. The Company's
revenues, margins, ent income and cash flow 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 - Results of Operations for Years Ended August 31, 1994, 1995, and
1996" and "Business - Raw Materials" included herein. Such factors include:

1.REGULATORY: The Company's ability to grow through acquisitions and
investments in joint ventures may be adversely affected by regulatory delays
or other unforeseeable factors beyond the Company's control. Various federal
and state regulations to protect the environment have encouraged, and are
likely to continue to encourage, farmers to reduce the amount of fertilizer
and other chemical applications that they use.

2.COMPETITION: Competitors may have better access to equity capital markets
than the Company and may offer more varied products or possess greater
resources than the Company.

3.IMPORTS AND EXPORTS: Specific factors which may affect the level of
agricultural products imported or exported include foreign trade and monetary
policies, laws and regulations, political and governmental changes, inflation
and exchange rates, taxes, operating conditions and world demand.
Fluctuations in the level of agricultural product imports and exports will
likely impact the Company's operations.

4.WEATHER: Weather conditions, both domestic and global, affect the Company's
operations. Weather conditions may either increase or decrease demand and,
thereby, affect prices related to the Company's farm supply operation (crop
production, petroleum and feed). Weather conditions also may increase or
decrease the supply of products and, thereby, affect costs related to the
Company's pork and beef processing and marketing, grain processing and
marketing and feed operations.

5.RAW MATERIALS COST: Historically, changes in the costs of raw materials used
in the manufacture of the Company's finished products have not necessarily
resulted in corresponding changes in the prices at which such products have
been sold by the Company.

6.OTHER FACTORS: Both domestic variables, such as crop failures, federal
agricultural programs, and production efficiencies, and global variables,
such as embargoes, political instabilities, and local conflicts, affect the
supply, demand and price of crude oil, refined fuels, natural gas and other
commodities and may unfavorably impact the Company's operations.

LIMITED ACCESS TO EQUITY CAPITAL MARKETS

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

ENVIRONMENTAL MATTERS

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

Many of the Company's current and former facilities have been in operation
for many years and, over such time, the Company and other predecessor operators
of such facilities have generated, used, stored, or disposed of substances or
wastes that are or might be considered hazardous under applicable environmental
laws. As a result of such operations, the soil and groundwater at or under
certain of the Company's current and former facilities have been contaminated.
Material expenditures may be required by the Company in the future to remediate
contamination from past or future releases of hazardous substances or wastes.

The Company wholly or jointly owns or operates 34 grain elevators and 58
manufacturing properties and has potential responsibility for environmental
conditions at a number of former manufacturing facilities and at waste disposal
facilities operated by third parties. The Company also has been identified as a
potentially responsible party (a ''PRP'') under the federal Comprehensive
Environmental Response, Compensation and Liability Act (''CERCLA'') at various
National Priority List sites and has unresolved liability with respect to the
past disposal of hazardous substances at five such sites. CERCLA may impose
joint and several liability on certain statutory classes of persons for the
costs of investigation and remediation of contaminated properties, regardless of
fault or the legality of the original disposal. These persons include the
present and former owner or operator of a contaminated property, and companies
that generated, disposed of or arranged for the disposal of, hazardous
substances found at the property. The Company currently is aware of probable
obligations for environmental matters at 39 properties and is investigating or
remediating contamination at 28 properties. During 1994, 1995 and 1996, the
Company paid approximately $1.4 million, $3.2 million and $1.8 million,
respectively, for environmental investigation and remediation.

The Company's actual final costs of addressing certain environmental
matters are not quantifiable, and therefore have not been accrued, because such
matters are in preliminary stages and the timing, extent and costs of various
actions which governmental authorities may require are currently unknown.
Management is aware of other environmental matters for which there is a
reasonable possibility that the Company will incur costs to resolve. It is
possible that the costs of resolution of the matters described in this paragraph
may exceed the liabilities which, in the opinion of management, are probable and
which costs are reasonably estimable at August 31, 1996. In the opinion of
management, it is reasonably possible for such costs to be approximately an
additional $20.6 million. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Matters Involving the
Environment" and "Business - Matters Involving the Environment" included herein.

ABSENCE OF PUBLIC MARKET

There is currently no trading market for Farmland's Demand Loan
Certificates or Subordinated Debt Certificates. It is unlikely that a secondary
market for these securities will develop. The Company does not intend to apply
for listing of any of its Demand Loan Certificates and Subordinated Debt
Certificates on any securities exchange or NASDAQ.

AFFILIATED UNDERWRITER

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

POTENTIAL TAXABLE GAINS OR LOSSES FROM THE EXCHANGE

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

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of the end of and for
each of the years in the five-year period ended August 31, 1996 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, 1995 and 1996 and for each of the years in the three-year period
ended August 31, 1996 (the "Consolidated Financial Statements"), and the
independent auditors' report thereon, are included elsewhere herein. The
information set forth below should be read in conjunction with information
appearing elsewhere herein: "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and related notes.
<TABLE>
<CAPTION>
Year Ended August 31
1992 1993 1994 1995 1996
(Amounts in Thousands except ratios)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:(1)(2)
Net Sales........................... $ 3,429,307 $ 4,722,940 $ 6,677,933 $ 7,256,869 $ 9,788,587
Operating Income of Industry
Segments.......................... 160,912 86,579 154,799 293,381 238,825
Interest Expense.................... 27,965 36,764 51,485 53,862 62,445
Income (Loss) From
Continuing Operations ............ 61,046 (30,400) 73,876 162,799 126,418
Net Income (Loss)................... $ 62,313 $ (30,400) $ 73,876 $ 162,799 $ 126,418

DISTRIBUTION OF NET INCOME (LOSS):
Patronage Refunds:
Allocated Equity.................. $ 1,038 $ 1,155 $ 44,032 $ 61,356 $ 60,776
Cash and Cash Equivalents......... 17,918 495 26,580 33,061 32,719
Earned Surplus and Other
Equities.......................... 43,357 (32,050) 3,264 68,382 32,923

$ 62,313 $ (30,400) 73,876 $ 162,799 $ 126,418

RATIO OF EARNINGS TO FIXED
CHARGES (3)....................... 2.5 Note 3 2.1 4.0 3.0

BALANCE SHEETS:
Working Capital..................... $ 208,629 $ 260,519 $ 290,704 $ 319,513 $ 322,050
Property, Plant and
Equipment, Net.................... 446,002 504,378 501,290 592,145 717,224
Total Assets........................ 1,526,392 1,719,981 1,926,631 2,185,943 2,568,446
Long-Term Borrowings (excluding
current maturities)............... 296,297 482,112 506,531 469,718 616,258
Capital Shares and Equities......... 588,129 561,707 585,013 687,287 755,331

</TABLE>

[FN]

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

2. Acquisitions and Dispositions:

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

b) During 1993, the Company and partners NBPC. Farmland retained a 58%
ownership interest in NBPC by investing $10.5 million in cash. The
partnership interest was increased to 68% effective March 31, 1995 and
to 75% effective September 1, 1996). On April 15, 1993, NBPC acquired
the business of Idle Wild Foods, Inc. ("Idle Wild"), a beef packing
plant and feedlot located in Liberal, Kansas. NBPC acquired the
assets by assuming liabilities of Idle Wild with a fair value of
approximately $130.6 million. 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 excess of liabilities assumed over the fair value
of the net identifiable assets acquired has been recorded as goodwill.

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

d) 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 $51.3 million 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
($21.0 million) acquired has been recorded as goodwill and is being
amortized on a straight-line basis over 25 years.

e) The following unaudited financial information for the years ended
August 31, 1992 and 1993 present 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 both on recourse and nonrecourse debt
assumed in the acquisitions. The pro forma financial information does
not necessarily reflect the results of operations that would have
occurred had the Company been a single entity which excluded CFA and
included Union Equity and NBPC for the full years 1992 and 1993.

August 31 (Unaudited)
1992 1993
(Amounts in Thousands)

Net Sales............................ $ 5,441,303 $ 5,357,867

Income (Loss) Before Extraordinary $ 47,225 $ (44,040)
Item.................................

3. The ratios of earnings to fixed charges have been computed by dividing fixed
charges into the sum of (a) income (loss) before taxes for the enterprise as
a whole, less capitalized interest and with adjustments to appropriately
reflect the Company's majority-owned, 50%-owned, and less-than-50%-owned
affiliates, and (b) fixed charges. Fixed charges consist of interest on all
indebtedness (including amortization of debt issuance expenses) and the
component of operating rents determined to be interest, with adjustments as
appropriate to reflect the Company's 50%-owned and less-than-50%-owned
affiliates. Income was inadequate to cover fixed charges for the year ended
August 31, 1993. The dollar amount of the coverage deficiency was $36.6
million.

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

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

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

The Company's debt securities issued under the continuous debt program
generally are offered on a best-efforts basis through the Company's wholly owned
broker-dealer subsidiary, Farmland Securities Company, and through American
Heartland Investments, Inc. (which is not affiliated with Farmland), and also
may be offered by selected unaffiliated broker-dealers. The types of securities
offered in the continuous debt program include certificates payable on demand
and five- and ten-year subordinated debt certificates. The total amount of such
debt outstanding and the flow of funds to, or from, the Company as a result of
the continuous debt program are influenced by the rate of interest which
Farmland establishes for each type of debt certificate offered and by options of
Farmland to call for redemption certain of its outstanding debt certificates.
During the year ended August 31, 1996, the outstanding balance of demand
certificates increased by $26.6 million and the outstanding balance of
subordinated debt certificates increased by $24.1 million.

In May 1996, Farmland entered into a five year Credit Agreement (the
"Agreement") with various participating banks. The Agreement provides a $1.1
billion facility, subject to compliance with financial covenants as set forth in
the Agreement, consisting of an annually renewable short-term credit of up to
$650.0 million and a long-term credit of up to $450.0 million.

Farmland pays commitment fees under the Agreement equal to 1/10 of 1%
annually on the unused portion of the short-term credit and 1/4 of 1% annually
on the unused portion of the long-term credit. In addition, Farmland must comply
with the Agreement's financial covenants regarding working capital, the ratio of
certain debts to average cash flow, and the ratio of equity to total
capitalization, all as defined therein. The short-term credit provisions of the
Agreement are subject to review and renewal annually by the lenders and the
Company. The next renewal date is in May 1997. The Agreement matures in May
2001.

At August 31, 1996, under the Agreement the Company had short-term
borrowings of $236.6 million, long-term borrowings of $175.0 million and $69.5
million was being utilized to support letters of credit issued on behalf of
Farmland by participating banks. As of August 31, 1996, under the short-term
credit provisions, the Company had capacity to finance additional working
capital of $386.7 million and, under the long-term credit provisions, the
Company had capacity to borrow up to an additional $232.2 million.

NBPC maintains borrowing agreements with a group of banks which provide
financing support for its beef packing operations. Such borrowings are
nonrecourse to Farmland or Farmland's other affiliates (except to the extent of
$10.0 million). At August 31, 1996, $90.0 million was available under this
facility of which $47.0 million was borrowed and $0.6 million was utilized to
support letters of credit. In addition, NBPC has incurred certain long-term
borrowings from Farmland. NBPC has pledged certain assets to Farmland and such
group of banks to support its borrowings.

Tradigrain has borrowing agreements with various international banks which
provide financing and letters of credit to support current international grain
trading transactions. Obligations of Tradigrain under these loan agreements are
nonrecourse to Farmland or Farmland's other affiliates. At August 31, 1996,
such borrowings totaled $78.8 million.

The Company maintains other borrowing arrangements with banks and financial
institutions. Under such agreements, at August 31, 1996, $18.0 million was
borrowed.

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.

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

The Company does not hold or issue derivative instruments for the purpose
of speculation. However, in the normal course of business, the Company utilizes
commodity based derivative instruments, primarily related to grain, to hedge its
exposure to price volatility. Relatively straightforward and involving little
complexity, these instruments consist mainly of grain contracts traded on
organized exchanges and forward purchase and sales contracts in cash markets.
These hedging activities limit both the risk of loss and the potential for gain
which otherwise could result from changes in market prices. See "Business -
Grain Marketing".

As a cooperative, Farmland's member-sourced net earnings (i.e., income from
business done with or for members) are distributed to its voting members,
associate members and patrons in the form of common shares, associate member
common shares, capital credits or cash. For this purpose, net income or loss is
determined in accordance with the requirements of federal income tax law up to
1994 and is determined in accordance with generally accepted accounting
principles in 1995 and after. Other income is treated as "nonmember-sourced
income". Nonmember-sourced income is subject to income tax and after-tax
earnings are transferred to earned surplus. Under Farmland's bylaws, the
member-sourced income is distributed to members as patronage refunds unless the
earned surplus account, at the end of that year, is lower than 30% of the sum of
the prior year-end balance of outstanding common shares, associate member
shares, capital credits and patronage refunds for reinvestment. In such cases,
member-sourced income is reduced by the lesser of 15% or an amount required to
increase the earned surplus account to the required 30%. The amount by which
the member-sourced income is so reduced is treated as nonmember-sourced income.
The member-sourced income remaining is distributed to members as patronage
refunds. For the years 1994, 1995 and 1996, the earned surplus account exceeded
the required amount by $2.3 million, $62.8 million and $45.5 million,
respectively.

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

Cash provided by operating activities totaled $182.1 million in 1996
compared with $47.5 million in 1995. This increase is primarily the result of
the cash effect of changes in working capital as cash generated through a
reduction in inventories and an increase in accounts payable were partially
offset by increased levels of accounts receivable and other current assets.

Other major sources of cash include $53.2 million from distributions from
joint ventures, sale of investments and collection of long-term notes
receivable, $50.7 million from investors in demand loan and subordinated debt
certificates and $71.1 million from bank loans and other notes.

Major uses of cash during 1996 include $192.0 million for capital additions
and other long-term assets, $51.9 million for acquisition of investments and
notes receivable, $39.5 million for acquisition of pork processing businesses
and facilities, $32.8 million for patronage refunds and dividends distributed
from 1995 earnings and $27.5 million for the redemption of allocated equities
under the Farmland base capital plan and special allocated equity redemption
plan.

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

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

The liability resulting from an adverse decision by the United States Tax
Court would be charged to current earnings and would have a material adverse
effect on the Company. In the event of such an adverse determination of the
Terra tax issue, certain financial covenants of the Company's Credit Agreement
(the "Agreement") become less restrictive. Had the United States Tax Court
decided in favor of the IRS on all unresolved issues, and had all related
additional federal and state income taxes and accumulated interest thereon been
due and payable on August 31, 1996, Farmland's borrowing capacity under the
Agreement was adequate at that time to finance the liability. However,
Farmland's ability to finance such an adverse decision depends substantially
on the financial effects of future operating events on its borrowing capacity
under the Agreement.

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

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

RESULTS OF OPERATIONS FOR YEARS ENDED AUGUST 31, 1994, 1995 AND 1996

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

The increase (decrease) in sales and operating income by business segment
in each of the years in the three-year period ended 1996, compared with the
respective prior year, is presented in the below table.

Management's discussion of industry segment sales, operating income or loss
and other factors affecting the Company's net income during 1994, 1995 and 1996
follows the table.
<TABLE>
<CAPTION>
Change in Sales Change in Net Income

1994 1995 1996 1994 1995 1996
Compared Compared Compared Compared Compared Compared
with 1993 with 1994 with 1995 with 1993 with 1994 with 1995
(Amounts in Millions)
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) OF INDUSTRY SEGMENT
SALES AND OPERATING INCOME OR LOSS:
Petroleum.................. $ (32) $ 21 $ 181 $ 32 $ (35) $ 13
Crop Production............ 278 8 165 74 73 (20)
Feed....................... 49 (60) 102 (4) (7) 3
Food Processing
and Marketing ............. 943 337 528 4 56 (11)
Grain Marketing............ 674 279 1,566 (34) 52 (37)
Other...................... 43 (6) (10) (4) -0- (3)

$ 1,955 $ 579 $ 2,532 $ 68 $ 139 $ (55)

<S> <C> <C> <C>
CORPORATE EXPENSES AND OTHER:
General corporate expenses (increase) decrease....................... $ (9) $ (14) $ (11)
Interest expense (increase) decrease................................. (15) (2) (8)
Other income and deductions increase (decrease)...................... 14 (6) 10
Equity in net income of investees increase (decrease)................ 23 11 18
Minority owners' interest in net income of subsidiaries
(increase) decrease ............................................... 5 (14) 2
Provision for loss on disposition of assets
(increase) decrease ............................................... 29 -0- -0-
Income taxes (increase) decrease..................................... (11) (25) 8

Net income increase (decrease)....................................... $ 104 $ 89 $ (36)

</TABLE>

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

PETROLEUM

SALES

Sales of the petroleum business increased $181.5 million in 1996 compared
with 1995. This increase was primarily the result of increased fuel (gasoline,
distillate, diesel and propane) prices and unit sales of approximately 11% and
9.5%, respectively.

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

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

OPERATING INCOME

The petroleum business had operating income of $5.0 million in 1996
compared to an operating loss of $8.0 million in 1995. This improvement was
primarily attributable to higher unit margins resulting from seasonal demand
pressure on product price movements. In addition, petroleum realized some
margin improvement resulting from increased production capacity at the Company's
refinery.

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

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

CROP PRODUCTION

SALES

Crop production sales, consisting primarily of plant nutrients, increased
$164.9 million or 14.1% in 1996 compared with 1995. This increase was primarily
a net result of increased unit sales of phosphate and nitrogen fertilizers and
higher phosphate prices, partly offset by a slight decline of nitrogen prices.

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

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

OPERATING INCOME

Operating income of the Company's crop production business reflects a
decrease of $19.7 million in 1996 compared with 1995. However, the aggregate
contribution to net income from all crop production operations (including joint
ventures) was at about the same level in 1996 as in 1995.

The Company's crop production operations reflect a decrease primarily
because of lower fertilizer margins. The approximately $6.0 million, or 2.8%,
decrease in nitrogen fertilizer margins was the result of lower average unit
selling prices combined with higher raw material costs. Unit margins from the
Company's phosphate fertilizer operations decreased approximately $17.0 million.
The effect of these decreases were largely offset by an increase of
approximately $17.1 million in the Company's share of net income from joint
ventures engaged in phosphate fertilizer manufacturing operations and an
increase of approximately $2.4 million in the Company's share of net income from
WILFARM (a joint venture engaged in the distribution of crop protection
products).

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

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

FEED

SALES

Sales of feed products increased 21.9% to $569.9 million in 1996 compared
with $467.7 million in 1995. The increase is primarily attributable to higher
unit prices which reflects higher cost of raw materials. In addition, unit
sales of formula feed and feed ingredients increased approximately 2% and 10%,
respectively.

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

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

OPERATING INCOME

Operating income of the feed business increased $2.9 million in 1996
compared with 1995. This increase is attributable primarily to increased unit
margins on feed grade phosphate and to increased sales of feed ingredients.

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

Operating income of the feed business segment decreased $3.7 million in
1994 compared with 1993. Gross margins decreased approximately $0.5 million
reflecting lower margins on feed ingredients and pet food of $0.8 million and
$0.4 million, respectively, partly offset by $0.7 million higher margins on
animal health products. In addition, feed sales, marketing and administration
expenses increased $3.2 million primarily due to higher commissions and other
variable compensation plans.

FOOD PROCESSING AND MARKETING

SALES

Sales of the food processing and marketing business increased $528.1
million in 1996 compared with 1995. Beef sales increased $308.7 million due
primarily to the effect of including operations of the Hyplains Beef L.C.
("Hyplains") beef plant in the Company's financial statements for a full year in
1996. The Company acquired a majority ownership in this plant in March 1995.
Pork sales increased $219.4 million primarily as a result of higher unit sales
of branded products mostly as a result of acquisitions (OhSe and Farmstead
brands).

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

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

OPERATING INCOME

Operating income of the food processing and marketing business of $66.0
million represents an $11.1 million decrease compared to 1995. This decrease
primarily results from decreased margins on fresh pork and increased pork
administrative expenses, partially offset by increased beef unit sales.

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

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

GRAIN MARKETING

SALES AND OPERATING INCOME

Grain sales increased $1.6 billion, or 82%, principally owing to a 40%
increase in units sold combined with increased grain prices. Grain had a $19.0
million operating loss in 1996 compared with $17.9 million operating income in
1995. The operating loss was principally attributable to drought conditions in
certain major wheat producing regions of the United States which resulted in
both shortages of and significantly higher prices for wheat. Due to this
shortage, the Company had to source wheat (in order to meet contractual
obligations), from domestic geographic areas further from the Company's Gulf
coast export elevator than expected, resulting in higher than anticipated
purchase prices and transportation charges. The Company's policy is to hedge
its exposure to price fluctuations. However, in order to avoid influencing
price movement in certain commodity futures markets, significant contracts are
hedged over a period of time, but as soon as practical, after such contracts are
written. In 1996, the Company entered into a significant fixed price sales
contract. During the time required to fully hedge this contract, the market for
wheat was relatively volatile but generally trended upward. The joint effect of
these factors contributed to the loss in the Company's grain operations.

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

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

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

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses ("SG&A") increased $24.6
million, or 7.1%, in 1996 compared with 1995. Approximately $13.5 million of
the increase was directly connected to business segments (primarily the pork and
grain businesses) and has been included in the determination of the operating
income of business segments. The increase of general corporate expenses, not
identified to business segments ($11.1 million), includes higher expenses from
improving the management information systems and higher employee related costs.

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

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

OTHER INCOME (DEDUCTIONS)

INTEREST EXPENSE

Interest expense increased $8.6 million in 1996 compared with 1995,
reflecting higher average borrowings, partly offset by a slight decline in the
average interest rate.

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

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

CAPITAL EXPENDITURES

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

OTHER, NET

In May 1996, the Company sold its interest in a communications joint
venture, Broadcast Partners. The sale resulted in a gain before income taxes of
$10.9 million, which has been included in the caption "Other income
(deductions): Other, net" in the Company's 1996 Consolidated Statement of
Operations. See Note 16 of the Notes to Consolidated Financial Statements
included herein.

In June 1993, the Company filed a lawsuit against 43 insurance carriers
and other parties (the "Defendants") seeking declaratory judgments regarding the
Defendants' insurance coverage obligations for environmental remediation costs.
In 1994, 1995 and 1996, the Company negotiated settlements with 20, 2 and 3
insurance companies, respectively, and, as part of the settlements, the Company
provided the Defendants with releases of various possible environmental
obligations. As a result of these settlements, the Company received cash
payments of $13.6 million, $0.3 million and $0.5 million in 1994, 1995 and 1996,
respectively, and has included such amounts in the caption "Other income
(deductions): Other, net" in the Company's and Consolidated Statement of
Operations for the year then ended. See Note 16 of the Notes to Consolidated
Financial Statements included herein.

MATTERS INVOLVING THE ENVIRONMENT

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

The Company wholly or jointly owns or operates 34 grain elevators and 58
manufacturing properties and has potential responsibility for environmental
conditions at a number of former manufacturing facilities and at waste disposal
facilities operated by third parties. The Company also has been identified as a
PRP under CERCLA at various National Priority List sites and has unresolved
liability with respect to the past disposal of hazardous substances at five such
sites. CERCLA may impose joint and several liability on certain statutory
classes of persons for the costs of investigation and remediation of
contaminated properties, regardless of fault or the legality of the original
disposal. These persons include the present and former owners or operators of a
contaminated property, and companies that generated, disposed of, or arranged
for the disposal of hazardous substance found at the property. The Company is
investigating or remediating contamination at 28 properties under CERCLA and/or
the state and federal hazardous waste management laws. During 1994, 1995 and
1996, the Company paid approximately $1.4 million, $3.2 million and $1.8
million, respectively, for environmental investigation and remediation.

The Company currently is aware of probable obligations for environmental
matters at 39 properties. As of August 31, 1996, the Company has an
environmental accrual in its Consolidated Balance Sheet for probable and
reasonably estimated cost for remediation of contaminated property of
$18.9 million. The Company periodically reviews and, as appropriate, revises its
environmental accruals. Based on current information and regulatory
requirements, the Company believes that the accruals established for
environmental expenditures are adequate.

Under the Resource Conservation Recovery Act of 1976 (''RCRA''), the
Company has four closure and four post-closure plans in place for six locations.
Closure and post-closure plans also are in place for three landfills and two
injection wells as required by state regulations. Such closure and post-closure
costs are estimated to be $5.2 million at August 31, 1996 (and is in addition to
the $20.6 million discussed in the prior paragraph). 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.

As a result of the uncertainties surrounding environmental costs for
investigation and remediation, or if new claims arise, it is possible that
charges to income for environmental liabilities could have a material affect on
the operating results reported in the financial statements. However, in the
opinion of management, it is unlikely that resolution of currently identified
environmental matters will have a material adverse affect on the financial
position, results of operations, liquidity or competitive position of the
Company.

The Company and the Environmental Protection Agency (''EPA'') reached an
agreement to settle three proceedings brought by Region VII of the EPA with
respect to alleged violations under the Clean Air Act, the Emergency Planning
and Community Right-to-Know Act and RCRA at the Coffeyville refinery. The major
terms of the settlement are: (1) the Company does not acknowledge liability or
fault; (2) the Company will spend approximately $4.3 million to implement
Supplemental Environmental Projects; and (3) the Company will pay penalties of
approximately $1.5 million. The penalties have been included in the Company's
August 31, 1996 environmental accrual of $18.9 million.

Protection of the environment requires the Company to incur expenditures
for equipment or processes, which expenditures may impact the Company's future
net income. However, the Company does not anticipate that its competitive
position will be adversely affected by such expenditures or by laws and
regulations enacted to protect the environment. Environmental expenditures are
capitalized when such expenditures provide future economic benefits. In 1994,
1995 and 1996, the Company had capital expenditures of approximately $2.6
million, $4.7 million and $10.7 million, respectively, to prevent future
discharges into the environment. The majority of such expenditures were for
improvements at the Coffeyville refinery. Management believes the Company
currently is in substantial compliance with existing environmental rules and
regulations.

RECENT ACCOUNTING PRONOUNCEMENTS

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

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

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

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

The Company is including the following cautionary statement in this
Form S-1 to make applicable and take advantage of the new "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995 for any
forward-looking statement made by, or on behalf of, the Company. The factors
identified in this cautionary statement important factors (but not necessarily
all important factors) that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Company.

Where any such forward-looking statement includes a statement of the
assumptions or basis underlying such forward-looking statement, the Company
cautions that, while it believes such assumptions or basis to be reasonable and
makes them in good faith, assumed facts or basis almost always vary from actual
results, and the differences between assumed facts or basis and actual results
can be material, depending upon the circumstances. Where, in any forward-
looking statement, the Company, or its management, expresses an expectation or
belief as to future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis, but there can be no assurance
that the statement of expectation or belief will result or be achieved or
accomplished. The words "believe", "expect" and "anticipate" and similar
expressions identify forward-looking statements.

Taking into account the foregoing, the following are identified as
important factors that could cause actual results to differ materially from
those expressed in any forward-looking statement made by, or on behalf of, the
Company:

1.Weather patterns (flood, drought, frost, etc.) or crop failure.

2.Federal or state regulations regarding agricultural programs and production
efficiencies.

3.Federal or state regulations regarding the amounts of fertilizer and other
chemical applications used by farmers.

4.Factors affecting the export of U.S. agricultural produce (including foreign
trade and monetary policies, laws and regulations, political and governmental
changes, inflation and exchange rates, taxes, operating conditions and world
demand).

5.Factors affecting supply, demand and price of crude oil, refined fuels,
natural gas and other commodities.

6.Regulatory delays and other unforeseeable obstacles beyond the Company's
control that may affect growth strategies through acquisitions and
investments in joint ventures.

7.Competitors in various segments which may be larger than the Company, offer
more varied products or possess greater resources.

8.Unusual or unexpected events such as, among other things, litigation
settlements, adverse rulings or judgments, and environmental remediation
costs in excess of reserves.

9.The factors identified in "Risk Factors" included herein.

DETERMINATION OF THE CERTIFICATE INTEREST RATE

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

On the date of this Prospectus, the CIR was 7.5% on Five-Year and 8.0% on
Ten-Year Subordinated Capital Investment Certificates; 7.5% on Five-Year and
8.0% on Ten-Year Subordinated Monthly Income Capital Investment Certificates;
and 5.75% 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 Subordinated
Capital Investment Certificates," "Description of the Five-Year Subordinated
Capital Investment Certificates," "Description of the Ten-Year Subordinated
Monthly Income Capital Investment Certificates," "Description of the Five-Year
Subordinated Monthly Income Capital Investment Certificates" and "Description of
the Demand Loan Certificates" included herein.

USE OF PROCEEDS

The offering is made on a best efforts basis with no established minimum
amount of Subordinated Debt Certificates and Demand Loan Certificates that must
be sold. No assurance can be provided as to the amount of net proceeds the
Company may receive as a result of this offering. Assuming that all of the
Subordinated Debt and Demand Loan Certificates offered hereby are sold, net
proceeds to the Company will be approximately $250.7 million after deducting
estimated commissions and expenses. Any proceeds to the Company from this
offering may be used: 1) to fund portions of the Company's capital expenditures
and investments in ventures which are estimated to be approximately
$278.3 million through the two-year period ending August 31, 1998; 2) to
refinance approximately $58.3 million of Subordinated Debt Certificates with
interest rates of 7.25% to 10.5% which mature at various times prior to
August 31, 1998; or 3) to redeem Subordinated Debt Certificates prior to
maturity at owners' requests, restricted to the limited redemption rights of
owners as described in each Subordinated Debt Certificate's respective trust
indenture. To the extent that proceeds from sales of the securities offered
hereby are less than amounts required for these purposes, such insufficient
amounts may be obtained from operations, from bank or other borrowings or from
other financing arrangements. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Condition, Liquidity
and Capital Resources", included herein, "- Capital Expenditures and Investments
in Ventures", included herein, and the subcaption "Redemptions" within the
description of each type of certificate included herein.

PLAN OF DISTRIBUTION

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

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

FSC, AHI and other brokers-dealers, if any, selected by Farmland have or
will agree to deliver a current prospectus relating to the Demand Loan
Certificates and Subordinated Debt Certificates to prospective investors at the
time of or prior to any offering of such certificates for sale or for exchange.

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:

If, at the time of Then, to be eligible
issuance the maturity for exchange, the
period of the certificate must have
certificate held was: 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" included herein) or by telephone
to (816) 459-6360. This exchange offer will expire at 12:00 P.M. Eastern
Standard Time on December 31, 1997, 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 following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to exchanges of certificates. This summary is the opinion of Robert B. Terry,
General Counsel for Farmland and is not intended to be exhaustive and, among
other things, does not describe state, local or foreign income and other tax
consequences. Generally, the exchange of certificates would be considered as
taxable exchanges. The basis for determining a taxable gain or loss on a
taxable exchange is for an owner to take into account as gain or loss the
difference between the fair market value of the security being received and his
basis (usually cost) in the security being exchanged. As a practical matter,
most owners should have no gain or loss since the securities were sold at 100%
of Face Amount and are being exchanged at 100% of Face Amount. However, since
it is possible for a prior owner to have sold his certificate to another person
at a cost which is more or less than he had paid for it, a subsequent owner
could have a different cost than the original issued cost. Any gain or loss
recognized on a taxable exchange would be taken into account for purpose of
federal income taxes as a gain or loss from the sale or disposition of a capital
asset and would be short-term gain or loss unless, at the time of exchange, it
had been held for a period of more than twelve months. Owners of these
certificates should seek advice from their tax advisor before accepting the
exchange offer.

HOW TO ACCEPT EXCHANGE OFFER

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

HOW TO TRANSFER OWNERSHIP

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

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

DESCRIPTION OF THE TEN-YEAR SUBORDINATED
CAPITAL INVESTMENT CERTIFICATES

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

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

GENERAL

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

The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 8, 1984, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be issued
by Farmland. At August 31, 1996, a total of $158.3 million was outstanding.

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P. O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6348.

CERTIFICATE INTEREST RATE

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

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

REMEDIES IN EVENT OF DEFAULT

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

SUBORDINATION

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

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

See "Risk Factors - Subordination and Additional Debt" included herein.

REDEMPTION

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

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

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

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

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

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

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

CONCERNING THE TRUSTEE

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

MODIFICATION OF THE INDENTURE

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

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

DEFAULTS AND NOTICE THEREOF

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

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

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

The Indenture of November 8, 1984 does not require any periodic evidence to
be furnished as to the absence of default or as to compliance with the terms of
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
within this section ("Description of the Five-Year Subordinated Capital
Investment Certificates") referred to as "Certificates," bearing an interest
rate hereinafter described in this section and referred to in this section as
the "CIR", are issued under an indenture (the "Indenture of November 8, 1984")
dated November 8, 1984, as amended January 3, 1985 and December 3, 1991, between
Farmland Industries, Inc. ("Farmland") and Commerce Bank of Kansas City,
National Association, Kansas City, Missouri, as Trustee (the "Trustee.")

GENERAL

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

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6348.

CERTIFICATE INTEREST RATE

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

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

REMEDIES IN EVENT OF DEFAULT

SUBORDINATION

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

See "Risk Factors - Subordination and Additional Debt" included herein.

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%.

CONCERNING THE TRUSTEE

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

MODIFICATION OF THE INDENTURE

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

DEFAULTS AND NOTICE THEREOF

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

SATISFACTION AND DISCHARGE OF INDENTURE

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

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

The Ten-Year Subordinated Monthly Income Capital Investment Certificates,
hereinafter within this section ("Description of the Ten-Year Subordinated
Monthly Income Capital Investment Certificates") referred to as "Certificates,"
bearing an interest rate hereinafter described in this section and referred to
in this section as the "CIR", are issued under an indenture (the "Indenture of
November 8, 1984") dated November 8, 1984, as amended January 3, 1985 and
November 20, 1985, between Farmland Industries, Inc. ("Farmland") and Commerce
Bank of Kansas City, National Association, Kansas City, Missouri, as Trustee
(the "Trustee.")
The following descriptive paragraphs are brief summaries of certain terms
and provisions contained in the Indenture of November 8, 1984, and do not
purport to be complete. The section references therein refer to the sections of
the Indenture of November 8, 1984. Where references are made to particular
sections of said Indenture, such sections are incorporated by reference as a
part of the statements made, and such statements are qualified in their entirety
by such reference.

GENERAL

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

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6348.

CERTIFICATE INTEREST RATE

REMEDIES IN EVENT OF DEFAULT

SUBORDINATION

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

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

See "Risk Factors - Subordination and Additional Debt" included herein.

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 of
principal or interest on any of the Certificates, the Trustee shall be protected
in withholding such notice if and so long as the Trustee determines that the
withholding of such notice is in the interest of the Certificate owners (Section
6.02).

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

SATISFACTION AND DISCHARGE OF INDENTURE

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

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

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

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

GENERAL

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

The issue of Certificates is limited to $500,000,000 outstanding at any one
time under the Indenture of November 11, 1985, but such Indenture does not limit
the amount of other securities, either secured or unsecured, which may be issued
by Farmland. At August 31, 1996, a total of $22.7 million was outstanding.

CERTIFICATE INTEREST RATE

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

REMEDIES IN EVENT OF DEFAULT

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

SUBORDINATION

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

See "Risk Factors - Subordination and Additional Debt" included herein.

REDEMPTION

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

CONCERNING THE TRUSTEE

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

MODIFICATION OF THE INDENTURE

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

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

DEFAULTS AND NOTICE THEREOF

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

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

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

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

SATISFACTION AND DISCHARGE OF INDENTURE

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

DESCRIPTION OF THE DEMAND LOAN CERTIFICATES

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

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

GENERAL

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

The issuance of Demand Loan Certificates is limited to $500,000,000
outstanding at any one time under the Indenture of November 20, 1981 but such
Indenture does not limit the amount of other securities either secured or
unsecured, which may be issued by Farmland. At August 31, 1996, a total of
$40.1 million was outstanding.

Farmland intends to mail to the Certificate owners a copy of the latest
annual report containing Farmland's audited Consolidated Financial Statements
upon written request of the owner to Farmland Industries, Inc., P.O. Box 7305,
Kansas City, Missouri 64116. Attention: Executive Vice President and Chief
Financial Officer, Telephone (816) 459-6348.

See "Risk Factors - Subordination and Additional Debt" included herein.

REDEMPTION

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

CONCERNING THE TRUSTEE

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

MODIFICATION OF THE INDENTURE

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

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

DEFAULTS AND NOTICE THEREOF

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

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

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

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

SATISFACTION AND DISCHARGE OF INDENTURE

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

LEGAL MATTERS

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

Farmland is an agricultural farm supply and processing and marketing
cooperative headquartered in Kansas City, Missouri that is primarily owned by
its members and operates on a cooperative basis. Founded originally in 1929,
Farmland has grown from revenues of $310,000 during its first year of operation
to over $9.7 billion during 1996. Members are entitled to receive patronage
refunds distributed by Farmland from its member-sourced annual net earnings.
Unless the context otherwise requires, the term "member" herein means (i) any
voting member, (ii) any associate member, or (iii) any other person with which
Farmland is a party to a currently effective patronage refund agreement (a
"patron"). See "Business - Patronage Refunds and Distribution of Annual
Earnings" included herein.

Farmland was formally incorporated in Kansas in 1931. Its principal
executive offices are at 3315 North Farmland Trafficway, Kansas City, Missouri
64116 (telephone 816-459-6000). Unless the context requires otherwise, (i)
"Farmland" or the "Company" herein refers to Farmland Industries, Inc. and its
consolidated subsidiaries, (ii) all references herein to "year" or "years" are
to fiscal years ended August 31, (iii) all references herein to "tons" are to
United States short tons.

MEMBERSHIP

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

VOTING MEMBERS

As of August 31, 1996, Farmland's requirements for voting membership were
as follows: the voting member must (1) own a minimum of $1,000 of Farmland's
common stock; and (2) transact business with Farmland on a patronage basis; and
(3) not be a significant direct competitor with Farmland in any of Farmland's
major business lines; and (4) (a) be a natural person, a family farm corporation
or a family farm partnership that (i) derives a majority of earned income from a
farming operation (excluding any earned income of a spouse from other sources)
and (ii) is a vendor of livestock to Farmland and/or a contract producer of
livestock for Farmland; or (b) be an association of producers of agricultural
products that (i) is organized and conducts business on a cooperative basis;
(ii) distributes its earnings based on patronage; and (iii) is controlled
directly by its voting producer members.

ASSOCIATE MEMBERS

To qualify for associate membership in Farmland, all of the following
conditions must be met: the associate member must (1) own a minimum of $1,000
of Farmland's associate member common stock; and (2) not be a significant direct
competitor of Farmland in any of the business line(s) in which the associate
member expects to conduct patronage business with Farmland; and (3)(a) be a
natural person, a family farm corporation, or a family farm partnership that (i)
derives a majority of earned income from a farming operation (excluding any
earned income of a spouse from other sources) and (ii) is a vendor of livestock
to Farmland and/or a contract producer of livestock for Farmland; or (b) be an
association conducting business on a cooperative basis; or (c) be a business
entity owned 100%, directly or indirectly, by Farmland or its members or
associate members; or (d) be a hog-and/or cattle-feeding business entity that
agrees to provide Farmland with the information it needs to pass on patronage
refunds from Farmland's hog- and/or cattle-marketing operations to those
agricultural producer-members of Farmland who have conducted business with the
entity.

PATRONAGE AGREEMENTS WITH PATRONS

All existing patronage agreements with patrons will remain in force until
such time as either (a) the patron has been inactive with Farmland during any
single fiscal year; or (b) the patronage agreement is canceled by mutual
consent. No new patronage agreements will be authorized without prior approval
by the Board of Directors.

As of August 31, 1996, Farmland's membership, associate membership and
patrons eligible for patronage refunds consisted of approximately 1,800
cooperative associations of farmers and ranchers and 11,800 pork or beef
producers or associations of such producers. See ''Business - Patronage Refunds
and Distribution of Annual Earnings'' included herein.

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, or (b) in exchange for such common stock
or associate member common stock to issue or record on the books of Farmland
capital credits in an equivalent amount. On the failure of any holder,
following any demand by Farmland therefor, to deliver the certificate or
certificates evidencing any common stock or associate member common stock,
Farmland may cancel the same on its books and issue or record on the books of
Farmland an equivalent amount of capital credits in lieu thereof.

BUSINESS
GENERAL

The Company is one of the largest cooperatives in the United States in
terms of revenues. In 1996, Farmland had exports to approximately 70 countries,
and derived approximately 42% of its grain revenues from export sales.
Substantially all of the Company's foreign grain sales are paid in U.S. Dollars.

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

The Company's farm supply operations consist of three principal product
divisions: petroleum, crop production and feed. Principal products of the
petroleum division are refined fuels, propane, by-products of petroleum refining
and car, truck and tractor tires, batteries and accessories. Principal products
of the crop production division are nitrogen-, phosphate- and potash-based
fertilizers ("plant nutrients"), and, through the Company's ownership in WILFARM
(a 50%-owned venture formed in 1995) ("WILFARM"), a complete line of
insecticides, herbicides and mixed chemicals. Principal products of the feed
division include swine, dairy, pet, beef, poultry, mineral and specialty feeds,
feed ingredients and supplements, animal health products and livestock services.
Over 50% of the Company's farm supply products sold in 1996 was produced in
plants owned by the Company or operated by the Company under long-term lease
arrangements. Approximately 60% of the Company's farm supply products sold in
1996 were sold at wholesale to farm cooperative associations which are members
of Farmland. These farm cooperatives distribute products primarily to farmers
and ranchers in states which comprise the corn belt and the wheat belt and who
utilize the products in the production of farm crops and livestock.

On the output side, the Company's operations include the processing of
pork and beef, the marketing of fresh pork, processed pork and fresh beef and
the storage, marketing and processing of grain. In 1996, approximately 66% of
the hogs processed, 14% of the beef cattle processed and 45% of the grain
marketed by the Company were supplied to the Company by its members.
Substantially all of the Company's pork and beef products sold in 1996 were
processed in plants owned by the Company.

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

The principal businesses of the Company are highly seasonal.
Historically, the majority of sales of farm supply products occur in the spring.
Revenues in the beef business and in grain marketing historically have been
concentrated in the summer, and summer is the lowest sales period for pork
products.

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 (some of which are cooperatives) of nitrogen and
phosphate fertilizers and product importers and brokers. The feed, pork and
beef industries are comprised of a large variety of competitive participants.

PETROLEUM

MARKETING

The principal product of this business segment is refined fuels.
Approximately 58% of refined fuels products sold in 1996 resulted from
transactions with Farmland's members. The balance of the Company's refined
fuels products sales were principally to retailing chains in urban areas. Other
petroleum products include lube oil, grease, by-products of petroleum refining
and car, truck and tractor tires, batteries and accessories. Sales of petroleum
products as a percent of the Company's consolidated sales for 1994, 1995 and
1996 were 13%, 12% and 11%, respectively.

Competitive methods in the petroleum industry include service, product
quality and prices. 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 mid-continent refiner and as a wholesale distributor of petroleum products.

PRODUCTION

The Company owns a refinery at Coffeyville, Kansas. Production volume for
1994, 1995 and 1996 was as follows:

Barrels of Crude Oil Processed
Daily Average
Based on 365 Days per year
1994 1995 1996
(barrels)

Coffeyville, Kansas 63,872 66,367 64,276

The Coffeyville refinery produced approximately 25 million barrels of
motor fuels, heating fuels and other petroleum products in 1994, 26 million
barrels in 1995, and 25 million barrels in 1996. Production at the refinery
reflects a decrease in 1996 compared with 1995 primarily because production was
suspended for 35 days for scheduled maintenance during that year. Approximately
65% of petroleum product sales in 1996 represented products produced at this
location.

In July 1994, the Company acquired a mothballed refinery in Texas for
reassembly at the Coffeyville refinery site. Reassembly was completed during
the fourth quarter of 1996 which expanded crude oil processing capacity to
95,000 barrels per day.

RAW MATERIALS

Farmland's refinery at Coffeyville, Kansas presently 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. In 1996, the Company's pipeline/trucking gathering system
collected approximately 25% of its crude oil supplies from producers near its
refineries. Additional supplies are acquired from diversified sources.

Modifications to the Coffeyville refinery to increase its capability to
process efficiently crude oil streams containing greater amounts of lower
quality crude are continuing. In October 1996, Farmland entered into various
20-year agreements with Tessenderlo KERLEY Inc. ("TKI") whereby TKI will build,
own and operate a sulfur processing plant at the Coffeyville refinery (the
Company anticipates the plant will be completed by the first quarter of 1998).
Under the agreements, Farmland will provide high sulfur gas streams to TKI's
plant. High sulfur gas streams, a by-product of Farmland's refinery, will be
utilized by TKI's plant as a source of feedstock to manufacture sulfur. TKI's
facility will have the capacity to process 100 tons sulfur per day. The
refinery operations currently include a sour gas stripper and sulfur plant but
additional sulfur handling capacity will be required to accommodate any
additional expansion of refinery capacity.

Crude oil is purchased approximately 45 to 60 days in advance of the time
the related refined products are to be marketed. Certain of these advance crude
oil purchase transactions, as well as fixed price refined products advance sales
contracts, are hedged utilizing petroleum futures contracts. See "Risk Factors
- - General Factors Affecting the Business" included herein.

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. There can be no assurance as to what, if any, government
action would be taken if a crude oil shortage were to develop.

CROP PRODUCTION

MARKETING

The Company's crop production business plant nutrients and, through the
Company's ownership in WILFARM, 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, 1995 and 1996 were
17%, 16% and 14%, 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. The Company maintains a significant capital
investment in distribution assets and a seasonal investment in inventory to
enhance its manufacturing and distribution operations. The Company owns or
leases plant nutrient custom dry blending, liquid mixing, storage and
distribution facilities at 177 locations throughout its trade territory to
conform delivery capacity more closely to customer demands for delivery
services.

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

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

PRODUCTION

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

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

Nitrogen fertilizer production information for 1994, 1995 and 1996 is as
follows:

Actual Annual Production Anhydrous
Ammonia
Plant Location 1994 1995 1996
(tons)
Lawrence, Kansas............ 443,000 430,000 431,000
Dodge City, Kansas.......... 257,000 276,000 285,000
Fort Dodge, Iowa............ 256,000 258,000 263,000
Beatrice, Nebraska.......... 277,000 281,000 276,000
Enid, Oklahoma (2 plants)(A) 985,000 998,000 1,005,000
Pollock, Louisiana(A)....... 526,000 497,000 508,000

(A) Leased plants

Natural gas is the major raw material used in production of synthetic
anhydrous ammonia. Synthetic anhydrous ammonia is the basic component of other
commercially produced nitrogen-based crop production products including urea,
urea ammonium nitrate ("UAN") solutions and other products. The Company
produces such value-added nitrogen-based products at four plants. Production of
such value-added products from anhydrous ammonia for 1994, 1995 and 1996 was as
follows:
Actual Annual Production
Plant Location 1994 1995 1996
(tons)
Lawrence, Kansas............ 654,000 719,000 710,000
Enid, Oklahoma (2 plants)(A) 433,000 473,000 475,000
Dodge City, Kansas.......... 163,000 202,000 187,000
Beatrice, Nebraska.......... 162,000 165,000 161,000

(A) Leased plants

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

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

Production at the Joplin plant for 1994, 1995 and 1996 was as follows:

Actual Annual Production
1994 1995 1996
(tons)
Ammonium Phosphate........... 75,000 64,000 65,000
Feed Grade Phosphate......... 157,000 159,000 160,000

The Company and Norsk Hydro a.s. are each 50% owners of a joint venture,
Farmland Hydro, L.P. ("Hydro"), which is a manufacturer of phosphate fertilizer
products for distribution principally 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. Hydro's plant produces
phosphoric acid products such as super acid, diammonium phosphate and
monoammonium phosphate. Annual production in tons of such products for 1994,
1995 and 1996 was 1,437,000, 1,471,000 and 1,494,000, respectively. The
phosphate rock required to operate Hydro'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 are each 50% owners of a joint
venture, SF Phosphates Limited Company ("SF Phosphates"), which operates a
phosphate mine located in Vernal, Utah, a phosphate chemical plant located in
Rock Springs, Wyoming and a 96-mile pipeline connecting the mine to the plant.
The plant produces monoammonium phosphate and super acid with annual production
in tons for 1994, 1995 and 1996 of 465,000, 451,000 and 506,000, respectively.
Under the joint venture agreement, the Company and J.R. Simplot Company purchase
the production of the joint venture in proportion to their ownership. Based on
current recovery methods and the levels of plant production in recent years, the
Company estimates that the phosphate rock reserves owned by SF Phosphates are
adequate to provide the phosphate rock requirements of the plant for
approximately 75 years.

The Company and Mississippi Chemical Company are each 50% owners of a
joint venture formed to develop, construct and operate a 1,850 metric ton per
day ammonia production facility in The Republic of Trinidad and Tobago. The
plant construction is funded by a combination of nonrecourse project financing
and equity. The Company expects to fund its equity position in the project
(estimated to amount to approximately $67.0 million) from currently available
sources of capital. Construction is tentatively scheduled to be completed in
1998. See "Business - Capital Expenditures and Investments in Ventures"
included herein.

RAW MATERIALS

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

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

Products in the Company's feed line include swine, beef, poultry, dairy,
pet, mineral and specialty feeds, feed ingredients and supplements and animal
health products. The primary component of feed products is grain and grain by-
products, which are generally available in the region in which the company
operates.

This business segment's sales were approximately 8%, 6% and 6% of
consolidated sales for the years 1994, 1995 and 1996, respectively.
Approximately 56% of the feed business segment's sales in 1996 was attributable
to products manufactured in the Company's feed mills. The Company operates feed
mixing plants at 22 locations throughout its territory, an animal protein and
premix plant located in Eagle Grove, Iowa, a premix plant in Marion, Ohio and a
pet food plant in Muncie, Kansas.

Feed production for 1994, 1995 and 1996 was as follows:

Actual Annual Production
1994 1995 1996
(tons)
25 feed mills (combined)..... 1,118,000 1,112,000 1,103,000

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

FOOD PROCESSING AND MARKETING

PORK

PROCESSING

The Company's pork processing and marketing operations are conducted
through a 99%-owned subsidiary, Farmland Foods, Inc. ("Foods"), which operates
11 food processing facilities including facilities at Topeka, Kansas, Albert
Lea, Minnesota and Dubuque, Iowa which were purchased during 1996. Meat
processing facilities at Springfield, Massachusetts, Carey, Ohio, and New
Riegel, Ohio produce Italian-style specialty meats and ham products. Plants in
Wichita and Topeka, Kansas and Albert Lea, Minnesota process fresh pork into a
variety of products including ham, bacon and sausage. Additionally, the
Wichita, Kansas facility processes pork, beef and chicken into hot dogs, dry
sausage and other luncheon meats. Facilities in Denison, Iowa, Monmouth,
Illinois, Dubuque, Iowa and Crete, Nebraska function as pork abattoirs and have
additional capabilities for processing pork into bacon, ham and smoked meats.
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 plant located in Carroll, Iowa is primarily a packaging
facility for canned or cook-in-bag products.

Production for 1994, 1995 and 1996 is as follows:

Actual Weekly Production
1994 1995 1996
(pounds)
Crete, Nebraska.............. 2,800,000 3,100,000 3,300,000
Denison, Iowa................ 2,700,000 2,800,000 2,700,000
Wichita, Kansas.............. 1,900,000 2,200,000 2,600,000
Monmouth, Illinois........... 1,400,000 1,900,000 1,900,000
Carroll, Iowa................ 1,100,000 1,400,000 1,200,000
Springfield, Massachusetts... 750,000 725,000 782,619
Carey/New Riegel, Ohio....... 275,000 425,000 434,996
Dubuque, Iowa(A)............. n/a n/a 1,200,000
Albert Lea, Minnesota (A).... n/a n/a 1,300,000
Topeka, Kansas (a) .......... n/a n/a 810,000

(A) Actual weekly averages since acquisition of the plant by the Company.

Actual Weekly Head Slaughtered
1994 1995 1996

Crete, Nebraska.............. 46,000 46,000 43,000
Denison, Iowa................ 40,000 41,000 37,000
Monmouth, Illinois........... 27,000 33,000 31,000

MARKETING

The Company's products 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 a variety of brand names including: Farmland,
Farmstead, OhSe, Maple River, Carando, Roegelein, Regal and Marco Polo.
Product distribution is through national and regional retail food chains, food
service accounts, distributors and through international marketing brokers.

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

BEEF

PROCESSING

The Company's beef processing and marketing operations are conducted
through National Beef Packing Company, L.P. ("NBPC"), which was formed in April
1993, and at September 1, 1996, was 75%-owned by Farmland. The processing
facilities for these beef operations are located in Liberal, Kansas and Dodge
City, Kansas. These facilities function as beef abattoirs and process fresh
beef into primal cuts for additional processing into fabricated or boxed beef.
During 1994, 1995 and 1996, the two plants slaughtered an aggregate of 1.7
million, 1.9 million and 2.1 million cattle, respectively.

MARKETING

Products in the Company's beef processing and marketing operations include
fresh beef, boxed beef and packing house by-products. Product distribution is
through national and regional retail and food service customers as well as under
the Farmland Black Angus Beef label. In addition, certain beef products are
distributed in international markets.

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

GRAIN

MARKETING

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

The Company is exposed to risk of loss in the market value of its grain
inventory and fixed price purchase contracts if grain market prices decrease,
and is exposed to loss on its fixed price sales contracts if grain market prices
increase. To reduce the price change risk associated with holding positions in
grain, the Company takes opposite and offsetting positions by entering into
grain commodity futures contracts. Such contracts have terms of up to one year.
The Company's strategy is to maintain hedged positions on as close to 100% of
its position in grain as is possible. During 1994, 1995 and 1996, the Company
maintained hedges on approximately 95.3%, 97.9% and 94.8%, respectively, of its
grain positions. Based on total assets at the beginning and end of 1996, the
average market value of grain positions not hedged during the year amounted to
less than 1% of the Company's average total assets. While hedging activities
reduce the risk of loss from changing market values of grain, such activities
also limit the gain potential which otherwise could result from changes in
market prices of grain. See "Management's Discussion and Analysis of Financial
Conditions and Results of Operations - Financial Condition, Liquidity and
Capital Resources".

In 1996, approximately 42% of grain revenues were from export sales or
sales to domestic customers for export. In 1994 and 1995, export sales or sales
to domestic customers for export accounted for approximately 37% and 47%,
respectively, of consolidated grain revenues. Export-related sales are subject
to international political upheavals and changes in other countries' trade
policies which are not within the control of the United States or the Company.
Foreign sales of grain generally are paid in U.S. Dollars.

Heartland Wheat Growers, L.P. (79%-owned by Farmland and 21%-owned by five
cooperative members of Farmland), which processes wheat into gluten for use
primarily in commercial baking and pet food markets and starch for numerous
industrial purposes, started commercial operations during May 1996. The plant
has capacity to process 4.3 million bushels of wheat annually; actual production
for 1996 was approximately 0.6 million bushels of wheat.

PROPERTY

The Company owns or leases 33 inland elevators and one export elevator in
North America with a total capacity of approximately 179.2 million bushels of
grain, six of which elevators (with an aggregate capacity of 55.5 million
bushels of grain) are temporarily closed due to current demand for grain holding
and storage facilities.

TRADIGRAIN

Eight international grain trading subsidiaries of Farmland (collectively
referred to as "Tradigrain") import, export and ship all major grains from the
major producing countries to final consumers which are either governmental
entities, private companies or other major grain companies.

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

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, breeding and feeding practices of
livestock and pets.

Expenditures related to Company-sponsored product research and process
improvements amounted to $2.7 million, $2.3 million and $2.4 million for 1994,
1995 and 1996, respectively.

CAPITAL EXPENDITURES AND INVESTMENTS IN VENTURES

In 1996, the Company made capital expenditures and investments in ventures
totaling $233.5 million. See "Business - Petroleum", " - Crop Production", " -
Feed"," - Food Processing and Marketing" and " - Grain" included herein.

The Company plans expenditures for capital additions, improvements and
investments in ventures of an aggregate of approximately $278.3 million during
the years 1997 and 1998 (of which $61.0 million was committed as of August 31,
1996) as described in the following paragraphs. Of this amount, the Company
plans expenditures of $248.6 million for capital additions and improvements and
$29.7 million for investments in ventures.

Capital expenditures and investments planned for the crop production
business segment total approximately $127.7 million and include: an investment
in a 50%-owned venture organized to construct and operate an anhydrous ammonia
plant in The Republic of Trinidad and Tobago, construction of a 525,000 ton per
year UAN facility in Ft. Dodge, Iowa and expenditures for operating
efficiencies, environmental and safety issues and for operating necessities or
betterments.

Capital expenditures and investments planned for the feed business segment
total approximately $11.5 million for feed mill efficiencies, operating
necessities and replacements.

Capital expenditures and investments planned for the petroleum business
segment total approximately $39.4 million and are for operating necessities,
increased operating efficiency and for environmental and safety issues.

Capital expenditures and investments of approximately $72.8 million are
planned for the food processing and marketing business segment. These
expenditures are primarily for operating necessities and improvements.

Capital expenditures and investments of approximately $6.3 million planned
for the grain business segment are mainly for expansion and replacements.

Capital expenditures and investments of approximately $20.6 million are
planned for the other operations and corporate groups. These expenditures
include upgrades of management information services. The remaining expenditures
are planned for operating necessities and improvements.

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

MATTERS INVOLVING THE ENVIRONMENT

The Company wholly or jointly owns or operates 34 grain elevators and 58
manufacturing properties and has potential responsibility for environmental
conditions at a number of former manufacturing facilities and at waste disposal
facilities operated by third parties. The Company also has been identified as a
PRP under CERCLA at various National Priority List sites and has unresolved
liability with respect to the past disposal of hazardous substances at five such
sites. CERCLA may impose joint and several liability on certain statutory
classes of persons for the costs of investigation and remediation of
contaminated properties, regardless of fault or the legality of the original
disposal. These persons include the present and former owners or operators of a
contaminated property, and companies that generated, disposed of, or arranged
for the disposal of hazardous substance found at the property. The Company is
investigating or remediating contamination at 28 properties under CERCLA and/or
the state and federal hazardous waste management laws. During 1994, 1995 and
1996, the Company paid approximately $1.4 million, $3.2 million and $1.8
million, respectively, for environmental investigation and remediation.

GOVERNMENT REGULATION

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

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

The Federal Agriculture Improvement and Reform Act of 1996 ("FAIR")
represents the most significant change in government farm programs in more than
60 years. FAIR greatly accelerates the trend toward greater market orientation
and reduced Government influence on the agricultural sector. As a result, the
Company expects the number of acres under cultivation to increase. This
increase could favorably impact demand of producers for the Company's plant
nutrients and crop protection products and fuels. Whether demand for the
Company's products is favorably impacted depends in a large part on whether U.S.
agriculture becomes more competitive in world markets as this industry moves
toward greater market orientation, the extent which governmental actions expand
international trade agreements and whether markets access opportunities for U.S.
agriculture is increased.

Management is not aware of any newly implemented or pending policies, other
than as discussed above, having a significant impact or which may have a
significant impact on operations of the Company.

EMPLOYEE RELATIONS

At August 31, 1996, the Company had approximately 14,700 employees.
Approximately 50% of the Company's employees were represented by unions having
national affiliations. The Company considers its relationship with employees 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
February 1999.

PATRONAGE REFUNDS AND DISTRIBUTION OF ANNUAL EARNINGS

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

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

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

For the years ended 1994, 1995 and 1996, Farmland returned the following
patronage refunds:

Cash or Cash
Equivalent Non-Cash Total
Portion of Portion of Patronage
Patronage Patronage Refunds
Refunds Refunds

(Amounts in thousands)
1994......... $ 26,552 $ 44,032 $ 70,584
1995......... $ 33,038 $ 61,356 $ 94,394
1996......... $ 32,719 $ 60,776 $ 93,495

Nonmember-sourced income (earnings attributed to transactions with persons
not eligible to receive patronage refunds, i.e. nonmembers) and nonpatronage
income or loss (income or loss from activities not directly related to the
cooperative marketing or purchasing activities of Farmland) is subject to income
taxes computed on the same basis as such taxes are computed on the income or
loss of other corporations.

EQUITY REDEMPTION PLANS

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

BASE CAPITAL PLAN

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

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

ESTATE SETTLEMENT PLAN

The estate settlement plan provides that equity holdings of deceased
natural persons (except for equity purchased and held for less than five years)
will be redeemed at par value. This provision is subject to a limitation of
$1.0 million in any one fiscal year without further authorization by the Board
of Directors for such year.

SPECIAL EQUITY REDEMPTION PLANS

From time to time, the Company has redeemed portions of its outstanding
equity under various special equity redemption plans. The special equity
redemption plans (collectively, the "Plans") may be changed at any time or from
time to time at the sole and absolute discretion of the Board of Directors. The
Plans are also not binding upon the Board of Directors or the Company, and the
Board of Directors reserves the right to redeem, or not redeem, any equities of
the Company without regard to whether such action or inaction is in accordance
compliance with the Plans.

The special equity redemption plans are designed to return cash to members
or former members of Farmland or Foods by a systematic method for redemption of
outstanding equity which is not subject to redemption through other Plans, such
as the Base Capital Plan or the estate settlement plan. The order in which each
type of equity is redeemed is determined by the Board of Directors.

Presented below are the amounts of equity approved for redemption by the
Board of Directors under the Base Capital Plan, the estate settlement plan,
special equity redemption plans and redemptions of Foods equities for each of
the years in the five-year period ended 1996. Substantially all amounts
approved for redemptions are paid in cash in the year following approval.
<TABLE>
<CAPTION>
Base Capital Plan Estate Settlement Special Equity Total Plan
Redemptions Plan Redemption Redemption(A) Redemptions

(Amounts in Thousands)
<S> <C> <C> <C> <C>
1992........... $ 6,707 $ 234 $ 6,755 $ 13,696
1993........... $ -0- $ 127 $ 12 $ 139
1994........... $ 8,740 $ 126 $ 4,108 $ 12,974
1995........... $ 14,159 $ 128 $ 13,451 $ 27,738
1996........... $ 14,024 $ 138 $ 11,277 $ 25,439
</TABLE>

(A) Included in 1995 and 1996 are redemptions of preferred stock.

LEGAL PROCEEDINGS

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

In accordance with Securities and Exchange Commission regulations, the Company
reports that, during the fourth quarter, it resolved (see "Business - Matters
Involving the Environment" included herein) the following civil and
administrative proceedings in which violations of environmental laws were
alleged and civil penalties in excess of $100,000 were sought.

1. COFFEYVILLE CERCLA/EPCRA PENALTIES. Administrative complaint issued

August 10, 1993, by Region VII of the EPA seeking $350,000 in civil
penalties for alleged violations of notification requirements under the
CERCLA and the Emergency Planning and Community Right to Know Act.

2. COFFEYVILLE RCRA DOCKET NO. VII-94-H-0018. Administrative compliant
issued August 2, 1994, by Region VII of the EPA seeking $1.4 million in
civil penalties for alleged violations of the RCRA and of regulations
issued thereunder.

3. COFFEYVILLE CLEAN AIR ACT CIVIL PENALTY. Federal civil complaint filed

August 15, 1996, by the U.S. Department of Justice for alleged violations
of the Clean Air Act.

EXPERTS

The Consolidated Financial Statements of Farmland as of August 31, 1995
and 1996 and for each of the years in the three-year period ended August 31,
1996 included herein and elsewhere in the Registration Statement, have been
included herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein and upon the authority of such firm as experts in accounting
and auditing.

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", included herein, regarding the exception from pricing by the
qualified independent underwriter.

MANAGEMENT

The directors of Farmland are as follows:
Total
Years
Expiration of
Age as of Positions of Present Service
August 31, Held With Term as as Board
Name 1996 Farmland Director Member Business Experience During Last Five Years

<S> <C> <C> <C> <C> <C>
Albert J. Shivley 53 Chairman of 1998 12 General Manager--American Pride Co-op
the Board Association, Brighton, Colorado, a local
cooperative association of farmers and
ranchers.

H. D. Cleberg 57 President and 1997 6 Mr. Cleberg has been with Farmland since
Chief 1968. He was named as president-elect in
Executive February 1991 and became President in April
Officer 1991. From 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 65 Vice Chairman 1997 13 Producer--Deerfield, Kansas. Mr. Molz has
and Vice served as Chairman of the Board of the
President National Bank for Cooperatives since January
1993. He served as 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. 45 1998 4 General Manager--Cooperative Grain and
Supply, Hillsboro, Kansas, a local
cooperative association of farmers and
ranchers.

Ronald J. Amundson 52 1997 8 General Manager--Central Iowa Cooperative,
Jewell, Iowa, a local cooperative association
of farmers and ranchers.

Baxter Ankerstjerne 60 1999 6 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 55 1997 5 Producer--Texline, Texas.

Richard L. Detten 62 1999 9 Producer--Ponca City, Oklahoma.

Steven Erdman 46 1998 4 Producer--Bayard, Nebraska.

Harry Fehrenbacher 48 1999 * Producer--Newton, Illinois. Mr. Fehrenbacher
serves as President of the Board of Directors
of Effingham Equity, Effingham, Illinois, a
local cooperative association of farmers and
ranchers.

Warren Gerdes 48 1998 3 General Manager--Farmers Cooperative Elevator
Company, Buffalo Lake, Minnesota, a local
cooperative association of farmers and
ranchers.

Ben Griffith 47 1998 7 General Manager--Central Cooperatives, Inc.,
Pleasant Hill, Missouri, a local cooperative
association of farmers and ranchers.

Gail D. Hall 54 1997 8 General Manager--Lexington Cooperative Oil
Company, Lexington, Nebraska, a local
cooperative association of farmers and
ranchers.

Jerome Heuertz 55 1997 2 General Manager--Farm Service Cooperative,
Council Bluffs, Iowa, a local cooperative
association of farmers and ranchers.

Barry Jensen 51 1999 6 Producer--White River, South Dakota.
Mr. Jensen currently serves as a Director,
and was President from May 1989 to May 1993,
of Farmers Co-op Oil Association, Winner,
South Dakota, a local cooperative association
of farmers and ranchers.

Ron Jurgens 58 1998 1 General Manager-Agri Co-op in Holdrege,
Nebraska, a local cooperative association of
farmers and ranchers.

William F. Kuhlman 47 1999 * Producer--Oakley, Kansas. Mr. Kuhlman serves
on the Boards of Directors of Kansas Retail
Venture Group and Northwest Kansas Ground
Water Management. Formerly, he was President
and CEO of Cooperative Agricultural Services,
Inc., Oakley, Kansas and General Manager of
Menlo-Rexford Cooperative, local cooperative
associations of farmers and ranchers.

Greg Pfenning 47 1997 4 Producer--Hobart, Oklahoma. Director of
Hobart & Roosevelt Cooperative, a local
cooperative association of farmers and
ranchers.

Monte Romohr 43 1999 6 Producer--Gresham, Nebraska. From March 1988
to March 1991, Mr. Romohr served as President
of Farmers Co-op Business Association,
Shelby, Nebraska, a local cooperative
association of farmers and ranchers.

Joe Royster 44 1999 3 General Manager--Dacoma Farmers Cooperative,
Inc., Dacoma, Oklahoma, a local cooperative
association of farmers and ranchers.

E. Kent Stamper 50 1999 * Producer--Plainville, Kansas. Mr. Stamper
serves as Director and Vice President of the
Board of Directors of Midland Marketing Coop,
Hays, Kansas, a local cooperative association
of farmers and ranchers. He is a member of
the Director Development Committee of the
Kansas Cooperative Council. Formerly, he
served as Director and Secretary of the Board
of Directors of Union Equity Cooperative
Exchange, Enid, Oklahoma, a regional grain
marketing cooperative.

Frank Wilson 50 1998 1 General Manager-Elkhart Farmers Co-op
Association, Elkhart, Texas, a local
cooperative association of farmers and
ranchers.
* Elected to Board of Directors on December 5, 1996

</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 the Board of Directors is elected each
year. H. D. Cleberg is serving as director-at-large; the remaining 21 directors
were elected from nine geographically defined districts. The executive
committee consists of Ronald Amundson, Ben Griffith, Otis Molz, Monte Romohr,
Albert Shivley and H. D. Cleberg. With the exception of H. D. Cleberg,
President and Chief Executive Officer, members of the executive committee serve
as chairman of standing committees of the Board of Directors as follows: Ronald
Amundson, corporate responsibility committee; Ben Griffith, audit committee;
Otis Molz, compensation committee; Monte Romohr, finance committee; and Albert
Shivley, nominating committee.

The executive officers of Farmland are:

Age as of
August 31,
Name 1996 Principal Occupation and Other Positions

<S> <C> <C>
J. F. Berardi 53 Executive Vice President and Chief Operating Officer, Grain Businesses - Mr.
Berardi joined Farmland March 1992, serving as Executive Vice President and
Chief Financial Officer. He was appointed to his present position in July 1996.
He 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.

T. M. Campbell 46 Executive Vice President and Chief Financial Officer - Mr. Campbell jointed
Farmland August 1992, serving as Vice President and Treasurer. He was appointed
to his present position in August 1996. He served as Vice President and
Assistant Treasurer of Harcourt Brace Jovanovich, Inc., a diversified Fortune
200 company, from 1986 to 1992.

H. D. Cleberg 57 President and Chief Executive Officer - Mr. Cleberg has been with Farmland since
1968. He was appointed to his present position effective April 1991. From
September 1990 to March 1991 he served as Senior Vice President and Chief
Operating Officer. From April 1989 to August 1990 he served as Executive Vice
President, Operations. Prior to April 1989 he held several executive management
positions with Farmland.

S. P. Dees 53 Executive Vice President, Business Development and International Marketing - Mr.
Dees joined Farmland in 1984, serving as Vice President and General Counsel, Law
and Administration. He was appointed to his present position in September 1995.
From September 1993 to September 1995 he served as Executive Vice President,
Farmland and Director General of Farmland Industrias, S.A. de C.V. From October
1990 to September 1993 he served as Executive Vice President, Administrative
Group and General Counsel.

G. E. Evans 52 Executive Vice President and Chief Operating Officer, Livestock and Meat
Businesses - Mr. Evans has been with Farmland since 1971. He was appointed to
his present position in September 1995. From January 1992 to September 1995 he
served as Senior Vice President, Agricultural Production Marketing/Processing.
From April 1991 to January 1992 he served as Senior Vice President, Agricultural
Inputs. He served as Executive Vice President, Agricultural Marketing from
October 1990 to March 1991.

R. W. Honse 53 Executive Vice President and Chief Operating Officer, Ag Input Businesses - Mr.
Honse has been with Farmland since 1983. He was appointed to his present
position in September 1995. From January 1992 to September 1995, he served as
Executive Vice President, Agricultural Inputs Operations. From October 1990 to
January 1992 he served as Executive Vice President, Agricultural Operations.

B. L. Sanders 55 Senior 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.
</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, 1995 and 1996.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
Year Employee Other Annual LTIP
Name and Principal Position Ending Salary Variable Compensation Payouts
August 31 Compensation
Plan

<S> <C> <C> <C> <C> <C>
H. D. Cleberg, 1994 $ 439,728 $ 338,481 $ -0- $ -0-
President and 1995 $ 456,218 $ 346,944 $ -0- $ -0-
Chief Executive Officer 1996 $ 497,713 $ 356,485 $ -0- $ 1,296,482

G. E. Evans, 1994 $ 278,304 $ 217,761 $ -0- $ -0-
Executive Vice President and 1995 $ 283,988 $ 217,761 $ -0- $ -0-
Chief Operating Officer 1996 $ 298,848 $ 216,121 $ -0- $ 648,241
Livestock and Meat Businesses

R. W. Honse, 1994 $ 251,532 $ 205,206 $ -0- $ -0-
Executive Vice President and 1995 $ 280,248 $ 210,337 $ -0- $ -0-
Chief Operating Officer 1996 $ 303,364 $ 216,121 $ -0- $ 648,241
Ag Input Businesses

J. F. Berardi, 1994 $ 216,252 $ 146,576 $ -0- $ -0-
Executive Vice President and 1995 $ 226,914 $ 150,241 $ -0- $ -0-
Chief Operating Officer, 1996 $ 244,770 $ 154,372 $ -0- $ 549,204
Grain Businesses

S. P. Dees, 1994 $ 205,066 $ 119,093 $ 124,138(a) $ -0-
Executive Vice President 1995 $ 211,000 $ 122,070 $ 127,878(a) $ -0-
Business Development and 1996 $ 236,765 $ 125,427 $ 5,357(a) $ 459,171
International Marketing

<FN>
(a)Mr. Dees received a differential remuneration and reimbursements in 1994,
1995 and 1996 for taxes in connection with foreign
assignments. Mr. Dees' foreign assignment ended in September 1995.
</TABLE>

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

Under the Company's Annual Employee Variable Compensation Plan, all regular
salaried employees' total compensation is based on a combination of base and
variable pay. The variable compensation payment is dependent upon the
employee's position, the performance of the Company for the fiscal year or other
performance criteria of the individual's operating unit. Variable compensation
is awarded only in years that the Company achieves a threshold performance level
as 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. Distributions under this plan are made
annually after the close of each fiscal year.

During 1996, under the Company's Management Long-Term Incentive Plan for
1996 through 1998, certain management employees became eligible for future
payments (contingent on satisfying the terms and conditions of the Plan as set
forth below herein) including those executives set forth below.

<TABLE>
<CAPTION>
(A) (B) (C) Estimated Future Payouts Under Non-Stock
Price Based Plans

Number of Shares, Performance or Other (D) (E) (F)
Name Units or Other Period Until Maturation Threshold Target (2) Maximum (2)
Rights (1) or Payout

(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
H. D. Cleberg 1996 - 1998 $ 392

G. E. Evans 1996 - 1998 $ 196

R. W. Honse 1996 - 1998 $ 196

J. F. Berardi 1996 - 1998 $ 153

S. P. Dees 1996 - 1998 $ 139

<FN>

(1) Rights in the incentive pool are expressed as a minimum percentage
of the total pool. See discussion contained below herein.

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

Under the Management Long-Term Incentive Plan, certain of the Company's
management employees are paid cash incentive amounts determined by a formula
which takes into account the level of management and the aggregate income of the
Company over a three year period. The Management Long-Term Incentive Plan
provides for three year performance and reward cycles and, in general,
participants must be active employees of the Company at the end of the cycle in
order to receive payment of the award with respect to such cycle. Periods
currently covered by the Management Long-Term Incentive Plan are: 1995 through
1997 ("1997 Plan"); 1996 through 1998 ("1998 Plan") and 1997 through 1999 ("1999
Plan"). The income threshold ("Threshold") for the three year period of the
1997 Plan, the 1998 Plan and 1999 Plan is $235,043,000, $393,481,000 and
$541,768,000, respectively. For each plan, if the aggregate income is less than
the Threshold or if the sum of the cash returned to members during the 1997
Plan, the 1998 Plan and the 1999 Plan, as patronage refunds, redemptions under
the base capital plan, estate settlement plans and special allocated equity
redemption plans is less than $61,938,000, $90,000,000 and $147,285,000,
respectively, subject to the following sentence, no payment will occur with
respect to such plan. The Board of Directors may, in its sole discretion, amend
or discontinue the Management Long-Term Incentive Plan, adjust or cancel any
awards otherwise payable thereunder should the Company incur a loss in the final
year of any performance cycle or impact the goals and rewards of the plan by
approving for inclusion or exclusion in the calculation of performance results
the financial results of extraordinary events occurring during the cycle.
Subject to the preceding sentence, if aggregate income equals or exceeds the
Threshold and the cash returned to members equals or exceeds the specified
amounts, then .83% of aggregate income for the 1997 Plan, the 1998 Plan and the
1999 Plan is allocated to an incentive pool for each such plan from which awards
to management will be paid. Absent a significant change in their status, in
which event such percentages may be adjusted, of the amount, if any, allocated
to the incentive pool Messrs. Cleberg, Evans, Honse, Berardi and Dees will
receive at least : 12%, 6% 6%, 5.6% and 4.25%, respectively, for the 1997 Plan;
12%, 6%, 6%, 6% and 4.25%, respectively, for the 1998 Plan; and 11.2%, 5.6%,
5.6%, 5.6% and 4.0%, respectively, for the 1999 Plan.

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 years 1994, 1995 and 1996 are
included in the cash compensation table.

The Company established the Farmland Industries, Inc. Employee Retirement
Plan (the "Plan") in 1986 for all employees whose customary employment is at the
rate of at least 1,000 hours per year. Participation in the Plan is optional
prior to age 34, but mandatory thereafter. Approximately 6,890 active and 7,640
inactive employees were participants in the Plan on August 31, 1996. 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, and all
funds of the Plan are held by a bank trustee in accordance with the terms of the
trust agreement. It is the present intent to continue this plan indefinitely.
The Company's funding policy is to make the maximum annual contributions to the
Plan's trust fund that can be deducted for federal income tax purposes. Company
contributions made to the Plan for the years ended August 31, 1994, 1995 and
1996 were $2.9 million, $5.3 million and $12.2 million, respectively.

Payments to participants in the Plan are based upon length of participation
and compensation reported to the Plan for the four highest of the last ten years
of employment. Compensation for this purpose includes base salary and
compensation earned under the Company's Annual Employee Variable Compensation
Plan discussed above. However, at the present time, the maximum compensation
(per participant) which may be covered by a qualified pension plan is limited to
$150,000 ($160,000 for the plan year beginning in 1997) annually and the maximum
retirement benefit which may be paid by such plan is limited to $120,000
($125,000 for the limitation year beginning in 1997) annually by the Internal
Revenue Code ("IRC").

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 IRC on the amount of
annual salary which can be included in the computation of retirement income
(currently $150,000) or the amount of annual retirement benefit which may be
paid by a qualified retirement plan (currently $120,000).

The Board of Directors has appointed an Administrative Committee to
administer the SERP. The Company purchased cash value life insurance polices on
the lives of certain plan participants to recover its cost of providing benefits
under the SERP. The Company owns these insurance policies and has the sole
right to name policy beneficiaries. The total SERP premiums charged to
operations for the years ended August 31, 1994, 1995 and 1996 were $0.4 million,
$0.6 million and $-0-, respectively.

The Company's obligation to pay supplemental retirement benefits under the
SERP is limited to the aggregate cash value of the life insurance policies
designated by the Administrative Committee as policies of the SERP. If the
benefit payments under this Plan for a year would, when added to all prior
benefit payments made from this Plan, exceed (a) the total cash value, on August
31 of the preceding year, of the policies designated by the Administrative
Committee, increased by (b) any previous reductions in cash value caused by
withdrawals from the policies by the Corporation, each Participant's payment
shall be reduced.

The following table sets forth, for compensation levels up to $150,000, the
estimated annual benefits payable at age 62 for members of the Retirement Plan,
which benefits are not reduced by virtue of Social Security payments. The
following table also sets forth, for compensation levels exceeding $150,000, the
combined estimated annual benefits payable under the Retirement Plan and SERP
for each of the first 10 years following retirement (no SERP payouts are to be
made after 10 years) assuming: retirement occurs on or after age 62; the
portion of the employee's benefit lost (due to the IRC limitations), which would
have been provided by the employer's contribution to the Retirement Plan, is
85%; the employee lives for 10 years after retirement; and, the aggregate
payments under the SERP are less than the cash value of life insurance policies
designated (see above) as SERP policies.

Final Average Years of Service
Wage 15 20 25 30

The following table sets forth the credited years of service for certain
executive officers of the Company at August 31, 1996.

Name Years of Creditable Service

H. D. Cleberg 31
G. E. Evans 22
R. W. Honse 22
J. F. Berardi 4
S. P. Dees 12

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The following persons, none of whom, except as indicated below, is either
currently or formerly an officer or employee of the Company or any of its
subsidiaries, served as members of the Company's compensation committee during
1996. Messrs. Lyman Adams, Jody Bezner, Warren Gerdes, Gail Hall and Otis Molz.
Mr. Molz was Chairman of the Board of the Company from December 1991 to December
1992. No executive officer of the Company (i) served as a member of a
compensation committee (or other board committee performing equivalent functions
or, in the absence of such committee, the entire board of directors) of another
entity, one of whose executive officers served on the compensation committee of
the Company, (ii) served as a director of another entity, one of whose executive
officers served on the compensation committee of the Company, or (iii) served as
a member of a compensation committee (or other board committee performing
equivalent functions or, in the absence of such committee, the entire board of
directors) of another entity, one of whose executive officers served as a
director of the Company.

COMPENSATION OF DIRECTORS

Directors' compensation consists of payment of three hundred dollars
($300.00) per day of Farmland business, plus reimbursement of necessary expenses
incurred in connection with their official duties. In addition, annual
retainers of $30,000 for the Chairman; $25,000 for each member of the Executive
Committee, other than the Chairman and President; and $20,000 for all other
directors shall be paid.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Farmland's equity consists of preferred shares, common shares, associate
member common shares and capital credits. Only the common shares have voting
rights.

At August 31, 1996, no person was known by Farmland to be the beneficial
owner of more than five percent of Farmland's common shares.

At August 31, 1996, none of the directors of Farmland and the executive
officers listed under the first table under "Executive Compensation" above,
either individually or as a group, beneficially owned in excess of one percent
of any class of Farmland's equity.

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. See Note 15 of the Notes to the Consolidated Financial Statements.

INDEX TO FARMLAND CONSOLIDATED FINANCIAL STATEMENTS

Independent Auditors' Report ......

Consolidated Balance Sheets, August 31, 1995 and
1996 ..............................

Consolidated Statements of Operations for each of
the years in the three-year period ended August
31, 1996 ..........................

Consolidated Statements of Cash Flows for each of
the years in
the three-year period ended August 31, 1996

Consolidated Statements of Capital Shares and
Equities for each of the years in the three-year
period ended August 31, 1996 ......

Notes to Consolidated Financial Statements

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, 1995 and 1996, 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, 1996.
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, 1995 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended August 31, 1996, in conformity with generally accepted accounting
principles.

KPMG Peat Marwick LLP

Kansas City, Missouri
October 18, 1996

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS
<TABLE>
<CAPTION>
August 31

1995 1996

(Amounts in Thousands)
<S> <C> <C>
Current Assets:
Accounts receivable - trade........................................ $ 446,232 $ 624,002
Inventories (Note 3)............................................... 772,528 736,620
Other current assets............................................... 60,883 101,748

Total Current Assets.......................................... $ 1,279,643 $ 1,462,370

Investments and Long-Term Receivables (Note 4)....................... $ 185,687 $ 241,124

Property, Plant and Equipment (Notes 5 and 6):
Property, plant and equipment, at cost............................. $ 1,334,849 $ 1,506,460
Less accumulated depreciation and amortization..................... 742,704 789,236

Net Property, Plant and Equipment.................................. $ 592,145 $ 717,224

Other Assets......................................................... $ 128,468 $ 147,728

Total Assets......................................................... $ 2,185,943 $ 2,568,446

FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

LIABILITIES AND EQUITIES
<TABLE>
<CAPTION>
August 31

1995 1996
(Amounts in Thousands)
<S> <C> <C>
Current Liabilities:
Demand loan certificates............................................... $ 13,524 $ 40,099
Short-term notes payable (Note 6)...................................... 346,133 315,428
Current maturities of long-term debt (Note 6).......................... 42,394 41,080
Accounts payable - trade............................................... 245,905 392,436
Accrued payroll........................................................ 50,337 48,893
Other current liabilities.............................................. 261,837 302,384

Total Current Liabilities......................................... $ 960,130 $ 1,140,320

Long-Term Liabilities (Note 6):
Long-term borrowings (excluding current maturities).................... $ 469,718 $ 616,258
Other long-term liabilities............................................ 36,315 35,983

Total Long-Term Liabilities....................................... $ 506,033 $ 652,241

Deferred Income Taxes (Note 7)........................................... $ 12,501 $ 6,709

Minority Owners' Equity in Subsidiaries (Note 8)......................... $ 19,992 $ 13,845

Capital Shares and Equities (Note 9):
Preferred shares, $25 par value--Authorized 8,000,000 shares, 50,565
shares issued and outstanding
(98,113 shares in 1995).............................................. $ 2,453 $ 1,264
Common shares, $25 par value--Authorized 50,000,000
shares, 16,580,112 shares issued and outstanding
(15,416,370 shares in 1995)......................................... 385,409 414,503
Associate member common shares (nonvoting), $25 par value --Authorized
2,000,000 shares, 623,058 shares
issued and outstanding (445,323 shares in 1995)...................... 11,133 15,576
Earned surplus and other equities...................................... 288,292 323,988

Total Capital Shares and Equities............................ $ 687,287 $ 755,331

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

Total Liabilities and Equities............................................. $ 2,185,943 $ 2,568,446

<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 1995 1996
(Amounts in Thousands)
<S> <C> <C> <C>
Sales........................................................ $ 6,677,933 $ 7,256,869 $ 9,788,587
Cost of sales................................................ 6,284,084 6,699,178 9,272,002

Gross income................................................. $ 393,849 $ 557,691 $ 516,585

Selling, general and administrative expenses................. $ 305,279 $ 344,364 $ 368,954

Other income (deductions):
Interest expense.......................................... $ (51,485) $ (53,862) $ (62,445)
Interest income........................................... 6,170 8,334 5,021
Other, net (Note 16)...................................... 20,111 11,600 24,257

Total other income (deductions).............................. $ (25,204) $ (33,928) $ (33,167)

Income before income taxes and equity in net income of
investees and minority owners'
interest in net (income) loss of subsidiaries............ $ 63,366 $ 179,399 $ 114,464

Income tax expense (Note 7)................................. 4,890 29,628 21,755

Income before equity in net income of investees and minority
owners' interest in net
(income) loss of subsidiaries............................ $ 58,476 $ 149,771 $ 92,709

Equity in net income of investees
(Note 4).................................................. 10,878 22,785 41,092

Minority owners' interest in net (income)
loss of subsidiaries...................................... 4,522 (9,757) (7,383)

Net income .................................................. $ 73,876 $ 162,799 $ 126,418

Distribution of net income (Note 9):
Patronage refunds:
Farm supply patrons....................................... $ 59,685 $ 74,557 $ 83,739
Pork marketing patrons.................................... 10,927 16,087 6,998
Beef marketing patrons.................................... -0- 2,488 2,753
Grain marketing patrons................................... -0- 1,285 -0-
Livestock production...................................... -0- -0- 5

$ 70,612 $ 94,417 $ 93,495
Earned surplus and other equities (Note 9)................ 3,264 68,382 32,923

$ 73,876 $ 162,799 $ 126,418

<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>

FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 31
1994 1995 1996
(Amounts in Thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................... $ 73,876 $ 162,799 $ 126,418
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................ 62,960 69,138 77,741
Gain on disposition of investments........................... -0- -0- (11,300)
(Gain) loss on disposition of fixed assets................... (1,794) 1,882 (967)
Patronage refunds received in equities....................... (2,171) (2,025) (2,244)
Proceeds from redemption of patronage equities............... 573 3,776 5,112
Equity in net income of investees............................ (10,878) (22,785) (41,092)
Deferred income tax (benefit) expense........................ (5,034) 6,161 11,034
Minority owners' equity in net
income (loss) of subsidiaries.............................. (4,522) 9,757 7,383
Other........................................................ 5,292 412 (2,335)
Changes in assets and liabilities (exclusive
of assets and liabilities of businesses acquired):
Accounts receivable........................................ (12,079) (70,413) (175,991)
Inventories................................................ (4,692) (186,570) 47,220
Other assets............................................... (34,873) 38,889 (40,774)
Accounts payable........................................... 17,884 782 140,721
Other liabilities.......................................... 32,617 35,684 41,194

Net cash provided by operating activities...................... $ 117,159 $ 47,487 $ 182,120

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses...................................... $ (35,790) $ -0- $ (39,536)
Proceeds from sale of investments
and collection of notes receivable........................... 34,577 39,780 31,003
Acquisition of investments and notes receivable................ (22,117) (26,789) (51,923)
Capital expenditures........................................... (69,776) (124,722) (168,272)
Acquisition of other long-term assets.......................... (11,117) (2,141) (23,768)
Proceeds from sale of fixed assets............................. 14,785 3,828 5,996
Distribution from joint venture............................... -0- 513 22,239
Proceeds from sale of assets to
joint venture partner....................................... 2,310 -0- -0-
Other.......................................................... 5,547 -0- (6,803)

Net cash used in investing activities.......................... $ (81,581) $ (109,531) $ (231,064)

<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>

<TABLE>
<CAPTION>
Year Ended August 31

1994 1995 1996
(Amounts in Thousands)
<S> <C> <C> <C>

CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand loan $ (6,702) $ (9,634) $ 26,575
certificates................................
Proceeds from bank loans and notes payable.. 888,088 522,916 597,959
Payments of bank loans and notes payable....(924,731) (513,672) (526,814)
Proceeds from issuance of subordinated debt 57,636 46,715 67,965
certificates................................
Payments for redemption of subordinated
debt certificates......................... (33,034) (26,866) (43,803)
Net increase (decrease) in checks
and drafts outstanding.................... -0- 37,088 (6,144)
Payments for redemption of equities......... (3,244) (12,431) (27,470)
Payments of patronage refunds and dividends. -0- (26,648) (32,781)
Other, increase (decrease).................. 2,120 492 (6,543)

Net cash provided by (used in) financing $(19,867) $ 17,960 $ 48,944
activities..................................

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

SUPPLEMENTAL SCHEDULE OF CASH PAID FOR
INTEREST AND INCOME TAXES:
Interest....................................$ 43,419 $ 50,551 $ 58,125

Income taxes (net of refunds)...............$ 9,746 $ 30,422 $ 27,943

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equities and minority owners' interest
called
for redemption............................$ 12,935 $ 27,738 $ 25,214

Transfer of assets in exchange for
investment in
joint ventures............................$ 309 $ 2,061 $ -0-

Appropriation of current year's net income
as patronage refunds......................$ 70,612 $ 94,417 $ 93,495

Acquisition of businesses:
Fair value of net assets acquired.........$131,847 $ -0- $ 52,401
Goodwill.................................. 1,094 -0- 3,181
Minority owners' investment............... (843) -0- -0-
Cash Paid................................. (35,790) -0- (39,536)

Liabilities assumed.........................$ 96,308 $ -0- $ 16,046

</TABLE>
FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITAL SHARES AND EQUITIES
<TABLE>
<CAPTION>
Years Ended August 31, 1994, 1995 and 1996
Associate Earned Total
Member Surplus and Capital
Preferred Common Common Other Shares and
Shares Shares Shares Equities Equities

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

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

BALANCE AT AUGUST 31, 1995......................... $ 2,453 $ 385,409 $11,133 $ 288,292 $ 687,287
Issue, redemption and cancellation of equities..... 1 (166) (6) 29 (142)
Appropriation of current year's net income......... -0- -0- -0- 126,418 126,418
Patronage refund payable in cash transferred
to current liabilities........................... -0- -0- -0- (32,719) (32,719)
Base capital redemptions transferred
to current liabilities........................... (1,190) (13,922) (103) -0- (14,025)
Other equity redemptions transferred
to current liabilities........................... -0- (6,578) (287) (3,272) (11,327)
Prior year patronage refund allocation............. -0- 49,644 6,493 (56,294) (157)
Dividends on preferred stock....................... -0- -0- -0- (4) (4)
Exchange of common stock, associate member
common stock and other equities.................. -0- 116 (1,654) 1,538 -0-

BALANCE AT AUGUST 31, 1996 $ 1,264 $ 414,503 $15,576 $ 323,988 $ 755,331

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

General -- The consolidated financial statements include the accounts of
Farmland Industries, Inc. and all of its majority-owned subsidiaries ("Farmland"
or the "Company", unless the context requires otherwise). All significant
intercompany accounts and transactions have been eliminated. When necessary,
the financial statements include amounts based on informed estimates and
judgments of management. The Company's fiscal year ends August 31.
Accordingly, all references to "year" or "years" are to fiscal years ended
August 31.

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

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

Accounts Receivable -- The Company uses the allowance method to account for
doubtful accounts and notes. Pursuant to the Company's right to offset, as
contained in its bylaws, uncollectible accounts and notes receivable from
members are written off against the common shares held by members before such
uncollectible accounts are charged to operations.

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

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

Goodwill -- The excess of cost over the fair market value of assets of
businesses purchased is amortized on a straight-line basis over a period of 15
to 25 years. The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows. Goodwill is
reflected in the accompanying Consolidated Balance Sheets net of accumulated
amortization of $6.9 million and $10.3 million, respectively at August 31, 1995
and 1996.

Sales -- The Company's policy is to recognize sales at the time product is
shipped. Net margins on international grain merchandised, rather than the gross
value of such products merchandised, are included in net sales. The gross value
of international grain merchandised in 1994, 1995 and 1996 was $590.2 million,
$1.6 billion and $2.6 billion, respectively.

Environmental Expenditures -- 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 as new facts or changes in law or technology occur.
Environmental expenditures are capitalized when such costs provide future
economic benefits.

Federal Income Taxes -- Farmland is subject to income taxes on all income
not distributed to patrons as patronage refunds. Farmland files consolidated
federal and state income tax returns.

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

(2) ACQUISITIONS

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

The acquisition of Tradigrain has been accounted for by the purchase method
of accounting and, accordingly, the operating results have been included in the
Company's Consolidated Financial Statements from the date 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 effect of the acquisition of Tradigrain on
the Consolidated Financial Statements is not significant.

(3) INVENTORIES

Major components of inventories are as follows:

August 31

1995 1996

(Amounts in Thousands)
Finished and in-process products..... $ 682,801 $ 620,794
Materials............................ 39,399 58,526
Supplies............................. 50,328 57,300

$ 772,528 $ 736,620

The carrying values of crude oil and refined petroleum inventories stated
under the lower of LIFO cost or market at August 31, 1995 and 1996 were
$82.6 million and $111.8 million, respectively. Replacement cost approximated
the LIFO carrying values of inventories at both August 31, 1995 and 1996.

The carrying values of beef inventories stated under the lower of LIFO or
market at August 31, 1995 and 1996 were $30.2 million and $32.3 million,
respectively. At both August 31, 1995 and 1994, market value was lower than
LIFO and, accordingly, such inventories were valued at market.

(4) INVESTMENTS AND LONG-TERM RECEIVABLES

Investments and long-term receivables are as follows:

August 31
1995 1996
(Amounts in Thousands)

Investments accounted for by the equity method $ 88,786 $ 147,028
Investments in and advances to other cooperatives 47,328 44,944
National Bank for Cooperatives ............ 27,000 24,913
Other investments and long-term receivables 18,355 22,796
Notes receivable from ventures, 20% to 50% owned 4,218 1,443

$185,687 $241,124

National Bank for Cooperatives ("CoBank") requires its borrowers 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, 1995 and 1996, Farmland's investment in CoBank
approximated its requirement. CoBank maintains a statutory lien on the
investment held by the Company in CoBank.

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

August 31
1995 1996
(Amounts in Thousands)

Current Assets............................. $243,259 $228,883
Long-Term Assets........................... 238,297 319,166

Total Assets............................ $481,556 $548,049

Current Liabilities........................ $ 205,713 $191,632
Long-Term Liabilities...................... 94,029 57,208

Total Liabilities....................... $299,742 $248,840

Net Assets................................. $181,814 $299,209

Year Ended August 31
1994 1995 1996
(Amounts in Thousands)
Net sales..................... $ 803,516 $1,212,592 $1,154,195

Net income.................... $ 24,285 $ 46,803 $ 83,075

Farmland's equity in net
income.....................$ 10,878 $ 22,785 $ 41,092

The Company's investments accounted for by the equity method consist
principally of 50% equity interests in three manufacturers of crop production
products, Farmland Hydro, L.P., SF Phosphates Limited Company and Farmland
MissChem, Limited (expected to commence production in 1998) and a 50% equity
interest in a distributor of crop protection products, WILFARM, LLC.

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

(5) PROPERTY, PLANT AND EQUIPMENT

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

August 31
1995 1996
(Amounts in Thousands)
Land and improvements...... $ 42,355 $ 50,800
Buildings.................. 245,460 278,097
Machinery and equipment.... 765,383 880,152
Automotive equipment....... 67,124 67,754
Furniture and fixtures..... 54,888 61,426
Capital leases............. 49,241 50,562
Leasehold improvements..... 21,763 24,539
Other...................... 7,124 8,837
Construction in progress... 81,511 84,293

$1,334,849 $1,506,460

During 1994, 1995 and 1996, the Company capitalized construction period
interest of $0.4 million, $0.7 million and $1.6 million, respectively.

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

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

August 31
1995 1996
(Amounts in Thousands)
Subordinated capital investment
certificates
--6% to 9.5%, maturing 1997 through 2004 $ 225,132 $ 245,792
Subordinated monthly income certificates
--6.25% to 10.5%, maturing 1997 through 2006 74,863 78,313
Syndicated Credit Facility
--5.73% to 6.05%, maturing 2001....... 85,000 175,000
Other bank notes--7.2% to 10.75%,
maturing 1997 through 2001............ 71,498 88,704
Industrial revenue bonds--6.75% to
9.25%, maturing 1997 through 2007............ 21,750 18,930
Promissory notes--7% to 8.5%,
maturing 1997 through 2002............ 17,210 16,917
Other--5% to 14.92%..................... 16,659 33,682

512,112 657,338
Less current maturities................. 42,394 41,080

$ 469,718 $ 616,258

The Company has a $1.1 billion Credit Agreement ("the Agreement"). The
Agreement provides short-term credit of up to $650.0 million to finance seasonal
operations and inventory, and revolving term credit of up to $450 million. At
August 31, 1996, the Company had $236.6 million of short-term borrowings under
the Agreement, $175.0 million of revolving term borrowings and $69.5 million was
being utilized to support letters of credit issued on behalf of the Company by
participating banks.

The Company pays commitment fees under the Agreement of 1/10 of 1% annually
on the unused portion of the short-term commitment and 1/4 of 1% annually on the
unused portion of the revolving term commitment. In addition, the Company must
comply with the Agreement's financial covenants regarding working capital, the
ratio of certain debt to average cash flow and the ratio of equity to total
capitalization, all as defined therein. The short-term provisions of the Credit
Agreement are reviewed and/or renewed annually. The next review date is in May
1997. The revolving term provisions of this agreement expire in May 2001.

The Company maintains other borrowing arrangements with banks and financial
institutions. At August 31, 1996, $18.0 million was borrowed under such
agreements.

National Beef Packing Company, L.P. ("NBPC") maintains a $90.0 million
borrowing agreement with a group of banks which provides financing support for
its beef packing operations. Such borrowings are nonrecourse to Farmland or
Farmland's other affiliates (except to the extent of $10 million). At
August 31, 1996, $47.0 million was borrowed under this agreement and $0.6
million was utilized to support letters of credit. In addition, NBPC has
incurred certain long-term borrowings from Farmland. NBPC has pledged certain
assets to Farmland and such group of banks to support its borrowings.

Tradigrain has borrowing agreements with various international banks which
provide financing and letters of credit to support current international grain
trading transactions. At August 31, 1996, such short-term borrowings totaled
$78.8 million. Obligations of Tradigrain under these loan agreements are
nonrecourse to Farmland or Farmland's other affiliates.

Subordinated debt certificates have been issued under several different
indentures. Certain subordinated capital investment certificates may be
redeemed prior to maturity at the option of the owner in accordance with the
indenture. Subject to limitations in the Agreement, the Company has an option
to redeem certain subordinated capital investment certificates in advance of
scheduled maturities. Additionally, the Company may redeem subordinated capital
investment certificates and subordinated monthly interest certificates upon
death of the holder.

Outstanding subordinated debt certificates are subordinated to senior
indebtedness ($522.6 million at August 31, 1996) and additional financings
(principally long-term operating leases). See Note 10.

Under industrial revenue bonds and other agreements, property, plant and
equipment with a carrying value of $20.5 million have been pledged.

Borrowings from CoBank, totaling $94.3 million at August 31, 1996, are
partially secured by liens on the equity investment held by the Company in
CoBank. See Note 4.

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

(Amounts in Thousands)
1997................. $ 41,080
1998................. 132,769
1999................. 22,016
2000................. 31,070
2001................. 226,551
2002 and after....... 203,852

$ 657,338

At August 31, 1995 and 1996, the Company had demand loan certificates and
short-term bank debt outstanding of $365.3 million (weighted average interest
rate of 6.4%) and $355.5 million (weighted average interest rate of 6.29%),
respectively.

(7) INCOME TAXES

A. TERRA RESOURCES, INC.

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

B. OTHER INCOME TAX MATTERS

Income tax expense is comprised of the following:

Year Ended August 31
1994 1995 1996
(Amounts in Thousands)
Federal:
Current............... $ 10,076 $ 18,533 $ 7,322
Deferred.............. (3,217) 4,255 9,430

$ 6,859 $ 22,788 $ 16,752

State:
Current.............. $ 1,965 $ 3,356 $ 1,292
Deferred............. (755) 665 1,664

$ 1,210 $ 4,021 $ 2,956

Foreign:
Current.............. $ (2,117) $ 1,578 $ 2,107
Deferred............. (1,062) 1,241 (60)

$ (3,179) $ 2,819 $ 2,047

Total income tax expense $ 4,890 $ 29,628 $ 21,755

During the year ended August 31, 1994, a charge in lieu of taxes, resulting
from initial recognition of acquired tax benefits that are allocated to reduce
goodwill related to the acquired entity, decreased Farmland's deferred tax
benefit by $3.0 million.

Income (loss) before income tax expense from foreign sources amounted to
($14.3 million), $19.3 million and $13.5 million for 1994 , 1995 and 1996,
respectively.

Income tax expense attributable to income from continuing operations
differs from the "expected" income tax expense using statutory rate of 35% as
follows:

Year Ended August 31
1994 1995 1996
(Amounts in Thousands)
Computed "expected" income tax
expense on income
before income taxes ........ 35.0 % 35.0% 35.0 %
Increase (reduction) in income
tax expense attributable to:
Patronage refunds............. (33.3) (18.3) (20.4)
State income tax expense net of
federal income tax effect .. 1.1 2.2 2.5
Other, net.................... 3.8 (2.4) 1.9

Income tax expense............ 6.6 % 16.5% 19.0 %

The tax effect of temporary differences that give rise to significant
portions of deferred tax liabilities and deferred tax assets at August 31, 1995
and 1996 are as follows:

August 31
1995 1996
(Amounts in Thousands)
Deferred tax liabilities:
Property, plant and
equipment, principally due
to differences
in depreciation............ $ 26,009 $40,182
Prepaid pension cost ....... 19,807 21,500
Other ...................... 15,065 2,080

Total deferred tax $ 60,881 $63,762
liabilities ................

Deferred tax assets:
Safe harbor leases ......... $ 5,096 $ 4,699
Accrued expenses ........... 29,394 47,140
Accounts receivable,
principally due to
allowance for
doubtful accounts.......... 2,300 1,971
Other ...................... 11,590 3,243

Total deferred tax assets .. $ 48,380 $57,053

Net deferred tax liability.... $ 12,501 $ 6,709

A valuation allowance for deferred tax assets was not necessary at August
31, 1995 or 1996.

(8) MINORITY OWNERS' EQUITY IN SUBSIDIARIES

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

August 31
1995 1996
(Amounts in Thousands)
National Beef Packing Company, L.P.
and G.P. $12,473 $6,455
Farmland Foods, Inc. .................... 4,682 4,594
Other subsidiaries....................... 2,837 2,796

$19,992 $13,845

(9) PREFERRED STOCK, EARNED SURPLUS AND OTHER EQUITIES

A summary of preferred stock is as follows:

August 31
1995 1996
(Amounts in Thousands)
Preferred shares, $25 par value -
Authorized 8,000,000 shares: 6% - 608
shares issued and outstanding, 6% -
608 shares issued and
outstanding, (608 shares in 1995)... $ 15 $ 15

5-1/2% - 2,412 shares issued and
outstanding
(2,436 shares in 1995).............. 61 60

Series F - 47,545 shares issued and
outstanding
(95,069 shares in 1995).............. 2,377 1,189

$ 2,453 $ 1,264

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

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

August 31
1995 1996
(Amounts in Thousands)
Earned surplus......................... $ 197,666 $ 230,340
Patronage refund payable in equities... 61,356 60,776
Capital credits........................ 27,645 31,237
Additional paid-in surplus............. 1,603 1,616
Currency translation adjustment........ 22 19

$ 288,292 $ 323,988

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

Farmland maintains a base capital plan. The plan's objectives are as
follows: 1) to achieve proportionality between the dollar amount of business a
member or associate member of Farmland ("Participant") transacts with Farmland
and the equity of Farmland which the Participant should hold (hereinafter
referred to as the Participant's "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 amount of such equity held by the Participant exceeds the
Participant's Base Capital Requirement. This plan provides a mechanism under
which the cash portion of the patronage refund payable to voting members or
associate members will depend upon the degree to which such voting members or
associate members meet their base capital requirements.

The Base Capital Requirement is determined annually by the Farmland Board
of Directors at its sole discretion. At August 31, 1995 and 1996, common stock
and associate member common stock with an aggregate par value of $14.2 million
and $14.0 million, respectively, were approved for redemption by the Board of
Directors under the base capital plan and such amounts have been included in
"Other current liabilities" in the Consolidated Balance Sheets at August 31,
1995 and 1996, respectively.

Farmland maintains an estate settlement plan for redemption of equities
held by estates of deceased individuals (except purchased equities held less
than five years) and special equity redemption plans. 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.

At August 31, 1995 and 1996, certain equities of Farmland with a face
amount of $12.8 million and $11.3 million, respectively, and capital equity fund
certificates held by certain members of Farmland Foods, Inc. in the amount of
$0.8 million and $0.1 million, respectively, have been approved by the Board of
Directors for redemption under the estate settlement and special allocated
equity redemption plan and such amounts have been included in "Other current
liabilities" in the Consolidated Balance Sheets at August 31, 1995 and 1996,
respectively.

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

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

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

(10) CONTINGENT LIABILITIES AND COMMITMENTS

The Company leases various equipment and real properties under long-term
operating leases. For 1994, 1995 and 1996, rental expenses totaled $41.8
million, $44.6 million and $43.6 million, respectively. Rental expense is
reduced for mileage credits received on leased railroad cars ($1.9 million in
1994, $1.8 million in 1995 and $1.4 million in 1996).

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

(Amounts in Thousands)
1997...........................$ 46,750
1998........................... 50,498
1999........................... 43,847
2000........................... 39,296
2001........................... 36,143
2002 and after................. 92,296

$ 308,830

Commitments for capital expenditures and investments in joint ventures
aggregated $61.0 million at August 31, 1996.

The Company has been designated by the Environmental Protection Agency as a
potentially responsible party ("PRP") under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), at various National
Priority List ("NPL") sites. In addition, the Company is aware of possible
obligations associated with environmental matters at other sites, including
sites where no claim or assessment has been made. The Company's accrued
liability for probable and reasonably determinable obligations for resolution of
environmental matters at NPL and other sites was $18.5 million and $18.9 million
at August 31, 1995 and 1996, respectively.

The ultimate costs of resolving certain 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, 1996. In the opinion of management, it is reasonably
possible for such costs to approximate an additional $20.6 million.

In the ordinary course of conducting international grain trading,
Tradigrain, as of August 31, 1996, was contingently liable in respect of $114.2
million of guarantees, performance and bid bonds, and letters of credit.

The Company is involved in various lawsuits arising in the normal course of
business. 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.

(11) EMPLOYEE BENEFIT PLANS

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

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

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

<TABLE>
Components of the Company's pension cost are as follows:
<CAPTION>
August 31
1994 1995 1996
(Amounts in Thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 8,663 $10,336 $10,886
Interest cost on projected benefit obligation. 15,292 16,707 18,843
Actual return on Plan assets.................. (10,949) (27,422) (46,630)
Net amortization and deferral................. (7,860) 8,677 24,634

Pension expense............................... $ 5,146 $8,298 $ 7,733
</TABLE>

The discount rate, the rate of increase in future compensation levels used
in determining the actuarial present value of the projected benefit obligations
and the expected long-term rate of return on assets were 8.0%, 4.5% and 8.5%,
respectively, at August 31, 1994, 1995 and 1996.

The following table sets forth the Plan's funded status and amounts
recognized in the Company's Consolidated Balance Sheets at August 31, 1995 and
1996. Such prepaid pension cost is based on the Plan's funded status as of May
31, 1995 and 1996.
August 31
1995 1996
(Amounts in Thousands)
Actuarial present value of benefit obligations:
Vested benefits.............................. $ 170,105 $180,253
Nonvested benefits........................... 11,584 12,024
Accumulated benefit obligation............... $ 181,689 $192,277
Increase in benefits due to future
compensation increases.........................56,353 56,030

Projected benefit obligation................. $ 238,042 $248,307
Estimated fair value of Plan assets.......... 259,262 301,504

Plan assets in excess of projected benefit
obligation....................................$ 21,220 $ 53,197.
Unrecognized net loss from past experience
different from that assumed and effects of
changes in assumptions....................... 27,750 450
Unrecognized prior service cost.............. 1,089 871

Prepaid pension cost at end of year............ $ 50,059 $ 54,518

(12) INDUSTRY SEGMENT INFORMATION

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

On the output side, the Company's processing and marketing operations
include the processing of pork and beef, the marketing of fresh pork, processed
pork and fresh beef and the storage and marketing of grain.

Other operations primarily includes livestock production and services such
as computer services, accounting, financial, management, printing and
transportation.

The operating income (loss) of each industry segment includes the revenue
generated on transactions involving products within that industry segment less
identifiable and allocated expenses. In computing operating income (loss) of
industry segments, none of the following items 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. Corporate assets include cash, investments in other
cooperatives, the Company's corporate headquarters and certain other assets.

Following is a summary of industry segment information as of and for the
years ended August 31, 1994, 1995 and 1996.

<TABLE>
<CAPTION>
Unallocated
Corporate
Items
Cooperative Farm Supply Cooperative Marketing and Inter-
Crop and Processing Other 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- 19,467 (38,902) -0-

Total sales and
transfers........$860,322 $1,172,870 $529,936 $2,358,606 $1,627,156 $ 167,945 $ (38,902) $6,677,933

Operating income
(loss) of industry
segments.........$ 27,172 $ 126,047 $ 17,019 $ 20,608 $ (33,637) $ (2,410) $ 154,799

Equity in net income
(loss) of investees
(Note 4).........$ (41) $ 15,466 $ 155 $ (4,404) $ -0- $ (298) $ 10,878

General corporate
expenses.......... (66,229)

Other corporate
income............ 26,281

Interest expense... (51,485)

Minority interest... 4,522

Income tax expense.. (4,890)

Net income.......... $ 73,876

Identifiable assets at
August 31, 1994..$306,366 $ 357,178 $ 92,767 $ 395,159 $ 341,367 $ 62,301 $1,555,138

Investment in and
advances to
investees........$ 746 $ 76,439 $ 1,761 $ 13,927 $ -0- $ 8,560 $ 101,433

Corporate assets.... 270,060

Total assets........ $1,926,631

Provision for
depreciation and
amortization.....$ 9,911 $ 14,700 $ 3,815 $ 16,776 $ 4,011 $ 7,982 $ 5,765 $ 62,960

Capital expenditures
(including $16.9
million of capital
assets of
businesses
acquired)........$ 14,399 $ 14,136 $ 4,508 $ 19,040 $ 6,256 $ 26,051 $ 2,274 $ 86,664

1995
Sales to unaffiliated
customers........$876,776 $1,171,389 $467,695 $2,692,892 $1,906,191 $ 141,926 $ -0- $7,256,869

Transfers between
segments......... 2,877 6,547 940 3,100 -0- 29,100 (42,564) -0-

Total sales and
transfers........$879,653 $1,177,936 $468,635 $2,695,992 $1,906,191 $ 171,026 $ (42,564) $7,256,869

Operating income
(loss) of industry
segments.........$ (8,029) $ 198,720 $ 10,061 $ 77,060 $ 17,942 $ (2,373) $ 293,381

Equity in net income
(loss) of investees
(Note 4).........$ 168 $ 22,096 $ 130 $ 823 $ 688 $ (1,120) $ 22,785

General corporate
expenses.......... (80,054)

Other corporate
income............ 19,934

Interest expense... (53,862)

Minority interest... (9,757)

Income tax expense.. (29,628)

Net income.......... $ 162,799

Identifiable assets at
August 31, 1995..$313,478 $ 410,979 $ 93,438 $ 491,257 $ 525,032 $ 59,108 $1,893,292

Investment in and
advances to
investees........$ 953 $ 80,805 $ 1,497 $ 325 $ 120 $ 9,304 $ 93,004

Corporate assets.... 199,647

Total assets........ $2,185,943

Provision for
depreciation and
amortization.....$ 9,858 $ 15,530 $ 4,319 $ 21,891 $ 5,156 $ 5,308 $ 7,076 $ 69,138

Capital
expenditures $ 27,638 $ 23,845 $ 5,766 $ 32,219 $ 905 $ 7,504 $ 28,986 $ 126,863

1996
Sales to
affiliated
customers......$1,058,258 $1,336,307 $569,869 $3,220,996 $3,472,009 $ 131,148 $ -0- $9,788,587

Transfers between
segments......... 3,351 1,402 923 2,959 -0- 33,255 (41,890) -0-

Total sales and
transfers........$1,061,609 $1,337,709 $570,792 $3,223,955 $3,472,009 $ 164,403 $ (41,890) $9,788,587

Operating income
(loss)
of industry
segments.........$ 4,990 $ 179,008 $ 12,952 $ 65,953 $ (18,993) $ (5,085) $ 238,825

Equity in net
income (loss) of
investees
(Note 4).........$ (98) $ 41,899 $ 382 $ -0- $ (10) $ (1,081) $ 41,092

General corporate
expenses......... (91,194)

Other corporate
income........... 29,278

Interest expense.. (62,445)

Minority interest.. (7,383)

Income tax expense. (21,755)

Net income......... $ 126,418

Identifiable assets at
August 31, 1996..$433,352 $ 438,559 $107,267 $ 618,122 $ 492,919 $ 64,403 $2,154,622

Investment in and
advances to
investees........$ 611 $ 136,959 $ 3,399 $ 18 $ 468 $ 7,016 $ 148,471

Corporate assets... 265,353

Total assets....... $2,568,446

Provision for
depreciation and
amortization.....$ 11,024 $ 16,797 $ 4,625 $ 26,438 $ 5,729 $ 6,171 $ 6,957 $ 77,741

Capital
expenditures
(Including $29.9
million of
capital
assets of
businesses
acquired)........$ 42,075 $ 37,296 $ 5,083 $ 84,493 $ 15,084 $ 10,603 $ 27,342 $ 221,976
</TABLE>

Export sales from the Company's United States operations to unaffiliated
customers were as follows:
Year Ended August 31
1994 1995 1996
(Amounts in Thousands)
Asia...................... $435,593 $ 788,583 $ 705,905
Latin and South America... 139,787 216,059 695,404
Canada .................... 49,381 58,740 61,217
4Other..................... 217,715 224,386 527,770

Total..................... $842,476 $1,287,768 $1,990,296

(13) SIGNIFICANT GROUP CONCENTRATION OF CREDIT RISK

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

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

(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

<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, 1995 August 31, 1996
Carrying Carrying
Amount Fair Value Amount Fair Value
(Amounts in Thousands)
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Notes receivable from investees,
20% to 50% owned............................ $ 4,218 $ 3,747 $ 1,443 $ 1,454
National Bank for Cooperatives................ 27,000 **** 24,913 ****
Other cooperatives:
Equities.................................... 27,728 **** 27,187 ****
Notes receivable............................ 19,600 17,327 17,757 17,073

FINANCIAL LIABILITIES:
Subordinated capital investment certificates
and subordinated monthly
income certificates........................... $ (299,995) $ (304,450) $ (324,105) $ (317,476)
</TABLE>

****Investments in National Bank for Cooperatives and other cooperatives'
equities which have been purchased are carried at cost and equities received as
patronage refunds are carried at par value, less provisions for other than
temporary impairment. The Company believes it is not practicable to estimate
the fair value of these equities because there is no established market for
these equities and estimated future cash flows, which are largely dependent on
the future equity redemptions policy of each cooperative, are not determinable.

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

The estimated fair value of the subordinated debt certificates was
calculated using a discount rate equal to the interest rate on subordinated debt
certificates with similar maturities currently offered for sale by the Company.
The carrying amounts of the Company's other debt borrowings approximate their
fair market value.

(15) RELATED PARTY TRANSACTIONS

The Company has a 50% interest in two manufacturers of phosphate products,
Farmland Hydro, L.P. and SF Phosphates Limited Company, and a 50% interest in a
distributor of crop production products, WILFARM, LLC. During 1994, 1995 and
1996, the Company purchased $83.1 million, $106.2 million and $117.4 million,
respectively, of product from these ventures. Accounts payable includes $4.8
million and $2.9 million due to these ventures at August 31, 1995 and 1996,
respectively. The Company also has notes receivable from these ventures in the
amount of $16.6 million and $12.9 million at August 31, 1995 and 1996,
respectively.

(16) OTHER INCOME

In June 1993, the Company filed a lawsuit against 43 insurance carriers and
other parties (the "Defendants") seeking declaratory judgments regarding the
Defendants' insurance coverage obligations for environmental remediation costs.
The Company negotiated settlements with 20, 2 and 3 insurance companies in 1994,
1995 and 1996, respectively. As part of the settlements, the Company provided
the Defendants with releases of various possible environmental obligations. As
a result of these settlements, the Company received cash payments in 1994, 1995
and 1996 of $13.6 million, $0.3 million and $0.5 million, respectively, and
included such amounts in the caption "Other income (deductions): Other, net" in
the Consolidated Statement of Operations for the years ended.

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 $ 142,000
State taxes and fees.............. 7,000
Printing and engraving............ 242,000
Accounting and legal.............. 60,000
Trustee fee....................... 13,000
Advertising and administration.... 988,000

$1,452,000

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

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

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

ARTICLE VII - INDEMNIFICATION

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

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

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Company did not sell any unregistered securities during the three years
ended August 31, 1996.

ITEM 16. EXHIBITS; FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

The following exhibits are filed as a part of this Form S-1 Registration
Statement. Certain of these exhibits are incorporated by reference. Items
marked with an asterisk (*) are filed herein.

Exhibit No. Description of Exhibits

UNDERWRITING AGREEMENT:

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

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

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

ARTICLES OF INCORPORATION AND BYLAWS:

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

INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:

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

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

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

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

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

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

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

4.(ii)A Credit Agreement between Farmland Industries, Inc. and various banks
dated May 15, 1996, (Incorporated by Reference - Form 10-Q filed July 15,
1996)

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

MATERIAL CONTRACTS:

LEASE CONTRACTS:

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

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

MANAGEMENT REMUNERATIVE PLANS:

10.(iii)AAnnual Employee Variable Compensation Plan (September 1, 1996 -
August 31, 1997) (Incorporated by Reference - Form 10-K, filed November
27, 1996)

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

10.(iii)B(1) Exhibit E (Fiscal years 1997 through 1999) (Incorporated by
Reference - Form 10-K, filed November 27, 1996)

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

10.(iii)C(1) Resolution Approving the Revision of Appendix A and Appendix
A (Incorporated by Reference - Form 10-K, filed November 27,
1996)

10.(iii)DFarmland Industries, Inc. Executive Deferred Compensation Plan (As
Amended and Restated Effective November 1, 1996) (Incorporated by
Reference - Form 10-K, filed November 27, 1996)

12 Computation of Ratios (Incorporate by Reference - Form S-1, filed
November 27, 1996)

21 Subsidiaries of the Registrant (Incorporate by Reference - Form S-1,
filed November 27, 1996)

CONSENTS OF EXPERTS AND COUNSEL:

*23.A Independent Auditors' Consent

*23.B Consent of Special Tax Counsel

*23.C Consent of Qualified Independent Underwriter

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

24 Power of Attorney (Incorporate by Reference - Form S-1, filed November
27, 1996)

25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association Trustee, Form T-1. (Incorporate by Reference - Form
S-1, filed November 27, 1996)

25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank of
Kansas City, National Association as Trustee, Form T-1. (Incorporate by
Reference - Form S-1, filed November 27, 1996)

(B) FINANCIAL STATEMENT SCHEDULES

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

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

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

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

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) (Section 230.424(b) if,
in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee"
table in the effective Registration Statement;

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

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

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

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

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, FARMLAND
INDUSTRIES, INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY
OF KANSAS CITY, STATE OF MISSOURI ON December 24, 1996.

FARMLAND INDUSTRIES, INC.

BY TERRY M. CAMPBELL
Terry M. Campbell
Executive Vice President and
Chief Financial Officer

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

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

Signature Title Date
<S> <C> <C>

* Chairman of Board, December 24, 1996
Albert J. Shivley Director

* President, December 24, 1996
H. D. Cleberg Chief Executive
Officer and Director
(Principal Executive Officer)

* Vice Chairman of Board December 24, 1996
Otis H. Molz Vice President and Director

* Director December 24, 1996
Lyman Adams, Jr.

* Director December 24, 1996
Ronald J. Amundson

* Director December 24, 1996
Baxter Ankerstjerne

* Director December 24, 1996
Jody Bezner

* Director December 24, 1996
Richard L. Detten

* Director December 24, 1996
Steven Erdman

Harry Fehrenbacher Director

* Director December 24, 1996
Warren Gerdes

* Director December 24, 1996
Ben Griffith

* Director December 24, 1996
Gail D. Hall

* Director December 24, 1996
Jerome Heuertz

* Director December 24, 1996
Barry Jensen

* Director December 24, 1996
Ron Jurgens

Director
William F. Kuhlman

* Director December 24, 1996
Greg Pfenning

* Director December 24, 1996
Monte Romohr

* Director December 24, 1996
Joe Royster

Director
E. Kent Stamper

* Director December 24, 1996
Frank Wilson

/s/ TERRY M. CAMPBELL Executive Vice President December 24, 1996
Terry M. Campbell and Chief Financial Officer
(Principal Financial Officer)

/s/ MERL DANIEL Vice President and December 24, 1996
Merl Daniel Controller
(Principal Accounting Officer)

*BY /s/ TERRY M. CAMPBELL
Terry M. Campbell
Attorney-In-Fact

</TABLE>

Exhibit 99

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

EXHIBITS

Form S-1/A
As of August 31, 1996

Registration Statement
Under
The Securities Act of 1933

Farmland Industries, Inc.

EXHIBIT INDEX

The following exhibits are filed as a part of this Form S-1 Registration
Statement. Certain of these exhibits are incorporated by reference as
indicated. Items marked with an asterisk (*) are filed herein.

Exhibit No. Description of Exhibits

UNDERWRITING AGREEMENT:

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

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

INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES:

4.(ii)A Credit Agreement between Farmland Industries, Inc. and various banks
dated May 15, 1996, (Incorporated by Reference - Form 10-Q filed July 15,
1996)

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

MATERIAL CONTRACTS:

LEASE CONTRACTS:

MANAGEMENT REMUNERATIVE PLANS:

10.(iii)AAnnual Employee Variable Compensation Plan (September 1, 1996 -
August 31, 1997) (Incorporated by Reference - Form 10-K, filed November
27, 1996)

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

10.(iii)B(1) Exhibit E (Fiscal years 1997 through 1999) (Incorporated by
Reference - Form 10-K, filed November 27, 1996)
10.(iii)CFarmland Industries, Inc. Supplemental Executive Retirement Plan
(Effective January 1, 1994) (Incorporated by Reference - Form 10-K, filed
November 28, 1995)

10.(iii)C(1) Resolution Approving the Revision of Appendix A and Appendix
A (Incorporated by Reference - Form 10-K, filed November 27,
1996)

10.(iii)DFarmland Industries, Inc. Executive Deferred Compensation Plan (As
Amended and Restated Effective November 1, 1996) (Incorporated by
Reference - Form 10-K, filed November 27, 1996)

12 Computation of Ratios (Incorporated by Reference - Form S-1, filed
November 27, 1996)

21 Subsidiaries of the Registrant (Incorporated by Reference -
Form S-1, filed November 27, 1996)

CONSENTS OF EXPERTS AND COUNSEL:

*23.A Independent Auditors' Consent

*23.B Consent of Special Tax Counsel

*23.C Consent of Qualified Independent Underwriter

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

24 Power of Attorney (Incorpoarted by Reference - Form S-1, filed
November 27, 1996)

25.A Statement of Eligibility of Trustee and Qualification of UMB Bank,
National Association Trustee, Form T-1. (Incorpoarted by Reference -
Form S-1, filed November 27, 1996)

25.B Statement of Eligibility of Trustee and Qualification of Commerce Bank of
Kansas City, National Association as Trustee, Form T-1.
(Incorpoarted by Reference - Form S-1, filed November 27, 1996)

EXHIBIT 5

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

Gentlemen:

I am acting as the General Counsel for Farmland Industries, Inc., a Kansas
corporation (the "Company"), in connection with the Registration Statement on
Form S-1 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the contemplated issuance by the
Company from time to time of Demand Loan Certificates, 10-year Subordinated
Capital Investment Certificates, 5-year Subordinated Capital Investment
Certificates, 10-year Subordinated Monthly Income Capital Investment
Certificates, and 5-year Subordinated Monthly Income Capital Investment
Certificates of the Company, which with respect to Demand Loan Certificates may
be issued pursuant to an Indenture entered into between the Company and UMB
Bank, National Association, as successor trustee to Commerce Bank of Kansas
City, National Association and with respect to Subordinated Capital Investment
Certificates and Subordinated Monthly Income Capital Investment Certificates may
be issued under indentures entered into between the Company and Commerce Bank of
Kansas City, National Association, as trustee. Said Demand Loan Certificates,
Subordinated Capital Investment Certificates and Subordinated Monthly Income
Capital Investment Certificates, when issued and sold in accordance with this
Registration Statement 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. Capitalized terms
used herein have the meanings set forth in the Registration Statement, unless
otherwise defined herein.

I have examined the originals, or certified, conformed or reproduction
copies of all records, agreements, instruments and documents as I have deemed
relevant or necessary as the basis for the opinions hereinafter expressed. In
all such examinations, I have assumed the genuineness of all signatures on
original or certified copies and the conformity to original or certified copies
of all copies submitted to me as conformed or reproduction copies. As to
various questions of fact relevant to such opinions, I have relied upon, and
assumed the accuracy of, certificates and statements and other information of
public officials, officers or representatives of the Company and others.

Based upon the foregoing, and subject to the limitations set forth herein,
I hereby confirm the opinions attributed to me in the Registration Statement.

I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement (including any Amendment thereto) and to the references
to me under the captions "Legal Matters" and "Exchange Offers" in the Prospectus
and "Legal Matters" and "Exchange Offers" in any Prospectus Supplement forming a
part of the Registration Statement. In giving these consents, I do not hereby
admit that I am in the category of persons whose consent is required under
Section 7 of the Securities Act.

The opinions expressed herein are solely for the benefit of the Company and
Trustees (who may rely on this letter as though it were an addressee) and may
not be relied upon in any manner or for any purpose by any other person and may
not be quoted in whole or in part without my prior written consent.

Very truly yours,

Robert B. Terry

December 24, 1996

EXHIBIT 23.A

INDEPENDENT AUDITORS' CONSENT

The Board of Directors
Farmland Industries, Inc.:

We consent to the use of our report 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
December 24, 1996

EXHIBIT 23.B

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 LLP

December 24, 1996

EXHIBIT 23.C

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

December 24, 1996