AMERICAN CRYSTAL SUGAR CO /MN/, POS AM, 1996-11-12

AMERICAN CRYSTAL SUGAR CO /MN/
POS AM, 1996-11-12
SUGAR & CONFECTIONERY PRODUCTS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 12, 1996

REGISTRATION NO. 333-11693
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

POST-EFFECTIVE
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

------------------------

AMERICAN CRYSTAL SUGAR COMPANY
(Exact name of Registrant as specified in its charter)

MINNESOTA 2063 84-0004720
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) No.)

101 NORTH THIRD STREET, MOORHEAD, MINNESOTA 56560-1990
(218) 236-4400
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

MR. SAMUEL S.M. WAI
AMERICAN CRYSTAL SUGAR COMPANY
TREASURER
101 NORTH THIRD STREET
MOORHEAD, MINNESOTA 56560-1990
(218) 236-4400
(Name, address, including zip code, and telephone number, including
area code, of agent for service)

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COPIES TO:
RONALD D. MCFALL, Esq.
Doherty, Rumble & Butler Professional Association
2800 Minnesota World Trade Center
30 East Seventh Street
St. Paul, Minnesota 55101

------------------------

Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.

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. / /.

------------------------

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.

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<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY
CROSS REFERENCE SHEET
PURSUANT TO S-K ITEM 501(B)

<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
- ------------------------------------------------------------------------ ----------------------------------------------------
<C> <C> <S> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus................................... Outside Front Cover

2. Inside Front and Outside Back Cover Pages Outside Back Cover

3. Summary Information, Risk Factors, and Ratio of Earnings to
Fixed Charges.............................................. Summary, Selected Financial Data, Factors to be
Considered

4. Use of Proceeds.............................................. Use of Proceeds

5. Determination of Offering Price.............................. Determination of Offering Price

6. Dilution..................................................... Dilution

7. Selling Security Holders..................................... Not Applicable

8. Plan of Distribution......................................... Plan of Distribution

9. Description of Securities to be Registered................... Description of Common Stock and Preferred Stock

10. Interests of Named Experts and Counsel....................... Not Applicable

11. Information with Respect to the Registrant...................

(a) Description of Business........................... Description of Business

(b) Description of Property........................... Property and Processing Facilities

(d) Market Price, Dividends, etc...................... Description of Common Stock and Preferred Stock

(e) Financial Statements.............................. Financial Statements

(f) Selected Financial Data........................... Selected Financial Data

(g) Supplementary Financial Information............... Not Applicable

(h) Management's Discussion........................... Management's Discussion and Analysis of Financial
Condition and Results of Operations

(i) Disagreements with Accountants.................... Not Applicable

(j) Directors and Executive Officers.................. Management

(k) Executive Compensation............................ Executive Compensation

(l) Security Ownership................................ Principal Shareholders

(m) Certain Relationships and Related Transactions.... Related Party Transactions

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

ii
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[LOGO]
SUPPLEMENTED
PROSPECTUS
DATE NOVEMBER , 1996

AMERICAN CRYSTAL SUGAR COMPANY

500 SHARES OF COMMON STOCK AND 21,729 SHARES OF PREFERRED STOCK

The shares of Common Stock (the "Common Stock") and Preferred Stock (the
"Preferred Stock") offered hereby are available for purchase only by members of
the Company or "farmer-producers" who wish to become members of the Company,
which is a cooperative of sugarbeet growers. Members of the Company as of July
31, 1996 will be granted the first right to purchase their pro rata portion of
20,729 shares of the Preferred Stock offered hereby, "Small Growers" (as defined
herein) will be granted the first right to purchase up to an aggregate of 500
shares of the Preferred Stock offered hereby, and "New Growers" (as defined
herein) will be granted the first right to purchase up to an aggregate of 500
shares of the Preferred Stock offered hereby, all subject to the terms and
conditions described elsewhere in this Prospectus. The right to purchase lots of
50 shares of the Preferred Stock will be granted to 2 New Growers and 2 Small
Growers in each of the Company's five factory districts. The New and Small
Growers entitled to purchase such Preferred Stock will be determined by random
drawing among the New Growers and Small Growers, respectively, in each factory
district. If all of the Preferred Stock offered hereby is not purchased in
accordance with such procedures, members of the Company, Small Growers and New
Growers will be able to purchase such Preferred Stock if they obtain the right
to purchase such remaining Preferred Stock in a random drawing for the right to
purchase such remaining Preferred Stock. (See "Plan of Distribution," "Summary"
and "Description of Business.") Shares of Common Stock will be offered only to
persons who were not members of the Company on July 31, 1996, but who purchase
shares of Preferred Stock in this offering. There is only a limited, private
market for the Common Stock and the Preferred Stock; such shares may be
transferred only with the consent of the Company's Board of Directors. (See
"Determination of Offering Price" and "Plan of Distribution"). The Company does
not have a commitment from any party to purchase all or any portion of the
Preferred Stock offered hereby. Consequently, less than all of the Preferred
Stock may be sold. The Company has not established a minimum number of shares of
Preferred Stock which must be sold. Instead, the Company will accept
subscriptions for, and complete sales of, any portion of the Preferred Stock
offered hereby.

SEE "FACTORS TO BE CONSIDERED" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK AND PREFERRED
STOCK OFFERED HEREBY.
------------------------

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

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Common Stock(3).................................... $10 $0 $5,000
Preferred Stock.................................... $1,500 $0 $32,593,500
Total.............................................. $-- $0 $32,598,500
</TABLE>

(1) The Company will offer and sell the Shares itself and will not pay any
discounts or commissions. Certain of the Company's officers will be
responsible for completing offers and sales of the Shares. Such activities
will be considered part of the services provided by such officers in their
capacity as officers of the Company.

(2) Before deducting expenses of the offering payable by the Company, estimated
at $150,000.

(3) As described in "Description of Common Stock and Preferred Stock," each
prospective purchaser wishing to become a member of the Company must acquire
one (1) share of Common Stock, which share is required for membership in the
Company, and such number of shares of Preferred Stock as may be desired. If
the prospective purchaser is already a member of the Company, he or she will
already own a share of Common Stock and will not be required to acquire an
additional share of Common Stock. Ownership of Preferred Stock creates
obligations and rights with respect to the delivery of sugarbeets to the
Company. See "Description of Common Stock and Preferred Stock."
--------------------------

The Preferred Stock is being offered by the Company to existing
shareholders, to Small Growers and to New Growers. The Common Stock and
Preferred Stock will not be represented by certificates as all of the Company's
shares are uncertificated. However, confirmation of the purchase of any Common
Stock or Preferred Stock is expected to be delivered to subscribers on or before
January 17, 1997.
<PAGE>
SUMMARY

THIS SUMMARY OF CERTAIN PROVISIONS OF THIS PROSPECTUS IS INTENDED ONLY FOR
QUICK REFERENCE AND IS NOT A COMPLETE PRESENTATION OF ALL RELEVANT FACTS. IT IS
QUALIFIED IN ITS ENTIRETY BY THE OTHER INFORMATION PROVIDED IN THIS PROSPECTUS.

AMERICAN CRYSTAL SUGAR COMPANY

American Crystal Sugar Company ("American Crystal" or the "Company") is a
Minnesota agricultural cooperative corporation owned by approximately 2,443
sugarbeet growers in the Minnesota and North Dakota portions of the Red River
Valley. (The Red River Valley, the largest sugarbeet growing area in the United
States, forms a band approximately 35 miles on either side of the North Dakota
and Minnesota border and extends approximately 200 miles south from the border
of the United States and Canada.) The Company currently processes sugarbeets
from a base level of approximately 415,000 acres, subject to tolerances for
overplanting and underplanting established by the Board of Directors each year.
By owning and operating five sugarbeet processing facilities in the Red River
Valley, the Company provides its shareholders with the ability to process their
sugarbeets into sugar and by-products, such as molasses and beet pulp. The sugar
is pooled and then marketed through the services of a marketing agent under
contract with the Company. The sugar marketing agent, United Sugars Corporation,
is a cooperative owned by its members, American Crystal, Southern Minnesota Beet
Sugar Cooperative and Minn-Dak Farmers Cooperative. The Company's molasses, beet
pulp and Concentrated Separated By-product (a by-product of the molasses
desugarization process) are also marketed through a marketing agent, Midwest
Agri-Commodities Company. Midwest Agri-Commodities Company is a cooperative
whose members are the Company, Minn-Dak Farmers Cooperative and Southern
Minnesota Beet Sugar Cooperative. The Company is also one of three members of
ProGold Limited Liability Company, a joint venture the purpose of which is to
construct and operate a corn wet milling plant in Wahpeton, North Dakota.

American Crystal was organized in 1973 by sugarbeet growers to acquire the
business and assets of American Crystal Sugar Company, then a publicly held New
Jersey corporation in operation since 1899.

American Crystal's corporate headquarters are located at 101 North Third
Street, Moorhead, Minnesota 56560 (telephone number (218) 236-4400). Its fiscal
year ends August 31. See "Description of Business."

SECURITIES OFFERED

The Company is offering a total of 500 shares of its Common Stock, $10 par
value, and 21,729 shares of its Preferred Stock, $76.77 par value, for sale to
sugarbeet farm operators in the territory in which the Company is engaged in
business. To become a member of the Company, each sugarbeet farm operator must
acquire (or already own) a share of the Company's Common Stock. Members of the
Company as of July 31, 1996 will be granted the first right to purchase their
pro rata portion of 20,729 shares of the Preferred Stock offered hereby. (Such
rights will grant each of the current members the right to purchase an
additional number of shares of Preferred Stock equal to approximately 4.7% of
the number of shares of Preferred Stock owned by such member on July 31, 1996.)
Small Growers (as defined herein) will be granted the first right to purchase up
to an aggregate of 500 shares of the Preferred Stock offered hereby. New Growers
(as defined herein) will be granted the first right to purchase up to an
aggregate of 500 shares of the Preferred Stock offered hereby. For purposes of
this offering, a "Small Grower" is an individual eighteen years of age or older
who is eligible for membership in the Company and who, as of July 31, 1996,
owned fifty or fewer shares of the Company's Preferred Stock and, if a
participant in any entity, was an owner of an interest in only corporations,
partnerships, joint ventures or other entities which, in the aggregate and when
added to the shares of Preferred Stock held in such individual's name, owned
fifty or fewer shares of the Company's Preferred Stock. In addition, an
individual may qualify as a "Small Grower" only if that individual's spouse,
children residing with such individual or parents with whom such individual
resides (and any entity or entities in which such spouse, children or parents
held a direct or indirect beneficial interest) owned in the aggregate fewer than
250 shares of the Company's Preferred Stock. A "New Grower" is an individual
eighteen years of age or older who is eligible for membership in the Company and
who, as of July 31, 1996, was not a member or shareholder of the Company or any
other sugar cooperatives and was not an owner of any interest in any
corporations, partnerships, joint ventures or other entities which owned shares
of the Company's Preferred Stock or was a member or shareholder in any other
sugar cooperatives. In addition, an individual may not qualify as a "New Grower"
if that

2
<PAGE>
individual's spouse, children residing with such individual or parents with whom
such individual resides (and any entity or entities in which such spouse,
children or parents held a direct or indirect beneficial interest) owned any
shares of the Company's Preferred Stock or was a member or shareholder in any
other sugar cooperatives. AN ENTITY, SUCH AS A CORPORATION, PARTNERSHIP OR JOINT
VENTURE, CANNOT QUALIFY FOR PARTICIPATION IN THIS OFFERING AS EITHER A SMALL
GROWER OR A NEW GROWER. The shares of Preferred Stock offered for sale to New
Growers and Small Growers will be offered in units of fifty (50) shares of
Preferred Stock each, with two units of fifty (50) shares of Preferred Stock
available for purchase by New Growers in each of the Company's five (5) factory
districts and two units of fifty (50) shares of Preferred Stock available for
purchase by Small Growers in each of the Company's five (5) factory districts.
The New Growers and Small Growers from each factory district who will have the
opportunity to purchase shares of Preferred Stock will be determined by a random
drawing among those New Growers and Small Growers, respectively, from each of
the Company's factory districts who have indicated an interest in acquiring
shares of Preferred Stock. If any category of prospective subscribers do not
purchase all of the Preferred Stock offered to them hereby, (i) additional Small
Growers and New Growers may be able to purchase Common Stock and Preferred Stock
in this offering or (ii) other current shareholders will be able to purchase
shares of Preferred Stock in addition to those which they are entitled to
purchase under their pro rata purchase rights. The right to purchase any such
additional shares of Preferred Stock will be determined by a random drawing
among all parties who have indicated an interest in acquiring shares of
Preferred Stock and have not purchased all desired shares in other portions of
the offering of Preferred Stock made by the Company in accordance with this
Prospectus. Any shares of Common or Preferred Stock purchased by a New Grower or
Small Grower may not be transferred to any other party until after the harvest
of the 1997 sugarbeet crop.

Each member is entitled to one vote, based upon ownership of a share of
Common Stock. Ownership of Preferred Stock entitles a member to grow sugarbeets
for sale to the Company. Each share of Preferred Stock will entitle the holder
to grow one acre of sugarbeets for the Company. (Under the Company's By-laws,
the Board of Directors has the authority to adjust the ratio of Preferred Stock
owned by a member to the number of acres of sugarbeets which may be planted by
virtue of ownership of those shares. However, it is management's current
intention and recommendation to the Board of Directors that the relationship
between the shares of Preferred Stock and acres of sugarbeet production be
maintained at a ratio of 1 to 1 for the foreseeable future, subject to
tolerances for overplanting and underplanting established by the Board each
year. Those tolerances can and will vary from year to year; for the 1996
sugarbeet crop, the Board of Directors established a tolerance of plus 12% or
minus 2% of the number of acres represented by issued and outstanding shares of
Preferred Stock.) In connection with the purchase of Preferred Stock, each
purchaser will be required to enter into a Uniform Growers' Agreement,
obligating the member to sell the sugarbeets grown on one acre of farm land to
the Company for each share of Preferred Stock owned by such member. The transfer
of both the Common Stock and Preferred Stock is subject to approval by the Board
of Directors and may only be transferred to another sugarbeet farm operator.
Neither the Common Stock nor the Preferred Stock bear dividends. See "Plan of
Distribution" and "Description of Common Stock and Preferred Stock."

CERTAIN FACTORS

A decision to purchase Preferred Stock subjects the purchaser to certain
risks and immediate dilution. Accordingly, a decision to purchase Preferred
Stock may not be appropriate for persons who cannot afford to be subjected to
such risks. See "Factors to be Considered."

PAYMENTS TO MEMBERS FOR CROPS

Sugarbeets delivered to American Crystal by its members are processed and
the resulting sugar is marketed on a cooperative basis. A particular member's
share of the net proceeds from the sale of sugar is a function of the amount of
sugar recoverable from the sugarbeets the member delivers to the Company. All
members of American Crystal are credited with the same unit price per
hundredweight (100 pounds) of recoverable sugar delivered, a price which is
determined when the sugarbeets of all of the members have been processed and
most of the sugar has been sold. The price paid for sugarbeets is determined by
reducing the adjusted value of recovered sugar from the beets a member delivers
by the member's share of the Company's member business operating expenses and
any unit retains. Each member also receives a pro rata share of net revenues
from by-product sales, based on the tonnage of sugarbeets delivered by the
member. See "Description of Business" and "Business--Growers' Contracts."

3
<PAGE>
SELECTED FINANCIAL DATA

The selected financial data of the Company should be read in conjunction
with the financial statements and related notes included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31
----------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT FOR RATIOS)
<S> <C> <C> <C> <C> <C>
Revenues............................................. $ 688,012 $ 605,960 $ 563,420 $ 542,665 $ 545,220
Net Proceeds Before Accounting Change................ $ 310,206 $ 320,549 $ 273,785 $ 303,842 $ 269,388
Cumulative Effect of Accounting
Change(1).......................................... -- -- (12,214) -- --
Net Proceeds(2)...................................... $ 310,206 $ 320,549 $ 261,571 $ 303,842 $ 269,388
Total Assets......................................... $ 465,136 $ 420,890 $ 324,469 $ 303,318 $ 278,989
Long-Term Debt, including current maturities......... $ 190,919 $ 119,029 $ 115,834 $ 98,039 $ 91,615
Members' Investments................................. $ 152,136 $ 142,047 $ 115,609 $ 120,113 $ 107,679
Property and Equipment Additions, net of
retirements........................................ $ 43,168 $ 48,394 $ 50,824 $ 35,659 $ 42,046
Working Capital...................................... $ 32,071 $ 28,046 $ 30,859 $ 32,819 $ 27,254
Ratio of Long-Term Debt to Equity(3)................. 1.17:1 .75:1 .88:1 .71:1 .71:1
Ratio of Net Proceeds to Fixed
Charges(4)......................................... 14.3 11.6 15.0 14.2 15.0
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR ENDED AUGUST 31
------------------------------------------------------------------
PRODUCTION DATA(5) 1996 1995 1994 1993 1992 1991
- ------------------------------------------------------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Acres harvested........................................ 429 413 396 400 397 400
Tons purchased......................................... 8,029 8,332 6,450 6,748 6,915 5,345
Tons purchased per acre harvested...................... 18.7 20.2 16.3 16.9 17.4 13.4
Net beet payment per ton of sugarbeets purchased, plus
unit retains.......................................... $ 38.69 $ 39.15 $ 42.59 $ 45.11 $ 39.21 $ 48.81
Sugar hundredweight--
Produced............................................. 19,947 21,369 18,093 18,979 16,474 15,057
Sold, including purchased sugar...................... 22,179 19,702 19,450 17,957 17,262 14,936
Purchased sugar sold................................. 490 509 293 81 195 15
Pulp and molasses tons--
Produced............................................. 651 643 488 667 724 570
Sold................................................. 638 659 472 688 706 569
</TABLE>

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(1) During 1994, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Post-retirement Benefits Other than
Pensions" and Financial Accounting Standards No. 112, "Employers Accounting
for Post-employment Benefits." The cumulative effect of application of the
new standards resulted in the reduction of net proceeds shown above for the
year ended August, 1994. See note number 8 to the Financial Statements for a
more detailed description of the accounting change.

(2) Net Proceeds are the Company's gross revenues, less the costs and expenses
of producing and marketing sugar, by-products and beet seed, but before
payments to members for sugarbeets. Payments to be made to members for the
delivery of sugarbeets are liabilities of the Company. (For a more complete
description of the calculation of Net Proceeds, see "Description of
Business-Growers' Contracts.")

(3) Calculated by dividing the Company's long term debt, exclusive of the
current maturities of such debt, by members' investments.

(4) Computed by dividing (i) the sum of Net Proceeds plus interest plus
depreciation by (ii) the sum of interest plus principal payments. Although
the Company does lease certain items, such as some office furniture, office
equipment and computers, due to the proportionately small amounts involved,
such lease payments have not been included in the total of the Company's
Fixed Charges or the calculation of this ratio.

(5) Information for a fiscal year relates to the crop planted and harvested in
the preceding calendar year (e.g., information for the fiscal year ended
August 31, 1995 relates to the crop of 1994).

4
<PAGE>
FACTORS TO BE CONSIDERED

INTRODUCTION

The financial results of American Crystal's operations and the payments made
to its members for their beets may be directly and materially affected by many
factors, including prevailing prices of sugar and by-products, American
Crystal's ability to market its sugar competitively, the weather, government
programs and regulations, and costs and expenses, including those related to
energy and transportation.

COMPETITION

American Crystal sells sugar through United Sugars Corporation in all of its
markets in direct competition with beet and cane sugar produced by other sugar
companies. Because sugar is a fungible commodity, competition for sales volume
is based primarily upon customer service, price and reliability, though
differences in proximity to various geographic markets within the United States
result in differences in freight and shipping costs which in turn affect pricing
and competitiveness in general.

In addition to sugar, the overall sweetener market also includes corn-based
sweeteners, such as regular and high fructose corn syrups, and non-nutritive,
high-intensity sweeteners such as aspartame. Differences in functional
properties and prices have tended to define the use of these various sweeteners.
For example, corn sweeteners are generally limited to applications where a
liquid sweetener can be used. Non-nutritive sweeteners presently do not provide
the bulk and other physical properties of sugar. Although the various sweeteners
are not interchangeable in all applications, the substitution of other
sweeteners for sugar has occurred in certain products, such as soft drinks. The
Company is not able to predict the availability, development or potential use of
these sweeteners and their possible impact on the Company and its members.

According to U.S. Department of Agriculture (USDA) statistics, the Red River
Valley is generally one of the most cost efficient sugarbeet producing areas in
the nation. As a result, the Company's management believes that it possesses the
ability to compete successfully with other producers of sugar in the United
States. In spite of this competitive advantage, substitute products and sugar
imports could have a material and adverse effect on the Company's operations in
the future.

WEATHER AND OTHER FACTORS

The sugarbeet, as with most other crops, is affected by weather conditions
during the growing season. Additionally, weather conditions during the
processing season affect the Company's ability to store beets held for
processing. The Company recently began to process as its 1996 crop the
sugarbeets grown on approximately 459,000 acres, with an average yield of just
over 18 tons of sugarbeets per acre. The Company expects these sugarbeets to
have an average sugar content of approximately 17.3%. From the 1996 sugarbeet
crop, the Company expects to produce approximately 21.9 million hundredweight of
sugar. Growing and storage conditions different from the Company's expectations
may change the quantity and quality of sugarbeets available for processing and
therefore may affect the quantity of sugar produced by the Company. See
"Description of Business--Growers' Contracts" for more information regarding
such variations in crops and production.

A significant reduction in the quantity or quality of sugarbeets harvested
due to adverse weather conditions, disease or other factors could result in
increased per unit processing costs and decreased production, with adverse
financial consequences to the Company and its members.

GOVERNMENT PROGRAMS AND REGULATIONS

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<PAGE>
Act of 1996 (the "FAIR Act"), the price of sugar is required to be maintained
above the price at which producers could forfeit sugar to repay nonrecourse
loans obtained through the Commodity Credit Corporation (CCC). The USDA
maintains sugar prices without cost to the U.S. Treasury by regulating the
quantity of sugar imports. Under the "Tariff Rate Quota" implemented October 1,
1990, sugar producing countries are assigned a fixed quantity of imports
duty-free or subject to minimal duties. Unlimited additional quantities may be
imported upon payment of a tariff of 16 cents per pound prior to shipment. (To
date, only minute quantities of sugar have been imported under this higher
tariff level.)

The Uruguay Round agreement under the General Agreement on Tariffs and Trade
(GATT) mandates imports of at least 1,257,000 short tons of sugar per year into
the United States. The FAIR Act maintains the basic 18 cent per pound loan rate
for raw sugar and puts in place a 22.90 cent per pound loan rate for refined
beet sugar. Both loan rates are effective for crop years 1996 through 2002.
Price support loans are to be made on a non-recourse basis provided that US
sugar imports for domestic usage exceed 1.5 million short tons raw value in a
given fiscal (October through September) year. Loans made on a non-recourse
basis enable the sugar processor to forfeit sugar to the CCC if sugar prices are
below the loan rate. If imports during a given year are less than 1.5 million
short tons, loans must be made on a recourse basis, meaning that processors will
not be able to forfeit sugar to the CCC at its full loan value. In order to
recover the full value of a recourse loan, the CCC could require that cash or
other assets be provided in addition to the sugar used as collateral when the
loan is made. Another new provision of the FAIR Act is a one cent per pound
penalty paid by processors if the processor defaults on sugar price support
loans.

The nature and scope of future legislation affecting the sugar market cannot
be predicted and there can be no assurance that price supports will continue in
their present form. As a result of uncertainty regarding the impact of the
absence of price supports, the Company is not able to predict if such changes in
legislation would have an adverse impact on the Company or the magnitude of such
impact.

ENERGY AND TRANSPORTATION

American Crystal uses large quantities of energy in its operations,
principally for heating the cossettes (sliced beets), evaporating water from
juices containing sugar, drying wet beet pulp, and generating electrical power.
Each of the Company's five factories currently burn low sulphur coal as their
primary source of energy. However, the Company is in the process of converting
certain of its dryer facilities to operate with natural gas as the energy
source. The Company presently obtains all of its coal from Montana under a
supply contract expiring July 31, 2005. The Company has also entered into a
contract with a gas marketing company to meet the dryer facilities' natural gas
requirements primarily from Canadian sourced gas supplies, with an initial term
ending October 31, 2001. The Company has also entered into a related contract,
with a term ending in November, 2011, for firm transportation of gas from the
Canadian border. Although certain contingencies remain to be satisfied under the
gas supply and transportation contracts, it is anticipated that the contracts
will become effective in the Fall of 1996.

Changes in the cost and sources of energy may affect the financial results
of the Company's operations and the Net Beet Payment to members for their crops.

Transportation is another significant expense. Transportation costs include
the delivery costs of beets, sugar and the Company's major operating supplies,
including coal, coke, limerock and chemicals. Transportation costs for the
delivery of operating supplies are included in the cost of the supplies and
represent a major part of the Company's operating costs in connection with the
production of sugar and sugarbeet by-products.

As described elsewhere in this Prospectus, the Company markets its sugar
through United Sugars Corporation and its sugarbeet by-products through Midwest
Agri-Commodities Company. While those entities are responsible for marketing and
distributing the Company's products, the costs involved in such marketing and
distribution reduce the proceeds received by the Company from those
organizations in exchange for sugar and sugarbeet by-products. Most of the
Company's products are now quoted and sold

6
<PAGE>
to customers for a price which includes the cost of delivery. As noted above,
the cost of transporting sugar has a significant impact on the geographic
markets into which the Company is able to sell its products. A significant
change in transportation costs could have an adverse impact on the Company.

ENVIRONMENTAL MATTERS

American Crystal is subject to extensive federal and state environmental
laws and regulations with respect to water and air quality, solid waste disposal
and odor and noise control. The Company conducts an on-going and expanding
control program designed to meet these environmental laws and regulations.
American Crystal believes that it is in substantial compliance with applicable
environmental laws and regulations.

The Company cannot predict whether future changes in environmental laws or
regulations might increase the cost of operating its facilities and conducting
its business. Any such changes could have adverse financial consequences for the
Company and its members.

DETERMINATION OF OFFERING PRICE

There is only a very limited, private market for the Company's Preferred
Stock and no market for shares of the Company's Common Stock. The price for the
Common Stock offered hereby is the par value of such shares as established by
the Company's Articles of Incorporation. Ownership of the Company's Preferred
Stock provides a shareholder with the opportunity to (1) produce sugarbeets on
the farm, (2) participate in the Company's value added processing and (3) market
sugar and by-products through the Company's marketing agents, United Sugars
Corporation and Midwest Agri-Commodities Company. The price for the Preferred
Stock offered hereby has been determined by the Company's Board of Directors
after giving consideration to many complex factors. Although many factors have
been considered, the specific offering price for the preferred stock does not
have any direct relationship to the assets, earnings, book value, or other
measurable criteria of the Company. The Company makes no representations,
whether express or implied, as to the value of the Preferred Stock offered
hereby. There can be no assurance that such shares can be sold at either the
offering price or any other price in the future.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Preferred Stock offered
hereby, after payment of expenses of the offering totalling approximately
$150,000, are estimated to be approximately $32.4 million if the maximum number
of shares of Preferred Stock is sold. The Company intends to use such proceeds
as working capital for the Company's business activities. Such amounts will be
used in connection with the Company's other sources of working capital, for the
purposes described below.

The Company's sources of working capital during the fiscal year beginning on
September 1, 1996 are projected as follows:

7
<PAGE>
During the upcoming fiscal year, the Company intends to use such working
capital for the following purposes:

<TABLE>
<CAPTION>
APPROXIMATE AMOUNT
CATEGORY (IN MILLIONS)
- ------------------------------------------------------------------------- -------------------
<S> <C>
Property Additions and Improvements...................................... $ 99.7
Investment in United Sugars.............................................. $ 12.8
Investment in ProGold Limited Liability Company.......................... $ .8
Current Maturities of Long Term Debt..................................... $ 15.0
Payments to Estates of Deceased Members.................................. $ .4
Revolvement of Unit Retains.............................................. $ 7.7
Miscellaneous............................................................ $ 5.4
------
$ 141.8
------
------
</TABLE>

- ------------------------

(1) In the event that the Company sells less than all of the Preferred Stock
available in this offering, the Company will increase its borrowing to the
extent reasonably necessary to obtain the working capital required for the
Company's planned activities. The Company is in the process of negotiating
with its lenders to obtain financing for the fiscal year beginning on
September 1, 1996. Although the Company does not have a binding commitment
from its banks to provide the specified amount, the Company believes that
its relationships with its lenders are good.

The foregoing use of the Company's working capital is based upon the
Company's assumptions concerning its business objectives, finances and other
matters affecting the Company. It also assumes that all of the Preferred Stock
offered hereby will be sold. If current assumptions are not accurate, other
unforeseen conditions affecting the Company's business arise, or if less than
all of the shares of Preferred Stock offered are sold, there could be material
changes to the Company's projections. The Company would first seek debt
financing to allow it to complete its planned activities during the fiscal year
beginning on September 1, 1996. If such debt financing is not available or is
not available on appropriate terms, the Company could find it advisable to
allocate its working capital, including the offering proceeds, in a manner
different from that described above. Such adjustments may involve deferral or
reduction of certain capital expenditures.

Based on the Company's current financial resources and assuming the
availability of (i) the proceeds from the sale of all of the Preferred Stock and
(ii) debt financing in amounts and on terms and conditions acceptable to the
Company, the Company would not be required to raise additional equity capital
(other than through Unit Retains) to continue conducting its business at current
capacity. However, the Company may consider obtaining additional equity capital
through future sales of its securities in order to pursue its strategic
objectives.

Pending application of the proceeds of this offering, the Company will use
the funds to reduce its borrowings or invest in short-term interest-bearing
securities.

8
<PAGE>
DILUTION

The net tangible book value of the Company, based on the Company's audited
financial statements as of August 31, 1996 was $140,507,656 or approximately
$360.04 per share of Preferred Stock. "Net tangible book value per share"
represents the tangible assets of the Company less total liabilities divided by
the number of shares of Preferred Stock outstanding. Without taking into account
changes in net tangible book value subsequent to August 31, 1996 other than to
give effect to (i) the sale of the Preferred Stock offered hereby and (ii) the
application of the net proceeds of such sales, the pro forma net tangible book
value of the Company at August 31, 1996 would increase to $181,901,156, or
approximately $416.27 per share if the maximum number of Shares are sold.
Accordingly, the net tangible book value of the shares of Preferred Stock held
by the present shareholders of the Company will be increased by approximately
$56.23 per share if the maximum number of shares of Preferred Stock is sold. The
new investors will incur dilution of approximately $1,083.74 per share of
Preferred Stock if the maximum number of such shares are sold.

Dilution per share of Preferred Stock represents the difference between the
price for each share of Preferred Stock to be paid by new investors and the net
tangible book value per share as of August 31, 1996, as adjusted to give effect
to the offering of shares of Preferred Stock made hereby. The dilution per share
of Preferred Stock, calculated as described above, is illustrated in the
following table:

<TABLE>
<S> <C>
Offering price per share......................................... $ 1,500

Net tangible book value (deficit) before offering................ 360.04(1)
Increase to current stockholders in net tangible book value per
share due to offering.......................................... 56.23
---------

Net tangible book value (deficit) after offering................. 416.27
---------
Dilution per share to new investors.............................. $1,083.73
---------
---------
</TABLE>

In the event that the Company sells less than the maximum number of shares
of Preferred Stock offered hereby, each purchaser in this offering can expect to
incur dilution in excess of that described above.

The following table summarizes, as of the date of this Prospectus, the
differences among current stockholders and new members with respect to the
number of shares of Preferred Stock purchased from the Company, the total
consideration paid, and the average consideration paid per share, assuming the
sale of the maximum number of shares of Preferred Stock. See "Plan of
Distribution."

<TABLE>
<CAPTION>
PRESENT PURCHASERS IN
STOCKHOLDERS THIS OFFERING
------------------- -------------------
<S> <C> <C>
Average cost per share.............................. $ 140.86 $ 1,500
Percent of outstanding shares owned after
offering.......................................... 95.3%(1) 4.7%(1)
Total investment of group........................... $ 58,495,500 $ 32,593,500
Percentage of total investment...................... 35.8%
</TABLE>

- ------------------------

(1) Reflects the effects of the recapitalization which became effective on May
31, 1994. In that recapitalization, each share of Preferred Stock
outstanding was changed and reclassified into approximately .65 shares of
Preferred Stock. See "Description of Common Stock and Preferred Stock."

9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:

LIQUIDITY AND CAPITAL RESOURCES

Because American Crystal operates as a cooperative, payments for member
delivered sugarbeets, the principal raw material used in producing the sugar and
agri-products it sells, are subordinated to all member business expenses. In
addition, actual cash payments to members are spread over a period of
approximately one year following delivery of their sugarbeet crops to American
Crystal and are net of unit retains allocated to them, both of which remain
available to meet American Crystal's capital requirements. This member financing
arrangement may result in an additional source of liquidity and reduced outside
financing requirements in comparison to a similar business operated on a
non-cooperative basis. However, because sugar is sold throughout the year (while
sugarbeets are processed primarily in the fall and winter) and because
substantial amounts of equipment are required for its operations, American
Crystal has utilized substantial outside financing on both a seasonal and
long-term basis to fund such operations. The majority of such financing has been
provided by the St. Paul Bank for Cooperatives (the "Bank"). American Crystal
has a short-term line of credit with the Bank in 1996 of $210 million. The
Company also expects to expand its commercial paper program, which may provide
short-term borrowings of up to $75,000,000.

RESULTS OF OPERATIONS

INDUSTRY ENVIRONMENT

During most of the 1970s and 1980s, the sweetener industry witnessed two
significant trends: the increase in consumption of non-nutritive sweeteners,
principally aspartame, and the increased use of high fructose corn syrup (HFCS)
in place of refined sugar (sucrose) in certain food products, primarily
beverages.

During the late 1980s and the early 1990s, the domestic consumption of
refined sugar continuously increased, from 146 million hundredweights in 1986 to
174 million hundredweights in 1995. The growth has been at a compounded rate of
approximately 2% a year during that period. The Company believes that this
recent market trend has been due to population growth and general acceptability
of sugar as a desirable natural ingredient of a normal diet.

The Company's results of operations are substantially dependent on market
factors, including domestic prices for refined sugar. These market factors are
influenced by a variety of forces, including weather conditions and United
States farm and trade policy, that the company is unable to predict. See
"Business--Government Programs and Regulations." In addition, weather conditions
during the growing, harvesting and processing seasons, as well as diseases and
insects, may materially affect the quality and quantity of sugarbeets available
for purchase as well as the unit costs of raw materials and processing.

COMPARISON OF THE YEARS ENDED AUGUST 31, 1996, AND 1995

Revenue for the year ended August 31, 1996, was $688.0 million, an increase
of $82.0 million from 1995. Revenue from total sugar sales increased 15.4%,
reflecting a 12.6% increase in hundredweight sold and a 2.5% increase in the
average selling price per hundredweight. Revenue from pulp sales decreased 7.5%,
due to a 16.9% decrease in the volume of pulp sold partially offset by an 11.3%
increase in the average selling price per ton. Revenue from molasses sales
increased 32.4%, due to a 29.0% increase in the volume of molasses sold and a
2.6% increase in the average selling price per ton. Revenue from Concentrated
Separated By-Products ("CSB") increased 4.6%, due to a 2.4% increase in the
volume of CSB sold and a 2.2% increase in the average selling price per ton.
Revenue from beet seed sales was down 4.5%, primarily due to decreased sales
volume offset by an increase in sales prices.

10
<PAGE>

Cost of product sold, exclusive of payments to members for sugarbeets,
increased $72.5 million. The increase was primarily due to changes in product
inventory levels between 1996 and 1995, which impacted the cost of product sold
unfavorably by $77.1 million. Direct processing costs for sugar and pulp
decreased 2.5% primarily due to the harvesting and processing of a 3.6% smaller
crop. Fixed and committed expenses decreased by 2.9% due to a shorter processing
campaign.

Selling expenses increased $17.9 million. The increase is attributable
primarily to increased sales volume. General and administrative expenses
increased $4.5 million due primarily to higher Information Services costs,
capital projects expense and general increases in personnel costs, partially
offset by a favorable settlement of an IRS tax case.

Interest expense decreased $3.2 million from $14.5 million in 1995, to $11.3
million in 1996. This resulted from lower 1996 average interest rates for both
long-term and short-term debt, partially offset by higher average borrowing
levels.

Non-member business activities resulted in a loss of $396,000 in 1996 and a
loss of $15,000 in 1995.

Unit retains of $16.0 million and $16.6 million were withheld from members
in 1996 and 1995, respectively. The unit retain per-ton-purchased was $2.00 in
1996 and 1995.

Payments to members for sugarbeets decreased by $14.9 million from $309.5
million in 1995 to $294.6 million in 1996. The decrease is attributable
primarily to a decrease in tons harvested and a lower average sugar content from
the 1995 crop of sugarbeets.

COMPARISON OF THE YEARS ENDED AUGUST 31, 1995, AND 1994

Revenue for the year ended August 31, 1995 was $606 million, an increase of
$42.5 million from 1994. Revenue from total sugar sales increased 4.6%,
reflecting a 1.3% increase in hundredweight sold and a 3.3% increase in the
average selling price per hundredweight. Revenue from pulp sales increased
42.8%, due to a 41.6% increase in the volume of pulp sold and an 0.8% increase
in the average selling price per ton. Revenue from molasses sales increased
49.9% due to a 36.1% increase in the volume of molasses sold and a 10.1%
increase in the average selling price per ton. Revenue from beet seed sales was
down 4.1% primarily due to decreased sales volume.

Cost of product sold, exclusive of payments for sugarbeets, decreased $25.4
million from $169.1 million in 1994 to $143.7 million in 1995. This was
primarily due to changes in product inventory levels between 1995 and 1994,
which impacted the cost of product sold favorably by $61.2 million. Also,
partially offset by increased process costs associated with a
large crop and higher costs for purchased sugar due to increased sales volume.

Selling, general and administrative expenses increased $19.1 million from
$113.7 million to $132.8 million. This was due primarily to higher selling
expenses associated with the increased volumes of products sold. General and
administrative expenses increased 15.4% due primarily to higher outside service
costs and general increases in personnel costs.

Interest expenses increased $6.6 million from $7.9 million in 1994 to $14.5
million in 1995. This resulted from a higher 1995 average borrowing levels and
higher interest rates for both long-term and short-term debt.

Non-member business activities resulted in a loss of $15,000 in 1995 and a
loss of $544,000 in 1994.

Unit retains of $16.6 million and $19.3 million were withheld from members
in 1995 and 1994, respectively. The unit retain per-ton-purchased was $2.00 in
1995 and $3.00 in 1994.

Payments to members for sugarbeets increased by $54.1 million from $255.4
million in 1994, to $309.5 million in 1995 due primarily to an increase in tons
harvested in the 1994 crop.

11
<PAGE>

COMPARISON OF THE YEARS ENDED AUGUST 31, 1994, AND 1993

Revenue for the year ended August 31, 1994 was $563.4 million, an increase
of $20.7 million from 1993. Revenue from total sugar sales increased 6.0%,
reflecting an 8.3% increase in hundredweight sold partially offset by a 2.2%
decrease in the average selling price per hundredweight. Revenue from pulp sales
decreased 12.1% due to a 12.8% decrease in the volume of pulp sold partially
offset by an 0.8% increase in the average selling price per ton. Revenue from
molasses sales decreased 45.5% due to a 53.6% decrease in the volume of molasses
sold partially offset by a 17.4% increase in the average selling price per ton.
The large decrease in molasses volume was due primarily to the reprocessing of
molasses into refined sugar through the desugarization process. Revenue from
beet seed sales was up 7.3% primarily due to increased sales volume.

Cost of product sold, exclusive of payments for sugarbeets, increased $48.6
million from $123.0 million in 1993, to $169.1 million in 1994. This was
primarily due to changes in product inventory levels between 1994 and 1993,
which impacted the cost of product sold unfavorably by $37.7 million. Also,
contributing to this variance was increased depreciation and process costs
associated with the desugarization process and higher costs for purchased sugar
due to increased sales volume.

Selling, general and administrative expenses increased $4.5 million from
$109.2 million to $113.7 million. This was due primarily to higher sugar selling
expenses associated with the increased volume of sugar sold partially offset by
lower pulp and molasses selling expenses associated with the lower sales volumes
of these products. General and administrative expenses and research expenses
decreased 19.8% due primarily to lower personnel costs in 1994 and
reorganization costs incurred in 1993.

Interest expense increased $700,000 from $7.2 million in 1993, to $7.9
million in 1994. This resulted from a higher 1994 average borrowing level for
long-term debt partially offset by lower average interest rates for long-term
debt and lower average borrowings for short-term debt.

Non-member business activities resulted in a loss of $544,000 in 1994 and a
loss of $77,000 in 1993.

Unit retains of $19.3 million and $20.2 million were withheld from members
in 1994 and 1993, respectively. The unit retain per-ton-purchased was $3.00 in
1994 and 1993.

Payments to members for sugarbeets decreased by $28.7 million from $284.1
million in 1993, to $255.4 million in 1994 due primarily to a decrease in tons
harvested and the lower sugar content of the 1993 crop.

1996 CROP AND ESTIMATED FISCAL YEAR 1997 INFORMATION

As noted in the "Growers Contracts" subsection of the "Description of
Business", the agreements between the Company and its members regarding the
delivery of sugarbeets to the Company require payment for members' sugarbeets in
four installments throughout the year after harvest of the applicable sugarbeet
crop. As only the final payment is made after the close of the fiscal year in
question, the first three payments to members for their sugarbeets are, of
necessity, based upon the Company's then-current estimates of the Net Beet
Payment arising from the processing of the crop in question and the subsequent
sale of the products obtained from processing those sugarbeets. This discussion
contains a summary of the Company's current estimates of the financial results
to be obtained from the Company's processing of the 1996 sugarbeet crop. There
can be no assurance that such estimates will prove accurate; in addition, the
Company believes that the estimates set forth in this section will be subject to
change as a result of factors beyond the control of the Company. As indicated
above, the Company will prepare new, then-current estimates in connection with
the payment to the members of the second and third installements of the Net Beet
Payment. (Those installments are expected to be made to the members with respect
to the 1996 sugarbeet crop on or about March 31, 1997 and September 30, 1997,
respectively.)

12
<PAGE>

The recently completed harvest of the sugarbeet crop grown during 1996
produced a total of 8.3 million tons of sugarbeets, or approximately 18.1 tons
of sugarbeets per acre from roughly 459,000 acres. That production exceeded 16.8
tons per acre, which is the ten-year average of tons per acre for the years from
1986 through 1995. The sugar content of the 1996 crop is 17.34%, in comparison
to a ten year average for the applicable period of approximately 17.5%. The
Company expects to produce a total of roughly 21.9 million hundredweight of
sugar from the 1996 sugarbeet crop, representing an estimated increase of
approximatley 2,000,000 hundredweight of sugar in comparison to the 1995
sugarbeet crop. Such sugar production provides a total sugar recovery of
approximately 273 pounds of sugar for each ton of sugarbeets harvested by the
Company.

Based on marketing information developed by United Sugars Corporation, the
Company's current estimate is that the average net selling price of the
Company's sugar will be approximately $24.30 per hundredweight, an increase of
nearly $1.00 from the ten year average of $23.36. The effect of the estimated
net selling price, when combined with the Company's anticipated recovery of
sugar from each ton of sugarbeets, results in expected sugar revenue per ton of
sugarbeets in an amount equal to $64.03 per ton.

To the revenue from the Company's sales of sugar must be added revenue
produced by the agri-products: molasses, beet pulp and Concentrated Separated
By-product. As the Company's estimates of the net selling prices for the
agri-products are greater than the net selling prices for such products produced
from the 1995 crop, the Company anticipates obtaining additional revenue of
$6.99 per ton of sugarbeets.

From the revenues generated from the sale of products produced from each ton
of sugarbeets must be deducted the Company's operating costs, which are
currently estimated to be $26.18 per ton. The deduction of those operating costs
results in an estimated gross beet payment of $44.84 per ton of sugarbeets. With
the subsequent deduction of a hauling allowance of $0.84 per ton and anticipated
unit retains of $2.00 per ton for the fiscal year ending on August 31, 1997, the
Company's current estimated Net Beet Payment is $42.00 per ton of sugarbeets. If
sucessful in achieving the estimated results, the Company's Net Beet Payment
will exceed the ten year average Net Beet Payment by roughly $2.70 per ton.

THE COMPANY'S CURRENT STRATEGIC PLAN

The Company's Board of Directors and management have been involved in a
continuing process of reviewing the Company's current business and plans for the
future. In considering the Company's future activities, the Company's Board of
Directors and management have focused on possible scenarios in which the
marketplace might present a future environment in which prices for the Company's
products remain relatively stable while the Company's costs might increase at
roughly the rate of inflation. In order to prevent the possible negative impact
if such a scenario were to arise, the Company's Board of Directors and
management have identified four key strategies which the Company intends to
pursue. First, the Company believes that it would be in the best interests of
the Company to increase its market share. Second, the Company believes it
appropriate to optimize the selling price for its products while, third,
maintaining its current low cost producer status by further reducing costs.
Finally, the Company will seek to continue its efforts to diversify its
business.

With respect to increasing the Company's share of the domestic market for
sugar, the Company believes that it could sell more product if it could produce
the additional sugar. However, including the sugarbeet production represented by
the shares of Preferred Stock to be sold in the offering described in this
prospectus, the Company's facilities will be near their current production
capacity. Instead of investing the substantial sums necessary to build another
sugarbeet processing facility, the Company's management proposes to increase the
Company's capacity to process sugarbeets through sequential increases in
processing capacity at some of the Company's current facilities over the course
of the next ten years. The Company believes that adopting such a procedure will
allow the Company to complete an appropriate course of expansion without being
exposed to excessive debt or financing risk and while still allowing the Company
to retain the flexibility to reconsider the decision with respect to each
incremental increase in

13
<PAGE>

production capacity immediatly prior to engaging in that activity. The Company
also believes that it may be possible for the Company to increase its market
share through acquisitions of or joint ventures with other sugar producers. The
Company will consider each such transaction if and when such opportunities
arise.

In order to obtain the best selling price for its products, the Company
intends to focus on sales and marketing stratgies which allow the Company to
provide its customers with an appropriate mixture of the Company's products. For
example, once the ProGold corn sweetener plant begins operations, the Company
will seek opportunities to sell both sugar and sweetener products to the same
customers. The Company also believes that additional storage capacity will allow
the Company additional flexibility in managing its inventory and sales and
marketing strategies.

To pursue the goal of maintaining and improving upon its current status as a
low cost producer, the Company intends to focus on working with its members to
increase the productivity of the members' sugarbeet farming operations. In
addition, the Company plans to focus on cost reduction at the factory level. At
the member level, the Company expects to focus on, among others, programs for
nitrogen management and new seed varieties. At the factory level, the Company
intends to pursue expansion of the Company's molasses desugarization
capabilities and on-going maintenance and improvement related to, for example,
diffuser replacement at the East Grand Forks, Crookston and Moorhead factories.

Finally, the Company will continue to pursue opportunities to diversify the
Company's business in the best interests of the Company and its members. Such
efforts are expected to include a continuation of the Company's involvement with
ProGold LLC and careful consideration of such other opportunities as may arise.

14
<PAGE>
DESCRIPTION OF BUSINESS

GENERAL

American Crystal is a Minnesota agricultural cooperative corporation owned
by approximately 2,443 sugarbeet growers in the Minnesota and North Dakota
portions of the Red River Valley. (The Red River Valley, the largest sugarbeet
growing area in the United States, forms a band approximately 35 miles on either
side of the North Dakota and Minnesota border and extends approximately 200
miles south from the border of the United States and Canada.) The Company
currently processes sugarbeets from a base level of approximately 415,000 acres,
subject to tolerances for overplanting and underplanting established by the
Board of Directors each year. By owning and operating five sugarbeet processing
facilities in the Red River Valley, the Company provides its shareholders with
the ability to process their sugarbeets into sugar and by-products, such as
molasses and beet pulp. The sugar is pooled and then marketed through the
services of a marketing agent under contract with the Company. The sugar
marketing agent, United Sugars Corporation, is a cooperative owned by its
members, American Crystal, Southern Minnesota Beet Sugar Cooperative and
Minn-Dak Farmers Cooperative. The Company's molasses, beet pulp and Concentrated
Separated By-Product (CSB) (a by-product of the molasses desugarization process)
are also marketed through a marketing agent, Midwest Agri-Commodities Company.
Midwest Agri-Commodities Company is a cooperative whose members are the Company,
Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative. The
Company is also one of three members of ProGold Limited Liability Company, a
joint venture the purpose of which is to construct and operate a corn wet
milling plant in Wahpeton, North Dakota.

American Crystal was organized in 1973 by sugarbeet growers to acquire the
business and assets of American Crystal Sugar Company, then a publicly held New
Jersey corporation in operation since 1899.

American Crystal's corporate headquarters are located at 101 North Third
Street, Moorhead, Minnesota 56560 (telephone number (218) 236-4400). Its fiscal
year ends August 31.

PRODUCTS AND PRODUCTION

American Crystal is engaged primarily in the production and marketing of
sugar from sugarbeets. American Crystal also markets beet pulp, molasses and
CSB, which are by-products of the sugar it produces, and sugarbeet seed.

American Crystal processes sugarbeets grown by its members in five factories
located in the Red River Valley area of Minnesota and North Dakota. The growing
area is divided into five factory districts, each containing one sugar
processing plant.

The period during which the Company's plants are in operation to process
sugarbeets into sugar and by-products is referred to as the "campaign." During
the campaign, each of the Company's factories is operated twenty-four hours per
day, seven days per week. The campaign is expected to begin in September, when a
small portion of the sugarbeet crop is harvested, and continues until the
available supply of beets has been depleted, which generally occurs in March or
April of the following year. Based on current processing capacity, an average
campaign lasts approximately 226 days, assuming normal crop yields.

Once the sugarbeets are harvested, rapid processing is important to maximize
sugar extraction and minimize spoilage. Members transport their crop by truck to
receiving stations designated by the Company and receive a hauling allowance
under the Grower's Contract. Beets are then stored in factory yards and at
outlying piling stations until processing.

American Crystal's total sugar production is presently influenced by the
amount and quality of sugarbeets grown by its members, the processing capacity
of the Company's plants and by the ability to store harvested beets. Most of the
beet harvest is stored in piles. Although frozen sugarbeets may be stored for
extended periods, beets stored in unprotected piles at temperatures above
freezing must be processed

15
<PAGE>
within approximately 150 days. In most years, therefore, the cold weather in
North Dakota and Minnesota offers an advantage to the Company as it permits the
outdoor storage of sugarbeets in below-freezing weather conditions. By contrast,
unprotected piles of sugarbeets would experience cycles of freezing and thawing
and, therefore, be subject to some deterioration. Subject to such freeze and
thaw cycles, beets on the exterior of piles freeze naturally. Beets near the
center of the piles, however, may not freeze and thus may be more subject to
spoilage. The Company utilizes a process called "split pile storage" in which
beets from the center of the piles are removed for processing first. Split pile
storage permits more of the stored beets to freeze naturally.

American Crystal also utilizes a ventilation technique to further reduce
spoilage. In this process, fans circulate air through ventilation channels
constructed within beet piles in order to precool and then deep freeze the
beets. Approximately 11% of an average crop may be stored in ventilated storage
sites. Enclosed cold storage facilities are also used to extend the beet storage
period at each of the Company's factory locations. Cold storage sites presently
have the capacity to cover approximately 8% of an average crop.

Once the sugarbeets arrive in the factory, the basic steps in producing
sugar from them include: washing; slicing into thin strips called "cossettes";
extracting the sugar from the cossettes in a diffuser; purifying the resulting
"raw juice" and boiling it, first in an evaporator to thicken it and then in
vacuum pans to crystalize the sugar; separating the sugar crystals in a
centrifuge; drying the sugar; storing sugar in bulk form and grading and
screening the crystals for packaging and bulk shipping.

The Company's sugarbeet by-products include molasses and beet pulp. After
the extraction of raw juice from the cossettes, the remaining pulp is dried and
processed into animal feeds. The Company processes approximately one-half of its
molasses through its molasses desugarization facility to extract additional
sugar. The remaining molasses and CSB from the molasses desugarization process
are marketed through Midwest Agri-Commodities and are sold primarily to yeast
and pharmaceutical manufacturers and for use in animal feeds.

The Company also has its own Seed Division which has been in existence since
the 1920s. The goal of the Seed Division is to ensure that the Company's
shareholders have the highest quality sugarbeet hybrids available to maximize
their production. Since the mid-1970s, American Crystal has had an effective
working arrangement with Danisco Seed of Denmark. Exchange of germplasm between
American Crystal and Danisco provides a wide genetic base in developing hybrids
by both companies. The Seed Division markets its seed to sugarbeet growers in
Michigan, Ohio, Montana, Wyoming, Colorado, Nebraska, Idaho, Oregon and
Washington.

RECENT CROPS

The recently completed harvest of the sugarbeet crop grown during 1996
produced a total of approximately 18 tons of sugarbeets per acre from roughly
459,000 acres. That production exceeded 16.8 tons per acre, which is the
ten-year average of tons per acre for the years from 1986 through 1995. The
sugar content of the 1996 crop is 17.34%, in comparison to a ten year average
for the applicable period of 17.5%. The Company expects to produce a total of
roughly 21.9 million hundredweight of sugar from the 1996 sugarbeet crop.

American Crystal's members harvested approximately 8.0 million tons of
sugarbeets from 430,000 acres for the 1995 crop. The approximately 18.7 ton per
acre crop yield was higher than the then-current 16.6 ton per acre 10 year
average. Sugar content for the 1995 crop was approximately 16.4%, which is 1.1%
lower than the then-current ten year average of 17.5%. Beet processing began on
September 7, 1995 and the Company produced 20.2 million hundredweights of sugar
during the 1995-1996 campaign.

For a discussion of the 1995, 1994 and 1993 crops and results of operations
for fiscal years 1996, 1995 and 1994, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations".

16
<PAGE>
MARKET AND COMPETITION

According to United States government estimates, the United States market
for sugar during the year beginning on October 1, 1995 and ending on September
30, 1996 totalled approximately 176 million hundredweights of sugar. That
estimate suggests the continuation of a trend of growth in the market in recent
years at a compounded rate of approximately 2% per year with estimates for 1996
and 1997 indicating a 1.3% increase in consumption. For example, from a market
of approximately 146 million hundredweights in 1986, the total domestic market
grew to a total of approximately 174 million hundredweights in 1995. Given the
size of the total market, the Company's sugar production and sales represented
slightly more than 11.1% of the total domestic market for refined sugar in 1994
and 1995.

The growth in the market for refined sugar in the late 1980s and the early
1990s is a reversal of trends in the 1970s and early 1980s which resulted in a
reduced market for refined sugar. During the 1970s and early 1980's, high
fructose corn syrup was increasingly used as a replacement for refined sugar in
certain food products. (The prime example of this trend was the use of high
fructose corn syrup in beverages such as soft drinks.) In addition,
non-nutritive sweeteners such as aspartame were developed and used in food
products. While high fructose corn syrup and non-nutritive sweeteners constitute
a large portion of the overall sweetener market, the Company believes that the
recent trend of increased use of refined sugar results from population growth
and increased acceptance of the use of sugar as a desirable natural ingredient
in a normal diet.

The trends described in the preceding paragraph are illustrated by the
following chart:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
MILLION SHORT TONS RAW VALUE
<S> <C>
81/2 9.206
82/3 8.874
83/4 8.578
84/5 8.097
85/6 7.794
86/7 8.046
87/8 8.193
88/9 8.264
89/0 8.531
90/1 8.901
91/2 9.006
92/3 9.197
93/4 9.333
94/5 9.337
95/6 9.700
</TABLE>

The Company's main competitors in the domestic market are beet sugar
processors including Holly Sugar Corporation (a division of Imperial Holly
Corporation), Western Sugar Company (a subsidiary of

17
<PAGE>

Tate & Lyle, Inc.), Amalgamated Sugar Company, Michigan Sugar Company
(wholly-owned by Savannah Foods and Industries, Inc.) and Monitor Sugar Company,
Inc. The Company's products also compete with cane sugar refined by Savannah
Foods and Industries, Inc., California and Hawaiian Sugar Company, Imperial
Holly Corporation and Domino Sugar (a subsidiary of Tate & Lyle, Inc.) Because
sugar is a fungible commodity, competition for sales volume is based primarily
upon price, customer service and reliability. However, recent information
suggests a decrease in sugar production in the United States of approximately 5%
in 1996 and 1997.

According to USDA statistics, the Red River Valley is generally one of the
most cost efficient sugarbeet producing areas in the nation. As a result, the
Company's management believes that it possesses the ability to compete
successfully with other producers of sugar in the United States. In spite of
this competitive advantage, substitute products and sugar imports could have a
material and adverse effect on the Company's operations in the future.

GOVERNMENT PROGRAMS AND REGULATION

Domestic sugar prices are supported under a program administered by the
USDA. Under the current program, which was initiated in 1981 and extended under
the Food Security Act of 1985, the Food, Agriculture, Conservation and Trade Act
of 1990 and the Federal Agriculture Improvement and Reform Act of 1996 (the
"FAIR Act"), the price of sugar is required to be maintained above the price at
which producers could forfeit sugar to repay nonrecourse loans obtained through
the Commodity Credit Corporation. The USDA maintains sugar prices without cost
to the U.S. Treasury by regulating the quantity of sugar imports. Under the
"Tariff Rate Quota" implemented October 1, 1990, sugar producing countries are
assigned a fixed quantity of imports duty-free or subject to minimal duties.
Unlimited additional quantities may be imported upon payment of a tariff of 16
cents per pound prior to shipment. (To date, only minute quantities of sugar
have been imported under this higher tariff level.)

MARKETING, CUSTOMERS AND PRICES

Since January, 1994, American Crystal's sugar has been marketed by United
Sugars Corporation, a cooperative common marketing agency. United Sugars
Corporation was formed in late 1993, at which time American Crystal contributed
approximately $6,880,000, in the form of certain assets, to the capital of
United Sugars Corporation. In exchange for that capital contribution, the
Company received an ownership interest of approximately 69%. (American Crystal's
representatives on the United Sugars Corporation Board of Directors total
one-third of the members of the United Sugars Board and, therefore, American

18
<PAGE>
Crystal does not possess a controlling interest in the day-to-day affairs of
United Sugars Corporation, except to the extent that certain Board actions must
also be approved by the members of the association, for example mergers or
consolidations, sales or liquidations of substantially all of the association's
assets, and dissolution of the association.) Upon completion of the
incorporation and capitalization of United Sugars Corporation, American Crystal
entered into a "Uniform Member Marketing Agreement" with United Sugars. Under
that agreement, the sugar produced by American Crystal is pooled with sugar
produced by Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar
Cooperative and is then sold through the efforts of United Sugars. The Company
receives payment for its sugar by receiving its pro rata share of the net
proceeds from the sale of the pooled sugar. The net proceeds of such sales
represent the gross proceeds of sale of the sugar, adjusted for the various
costs and expenses of marketing the pooled sugar, including the Company's pro
rata share of the marketing and sales expenses incurred by United Sugars
Corporation. Any net proceeds from the operation of United Sugars Corporation
are distributed to the various members on a patronage basis.

In 1993 and earlier years, American Crystal marketed most of its sugar
through direct sales efforts, supplemented by the efforts of sugar brokers
retained by the Company. Since 1994, the Company has marketed its sugar
exclusively through United Sugars Corporation. The Company's sugar is sold in
bulk, as liquid sugar and in cartons and bags ranging in size from 1 to 100
pounds.

The Company's sugar is marketed by United Sugars Corporation primarily to
industrial users such as confectioners, breakfast cereal manufacturers and
bakeries. For the fiscal year ended August 31, 1995, 84% (by weight) of the
Company's sugar production was sold to industrial users. The remaining portion
is marketed by United Sugars Corporation through sugar brokers to wholesalers
and retailers under the "Crystal Sugar" brand name and various private labels
for household consumption.

Customers are located primarily in Illinois, Minnesota, Iowa, Wisconsin,
Pennsylvania, Michigan, Indiana, Ohio, Missouri and Tennessee. During fiscal
1995, the Company's 10 largest customers purchased approximately 46% (by weight)
of the Company's sugar sold.

The prices at which United Sugars Corporation sells the Company's sugar
fluctuates periodically based on changes in domestic sugar supply and demand.
The largest proportion of American Crystal's sales are contracted one or more
quarters in advance, with the effect of stabilizing fluctuations in revenue from
quarter to quarter. Retail (grocery) products are sold on a spot price basis.

American Crystal markets dried beet pulp, molasses and CSB through Midwest
Agri-Commodities Company, a cooperative whose members are American Crystal,
Minn-Dak Farmers Cooperative and Southern Minnesota Beet Sugar Cooperative. Beet
pulp is marketed to livestock feed mixers and livestock feeders in the United
States and foreign markets. For the year ended August 31, 1995, approximately
95% of American Crystal's pulp production was exported to Japan and Europe. The
market for beet pulp is affected by the availability and quality of competitive
feedstuffs. Beet molasses is marketed primarily to yeast manufacturers,
pharmaceutical houses, livestock feed mixers and livestock feeders. By-product
sales accounted for approximately 9% of the Company's total revenues during
fiscal 1995. This relationship is primarily a function of the average market
prices for sugar, pulp and molasses and is not necessarily indicative of future
relationships between by-product and sugar revenues, because prices of these
commodities fluctuate independently of each other.

For a short period of time in the early 1990s, the Company (through United
Sugars) sold a portion of its sugar in the Canadian market. Due to the
imposition of significant duties, the Company does not currently consider Canada
to be a market for its products. The Company believes that consumption in the
United States represents an adequate market for the Company's sugar.

19
<PAGE>
GROWERS' CONTRACTS

American Crystal purchases virtually all of its sugarbeets from members
under contract with the Company. All members have five-year contracts with the
Company covering the growing seasons of 1993 through 1997 (the "Growers'
Contracts"). In addition, each member has an annual contract with the Company
specifying the number of acres the member is obligated to grow. Each share of
Preferred Stock held by a member entitles that member to grow one acre of
sugarbeets for sale to the Company. The Company's Board of Directors has the
discretion to adjust the acreage which may be planted for each share of
Preferred Stock held by the members. However, it is management's current
intention and recommendation to the Board of Directors that the relationship
between shares of Preferred Stock and acres of sugarbeet production be
maintained at a ratio of 1 to 1 for the foreseeable future, subject to
tolerances for overplanting and underplanting established by the Board each
year.

The total price for sugarbeets paid to a member (the "Net Beet Payment") is
based on the "Gross Beet Payment," as adjusted by certain allowances, costs and
deductions. The Gross Beet Payment is the value of recovered sugar from the
beets a member delivers plus the member's share of by-product revenues, minus
the member's share of member business operating costs, including depreciation
and interest. The following allowances, costs and deductions, if applicable, are
used to adjust the Gross Beet Payment to arrive at the Net Beet Payment: hauling
allowance program costs, early delivery allowance program costs, minimum payment
allowance program costs, and unit retains. Growers are paid a hauling allowance
based on the distance they must transport beets for delivery to the Company and
may also receive minimum beet payments and an allowance for early delivery of
beets prior to the commencement of the stockpiling of harvested sugarbeets. The
costs of these programs are shared among members on the basis of the net tonnage
of beets delivered by each member.

Under the current Growers' Contracts, payments to members for sugarbeets
must be made in at least four installments: (i) on or about November 15, 60% of
the Company's estimate of the grower's Net Beet Payment; (ii) on or about March
31, an amount which combined with the November payment equals 85% of the
estimated Net Beet Payment; (iii) on or about September 30, an amount which
combined with the November and March payments equals 95% of the estimated Net
Beet Payment; and (iv) not more than 15 days after completion and acceptance of
the audit of the Company's annual financial statements, the remainder of the
member's Net Beet Payment. Except for unit retains, the Company must pay to
members for their sugarbeets all proceeds from the sale of sugar and by-products
in excess of related member business operating costs, as described above.

The following tables summarize the "Gross Beet Payment" and "Net Beet
Payment" and the "Sugar Content of Sugarbeets" for each of the last 10 completed
fiscal years, respectively:

<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTION OF NET PROCEEDS--TOTALS (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Net Proceeds.................. $222,816 $270,736 $216,878 $209,510 $259,229 $269,388 $303,842 $261,571 $320,549 $310,206

Non-Member (Income)/Loss...... 328 (802) 844 698 1,058 1,075 77 544 15 396

Hauling Allowance............. 5,115 5,769 3,482 3,900 4,140 5,522 5,413 4,531 6,144 6,038
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Gross Beet Payment............ $228,259 $275,703 $221,204 $214,108 $264,427 $275,985 $309,332 $266,646 $326,708 $316,640

Unit Retains.................. (8,745) (9,610) (7,316) (7,995) (8,010) (10,364) (20,223) (19,328) (16,648) (16,040)

Member Tax ADJ, Net........... (524) (3,141) 1,908 1,922 589 676 447 12,585 5,621 0

Hauling Allowance............. (5,115) (5,769) (3,482) (3,900) (4,140) (5,522) (5,413) (4,531) (6,144) (6,038)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Net Beet Payment.............. $213,875 $257,183 $212,314 $204,135 $252,866 $260,775 $284,143 $255,372 $309,537 $294,562
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
</TABLE>

20
<PAGE>

<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
DISTRIBUTION OF NET PROCEEDS--PER TON HARVESTED(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Net Proceeds.................. $ 38.19 $ 42.22 $ 44.44 $ 39.27 $ 48.50 $ 38.95 $ 45.03 $ 40.55 $ 38.47 $ 38.64

Non-Member (Income)/Loss...... 0.05 (0.12) 0.17 0.13 0.20 0.16 0.01 0.09 0.00 0.05

Hauling Allowance............. 0.88 0.90 0.71 0.73 0.77 0.80 0.80 0.70 0.74 0.75
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Gross Beet Payment............ $ 39.12 $ 43.00 $ 45.32 $ 40.13 $ 49.47 39.91 $ 45.84 $ 41.34 $ 39.21 $ 39.44

Unit Retains.................. (1.50) (1.50) (1.50) (1.50) (1.50) (1.50) (3.00) (3.00) (2.00) (2.00)

Member Tax ADJ, Net........... (0.09) (0.49) 0.39 0.36 0.11 0.10 0.07 1.95 0.67 0.00

Hauling Allowance............. (0.88) (0.90) (0.71) (0.73) (0.77) (0.80) (0.80) (0.70) (0.74) (0.75)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------

Net Beet Payment.............. $ 36.65 $ 40.11 $ 43.50 $ 38.26 $ 47.31 $ 37.71 $ 42.11 $ 39.59 $ 37.15 $ 36.69
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<CAPTION>

SUGAR CONTENT OF SUGARBEETS(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Tons Harvested (In Thousands): 5,835 6,413 4,881 5,336 5,345 6,915 6,748 6,450 8,332 8,029

Tons Purchased Per Acre
Harvested: 17.6 19.3 13.4 14.5 13.4 17.4 16.9 16.3 20.2 18.7

Sugar Content of Beets: 17.1% 18.1% 18.2% 16.7% 18.6% 17.0% 18.0% 17.6% 16.8% 16.4%
</TABLE>

- ------------------------------

(1) Information provided with respect to net proceeds, gross beet payment, net
beet payment, tons harvested per acre and sugar content of beets represents
an average of the financial and production results experienced by the
Company's members. As described elsewhere in this prospectus, the return to
members for their sugarbeets is based upon the value of the recovered sugar
from the beets delivered to the Company by each member. As a result of
variations in the sugar content of the sugarbeets delivered by the various
members to the Company, the payments received by the various members also
vary.

RESEARCH AND DEVELOPMENT

American Crystal operates a research complex in Moorhead, Minnesota. The
Research Center is primarily involved in the development of technologies related
to improved factory operations and development of process efficiency technology.
The Company's research and development expenses for 1996, 1995, and 1994 were
approximately $4,535,000, $4,669,000, and $4,566,000, respectively.

In recent years research conducted by the Company has been diversified into
technical services and agriculture research. Technical services has focused
primarily on the testing and evaluation of technologies related to improved
factory operations and development of process efficiency concepts. Technical
services research also concentrates on developing tests and recommending
instrumentation for use in monitoring beet sugar processes, including molasses
desugarization. The results of these efforts will allow plant operators to be
proactive and to react to problems quickly thereby improving the overall
recovery of sugar from the beets.

The Company is also engaged in ongoing research with respect to beet seed.
This research focuses primarily on the development of agricultural practices for
the piling and storage of sugarbeets, as well as the monitoring and treatment of
sugarbeet diseases and insect infestations. Additionally, coded variety testing
and reporting are key services this area provides for the growers. The results
of this testing is critical in assisting growers decision making during the
selection of beet seed for planting. The Company and its members also contribute
resources to a number of public research institutions for general research
related to sugarbeets and their use. Those institutions include North Dakota
State University, University of Minnesota, University of Minnesota--Crookston,
the Beet Sugar Development Foundation and programs operated by the USDA.

21
<PAGE>
ENVIRONMENTAL MATTERS

The Company was cited in July 1994 by the State of Minnesota for
non-compliance with nitrous oxide emissions from the pulp driers at the East
Grand Forks facility. The notice of violation indicated that the operation of
the East Grand Forks facility created emissions in excess of those described in
the permit previously granted by the Minnesota Pollution Control Agency ("MPCA")
for that facility. The Company submitted an application to the MPCA requesting
that the limits be changed. The MPCA has not yet responded to this request. The
Company believes that the request will be granted.

The Company is in the process of converting the pulp drier operations at its
Moorhead and Crookston facilities. The conversion from coal to natural gas will
allow the Company to operate the driers in compliance with state and federal
requirements. Permits have been issued by the MPCA for the conversion. The
conversion for East Grand Forks was completed in 1995. The conversion for the
Moorhead and Crookston facilities is expected to be completed in 1996.

A notice of violation was received in April 1995, from the State of North
Dakota regarding emissions from the pulp drier at the Hillsboro factory. The
Company retested emissions from the drier and is in compliance with North Dakota
emission limits. Plans are also in place to improve pulp drier emission controls
at the Drayton factory, through the use of natural gas as an energy source, to
ensure compliance with North Dakota emission limits.

JOINT VENTURE WITH PROGOLD LIMITED LIABILITY COMPANY

American Crystal is one of three members of ProGold Limited Liability
Company ("ProGold"). ProGold was formed in July, 1994 as a limited liability
company to serve as a joint venture mechanism for the Company, Minn-Dak Farmers
Cooperative and Golden Growers Cooperative ("Golden Growers"), a North Dakota
cooperative association comprised of corn producers. The proposed purpose of the
joint venture is to construct and operate a corn wet milling plant capable of
processing corn to produce corn sweeteners (including high fructose corn
syrups), corn starch, corn oil, ethanol and various by-products.

American Crystal contributed a total of approximately $48 million for its
membership interest in ProGold and received a 46% interest in ProGold. Golden
Growers contributed approximately $51 million in exchange for a 49% interest in
ProGold, while Minn-Dak Farmers Cooperative made a capital contribution of
approximately $5.2 million in exchange for a 5% interest in ProGold. Under the
terms of the ProGold Member Control Agreement, in each year after September 1,
1997, the ProGold Board of Governors can require that the three members of
ProGold provide additional capital contributions in an aggregate amount not to
exceed $5 million per year, with each member obligated to provide a portion of
that capital contribution proportionate to its ownership interest in ProGold. As
a result, the Company could be required to make annual contributions in an
amount not greater than $2.3 million per year, based on the Company's ownership
of a 46% interest in ProGold. Any other capital contributions can be required
only with the prior written consent of all of ProGold's members.

Representatives of ProGold, the Company, Minn-Dak Farmers Cooperative and
Golden Growers have entered into various agreements relating to the ownership
and operation of ProGold and the corn wet-milling plant. The contracts include
(i) contract marketing agreements under which United Sugars Corporation and
Midwest Agri-Commodities Company would market various products on behalf of
ProGold, (ii) Uniform Member Marketing Agreements under which American Crystal,
Minn-Dak and Golden Growers are obligated to deliver to ProGold the corn to be
processed at the processing plant and

22
<PAGE>
(iii) administrative services agreements under which the Company provides
services such as accounting, financial planning support and human resources
services to both ProGold and Golden Growers. When ProGold's corn wet-milling
facility is fully operational, it is expected to require 30 million bushels of
corn for processing each year. The Company will be responsible for providing
corn to ProGold in proportion to the Company's ownership interest in ProGold. As
a result, the Company will need to provide 46% of the corn used at ProGold's
facility. In years when the ProGold facility is operating at full capacity, the
Company would be required to deliver approximately 13.8 million bushels of corn
to ProGold. Under the Company's agreements with ProGold, the Company does not
receive payment for the corn upon delivery. Instead, the Company will receive
payment of its proportionate share of ProGold's revenues from the sale of corn
sweeteners and related products, less its proportionate share of ProGold's
operating expenses (which will not include the cost of corn.) The distribution
of ProGold's net revenues is intended to provide both compensation for the corn
delivered to ProGold by the Company and the Company's share of ProGold's
profits, if any. While ProGold intends to distribute net revenues to its members
as soon as possible following receipt of proceeds from the sale of its products,
the Company anticipates that it will receive periodic distributions from ProGold
during each year, with a final distribution to be made following the close of
ProGold's fiscal year. The Company believes that ProGold could suffer a loss
during its initial operations of the corn wet-milling facility.

In connection with its involvement with ProGold, the Company provides a
variety of services related to corn procurement. Doing business under the name
"ProGold Grain", the Company, acting through certain of its employees, procures
corn to satisfy the obligations of the Company and Minn-Dak Farmers Cooperative
to deliver corn to ProGold. In addition, the Company also manages the corn
procurement function and corn pool arrangements for Golden Growers. In the
performance of those services, the Company purchases large quantities of corn,
as well as entering into various commodities contracts (including hedge and
futures contracts) with the goal of reducing price, delivery and other risks
associated with the purchase of corn and sale of corn sweetener. The Company
anticipates that its ProGold Grain activities will increase after the corn
wet-milling plant begins operations.

Construction of the corn wet-milling plant has begun and is nearly complete,
with testing procedures due to commence during October, 1996. ProGold expects
that the plant will begin operations in late 1996. If there are significant
delays in completion of the plant, ProGold may not be able to obtain
certification of the plant by various customers on a schedule which will permit
ProGold to perform certain contractual obligations for the delivery of
sweeteners to those customers in a timely manner; as a result, a substantial
delay in commencement of operational activities could have a material, adverse
effect on ProGold.

If, through the operation of the corn wet-milling facility, ProGold is
successful in generating profits for distribution to is members, those
distributions would become the property of the Company. Under the Company's
Articles of Incorporation and By-laws, the return, if any, from the Company's
involvement with ProGold would be classified as amount received from
"non-patronage" sources. The Company's By-laws currently provide that any
non-patronage net income is to become the property of the Company and is not to
be distributed directly to the members of the Company. Distributions from
ProGold could, in the discretion of the Company's Board of Directors, redound to
the benefit of the Company's members through such means as future reductions of
annual unit retain amounts, repayment of unit retains in advance of the current
seven year repayment schedule and the use of such returns, if any, for capital
investment in the Company. To date, the Company's Board of Directors has not
adopted any resolutions or made any commitments regarding the distribution of
non-patronage revenues directly to the Company's members or the application of
any such amounts for the indirect benefit of the Company's members. As described
above, any decisions regarding the application of distributions received by the
Company from ProGold will be made in the discretion of the Company's Board of
Directors.

23
<PAGE>
PROPERTY AND PROCESSING FACILITIES

American Crystal operates five sugarbeet processing factories in the Red
River Valley. The factories are located in Crookston, East Grand Forks and
Moorhead, Minnesota and Drayton and Hillsboro, North Dakota. American Crystal
owns all of its factories and the land on which they are located. The factories
range in size from 150,000 to 400,000 square feet and have a combined beet
processing capacity, expressed in terms of quantity of sugarbeets which may be
sliced into strips or "cossettes," of approximately 30,400 tons per day. The
Crookston, Minnesota plant has a capacity of 5,300 tons of sugarbeets per day,
the East Grand Forks, Minnesota plant has a capacity of 8,000 tons of sugarbeets
per day and the Moorhead plant has a capacity of 5,300 tons of sugarbeets per
day. The Company's Hillsboro, North Dakota plant has a capacity of 5,900 tons of
sugarbeets per day, while the Drayton, North Dakota plant has a capacity of
5,900 tons of sugarbeets per day. Each of the processing factories includes the
physical facilities and equipment necessary to process sugarbeets into sugar.
Each factory has space for sugarbeet storage, including ventilated and cold
storage sites. However, only approximately 20% of the sugarbeet crop is stored
in either ventilated storage sites or cold storage facilities. Each processing
factory includes the washing and slicing equipment necessary to cut the
sugarbeets into cossettes, the diffusers necessary to extract sugar from the
cossettes in the form of "raw juice" and the purification systems necessary to
remove impurities from the raw juice. The factories also contain the evaporators
and vacuum pans necessary to thicken the raw juice and then to crystalize the
sugar. Each factory also contains the centrifuges and dryers necessary to
complete the process. The Company's sugar packaging facilities are located at
the Moorhead, Hillsboro, Crookston and East Grand Forks factories. Each of the
Company's facilities is currently operating at or near its capacity.

The Company has recently completed a number of capital improvements to its
sugar factories. For example, at both the Hillsboro and Drayton factories beet
storage facilities and refined sugar conditioning/ storage bins were added. (The
beet storage facilities allow for expanding acres by extending the length of the
beet slicing campaign. The sugar conditioning/storage bins are used to condition
and store refined sugar.) A clarifier mud press was added to the Moorhead
factory to help reduce odors. The Moorhead factory also completed a sugar
screening station project designed to improve the packaging operations there. A
new beet piler was purchased for the Drayton factory district to increase beet
receiving capacity and efficiency. New juice purification stations have been
added at Drayton, Crookston and Moorhead. Evaporation equipment at Hillsboro and
East Grand Forks has been upgraded.

The Board of Directors recently approved funding for a number of capital
expenditures aimed at enhancing the Company's processing capacity. During the
period ending on August 31, 1999, the Company proposes to spend a total of up to
$82.5 million on a new molasses desugarization facility. The new facility is
expected to increase the Company's sugar production significantly. From the date
hereof until August 31, 1998, the Company proposes to spend a total of up to
$56.9 million on increasing the ability of the current Hillsboro processing
facility to slice sugarbeets by approximately 1,800 tons per day.

American Crystal's corporate office is located in a 30,000 square foot,
two-story office building in Moorhead, Minnesota. The Company also has a 100,000
square foot research center situated on approximately 200 acres in Moorhead,
Minnesota, a portion of which is used for the offices of United Sugars
Corporation, the Company's marketing agent. (United Sugars Corporation does own
certain facilities separate from the facilities owned by the Company.) The
Company owns both facilities, and owns numerous sites as sugarbeet receiving and
storage stations. All the Company's property, plant and equipment is mortgaged
or pledged as collateral for its indebtedness to the St. Paul Bank for
Cooperatives.

24
<PAGE>
EMPLOYEES

As of August 31, 1996, American Crystal had 1,187 full-time employees, of
which 877 were hourly, 310 were salaried and 31 were temporary workers. The
Company also employs approximately 1,250 additional hourly seasonal workers
during the sugarbeet harvest and approximately 575 hourly seasonal workers
during the remainder of the sugarbeet processing campaign.

Substantially all of the hourly employees at the factories, including
full-time and seasonal employees, are represented by the American Federation of
Grain Millers, AFL-CIO, and are covered by a collective bargaining agreement
expiring July 31, 1999. Office, clerical and management employees are not
unionized, except for certain office employees at the Moorhead and Crookston,
Minnesota, and Hillsboro, North Dakota, factories who are covered by the
collective bargaining agreement with the Grain Millers. The Company considers
its employee relations to be excellent.

Substantially all employees who meet eligibility requirements of age and
length of service are covered by one of the Company's two retirement plans. Plan
A (nonunion employees) and Plan B (union employees) are defined benefit,
noncontributory plans. The plans provide for vesting in five years with benefits
for early retirement, normal retirement and disability or death. The Company's
policy is to fund pension costs accrued, and the plans were fully funded for
vested benefits as of February 29, 1996, the end of the most recent plan year.
Union and nonunion employees are also eligible to participate in 401(k) savings
plans.

MANAGEMENT

BOARD OF DIRECTORS

The Board of Directors of the Company consists of three directors from each
of the five factory districts. Directors must be common shareholders or
representatives of common shareholders belonging to the district they represent
and are elected by the members of that district. In the case of a common
shareholder who is other than a natural person, a duly appointed or elected
representative of such common shareholder may serve as a director. The directors
have been elected to serve three-year terms expiring in December of the years
indicated in the table below. One director is elected each year from each
factory district.

The table below lists the current directors of the Company. Brief
biographies for each of the directors are included after the table. Due to the
resignation of Mr. Michael Warner from the Company's Board of Directors in
September, 1996 to focus on other business activities, only two representatives
from the Hillsboro Factory District are currently serving as members of the
Board of Directors. In addition to the election of a director from the Hillsboro
Factory District in connection with the expiration of Mr. Thomas Bryl's term, an
additional director will be elected from the Hillsboro Factory District at the
district meeting to be held in November, 1996, to fill the vacancy created by
Mr. Warner's resignation. The individual elected to fill that vacancy will serve
for a term expiring in December, 1997.

<TABLE>
<CAPTION>
TERM
YEAR DIRECTOR EXPIRES
NAME AND ADDRESS OF BIRTH FACTORY DISTRICT SINCE IN DEC.
- ------------------------------------------ ----------- -------------------- ----------- -----------
<S> <C> <C> <C> <C>
Paul Borgen .............................. 1947 Moorhead 1985 1997
R.R. 1, Box 43
Georgetown, MN 56546

Thomas Bryl .............................. 1947 Hillsboro 1993 1996
P.O. Box 171
Hillsboro, ND 58045-0171

Aime J. Dufault .......................... 1954 East Grand Forks 1990 1997
R.R.1, Box 162
Argyle, MN 56713
</TABLE>

25
<PAGE>
<TABLE>
<CAPTION>
TERM
YEAR DIRECTOR EXPIRES
NAME AND ADDRESS OF BIRTH FACTORY DISTRICT SINCE IN DEC.
- ------------------------------------------ ----------- -------------------- ----------- -----------
<S> <C> <C> <C> <C>
Steven M. Goodwin ........................ 1958 East Grand Forks 1995 1998
R.R. 3, Box 116
Angus, MN 56712

Court G. Hanson .......................... 1948 Hillsboro 1993 1998
R.R. 2, Box 1
Blanchard, ND 58009

Lonn M. Kiel ............................. 1953 Crookston 1994 1997
R.R. 3, Box 71
Crookston, MN 56716

David J. Kragnes ......................... 1952 Moorhead 1995 1998
R.R. 1, Box 100
Felton, MN 56536

Wayne Langen ............................. 1939 Drayton 1988 1997
P.O. Box 133
Kennedy, MN 56733

Duane Lien ............................... 1931 Crookston 1984 1996
R.R. 1, Box 57
Crookston, MN 56716

Patrick D. Mahar ......................... 1942 Drayton 1993 1996
R.R. 1, Box 363
Cavalier, ND 58220-9789

Barry W. Malme ........................... 1947 Crookston 1986 1998
R.R. 1, Box 19K
Shelly, MN 56581

Robert Nyquist, Chairman ................. 1933 Moorhead 1984 1996
R.R. 2, Box 176
Moorhead, MN 56560

G. Terry Stadstad ........................ 1943 East Grand Forks 1993 1996
R.R. 2, Box 98
Grand Forks, ND 58203-9644

Robert Vivatson .......................... 1949 Drayton 1992 1998
P.O. Box 63
Cavalier, ND 58220
</TABLE>

PAUL BORGEN. Mr. Borgen has been a director since 1985 and has been a
farmer since 1968. Mr. Borgen's operations are near Georgetown, Minnesota and
Mr. Borgen serves as President of Paul Borgen Farms, Inc. Mr. Borgen serves on
the Boards of Directors of American Bank, Moorhead, Minnesota, United Sugars
Corporation and American Sugarbeet Growers Association, Washington, D.C.

THOMAS BRYL. Mr. Bryl has been a director since 1993 and a farmer since
1973. Mr. Bryl is president of T.M. Bryl, Inc. and operates its farming
operations near Hillsboro, North Dakota.

AIME J. DUFAULT. Mr. Dufault has been a director since 1990. He has farmed
near Argyle, Minnesota since 1974.

26
<PAGE>
STEVEN M. GOODWIN. Mr. Goodwin has been a director since 1995. Mr. Goodwin
has been a farmer since 1980 and owns and operates a farm near Angus, Minnesota.

COURT G. HANSON. Mr. Hanson has been a director since 1993 and has been a
farmer since 1971. Mr. Hanson is president of C. Hanson Farm, Inc., operating
near Blanchard, North Dakota. Prior to farming, Mr. Hanson was an assistant
national bank examiner from 1970 to 1973.

LONN M. KIEL. Mr. Kiel has been a director since 1994 and has been farming
near Crookston, Minnesota since 1982. He is the President of Kiel Corporation
and also serves on the Board of Directors of the Crookston Fuel Company.

DAVID J. KRAGNES. Mr. Kragnes has been a director since 1995. Mr. Kragnes
has been a farmer since 1972, with his farming operation located near Felton,
Minnesota.

WAYNE LANGEN. Mr. Langen has been a director since 1988 and a farmer since
1963. Mr. Langen is a partner of Langen Bros. Joint Venture and operates its
farming operations near Kennedy, Minnesota. Mr. Langen serves on the board of
directors of Kennedy Farmers Elevator Company, United Sugars Corporation and
Midwest Agri-Commodities Company.

DUANE LIEN. Mr. Lien has been a director since 1984 and has been a farmer
since 1949. As a stockholder of Double D Inc., Mr. Lien operates near Crookston,
Minnesota. Mr. Lien serves on the Board of Directors of Midwest Agri-Commodities
Company.

PATRICK D. MAHAR. Mr. Mahar has been a director since 1993 and has been a
farmer since 1962. He is currently a partner of Mahar Farms near Cavalier, North
Dakota. Mr. Mahar previously served as president of the Red River Valley
Sugarbeet Growers Association, Fargo, North Dakota and as president of the
American Sugarbeet Growers Association, Washington, D.C. Mr. Mahar is currently
serving on the boards of directors of First State Bank and Farmers Coop
Elevator, both of Cavalier, North Dakota.

BARRY W. MALME. Mr. Malme has been a director since 1986. Mr. Malme has
been a farmer near Shelly, Minnesota since 1974. Mr. Malme is a director of
Midwest Agri-Commodities Company.

ROBERT NYQUIST. Mr. Nyquist has been a director since 1984 and is currently
chairman of the Company's board of directors. Mr. Nyquist has been a farmer
since 1952 and currently owns and operates Robert Nyquist Farms near Moorhead,
Minnesota. Mr. Nyquist serves on the boards of directors of United Sugars
Corporation and Midwest Agri-Commodities Company and on the board of governors
of ProGold Limited Liability Company.

G. TERRY STADSTAD. Mr. Stadstad has been a director since 1993 and has been
farming near Grand Forks, North Dakota since 1965. Mr. Stadstad serves on the
Board of Directors of United Sugars Corporation.

ROBERT VIVATSON. Mr. Vivatson has been a director since 1992. Operating as
a farmer near Cavalier, North Dakota, since 1975, Mr. Vivatson is a partner of
Vivatson Bros. and president of Vivatson Farms Inc. Mr. Vivatson is serving on
the board of directors of First State Bank, Cavalier, North Dakota and on the
board of governors of ProGold Limited Liability Company.

The Board of Directors meets monthly. The Company provides its directors
with minimal compensation, consisting of (i) a payment of $200 per month, (ii) a
per diem payment of $200 for each day spent on Company activities, including
board meetings and other Company functions, and (iii) reimbursement of expenses
for attendance at Board of Directors' meetings. The Chairman of the Board of
Directors receives a payment of $500 per month, rather than $200 per month; the
Chairman also receives a per diem in the amount of $200 for each day spent on
Company activities.

27
<PAGE>
EXECUTIVE OFFICERS

The table below lists the principal officers of the Company, none of whom
owns any shares of Common or Preferred Stock. Officers are elected annually by
the Board of Directors.

<TABLE>
<CAPTION>
YEAR
NAME OF BIRTH POSITION
- ---------------------------------- ----------- --------------------------------------------------------------------
<S> <C> <C>
Daniel J. McCarty................. 1952 Chief Executive Officer
Marcus F. Richardson.............. 1941 Chief Operating Officer
Robert W. Levos................... 1943 Vice President--Agriculture
James J. Horvath.................. 1945 Chief Financial Officer
Lawrence L. Mathias............... 1941 Vice President--Human Resources and Public Relations
David A. Berg..................... 1954 Vice President--Strategic Planning
James Dudley...................... 1950 Vice President--Operations
Ralph K. Morris................... 1940 Secretary
Samuel S.M. Wai................... 1953 Treasurer
Mark L. Lembke.................... 1955 Assistant Secretary & Assistant Treasurer
David L. Malmskog................. 1957 Assistant Treasurer
Daniel C. Mott.................... 1959 Assistant Secretary
Joseph J. Talley.................. 1960 Finance Director, Assistant Secretary and Assistant Treasurer
</TABLE>

DANIEL J. MCCARTY. Mr. McCarty was named Chief Executive Officer in April,
1996. Mr. McCarty has over fifteen years of experience in managing major
agricultural businesses. From 1992 through 1995, he was with Pet, Inc. as Group
Vice-President and President of the William Underwood subsidiary. He was
previously with Del Monte Foods for over ten years, where he was Director of the
flagship Del Monte Vegetable brand. Mr. McCarty serves on several Boards of
Directors, including United Sugars, Midwest Agri-Commodities Company, the Sugar
Association, Inc. and the U.S. Beet Sugar Association.

MARCUS F. RICHARDSON. Mr. Richardson has been Chief Operating Officer since
1995. Mr. Richardson has served in various manufacturing positions with the
Company since 1980 including, from 1986 to 1995, Vice President--Operations. Mr.
Richardson currently serves as a director of the Beet Sugar Development
Foundation, a non-profit industry association, and on the Board of Governors of
ProGold Limited Liability Company. Mr. Richardson also serves on the Board of
Directors of the Moorhead Economic Development Authority.

ROBERT W. LEVOS. Mr. Levos as been Vice President--Agriculture since 1986.
From 1981 to 1986 he was General Agriculturalist. He has been employed by the
Company since 1965. Mr. Levos currently serves on the Boards of Directors of
West Coast Beet Seed Company and the Beet Sugar Development Foundation.

JAMES J. HORVATH. Mr. Horvath was named Chief Financial Officer in March,
1996. From June, 1994 to March, 1996, Mr. Horvath served as the Company's Vice
President--Joint Ventures as well as Chief Manager and Chief Operating Officer
of ProGold Limited Liability Company. Mr. Horvath also served as the Company's
Vice President--Finance from 1985-1994.

LAWRENCE L. MATHIAS. Mr. Mathias has been Vice President--Human Resources
and Public Relations since 1990. He was Industrial Relations Manager with the
Company from 1976 to 1990. He currently serves on the board of directors of Blue
Cross Blue Shield of Minnesota.

DAVID A. BERG. Mr. Berg was named Vice President--Business Development in
1996. He served as the Company's Vice President--Strategic Planning from 1994 to
1996, Director-Market Information from 1992-1994, Manager of Marketing and
Analysis from 1990 to 1992 and Manager--Economic Research from 1987 to 1990. He
currently serves on the Regulatory Task Force of the U.S. Beet Sugar Association
and the Domestic Sugar Committee of the New York Coffee, Sugar and Cocoa
Exchange.

28
<PAGE>
JAMES DUDLEY. Mr. Dudley has been Vice President--Operations since 1995.
From 1993 until August of 1995, Mr. Dudley served as Regional Manager and then
as Factory Operations Manager. Mr. Dudley served as Operations Manager at the
Company's Crookston factory from 1985 through 1993.

RALPH K. MORRIS. Mr. Morris has been Secretary of the Company since 1995.
He is a shareholder and the Chief Executive Officer of the law firm of Doherty,
Rumble & Butler Professional Association. The firm acts as corporate counsel to
American Crystal. Mr. Morris is not an employee of the Company.

SAMUEL S.M. WAI. Mr. Wai has been Treasurer since 1985 and held various
financial positions with the Company from 1979 to 1985.

JOSEPH J. TALLEY. Mr. Talley was named Finance Director, Assistant
Treasurer and Assistant Secretary in March 1996. From July 1994 to March 1996,
Mr. Talley served as Finance Director of Progold Limited Liability Company. He
currently serves as Treasurer and Assistant Secretary of ProGold Limited
Liability Company as well as Assistant Treasurer and Assistant Secretary of
Golden Growers Cooperative. Prior to July 1994, Mr. Talley was a partner with
the accounting firm of Eide Helmeke PLLP.

MARK L. LEMBKE. Mr. Lembke was named Assistant Secretary and Assistant
Treasurer in March 1996. Mr. Lembke also served as the company's Corporate
Accounting Manager since August 1995. From July 1987 through July 1995, Mr.
Lembke served as Factory Accounting Supervisor.

DAVID L. MALMSKOG. Mr. Malmskog has been Assistant Treasurer since 1993 and
has also been Financial Planning and Analysis Manager since 1991. Mr. Malmskog
has held various financial positions with the Company since 1980.

DANIEL C. MOTT. Mr. Mott has been Assistant Secretary of the Company since
1995. He is a shareholder in the law firm of Doherty, Rumble & Butler
Professional Association. The firm acts as corporate counsel to American
Crystal. Mr. Mott is not an employee of the Company.

29
<PAGE>
EXECUTIVE COMPENSATION

The following table summarizes the amount of compensation paid for services
rendered to the Company during the fiscal year ended August 31, 1996 and the two
prior fiscal years to those persons serving as the Company's Chief Executive
Officer and to the four other most highly compensated executive officers of the
Company whose cash compensation exceeded $100,000 per annum.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------------------------------
------------------------------------- RESTRICTED
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($) ($)
- ----------------------------------- ---- -------- ------- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel J. McCarty(2)............... 1996 $149,808 $70,000 $ 77,372
Chief Executive Officer

Joseph P. Famalette(3)............. 1996 $ 0 $ 0 $ 0 $159,510(4)
Chief Executive Officer 1995 $296,966 $ 0 $ 48,904 $ 83,333(4)
1994 $250,000 $ 0 $ 34,001 $ 83,333(4)

Marcus F. Richardson(5)............ 1996 $245,000 $93,683 $ 60,550
Chief Operating Officer 1995 $268,000 $81,104 $ 31,220
1994 $190,700 $76,286 $ 13,767

James J. Horvath................... 1996 $205,330 $71,866 $ 27,646
Chief Financial Officer 1995 $175,000 $61,250 $ 17,603
1994 $147,552 $52,500 $ 18,511

Robert W. Levos.................... 1996 $178,490 $62,472 $ 37,222
Vice President--Agriculture 1995 $163,750 $57,313 $ 19,192
1994 $155,948 $46,785 $ 7,683

Lawrence L. Mathias................ 1996 $162,840 $56,994 $ 31,121
Vice President--Human 1995 $148,710 $52,049 $ 20,084
Resources and Public Relations 1994 $131,600 $52,640 $ 12,366
</TABLE>

- ------------------------------

(1) Includes the cost of additional life insurance coverage, use of a company
car, costs of tax return preparation, imputed interest, taxable moving
expenses reimbursed, the Company's matching contribution for 401(k) and SERP
and pension valuations.

(2) Mr. McCarty's employment with the Company began on March 28, 1996.
Calculated on an annualized basis, Mr. McCarty's salary for the fiscal year
ending on August 31, 1996 was $410,000.

(3) Mr. Famalette's employment with the Company ended on May 31, 1995.

(4) Represents forgiveness of installment payments due under loans from the
Company to Mr. Famalette. The loan arrangements and related agreements are
described below.

(5) Mr. Richardson also served as interim Chief Executive Officer between June
1995 and March 1996.

30
<PAGE>
Effective April 8, 1996, the Company and Mr. McCarty entered into an
"Employment Agreement" regarding Mr. McCarty's employment by the Company. The
agreement provides that such employment is for an initial term of three years,
after which Mr. McCarty shall serve as an "at will" employee at the pleasure of
the Board of Directors. Among other terms, the agreement establishes Mr.
McCarty's base compensation at $410,000 per year, and also provides that he may
participate in other benefit plans offered by the Company. Pursuant to the
agreement, Mr. McCarty was paid a signing bonus by the Company of $70,000 (less
applicable deductions), in lieu of participation in the Company's annual
management incentive plan through August 31, 1996. If during the initial term
the Board of Directors terminates Mr. McCarty's employment with the Company
without cause, Mr. McCarty is entitled to receive a severance payment equal to
$7,884.62 times the number of weeks between the date of termination and April 7,
1999.

During Mr. Famalette's tenure with the Company, the Company entered into
certain contractual arrangements with Mr. Famalette regarding his employment by
the Company. Although the agreements specifically indicate that Mr. Famalette is
an employee at will, they were intended to govern both (i) Mr. Famalette's
bonuses during the period prior to 1996 and (ii) severance payments due Mr.
Famalette should his employment with the Company be terminated.

Effective March 2, 1992, the Company and Mr. Famalette entered into a
"Compensation, Loan and Severance Agreement". Among other terms, that agreement
established Mr. Famalette's initial compensation at $250,000 per year. The
agreement also provided for a loan of $250,000 to Mr. Famalette. Evidenced by a
promissory note, the loan was to be repaid in three equal installments of
$83,333.33. The first such installment was due on March 2, 1993, the next
installment was due on March 2, 1994 and the final installment became due on
March 2, 1995. However, the "Compensation, Loan and Severance Agreement"
provides that for each full year in which Mr. Famalette remained employed as the
President and Chief Executive Officer of the Company, the sum of $83,333.33 due
under the note would be forgiven. As a result, on March 2, 1993, March 2, 1994,
and March 2, 1995 the Company forgave the installment payments due under the
promissory note. The "Compensation, Loan and Severance Agreement" specified that
the loan and any amounts forgiven under the terms of the agreement were provided
to Mr. Famalette in lieu of any other severance benefits to be paid upon
termination of Mr. Famalette's employment with the Company.

Effective October 1, 1993, the Company entered into a Compensation and Loan
Agreement with Mr. Famalette. The agreement governed Mr. Famalette's
compensation as of Mr. Famalette's employment by the Company. The Compensation
and Loan Agreement stated that Mr. Famalette's annual base compensation during
the period was to be $250,000, unless adjusted by the Board of Directors of the
Company. Effective October 1, 1994, Mr. Famalette's annual base compensation was
established as $359,500. The agreement further provided that Mr. Famalette was
not eligible for any executive incentive compensation or bonuses, but would
receive the loan described in this paragraph. Instead of participating in the
executive incentive program described below, Mr. Famalette received a loan in
the amount of $420,000. The loan bore no interest and was due in full on January
2, 1997; provided, that the loan was to be forgiven on January 2, 1997 if Mr.
Famalette remained in the employ of the Company through September 30, 1996. Upon
Mr. Famalette's departure from the Company, an Amendment to the Compensation and
Loan Agreement was mutually agreed upon providing that $140,000 of the loan
would be forgiven at such time as Mr. Famalette repaid the other $280,000 of the
loan. Mr. Famalette has since repaid the whole $280,000.

On March 11, 1994, a loan was made to Mr. Famalette. The amount of the loan
was $420,000 and bore interest at a rate of 4% per annum. Mr. Famalette repaid
the loan in full on August 29, 1994.

Certain management employees are entitled to participate in an incentive
program that provides for cash awards based partially on the performance of the
Company and partially on achievement of certain management performance
objectives. Those performance objectives are determined by the Board of

31
<PAGE>

Directors. An executive is not eligible for any awards under the incentive
program unless that executive's performance for the applicable fiscal year is
rated as "fully satisfactory" or better. Depending on the executive's
responsibilities, the performance of the Company (measured in terms of revenues
returned to the members) and the results of the executive's evaluation for the
fiscal year, the program provides for an incentive bonus in amounts ranging from
4% to 40% of the eligible executive's base salary.

The Company has also adopted a Long Term Incentive Plan ("LTIP") which
provides deferred compensation to certain key executives of American Crystal
effective September 1, 1995. The LTIP creates financial incentives that reward
executives for long-term commitment to the Company and for successfully
implementing the Company's long-term growth strategies. Such incentives are
based upon contract rights which are available to the executive under the terms
of the LTIP, the value of which is related to the value of preferred shares of
the Company. The LTIP allows participants to purchase a limited number of
contract rights at the end of each three-year cycle. The LTIP establishes both
minimum and maximum ownership levels. When an executive reaches his minimum
ownership level, he may sell any vested shares over the minimum to any qualified
grower. The executive or his estate may also sell any vested shares at the time
of his termination, disability or death. At the point of sale, the contract
right becomes a share of Preferred Stock which the Company issues to the
purchasing grower. The executive receives the proceeds of the sale, less
appropriate taxes. The long-term cost of the stock will not be to the Company,
but to the grower who eventually purchases the stock from the executive.

Management employees are also eligible to participate in the Company's
Retirement Plan "A," a 401(k) savings plan and, beginning on September 1, 1994,
a "Supplemental Executive Plan." Those plans are described below.

RETIREMENT PLANS

The Company has established noncontributory, defined benefit retirement
plans which are available to all eligible employees of the Company. Those
employees who are covered by a collective bargaining agreement participate in
one plan, while employees who are not subject to a collective bargaining
agreement, including the executive officers listed on the Summary Compensation
Table, participate in another pension plan. That plan is known as Retirement
Plan "A." The benefits of the plan are funded by periodic Company contributions
to a retirement trust which invests the Company's contributions and the earnings
from such contributions in order to pay the benefits to the employees. The plan
provides for the payment of monthly retirement benefits determined under a
calculation based on years of service and a participant's compensation.
Retirement benefits are paid to participants upon normal retirement at the age
of 65 or later or upon early retirement. The plan also provides for the payment
of certain disability and death benefits.

32
<PAGE>
The following table reflects the estimated annual benefits payable to a
fully-vested executive officer of the Company under Retirement Plan "A," upon
retirement at age 65, after 15, 20, 25, 30 and 35 years of annual service at the
remuneration levels set forth in the table:

American Crystal Sugar Company
1996 Calculation
PLAN A-QUALIFIED BENEFITS

<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000......................................... $ 24,595 $ 32,794 $ 40,993 $ 49,191 $ 49,191
$150,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$175,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$200,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$225,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$250,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$300,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$400,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
$500,000......................................... $ 29,846 $ 39,794 $ 49,743 $ 59,691 $ 59,691
</TABLE>

The five executive officers named in the Summary Compensation Table have
years of service under the plan as follows: Mr. McCarty has served for less than
1 year; Mr. Richardson has served for 16 years; Mr. Horvath has served for 12
years; Mr. Levos has served for 31 years; and Mr. Mathias has served for 21
years.

The Company maintains a Section 401(k) plan that permits employees to elect
to set aside, on a pre-tax basis, a portion of their gross compensation in trust
to pay future retirement benefits. The Company matches 100% of the employee's
first 4% of compensation. The total annual pre-income tax addition to any
employees account in any calendar year may not exceed the lesser of (i) $30,000
or (ii) 25% of annual compensation less the amount of the contribution and any
salary conversion. During 1996, the employee pre-income tax contribution is
limited to $9,500. An employee may also contribute up to 10% of his annual
compensation on an after-tax basis. Benefits under the 401(k) plan begin to be
paid to the employee upon the close of the plan year in which one of the
following events has occurred: the date the employee attains age 65, the date
the employee terminates his service with the employer and the date specified in
a written election made by the employee to receive benefits no later than April
1 of the year following the calendar year in which the employee retires, dies,
becomes disabled, reaches age 70 1/2 or is terminated.

Effective September 1, 1994, certain executive employees of the Company
became eligible to participate in a "Supplemental Executive Retirement Plan."
That plan was adopted by the Company's Board of Directors on June 30, 1994.
Subject to the discretion of the Board of Directors, the plan provides for the
Company to credit to the account of each executive eligible to participate in
the Supplemental Plan amounts equal to (i) the difference between amounts
actually contributed to the Company's 401(k) plan on behalf of the executive and
the amounts which could have been contributed if certain provisions of the
Internal Revenue Code did not prohibit the contribution of such amounts and (ii)
the difference between the benefits actually payable to the executive under the
provisions of Retirement Plan "A" and the amounts which would be payable under
Retirement Plan "A" if certain provisions of the Internal Revenue Code did not
prohibit the payment of such benefits. In addition, the executive may elect to
defer a portion of his or her compensation, ranging from 2% to 16%, by regular
payroll deductions under the Supplemental Plan, and may also so defer 100% of
all bonus and profits-per-acre payments. The Supplemental Plan is an "unfunded"
plan, with all amounts to be paid under the Supplemental Plan to be paid from
the general assets of the Company when due and also to be subject to the claims
of the Company's creditors.

33
<PAGE>
The following table reflects the estimated annual benefits payable to a
fully-vested executive officer of the Company under the Supplemental Plan, upon
retirement at age 65, after 15, 20, 25, 30 and 35 years of annual service at the
remuneration levels set forth in the table:

PLAN A-NON QUALIFIED BENEFITS 1996 CALCULATION

<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- --------------------------------------------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$125,000..................................... $ 0 $ 0 $ 0 $ 0 $ 0
$150,000..................................... $ 0 $ 0 $ 0 $ 0 $ 0
$175,000..................................... $ 5,250 $ 7,000 $ 8,750 $ 10,500 $ 10,500
$200,000..................................... $ 10,500 $ 14,000 $ 17,500 $ 21,000 $ 21,000
$225,000..................................... $ 15,750 $ 21,000 $ 26,250 $ 31,500 $ 31,500
$250,000..................................... $ 21,000 $ 28,000 $ 35,000 $ 42,000 $ 42,000
$300,000..................................... $ 31,500 $ 42,000 $ 52,500 $ 63,000 $ 63,000
$400,000..................................... $ 52,500 $ 70,000 $ 87,500 $ 105,000 $ 105,000
$450,000..................................... $ 63,000 $ 84,000 $ 105,000 $ 126,000 $ 126,000
$500,000..................................... $ 73,500 $ 98,000 $ 122,500 $ 147,000 $ 147,000
</TABLE>

PRINCIPAL SHAREHOLDERS

As of the date hereof, no director owns beneficially more than 1% of the
Company's issued and outstanding Preferred Stock and the directors, as a group,
beneficially own less than 2% of the Company's issued and outstanding Preferred
Stock. To the best of the Company's knowledge, no other party beneficially owns
more than 1% of the Company's Preferred Stock. Moreover, the offering will not
have any material effect on the amount and percentage of Preferred Stock owned
by each director and all directors as a group.

DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK

AUTHORIZED AND OUTSTANDING STOCK

As of August 31, 1996, American Crystal was authorized to issue 4,000 shares
of Common Stock, $10 par value, and 600,000 shares of Preferred Stock, $76.77
par value. As of August 31, 1996, there were 2,443 shares of Common Stock and
415,255 shares of Preferred Stock issued and outstanding.

QUALIFICATIONS FOR SHARE OWNERSHIP

Ownership of both Common Stock and Preferred Stock is restricted to
sugarbeet farm operators in the territory in which the Company is engaged in
business. The term "operator" means a person, firm, partnership or corporation
who is the legal owner of the sugarbeet crop, has a majority financial interest
in the crop, has general control of the sugarbeet operations of the farm where
the sugarbeet crop is grown, and is a "bona fide farmer" as that term is defined
in the United States Farm Credit Administration regulations (12 C.F.R. Section
613.3020). As used in this Prospectus, "member" means a farm operator who is a
common shareholder of the Company.

COMMON STOCK

No member may own more than one share of Common Stock. Only holders of a
share of Common Stock are entitled to vote for the election of directors and on
other matters relating to the management and affairs of the Company determined
by shareholders. Each member has an equal vote in the election of directors (but
only from the member's district) and on other matters, regardless of the number
of acres

34
<PAGE>
grown or volume of business done with American Crystal. Three directors are
elected from each of the Company's five factory districts by the members (common
shareholders) in each such district.

The Board of Directors, may, by resolution, determine that a member is no
longer eligible to be a holder of Common Stock. Upon such determination, the
Board may refund the par value of the member's share of Common Stock and, upon
such payment, the member will cease to have voting rights as a shareholder.

PREFERRED STOCK

Ownership of Preferred Stock entitles a member to grow sugarbeets for sale
to American Crystal. The Board of Directors determines the acreage that may be
grown for each share of Preferred Stock owned. However, as noted above, after
November 30, 1994, each share of Preferred Stock has represented the right to
sell the sugarbeets produced on one acre of land to the Company. Management's
current intention is that a 1 to 1 ratio between shares and acres be maintained
for the foreseeable future, subject to tolerances for overplanting and
underplanting established by the Board each year. Those tolerances vary from
year to year, in the discretion of the Board of Directors. Shares of Preferred
Stock have no voting rights. The Company has no obligation to repurchase the
Preferred Stock of a grower found to be ineligible for continued membership.

SALE AND TRANSFER OF SHARES

A member desiring to sell his or her Common Stock or Preferred Stock must
first offer them to the Company for purchase at par value. If the Company
declines to purchase such shares, either class may be sold to a new member
(i.e., another farm operator not already a member) and Preferred Stock may be
sold to one or more existing members or farm operators approved for membership,
in each case subject to approval by the Board of Directors. Because the number
of acres of sugarbeets a member may grow for sale to the Company is directly
related to the number of shares of Preferred Stock owned, a limited, private
market for Preferred Stock exists. To date, the Company's Board of Directors has
not exercised the Company's right of first refusal to purchase shares offered
for sale by its members. In the absence of the exercise of such right of first
refusal, the Company is aware of sales of Preferred Stock at prices in excess of
the par value of those shares. However, as the Company does not require parties
seeking approval for transfers to provide information regarding the transfer
price, the Company does not possess verifiable information regarding the
transfer price involved in recent transfers of the Company's Preferred Stock.

NO DIVIDENDS

The Company's By-laws prohibit the payment of dividends on the Common Stock
and Preferred Stock. Shareholders receive distributions from the Company in the
form of beet payments and the return of unit retains.

DISTRIBUTION OF ASSETS UPON DISSOLUTION

The Company's By-laws establish the following order and priority for
distribution of the Company's assets upon dissolution, each category to be
satisfied in full before any distribution is made to the next: first, all debts
and liabilities of the Company must be paid; second, the par value of the
Preferred Stock must be returned to the holders thereof; third, all capital
furnished through patronage and unit retains must be retired without priority as
to year on a pro rata basis; fourth, all paid-in surplus theretofore allocated
to particular shareholders or former shareholders must be returned; and fifth,
the par value of the Common Stock must be returned to the holders thereof. The
liquidation value of any property and assets of the Company remaining after such
priority distributions are then to be distributed among the holders of Preferred
Stock in proportion to the Preferred Stock held by each.

35
<PAGE>
AMENDMENTS TO BY-LAWS

The Company's By-laws may be amended by a majority of shareholders present
at any regular or special meeting at which a quorum is present or represented by
mail vote. The notice of such meeting must contain a summary of the proposed
amendment.

UNIT RETAINS

As a means of raising capital, an agricultural cooperative may retain a
portion of the payments otherwise due members for their crops. This is called a
"unit retain" or "unit retention capital." A unit retain "qualified" under the
Internal Revenue Code is not taxable income to the cooperative under federal law
and is taxable income to the cooperative's members, but is available for the
general business purposes of the cooperative, including debt service. (Unit
retains which are not "qualified" are taxable to the cooperative at the time
when declared but are not taxed again when distributed to the cooperative's
members.)

American Crystal's Board of Directors may set a variable unit retain
annually. Under the Company's By-laws, the unit retain may be up to 10% of the
weighted average gross per ton payment to all members for sugarbeets. For the
fiscal years ended August 31, 1989, 1990, 1991 and 1992, American Crystal's unit
retain was $1.50 per ton of sugarbeets delivered. The unit retain for the years
ended August 31, 1993 and 1994 was $3.00 per ton, while the unit retain in the
year ended August 31, 1995 was $2.00 per ton of sugarbeets delivered.

Cooperatives often have programs to return excess unit retains in subsequent
years. American Crystal's unit retains may be returned to members if the
Company's Board of Directors, in its discretion, finds the aggregate amount of
outstanding unit retains to be in excess of the amounts needed for operating the
Company's business and servicing its debts. The Company's By-laws provide that
it is the general policy to pay the oldest outstanding unit retains first. In
recent years, the practice of the Company's Board of Directors has been to
return unit retains after seven years.

American Crystal has a policy of refunding all accumulated unit retains of
disabled or deceased former members. During the years ended August 31, 1995,
1994, and 1993, such payments were approximately $361,000, $552,000, and
$389,000, respectively.

TAX TREATMENT

Subchapter T of the Internal Revenue Code sets forth rules for the tax
treatment of cooperatives and applies both to cooperatives exempt from tax under
Section 521 of the Internal Revenue Code and to non-exempt corporations
operating on a cooperative basis. American Crystal is a non-exempt cooperative.

As a cooperative, American Crystal is not taxed on amounts withheld from its
members in the form of qualified unit retains or on the amounts distributed to
its members in the form of payments for sugarbeets. Consequently, such amounts
are taxed only at the member level.

Income derived by American Crystal from non-member business is not entitled
to the "single tax" benefit of Subchapter T and is taxed to the cooperative at
corporate income tax rates. For the fiscal year ended August 31, 1995, American
Crystal had approximately $15,000 of net gain (loss) after taxes from its
non-member business.

PLAN OF DISTRIBUTION

The Company is offering and selling the Common Stock and Preferred Stock
without the assistance of any underwriter or agent. Instead, certain of the
Company's officers and directors will be responsible for completing the offer
and sale of the Common Stock and Preferred Stock. Such officers will not receive
any

36
<PAGE>
commission or compensation for such activities, other than their normal
compensation as employees of the Company.

With this Prospectus, each current member of the Company will receive a
subscription agreement, identified as Subscription Document A. That document
will indicate the number of shares of Preferred Stock he or she owned as of July
31, 1996. Based upon ownership of those shares of Preferred Stock, such member
will be entitled to purchase in this offering his or her pro rata portion of
20,729 shares of Preferred Stock offered hereby. The number of shares of
Preferred Stock represented by such pro rata portion will equal 4.7% of the
number of shares of Preferred Stock owned as of July 31, 1996, rounded up to the
nearest whole share of Preferred Stock. (In addition to indicating the number of
shares of Preferred Stock owned by a member as of July 31, 1996, the
subscription agreement will also indicate the number of Preferred Stock which
the member is entitled to purchase in this Offering.) The member must either
purchase the entire number of shares of Preferred Stock which he or she is
entitled to purchase or refrain from purchasing any Preferred Stock in this
Offering. Each such member will have until 5:00 p.m., November 22, 1996 to
indicate to the Company that he or she wishes to purchase his or her portion of
the Preferred Stock offered hereby. To indicate his or her desire to purchase
such Shares, each member must return to the Company an executed original of the
subscription agreement, along with a check in full payment for the Preferred
Stock which the member desires to purchase. (A member may return his response to
the Company's corporate headquarters by personal delivery or by certified or
other mail. However, as all responses must be received prior to the designated
time, members choosing to mail their response to the Company are cautioned to
allow adequate time for American Crystal's receipt of the response.) If the
Company has not received a response fully complying with the requirements
described in this section from any member by 5:00 p.m. on November 22, 1996, he
or she will be conclusively presumed to have waived his or her right to
participate in this offering.

A current member of the Company can also indicate, by returning a completed
"Indication of Interest in Purchasing Additional Shares" (identified as
Subscription Document B), that he or she is willing to purchase up to 50 shares
of Preferred Stock in addition to the Preferred Stock which he or she has a
right to purchase in this offering. Such response card must also be received by
the Company before 5:00 p.m. on November 22, 1996. The member must purchase his
or her pro rata portion of this Offering in order to be eligible to purchase any
additional Preferred Stock. However, the member will be entitled to purchase any
such additional Preferred Stock only if the procedure with respect to "Remaining
Shares" described below results in the member being granted the opportunity to
acquire additional Preferred Stock.

A "New Grower" can indicate, by returning an executed "Indication of
Interest in Purchasing Shares of Preferred Stock--For Qualifying New Grower"
(identified as Subscription Document C) and an executed form of "Representations
and Warranties For New Growers and Small Growers" (identified as Subscription
Document E), that he or she is willing to purchase a unit of fifty (50) shares
of Preferred Stock. For purposes of this offering, a "New Grower" is an
individual eighteen years of age or older who is eligible for membership in the
Company and who, as of July 31, 1996, was not a member or shareholder of the
Company or any other sugar cooperatives and was not an owner of any interest in
any corporations, partnerships, joint ventures or other entities which owned
shares of the Company's Preferred Stock or was a member or shareholder in any
other sugar cooperatives. In addition, an individual may not qualify as a "New
Grower" if that individual's spouse, children residing with such individual or
parents with whom such individual resides (and any entity or entities in which
such spouse, children or parents held a direct or indirect beneficial interest)
owned any shares of the Company's Preferred Stock or was a member or shareholder
in any other sugar cooperatives. AN ENTITY, SUCH AS A CORPORATION, PARTNERSHIP
OR JOINT VENTURE, CANNNOT QUALIFY AS A NEW GROWER; ONLY INDIVIDUALS MAY
PARTICIPATE IN THIS OFFERING AS NEW GROWERS. A total of five hundred (500)
shares of Preferred Stock will be allocated for purchase by New Growers. The
appropriate subscription documents must be received by the Company before 5:00
p.m. on November 22, 1996. After November 22, 1996, representatives of the
Company will randomly draw the names of two New Growers from each factory
district from among those parties who qualified as New Growers from such

37
<PAGE>
factory district and, after completion of the drawing, those New Growers whose
names have been drawn in each factory district will be notified in writing that
they are eligible to purchase fifty (50) shares of Preferred Stock. The Company
will send each such New Grower a subscription agreement for such Preferred Stock
and for one share of Common Stock. Full payment for such Preferred Stock and
Common Stock will be due in full within twenty (20) days of the date of the
Company's notice to such New Grower. If payment for such shares is not received
by the Company by the applicable due date, such New Grower's right to purchase
any such shares will be terminated. Any shares of Preferred or Common Stock
purchased by a New Grower hereunder may not be transferred by such New Grower to
any other party until after the harvest of the 1997 sugarbeet crop.

An individual who qualifies as a "Small Grower" can also indicate, by
returning an executed "Indication of Interest in Purchasing Shares of Preferred
Sock--For Qualifying Small Grower" (identified as Subscription Document D) and
an executed form of "Representations and Warranties For New Growers and Small
Growers" (identified as Subscription Document E), that he or she is willing to
purchase a unit of fifty (50) shares of Preferred Stock. For purposes of this
offering, a "Small Grower" is an individual eighteen years of age or older who
is eligible for membership in the Company and who, as of July 31, 1996 owned
fifty or fewer shares of the Company's Preferred Stock and, if a participant in
any entity, was an owner of an interest in only corporations, partnerships,
joint ventures or other entities which, in the aggregate and when added to the
shares of Preferred Stock held in such individual's name, owned fifty or fewer
shares of the Company's Preferred Stock. In addition, an individual may qualify
as a "Small Grower" only if that individual's spouse, children residing with
such individual or parents with whom such individual resides (and any entity or
entities in which such spouse, children or parents held a direct or indirect
beneficial interest) owned in the aggregate fewer than two hundred fifty (250)
shares of the Company's Preferred Stock. AN ENTITY, SUCH AS A CORPORATION,
PARTNERSHIP OR JOINT VENTURE, CANNOT QUALIFY AS A SMALL GROWER; ONLY INDIVIDUALS
MAY PARTICIPATE IN THIS OFFERING AS SMALL GROWERS. A total of five hundred (500)
shares of Preferred Stock will be allocated for purchase by Small Growers. The
applicable subscription documents must be received by the Company before 5:00
p.m. on November 22, 1996. After November 22, 1996, representatives of the
Company will randomly draw the names of two Small Growers from each factory
district from among those parties who qualified as Small Growers from such
factory district and, after completion of the drawing, those Small Growers whose
names have been drawn in each factory district will be notified in writing that
they are eligible to purchase shares of Preferred Stock. The Company will send
to each such Small Grower a subscription agreement for such Preferred Stock (and
a share of Common Stock, if appropriate.) Full payment for such Preferred Stock
(and Common Stock, if applicable) will be due in full within twenty (20) days of
the date of the Company's notice to such Small Grower. If payment for such
shares is not received by the Company by the applicable due date, such Small
Grower's right to purchase any such shares will be terminated. Any shares of
Preferred or Common Stock purchased by a Small Grower hereunder may not be
transferred by such Small Grower to any other party until after the harvest of
the 1997 sugarbeet crop.

After November 22, 1996, representatives of the Company will examine all
responses received from prospective purchasers of Preferred Stock. All members
who have indicated that they desire to acquire their pro rata portion of this
offering will be allocated such portion of the Preferred Stock offered hereby.
Any Preferred Stock remaining for sale after the Preferred Stock has been
allocated to current members, Small Growers and News Growers (the "Remaining
Shares") will be available for purchase by (i) those current members who
indicated that they wish to purchase Preferred Stock in excess of the amount
constituting their pro rata portion of the Company's offering, (ii) New Growers
whose subscriptions were not drawn in the "New Grower" random drawing described
above and (iii) Small Growers whose subscriptions were not drawn in the "Small
Grower" random drawing described above. The Remaining Shares will be allocated
to such prospective purchasers in a random drawing to be held in December 1996,
until no additional shares of Preferred Stock remain for sale or until the
Company elects to terminate the Offerings described herein. After completion of
the drawing, those subscribers whose Indications of Interest have been drawn in
the random drawing will be notified in writing of the number of shares of

38
<PAGE>
Preferred Stock which they are eligible to purchase. Full payment for such
Preferred Stock (and the membership share of Common Stock, if applicable) will
be due in full within twenty (20) days of the date of the Company's notice to
such parties. If payment for such shares is not received by the Company by the
applicable due date, such prospective purchaser's ability to purchase any
portion of the Remaining Shares will be terminated; the Company will then
randomly draw a response card from another subscriber, who will be granted the
opportunity to purchase the applicable portion of the Remaining Shares. The
Company will continue with such procedure until all Remaining Shares have been
purchased or until the Company elects, in its sole discretion, to cease efforts
to sell the Remaining Shares. All parties who have purchased shares of Common
Stock and/or Preferred Stock in this offering will receive confirmation of such
purchase on or about January 17, 1997.

Pursuant to the Company's Articles of Incorporation and By-laws, the Company
reserves the right to reject subscriptions from any party, in the Company's sole
discretion. As described in "Description of Common and Preferred Stock," each
prospective purchaser of Common Stock and Preferred Stock must also satisfy the
requirements for membership in the Company contained in the Company's Articles
of Incorporation and By-laws.

LEGAL PROCEEDINGS

From time to time and in the ordinary course of its business, the Company is
named as a defendant in legal proceedings related to various issues, including
worker's compensation claims, tort claims and contractual disputes. The Company
is currently involved in certain legal proceedings which have arisen in the
ordinary course of American Crystal's business; the Company is also aware of
certain other potential claims which could result in the commencement of legal
proceedings. The Company carries insurance which provides protection against
certain types of claims. With respect to current litigation and potential claims
of which the Company is aware, the Company's management believes that (i) the
Company has insurance protection to cover all or a portion of any judgments
which may be rendered against the Company with respect to certain claims or
actions and (ii) any judgments which may be entered against the Company and
which may exceed such insurance coverage or which may arise in actions involving
potential liabilities not covered by insurance policies are not likely to have a
material adverse effect upon the Company, or its assets or operations.

RELATED PARTY TRANSACTIONS

Each of the Company's directors is also a sugarbeet farmer and a shareholder
member or representative of a shareholder member of American Crystal. By virtue
of their status as such members of the Company, each director or the member he
represents sells sugarbeets to the Company and receives payments for those
sugarbeets. Such payments for sugarbeets often exceed $60,000. However, such
payments are received by the directors or the entities they represent on exactly
the same basis as payments are received by other members of the Company for the
delivery of their sugarbeets. Except for the sugarbeets sales described in the
preceding sentences, none of the directors or executive officers of the Company
have engaged in any other transactions with the Company involving amounts in
excess of $60,000.

FINANCIAL STATEMENTS

The financial statements of the Company for the fiscal years ended August
31, 1996, 1995 and 1994 have been audited by Eide Helmeke & Co., Fargo, North
Dakota, independent certified public accountants. Such financial statements have
been included herein in reliance upon the report of Eide Helmeke PLLP.

39
<PAGE>
INDEX TO FINANCIAL STATEMENTS

AMERICAN CRYSTAL SUGAR COMPANY

<TABLE>
<S> <C>
FINANCIAL STATEMENTS:

Report of Independent Auditors........................................ F-3

Balance Sheets as of August 31, 1996, and 1995........................ F-4

Statements of Operations for the Years Ended August 31, 1996, 1995,
and 1994............................................................. F-6

Statements of Changes in Members' Investment for the Years Ended
August 31, 1996, 1995, and 1994...................................... F-7

Statement of Cash Flows for the Years Ended August 31, 1996, 1995, and
1994................................................................. F-8

Notes to Consolidated Financial Statements............................ F-10
</TABLE>

F-1
<PAGE>
(This page has been left blank intentionally.)

F-2
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Members of American Crystal Sugar Company,
Moorhead, Minnesota

We have audited the accompanying balance sheets of the American Crystal
Sugar Company (a Minnesota agricultural cooperative corporation) as of August
31, 1996, and 1995, and the related statements of operations, changes in
members' investments and cash flows for each of the three years in the period
ended August 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the financial position of the American Crystal Sugar
Company as of August 31, 1996, and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended August 31, 1996,
in conformity with generally accepted accounting principles.

As described in Note 1 to the financial statements, the company changed its
method of depreciating certain classes of property and equipment in 1996.

/s/ Eide Helmeke PLLP

Eide Helmeke PLLP
October 8, 1996
Fargo, North Dakota

F-3
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
AUGUST 31
------------------------
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents............................................................. $ 3,807 $ 3,420
Receivables:
Trade................................................................................. 50,915 48,113
Members............................................................................... 3,845 4,207
Other................................................................................. 1,399 5,194
Advances to Related Parties............................................................. 10,308 6,091
Inventories............................................................................. 72,677 103,291
Prepaid Expenses........................................................................ 3,088 3,825
----------- -----------
Total Current Assets.................................................................... 146,039 174,141
----------- -----------
Property and Equipment:
Land.................................................................................. 12,059 11,876
Buildings and Equipment............................................................... 572,446 535,587
Construction in Progress.............................................................. 41,098 36,934
Less Accumulated Depreciation......................................................... (391,665) (373,709)
----------- -----------
Net Property and Equipment.............................................................. 233,938 210,688
----------- -----------
Other Assets:
Investments in Banks for Cooperatives................................................. 15,177 13,932
Investments in Marketing Cooperatives................................................. 15,468 5,545
Investments in ProGold Limited Liability Company...................................... 51,330 12,452
Other Assets.......................................................................... 3,184 4,132
----------- -----------
Total Other Assets...................................................................... 85,159 36,061
----------- -----------
Total Assets............................................................................ $ 465,136 $ 420,890
----------- -----------
----------- -----------
</TABLE>

The Accompanying Notes are an Integral Part of These Financial Statements.

F-4
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

BALANCE SHEETS

LIABILITIES AND MEMBERS' INVESTMENTS

<TABLE>
<CAPTION>
AUGUST 31
----------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Current Liabilities:
Short-Term Debt......................................................................... $ 13,643 $ 53,932
Current Maturities of Long-Term Debt.................................................... 13,525 12,115
Accounts Payable........................................................................ 24,550 25,893
Other Current Liabilities............................................................... 15,132 13,918
Amounts Due Members..................................................................... 47,118 40,237
---------- ----------
Total Current Liabilities................................................................. 113,968 146,095
Long-Term Debt, Net of Current Maturities................................................. 177,394 106,914
Deferred Income Taxes..................................................................... -- 1,029
Other Liabilities......................................................................... 21,638 24,805
---------- ----------
Total Liabilities......................................................................... 313,000 278,843
---------- ----------

Members' Investments:
Preferred Stock......................................................................... 31,879 31,879
Common Stock............................................................................ 24 23
Additional Paid-in Capital.............................................................. 33,041 32,417
Unit Retains............................................................................ 97,191 88,487
Pension Liability Adjustment............................................................ (4,518) (5,674)
Retained Earnings....................................................................... (5,481) (5,085)
---------- ----------
Total Members' Investments................................................................ 152,136 142,047
---------- ----------
Total Liabilities and Members' Investments................................................ $ 465,136 $ 420,890
---------- ----------
---------- ----------
</TABLE>

The Accompanying Notes are an Integral Part of These Financial Statements.

F-5
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

STATEMENTS OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net Revenue.................................................................... $ 688,012 $ 605,960 $ 563,420
Cost of Product Sold, Excluding Payments to Members for Sugarbeets............. 216,229 143,652 169,112
---------- ---------- ----------
Gross Proceeds................................................................. 471,783 462,308 394,308
Selling, General and Administrative Expenses................................... 155,188 132,752 113,679
---------- ---------- ----------
Operating Proceeds............................................................. 316,595 329,556 280,629
---------- ---------- ----------
Other Income (Expense):
Interest Income.............................................................. 485 281 641
Other Income................................................................. 4,200 1,934 2,081
Interest Expense, Net........................................................ (11,252) (14,532) (7,859)
Other Expenses............................................................... (371) (612) (1,419)
---------- ---------- ----------
Total Other Income (Expense)................................................... (6,938) (12,929) (6,556)
---------- ---------- ----------
Proceeds Before Income Taxes................................................... 309,657 316,627 274,073
Income Tax Benefit/(Expense)................................................... 549 3,922 (288)
---------- ---------- ----------
Net Proceeds Before Cumulative Effect of Changes in Accounting Principle....... 310,206 320,549 273,785
Cumulative Effect of Changes in Accounting Principle........................... -- -- (12,214)
---------- ---------- ----------
Net Proceeds Resulting from Member and Non-Member Business..................... $ 310,206 $ 320,549 $ 261,571
---------- ---------- ----------
---------- ---------- ----------
Distribution of Net Proceeds:
Credited (Charged) to Members' Investments:
Member Tax Accounting Adjustment, Net...................................... $ -- $ (5,621) $ (12,585)
Non-Member Business (Loss)................................................. (396) (15) (544)
Unit Retains Declared to Members........................................... 16,040 16,648 19,328
---------- ---------- ----------
Net Credit to Members' Investments............................................. 15,644 11,012 6,199
Payments to Members for Sugarbeets, Net of Unit Retains Declared............... 294,562 309,537 255,372
---------- ---------- ----------
Total.......................................................................... $ 310,206 $ 320,549 $ 261,571
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

The Accompanying Notes are an Integral Part of These Financial Statements.

F-6
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

STATEMENTS OF CHANGES IN MEMBERS' INVESTMENTS

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL PENSION
PREFERRED PAID-IN UNIT LIABILITY
STOCK COMMON STOCK CAPITAL RETAINS ADJUSTMENT
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 31, 1993.................... $ 30,429 $ 21 $ 5,558 $ 71,076 $ (651)
Member Tax Accounting Adjustment, Net..... -- -- -- -- --
Non-Member Business (Loss)................ -- -- -- -- --
Unit Retains Withheld from Members
($3.00/Ton)............................. -- -- -- 19,328 --
Payments to Estates and Disabled
Individuals............................. -- -- -- (552) --
Payments of 1986 Crop Unit Retains to
Members................................. -- -- -- (8,419) --
Pension Liability Adjustment.............. -- -- -- -- (1,735)
Common Stock Issued/(Redeemed), Net....... -- 3 -- -- --
------------- --- ------------- ------------- -------------
BALANCE, AUGUST 31, 1994.................... $ 30,429 $ 24 $ 5,558 $ 81,433 $ (2,386)
------------- --- ------------- ------------- -------------
Member Tax Accounting Adjustment, Net..... -- -- -- -- --
Non-Member Business (Loss)................ -- -- -- -- --
Unit Retains Withheld from Members
($2.00/Ton)............................. -- -- -- 16,648 --
Payments to Estates and Disabled
Individuals............................. -- -- -- (374) --
Payments of 1987 Crop Unit Retains to
Members................................. -- -- -- (9,220) --
Contributed Capital of Investee........... -- -- 460 -- --
Pension Liability Adjustment.............. -- -- -- -- (3,288)
Stock Issued/(Redeemed), Net.............. 1,450 (1) 26,399 -- --
------------- --- ------------- ------------- -------------
BALANCE, AUGUST 31, 1995.................... $ 31,879 $ 23 $ 32,417 $ 88,487 $ (5,674)
------------- --- ------------- ------------- -------------
Member Tax Accounting Adjustment, Net..... -- -- -- -- --
Non-Member Business (Loss)................ -- -- -- -- --
Unit Retains Withheld from Members
($2.00/Ton)............................. -- -- -- 16,040 --
Payments to Estates and Disabled
Individuals............................. -- -- -- (296) --
Payments of 1988 Crop Unit Retains to
Members................................. -- -- -- (7,040) --
Contributed Capital of Investee........... -- -- 624 -- --
Pension Liability Adjustment.............. -- -- -- -- 1,156
Stock Issued/(Redeemed), Net.............. -- 1 -- -- --
------------- --- ------------- ------------- -------------
BALANCE, AUGUST 31, 1996.................... $ 31,879 $ 24 $ 33,041 $ 97,191 $ (4,518)
------------- --- ------------- ------------- -------------
------------- --- ------------- ------------- -------------

RETAINED
EARNINGS TOTAL
------------- -------------
<S> <C> <C>
BALANCE, AUGUST 31, 1993.................... $ 13,680 $ 120,113
Member Tax Accounting Adjustment, Net..... (12,585) (12,585)
Non-Member Business (Loss)................ (544) (544)
Unit Retains Withheld from Members
($3.00/Ton)............................. -- 19,328
Payments to Estates and Disabled
Individuals............................. -- (552)
Payments of 1986 Crop Unit Retains to
Members................................. -- (8,419)
Pension Liability Adjustment.............. -- (1,735)
Common Stock Issued/(Redeemed), Net....... -- 3
------------- -------------
BALANCE, AUGUST 31, 1994.................... $ 551 $ 115,609
------------- -------------
Member Tax Accounting Adjustment, Net..... (5,621) (5,621)
Non-Member Business (Loss)................ (15) (15)
Unit Retains Withheld from Members
($2.00/Ton)............................. -- 16,648
Payments to Estates and Disabled
Individuals............................. -- (374)
Payments of 1987 Crop Unit Retains to
Members................................. -- (9,220)
Contributed Capital of Investee........... -- 460
Pension Liability Adjustment.............. -- (3,288)
Stock Issued/(Redeemed), Net.............. -- 27,848
------------- -------------
BALANCE, AUGUST 31, 1995.................... $ (5,085) $ 142,047
------------- -------------
Member Tax Accounting Adjustment, Net..... -- --
Non-Member Business (Loss)................ (396) (396)
Unit Retains Withheld from Members
($2.00/Ton)............................. -- 16,040
Payments to Estates and Disabled
Individuals............................. -- (296)
Payments of 1988 Crop Unit Retains to
Members................................. -- (7,040)
Contributed Capital of Investee........... -- 624
Pension Liability Adjustment.............. -- 1,156
Stock Issued/(Redeemed), Net.............. -- 1
------------- -------------
BALANCE, AUGUST 31, 1996.................... $ (5,481) $ 152,136
------------- -------------
------------- -------------
</TABLE>

The Accompanying Notes are an Integral Part of These Financial Statements.

F-7
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED AUGUST 31
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Provided By (Used In) Operations:
Net Proceeds Resulting from Member and Non-Member Business............... $ 310,206 $ 320,549 $ 261,571
Payments to Members for Sugarbeets, Net of Unit Retains.................. (294,562) (309,537) (255,372)
Add (Deduct) Non-Cash Items:
Depreciation and Amortization............................................ 20,314 28,174 25,117
Deferred Income Taxes.................................................... (1,216) (3,629) 175
Loss on the Disposition of Property and Equipment........................ 230 50 48
Non-Cash Portion of Patronage Dividend from the Banks for Cooperatives... (1,404) (1,653) (1,111)
Deferred Gain Recognition................................................ (223) (223) (149)

Changes in Certain Elements of Working Capital:
Accounts Receivable:
Trade.................................................................. (2,802) (14,120) (1,261)
Members................................................................ 362 8 (231)
Other.................................................................. 3,795 (2,827) (579)
Inventories.............................................................. 30,614 (49,511) 16,243
Prepaid Expenses......................................................... 737 1,727 540
Advances to Related Parties.............................................. (4,217) (1,898) 3,073
Accounts Payable......................................................... (1,343) 9,831 (2,758)
Other Current Liabilities................................................ 1,214 525 1,675
Amount Due Members....................................................... 6,881 (3,658) (232)
----------- ----------- -----------
Net Cash (Used)/Provided By Operations..................................... 68,586 (26,192) 46,749
----------- ----------- -----------

Cash Provided By (Used In) Investing Activities:
Purchases of Property and Equipment...................................... (43,549) (48,636) (50,015)
Proceeds from the Sale of Property and Equipment......................... 151 191 135
Investment in Banks for Cooperatives..................................... 159 770 1,178
Investments in Marketing Cooperatives.................................... (9,700) (4,482) (405)
Investment in ProGold Limited Liability Company.......................... (38,878) (12,262) (190)
Changes in Other Assets.................................................. (271) 178 (449)
----------- ----------- -----------
Net Cash Used in Investing Activities...................................... (92,088) (64,241) (49,746)
----------- ----------- -----------

Cash Provided By (Used In) Financing Activities:
Net Proceeds (Payments) on Short-Term Debt............................... (40,289) 53,932 (4,568)
Proceeds from Long-Term Debt............................................. 85,000 20,300 30,100
Long-Term Debt Repayment................................................. (13,115) (17,110) (12,310)
Payment of Unit Retains.................................................. (7,336) (9,594) (8,971)
Changes in Preferred Stock............................................... -- 1,450 --
Changes in Common Stock.................................................. 1 1 3
Changes in Additional Paid-In Capital.................................... 623 26,859 --
Changes in Other Long-Term Liabilities................................... (995) 3,601 10,734
----------- ----------- -----------
Net Cash Provided by Financing Activities.................................. 23,889 79,439 14,988
----------- ----------- -----------
Increase (Decrease) in Cash and Cash Equivalents........................... 387 (10,994) 11,991
Cash and Cash Equivalents, Beginning of Period............................. 3,420 14,414 2,423
----------- ----------- -----------
Cash and Cash Equivalents, End of Period................................... $ 3,807 $ 3,420 $ 14,414
----------- ----------- -----------
----------- ----------- -----------
</TABLE>

The Accompanying Notes are an Integral Part of These Financial Statements.

F-8
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

ORGANIZATION

American Crystal Sugar Company (American Crystal) is a Minnesota
agricultural cooperative corporation, which processes and markets sugar and
sugar beet pulp, molasses and seed. Business done with its shareholders
(members) constitutes "patronage business" as defined by the Internal Revenue
Code and the net proceeds therefrom are credited to members' investments in the
form of unit retains or distributed to members in the form of payments for sugar
beets. Members are paid the net amounts realized from the current year's
production less member operating costs determined on a book basis.

On April 26, 1995, the Company's shareholders amended the Bylaws of the
Company and the Grower Agreement between the Company and each of its
shareholders. The amendment changed the method by which the grower beet payment
is determined. Previously, the grower beet payment was on the basis of the
Company's taxable income. Effective with the fiscal year beginning September 1,
1995, the grower beet payment is calculated on the basis of the Company's book
income as reported in its financial statements.

CASH AND CASH EQUIVALENTS

American Crystal considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents. American Crystal
places its temporary cash investments with high credit quality financial
institutions. At times, such investments may be in excess of the applicable
insurance limit.

RECEIVABLES

American Crystal grants credit, individually and through its marketing
cooperatives, to its customers which are primarily companies in the food
processing industry located throughout the United States. Ongoing credit
evaluations of customers' financial condition are performed and the Company
maintains a reserve for potential credit losses. American Crystal does not
believe it is dependent upon one or a few customers.

INVENTORIES

Sugar, pulp and molasses inventories are valued at estimated net realizable
value. Maintenance parts and supplies and beet seed inventories are valued at
the lower of average cost or market.

ACCOUNTING ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principals requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

PROPERTY, EQUIPMENT AND DEPRECIATION

Property and equipment are recorded at cost. Indirect costs and construction
period interest are capitalized as a component of the cost of qualified assets.
Property and equipment are depreciated for financial reporting purposes
principally using straight line methods with estimated useful lives ranging from
3 to 45 years. Statutory lives and methods are used for income tax reporting
purposes.

F-9
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

Property and equipment acquired prior to September 1, 1995, was depreciated
for financial statement purposes, principally using declining balance methods
with estimated useful lives ranging from 3 to 45 years. Effective September 1,
1995, property and equipment was depreciated using the straight-line method. The
straight-line method of depreciation was adopted during fiscal 1996 to more
accurately reflect the allocation of the cost of the property and equipment in
the proper period and to conform with general industry practice. The effect of
the change was to increase net proceeds resulting from member and non-member
business for the year ended August 31, 1996, by $9.7 million.

Indirect costs capitalized were $1.0 million, $845,000 and $1.1 million in
1996, 1995 and 1994, respectively. Construction-period interest capitalized was
$3.8 million, $1.5 million and $1.4 million in 1996, 1995 and 1994,
respectively.

INVESTMENTS

Investments in the Banks for Cooperatives are stated at cost plus unredeemed
patronage refunds received or estimated to be received in the form of capital
stock. Investments in Marketing Cooperatives and ProGold Limited Liability
Company (ProGold) are accounted for using the equity method.

MEMBERS' INVESTMENTS

PREFERRED AND COMMON STOCK--The ownership of common and preferred stock is
restricted to a "farm operator" as defined by the bylaws of American Crystal.
Each "farm operator" may own only one share of common stock and is entitled to
one vote in the affairs of American Crystal. Each "farm operator" is entitled to
grow a specified number of acres of sugar beets in proportion to the shares of
preferred stock owned. The preferred shares are non-voting. All transfers of
stock must be approved by American Crystal's board of directors and any
shareholder desiring to sell stock must first offer it to American Crystal for
repurchase at its par value. American Crystal has never exercised this
repurchase option. The bylaws do not allow dividends to be paid on either the
common or preferred stock. The articles of incorporation of the Company were
amended to allow recapitalization of the Company to authorize the issuance of
600,000 shares of preferred stock with a par value of $76.77. As part of that
recapitalization, each share of preferred stock was changed and reclassified
into 65/100 (.65) of one share of preferred stock, with par value of $76.77 per
share.

<TABLE>
<CAPTION>
SHARES
SHARES ISSUED &
PAR VALUE AUTHORIZED OUTSTANDING
----------- ----------- -------------
<S> <C> <C> <C>
Preferred Stock:
August 31, 1996...................................... $ 76.77 600,000 415,255
August 31, 1995...................................... 76.77 600,000 415,255
August 31, 1994...................................... 50.00 700,000 608,582
Common Stock:
August 31, 1996...................................... $ 10.00 4,000 2,441
August 31, 1995...................................... 10.00 4,000 2,343
August 31, 1994...................................... 10.00 4,000 2,363
</TABLE>

UNIT RETAINS--The bylaws authorize American Crystal's board of directors to
require additional direct capital investments by members in the form of a
variable unit retain of up to a maximum of 10% of the weighted average gross
per-ton beet payment.

F-10
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)

RETAINED EARNINGS--Retained earnings represent the cumulative net
income/(loss) resulting from non-member business and the difference between
member income as determined for financial reporting purposes and federal income
tax reporting purposes from the years prior to 1996. The non-member net loss was
$396,000, $15,000 and $544,000 in 1996, 1995 and 1994, respectively.

Subsequent to year-end, American Crystal filed a registration statement with
the Securities and Exchange Commission relating to the issuance of up to 21,729
shares.

INTEREST EXPENSE, NET

American Crystal earns patronage dividends from the Banks for Cooperatives
based on American Crystal's share of the net interest income earned by the
banks. These patronage dividends are applied against interest expense.

INCOME TAXES

American Crystal is a non-exempt cooperative for federal income tax
purposes. As such, American Crystal is subject to corporate income taxes on its
net income from non-member sources. The provision for income taxes relates to
the results of operations from non-member business, state income taxes and
certain other permanent differences between financial and income tax reporting.
Deferred income taxes are provided for timing differences between financial and
income tax reporting. The Company has a $962,000 deferred income tax asset
balance attributable to alternative minimum tax credits and non-member net
operating losses, resulting in a $549,000 income tax benefit in the current
year.

Examinations of the Company's federal income tax returns for the years ended
on or before August 31, 1992, were conducted by the Internal Revenue Service
(IRS) in prior years. Statutory notices of deficiency had been issued by the
IRS, proposing additional income taxes of $5.4 million, plus accrued interest.
Petitions were filed with the Tax Court to contest the proposed increase in
income taxes. During the year ended August 31, 1996, issues involving $4.4
million of proposed taxes were resolved in favor of American Crystal. A tax
payment of $642,000, plus interest of $695,000, was made with respect to issues
conceded by American Crystal. The issues involved with the remaining proposed
deficiency of $440,000 are still awaiting trial in the Tax Court. At this time,
it is not possible to determine the additional taxes and interest, if any, that
may become due upon the resolution of the remaining contested matters. The
eventual resolution of these income tax matters, will not have a material effect
on these financial statements.

Net income tax payments (refunds) for the years ended August 31, 1996, 1995,
and 1994 were $(139,000), $183,000 and $63,000, respectively.

(2) INVENTORIES:

The major components of inventories are as follows:

<TABLE>
<CAPTION>
1996 1995
--------- ----------
(DOLLARS IN
THOUSANDS)
---------------------
<S> <C> <C>
Refined Sugar, Pulp, Molasses and Beet Seed................................... $ 46,155 $ 78,440
Maintenance Parts and Supplies................................................ 26,522 24,851
--------- ----------
Total Inventories............................................................. $ 72,677 $ 103,291
--------- ----------
--------- ----------
</TABLE>

F-11
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(3) INVESTMENT IN MARKETING COOPERATIVES:

As of January 1, 1994, American Crystal entered into a marketing agreement
with United Sugars Corporation (United), whereby United will market the
cooperative's production of sugar. The amount of the investment is accounted for
using the equity method. American Crystal's investment in United was comprised
of contributed assets with a net book value of $1.7 million and transferred
liabilities of $1.1 million. Upon transfer, certain assets were revalued based
on appraisals that increased the value of those assets by $4.2 million. This
increased value was recorded by United as a capital contribution from American
Crystal. American Crystal has recorded this $4.2 million as a deferred gain, net
of deferred income taxes, and will amortize it over a period of 31 years. The
investment in United is reported net of the unamortized deferred gain. During
1996, American Crystal invested an additional $10.0 million in United. This
investment was associated with the funding of United's current capital projects.
All sugar produced is sold by United as an agent for American Crystal. As of
August 31, 1996, American Crystal has a 71% ownership interest in United,
however, American Crystal has only one-third voting rights. The amount of sales
and related costs to be recognized by each owner is allocated based on their pro
rata share of production for the year. The owners provide United with cash
advances on an ongoing basis for operating and marketing expenses incurred by
United. During the year ended August 31, 1996 and 1995, American Crystal
advanced United $66.8 million and $59.5 million, respectively. American Crystal
had net advances to United of $7.1 million and $6.6 million as of August 31,
1996 and 1995, respectively. American Crystal provides administrative services
for United and is reimbursed for costs incurred. American Crystal was reimbursed
$708,000and $655,000 for services provided during 1996 amd 1995, respectively.

American Crystal has a one-third ownership interest in Midwest
Agri-Commodities Company (Midwest). The amount of the investment is accounted
for using the equity method. All beet pulp and molasses produced is sold by
Midwest as an agent for American Crystal. The amount of sales and related costs
to be recognized by each owner is allocated based on their pro-rata share of
production for the year. The owners provide Midwest with cash advances on an
ongoing basis for operating and marketing expenses incurred by Midwest. American
Crystal advanced Midwest $41.2 million, and $34.4 million, during the years
ended August 31, 1996, and 1995, respectively. American Crystal had outstanding
advances to Midwest of $3.2 million, and ($545,000) as of August 31, 1996, and
1995, respectively. The owners are guarantors of the short-term line of credit
Midwest has with the St. Paul Bank for Cooperatives (Bank). As of August 31,
1996 Midwest had outstanding short-term debt with the Bank of $1.7 million, of
which $1.4 million was guaranteed by American Crystal.

(4) PROGOLD LIMITED LIABILITY COMPANY

American Crystal has a 46% ownership interest in ProGold Limited Liability
Company. ProGold Limited Liability Company was formed to construct and operate a
corn wet milling plant, which intends to produce high-fructose corn syrup
sweetener. Construction of the plant began in May, 1995, with the anticipated
start-up set for the Fall of 1996. Following is summary financial information
for ProGold Limited Liability Company.

F-12
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(4) PROGOLD LIMITED LIABILITY COMPANY (CONTINUED)

SUMMARY INFORMATION (IN THOUSANDS)

<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Current Assets......................................................... $ 1,222 $ 12,608
Fixed Assets........................................................... 194,916 36,090
Other Assets........................................................... 5,026 388
---------- ---------
Total Assets....................................................... $ 201,164 $ 49,086
---------- ---------
---------- ---------
Current Liabilities.................................................... $ 24,268 $ 11,050
Long-Term Liabilities.................................................. 71,962 --
---------- ---------
Total Liabilities.................................................. 96,230 11,050
Equity................................................................. 104,934 38,036
---------- ---------
Total Liabilities and Equity........................................... $ 201,164 $ 49,086
---------- ---------
---------- ---------
Sales Revenue.......................................................... $ -- $ --
Cost of Sales.......................................................... -- --
---------- ---------
Gross Margins.......................................................... -- --
Other Income........................................................... 482 381
Expenses............................................................... (1,228) (1,099)
---------- ---------
Net (Loss)............................................................. $ (746) $ (718)
---------- ---------
---------- ---------
</TABLE>

(5) LONG-TERM AND SHORT-TERM DEBT:

The long-term debt outstanding as of August 31, 1996 and 1995, is summarized
below:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Term Loans from the St. Paul Bank for Cooperatives, Due in Varying Amounts
Through 2008, Interest at 6.07% to 9.2%, with First Lien on Substantially all
Property and Equipment......................................................... $ 168,800 $ 94,900
Term Loans from the First Bank, Minneapolis, Due in Equal Amounts Through 2002,
Interest at 7.60% to 8.25%, unsecured.......................................... 6,000 7,000
Term Loan from the Bank of North Dakota Due in Equal Amounts Through 2009, with
Interest at 6.34%, unsecured................................................... 10,400 11,200
Pollution Control and Industrial Development Revenue Bonds, Due in Varying
Amounts Through 2018, Interest at 6.00% to 8.00%............................... 5,719 5,929
---------- ----------
190,919 119,029
Less Current Maturities....................................................... (13,525) (12,115)
---------- ----------
Total Long-Term Debt........................................................ $ 177,394 $ 106,914
---------- ----------
---------- ----------
</TABLE>

F-13
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(5) LONG-TERM AND SHORT-TERM DEBT: (CONTINUED)

Aggregate maturities of long-term debt are as follows (in thousands):

<TABLE>
<S> <C>
1997...................................................... $ 13,525
1998...................................................... 14,300
1999...................................................... 14,300
2000...................................................... 14,415
2001...................................................... 14,425
Thereafter................................................ 119,954
---------
Total................................................. $ 190,919
---------
---------
</TABLE>

There is no unused term loan line of credit with the St. Paul Bank for
Cooperatives.

During the year ended August 31, 1996, American Crystal borrowed from the
St. Paul Bank for Cooperatives, the Commodity Credit Corporation and issued
commercial paper to meet its short-term borrowing requirements. American Crystal
had outstanding short-term debt with the St. Paul Bank for Cooperatives of $5
million and with the Commodity Credit Corporation of $8.6 million as of August
31, 1996. During the year ended August 31, 1996, American Crystal had available
short-term lines of credit totaling $220 million.

Maximum borrowings, average borrowing levels and average interest rates for
short-term debt for the years ended August 31, 1996 and 1995, follow:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS EXCEPT
INTEREST RATES)
<S> <C> <C>
Maximum Borrowings........................................ $ 190,798 $ 189,200
---------- ----------
---------- ----------
Average Borrowing Levels.................................. $ 118,481 $ 101,500
---------- ----------
---------- ----------
Average Interest Rates.................................... 5.77% 6.8%
</TABLE>

The terms of the loan agreements with the St. Paul Bank for Cooperatives
contain certain covenants related to, among other matters, the: level of working
capital; ratio of term liabilities to members' investments; ratio of short-term
debt balances to working capital; level of term debt to net funds generated; and
investment in bank stock in amounts prescribed by the bank. As of August 31,
1996, American Crystal was in compliance with the terms of the loan agreements,
or had obtained applicable waivers.

Interest paid was $16.1 million, $16.8 million and $10.3 million for the
years ended August 31, 1996, 1995 and 1994 respectively. Interest capitalized
was $3.8 million, $1.5 million and $1.4 million for the years ended August 31,
1996, 1995 and 1994, respectively.

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS:

The fair value of financial instruments is generally defined as the amount
at which the instrument could be exchanged in a current transaction between
willing parties, other than in a forced liquidation sale. Quoted market prices
are generally not available for the Company's financial instruments.
Accordingly, fair values are based on judgments regarding anticipated cash
flows, future expected loss experience, current economic conditions, risk
characteristics of various financial instruments and other factors. These
estimates involve uncertainties and matters of judgment, and, therefore, cannot
be determined with precision. Changes in assumptions could significantly affect
the estimates.

F-14
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(6) FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)

The estimated fair values of the Company's financial instruments as of
August 31, 1996 and 1995, are as follows:

LONG-TERM DEBT--Based upon current borrowing rates with similar maturities,
the fair value of the long-term debt approximates the carrying value.

INVESTMENTS IN BANKS FOR COOPERATIVES, INVESTMENTS IN MARKETING
COOPERATIVES, AND INVESTMENT IN PROGOLD LIMITED LIABILITY COMPANY--American
Crystal believes it is not practical to estimate the fair value of these
investments without incurring excessive costs because there is no established
market for these securities and it is inappropriate to estimate future cash
flows which are largely dependent on future earnings of these organizations.

(7) EMPLOYEE BENEFIT PLANS:

COMPANY-SPONSORED DEFINED BENEFIT PENSION PLANS

Substantially all employees who meet eligibility requirements of age and
length of service are covered by a Company-sponsored retirement plan. Plan A
(nonunion employees) and Plan B (union employees) are defined benefit,
noncontributory plans. The plans provide for vesting after 5 years of service
with benefits for early retirement, normal retirement and disability or death.

The assets of the plans are held by an insurance company. American Crystal's
funding policy for Plan A is to contribute the normal cost of the plan
determined under the entry age normal actuarial cost method, plus amounts
necessary to amortize changes over 30 years. The funding policy for Plan B is to
contribute the minimum required amount determined under the frozen initial
liability actuarial cost method. The actuarial assumptions are shown below:

<TABLE>
<CAPTION>
1996 1995 1994
----- ----- ---------
<S> <C> <C> <C>
Discount Rate...................................................................... 7.5% 7.5% 8.25%
Compensation Rate Increase (Plan A Only)........................................... 5.0% 5.0% 5.0%
Rate of Return..................................................................... 9.0% 9.0% 9.0%
</TABLE>

During 1995, the Company adopted a non-qualified Supplemental Executive
Retirement Plan for a select group of management and employees. The plan is
unfunded and provides for vesting after 5 years of service with benefits for
early retirement, normal retirement and disability or death.

F-15
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(7) EMPLOYEE BENEFIT PLANS: (CONTINUED)

The plans' status as of August 31, 1996, 1995 and 1994, is shown below:

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Normal Service Cost.................................................. $ 1,366 $ 1,281 $ 1,071
Interest Cost on Projected Benefit Obligation........................ 3,718 3,388 3,050
Return on Plan Assets................................................ (7,414) (3,458) (1,456)
Multiple Employer Adjustment......................................... (17) (21) --
Net Amortization (Deferral).......................................... 4,739 511 (1,674)
---------- ---------- ---------
Net Pension Expense.................................................. $ 2,392 $ 1,701 $ 991
---------- ---------- ---------
---------- ---------- ---------
Actuarial Present Value of Benefit Obligations:
Estimated Present Value of Vested Benefits......................... $ 44,933 $ 41,855 $ 30,055
Estimated Present Value of Non-Vested Benefits..................... 3,368 2,901 3,963
---------- ---------- ---------
Accumulated Benefit Obligation....................................... 48,301 44,756 34,018
Value of Future Pay Increases........................................ 7,239 6,086 4,108
---------- ---------- ---------
Projected Benefit Obligation......................................... 55,540 50,842 38,126
Estimated Market Value of Plan Assets................................ 43,853 37,385 34,453
---------- ---------- ---------
Projected Benefit Obligation in Excess of Plan Assets................ 11,687 13,457 3,673
Unrecognized Net Costs............................................... (14,407) (17,262) (8,004)
Unrecognized Net Assets.............................................. 2,049 2,345 2,604
Minimum Pension Liability Adjustment................................. 6,872 9,043 2,858
---------- ---------- ---------
Net Pension Liability................................................ $ 6,201 $ 7,583 $ 1,131
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

As required by Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions," American Crystal has recognized, as of
August 31, 1996, a minimum pension liability of $6.9 million, an intangible
pension asset of $2.4 million and a direct equity reduction of $4.5 million.

POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS

During 1994, American Crystal adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions" and Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits." The standards changed the method of accounting for the
postretirement and postemployment benefits from a cash basis to the accrual
basis. The result of these changes in accounting principle resulted in a
reduction of net proceeds resulting from member and non-member business of $13.3
million in 1994. Prior fiscal years were not restated and the cumulative effect
of the change on periods prior to the year ended August 31, 1994, totaling $12.2
million was charged, net of tax, against 1994 net proceeds resulting from member
and non-member business. The change had no effect on the growers' 1994, 1995 or
1996 net beet payments.

American Crystal Sugar Company has a medical plan and a Medicare supplement
plan which are available to substantially all American Crystal retirees.
American Crystal also has a medical plan that covers disabled employees who have
not attained retirement age. The cost of this program is paid by the company.

F-16
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(7) EMPLOYEE BENEFIT PLANS: (CONTINUED)

The rates used in determining the actuarial present value of the accumulated
other postretirement and postemployment benefit (OPEB) obligations are in the
following table:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Discount Rate................................................ 7.5% 7.5% 8.0%
Increase in Future Health Cost............................... 9.75% 10.5% 11.25%
Health Care Trend Rate....................................... 5.5% 5.5% 6.0%
</TABLE>

The components of accumulated OPEB obligations and the periodic OPEB cost
are set forth in the following table. If the health care cost trend rate was
increased by one percentage point for each year, OPEB expense would have
increased approximately $271,000 in 1996, and the actuarial present value of
accumulated OPEB obligations at August 31, 1996, would have increased
approximately $1.9 million.

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial Present Value of Accumulated OPEB Obligations
Retiree Benefits..................................................... $ 3,552 $ 3,261 $ 3,509
Other Fully Eligible Active Plan Participants........................ 2,295 1,934 1,961
Other Active Plan Participants....................................... 7,186 5,292 5,579
--------- --------- ---------
Present Value of Accumulated OPEB Obligations.......................... 13,033 10,487 11,049
Unrecognized Net Gain from Experience Different from Actuarial
Assumptions........................................................ 1,255 2,627 1,202
--------- --------- ---------
Total Accrued OPEB Obligation........................................ 14,288 13,114 12,251
Less Current Portion................................................. 831 397 437
--------- --------- ---------
Non-Current Accrued OPEB Obligation................................ $ 13,457 $ 12,717 $ 11,814
--------- --------- ---------
Net Periodic OPEB Cost:
Service Cost......................................................... $ 903 $ 770 $ 245
Interest Cost........................................................ 742 802 800
Amortization......................................................... (100) (11) --
Transition Obligation................................................ -- -- 12,214
--------- --------- ---------
Net Periodic OPEB Cost................................................. $ 1,545 $ 1,561 $ 13,259
--------- --------- ---------
--------- --------- ---------
</TABLE>

LONG-TERM INCENTIVE PLAN

The Long-Term Incentive Plan provides deferred compensation to certain key
executives of American Crystal Sugar Company effective September 1, 1995. The
Plan creates financial incentives that are based upon contract rights which are
available to the executive under the terms of the Plan, the value of which is
related to the value of preferred shares of the Company. As of August 31, 1996,
there were 234 rights issued, of which 50% were vested.

DEFINED CONTRIBUTION PLANS

American Crystal also has qualified 401(k) plans for all eligible employees.
The plans provide for immediate vesting of benefits. Participants contribute a
percentage of their gross earnings each pay period as provided in the
participation agreement. The Company matches the nonunion and union
participants' contribution up to 4% and 1% respectively, of their gross
earnings. The company's contributions to this

F-17
<PAGE>
AMERICAN CRYSTAL SUGAR COMPANY

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

(7) EMPLOYEE BENEFIT PLANS: (CONTINUED)

plan were $936,000, $887,000 and $580,000 for the years ended August 31, 1996,
1995 and 1994, respectively.

(8) COMMITMENTS AND CONTINGENCIES:

American Crystal had outstanding letters of credit totaling $3.9 million as
of August 31, 1996.

American Crystal is subject to various lawsuits and claims that arise in the
ordinary course of its business. Management believes the disposition of all such
proceedings, individually or in the aggregate, should not have a material
adverse effect on the Company's financial condition.

American Crystal is subject to extensive federal and state environmental
laws and regulations with respect to water pollution, discharge permits, air
pollution, noise pollution and solid waste disposal. American Crystal conducts
an ongoing pollution control program designed to meet these environmental laws
and regulations.

During 1995, the United Sugars' board of directors authorized the
construction of a sugar storage facility at the Crookston factory at a total
estimated cost of approximately $6.5 million. American Crystal is responsible
for the construction of this asset and all costs incurred are reimbursed by
United Sugars. As of August 31, 1996, costs incurred related to the sugar
storage facility were $4.4 million. The company was also committed to an
additional $1.0 million for the sugar storage facility.

American Crystal has outstanding commitments totaling $8.7 million as of
August 31, 1996, for consulting services, equipment and construction contracts
related to various capital projects.

F-18
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR AN OFFER TO PURCHASE ANY
SECURITIES OTHER THAN THE COMMON STOCK AND PREFERRED STOCK TO WHICH IT RELATES
OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary........................................ 2
Selected Financial Data........................ 4
Factors to be Considered....................... 5
Determination of Offering Price................ 7
Use of Proceeds................................ 7
Dilution....................................... 9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 10
Description of Business........................ 15
Property and Processing Facilities............. 24
Employees...................................... 25
Management..................................... 25
Executive Compensation......................... 30
Principal Shareholders......................... 34
Description of Common Stock and Preferred
Stock......................................... 34
Plan of Distribution........................... 36
Legal Proceedings.............................. 39
Related Party Transactions..................... 39
Financial Statements........................... 39
</TABLE>

500 SHARES
OF COMMON STOCK
AND
21,729 SHARES
OF PREFERRED STOCK

[LOGO]

AMERICAN CRYSTAL SUGAR COMPANY

COMMON STOCK
AND
PREFERRED STOCK

---------------------

SUPPLEMENTED
PROSPECTUS

---------------------

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
SEC registration fee.............................................. $ 11,241
NASD review fee................................................... $ 0
Accounting fees and expenses...................................... $ 25,000
Legal fees and expenses........................................... $ 60,000
Printing expenses................................................. $ 40,000
Blue Sky fees and expenses........................................ $ 1,000
Miscellaneous..................................................... $ 12,759
---------
Total......................................................... $ 150,000
---------
---------
</TABLE>

Except for the SEC registration fee, all of the foregoing expenses have been
estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company's By-laws provide for the indemnification of certain corporate
agents, including the Company's directors, officers and employees. Such
indemnification is provided to the full extent provided by Minnesota Statutes
Section 300.082 and acts amendatory thereof or supplementary thereto. The
indemnification provided to the Company's directors, officers and employees
includes coverage for amounts actually and reasonably incurred by such
individuals in connection with proceedings arising by reason of each such
individual's status as an officer, director or employee. The amount for which
the director, employee or officer is to be indemnified includes expenses,
including attorney's fees, judgments, fines and amounts paid in settlement of
claims.

The Registrant also carries a directors' and officers' liability insurance
policy in the amount of $15,000,000.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The Company has borrowed a total principal amount of $5,500,000 from the
City of East Grand Forks, Minnesota; the funds required for the City of East
Grand Forks to provide such a loan were obtained from the issuance of "Pollution
Control Revenue Refunding Bonds", in transactions exempt from the registration
requirements of the federal and state securities laws.

In each year since 1994, the Company has also issued negotiable commercial
paper notes (the "Notes") in an amount of $25,000,000 per year. The Notes were
issued to institutional purchasers and sophisticated individual investors and
have been repaid. The Notes were issued in reliance on the exemption from
registration provided by Section 3(a)(3) of the Securities Act of 1933, as
amended, and in reliance on a No-Action Letter from the Securities and Exchange
Commission to the Company dated October 13, 1987.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

<TABLE>
<C> <S>
*3(i) Restated Articles of Incorporation of American Crystal Sugar Company.

#3(ii) Restated By-laws of American Crystal Sugar Company.

#5.1 Opinion of Doherty, Rumble & Butler Professional Association.

#10(f) Growers' Contract (5-year Agreement).
</TABLE>

II-1
<PAGE>

<TABLE>
<C> <S>
*10(g) Growers' Contract (Annual Contract).

*10(h) Coal Supply Agreement between Registrant and Spring Creek Coal Company, dated
August 1, 1986.

*10(i) Coal Transportation Agreement between Registrant and Northern Coal
Transportation Company, dated August 1, 1986.

*10(j) Beet Loading and Hauling Agreement between Registrant and Transystems, Inc.,
dated May 18, 1993.

*10(k) Form of Uniform Member Marketing Agreement between Registrant and United Sugars
Corporation, dated January 1, 1994.

*10(l) Trademark License Agreement between Registrant and United Sugars Corporation,
dated November 1, 1993.

*10(m) Uniform Member Marketing Agreement, Pool Basis between Registrant and Midwest
Agri-Commodities Company, dated April 14, 1992.

*10(n) Stipulation Agreement between Registrant and State of Minnesota Pollution
Control Agency.

*10(o) Master Agreement between Registrant, United Sugars Corporation, American
Federation of Grain Millers, AFL-CIO, CLC, et al.

*10(p) Loan Agreement between Registrant and St. Paul Bank for Cooperatives, dated
December 20, 1993.

*10(q) Amended and Restated Loan Agreement between Registrant and First Bank National
Association, dated November 22, 1993.

*10(r) Pension Contract and Amendments.

*10(s) Compensation, Severance and Loan Agreement with Mr. J. Famalette, dated March 2,
1992.

*10(t) Compensation and Loan Agreement with Mr. J. Famalette, dated October 1, 1993.

*10(u) Form of Operating Agreement between Registrant and ProGold Limited Liability
Company.

*10(v) Form of Member Control Agreement between Registrant and ProGold Limited
Liability Company.

*10(w) Administrative Services Agreement between Registrant and ProGold Limited
Liability Company

*10(x) Uniform Member Marketing Agreement.

#10(y) Coal Supply Agreement between Registrant and Spring Creek Coal Company, dated
August 25, 1995 (Confidential treatment requested as to certain provisions).

#10(z) Coal Transportation Agreement between Registrant and Northern Coal
Transportation Company, dated August 25, 1995 (Confidential treatment requested
as to certain provisions).

#10(aa) Gas Sales Contract between Registrant and Coastal Gas Marketing Company, dated
as of March 20, 1996 (Confidential treatment requested as to certain
provisions.)

#10(bb) Employment Agreement with Mr. Daniel McCarty, dated as of April 8, 1996.

#10(cc) Form of Subscription Agreement for Preferred Stock (Current Members).
Subscription Document A.
</TABLE>

II-2

<PAGE>
<TABLE>
<C> <S>
#10(dd) Form of Indication of Interest in Purchasing Additional Shares of Preferred
Stock (Current Members). Subscription Document B.

#10(ee) Form of Indication of Interest in Purchasing Shares of Preferred Stock
(Prospective Members). Subscription Document C.

#10(ff) Form of Subscription Agreement (Prospective Members). Subscription Document D.

#10(gg) Form of Representations and Warranties. Subscription Document E.

23 Consent of Independent Public Accountant.

#24 Power of Attorney (included in the signature page to the Registration
Statement).
</TABLE>

- ------------------------

* Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-83868), declared effective November 23, 1994.

# Previously filed.

(b) Financial Statement Schedules.

None.

ITEM 17. UNDERTAKINGS.

The undersigned Registrant hereby undertakes:

(1) 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 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.

(2) for purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.

(3) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus 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
initial bona fide offering thereof.

II-3

<PAGE>
SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MOORHEAD, STATE OF MINNESOTA ON NOVEMBER 8, 1996.

AMERICAN CRYSTAL SUGAR COMPANY

BY /S/ DANIEL J. MCCARTY
-----------------------------------------
Daniel J. McCarty,
CHIEF EXECUTIVE OFFICER
Dated: November 8, 1996

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
POST-EFFECTIVE AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY
THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- ------------------

<C> <S> <C>
/s/ DANIEL J. MCCARTY
- ------------------------------ Chief Executive Officer November 8, 1996
Daniel J. McCarty

/s/ SAMUEL S.M. WAI
- ------------------------------ Corporate Controller November 8, 1996
Samuel S.M. Wai

PAUL BORGEN*
- ------------------------------ Director November 8, 1996
Paul Borgen

THOMAS BRYL*
- ------------------------------ Director November 8, 1996
Thomas Bryl

AIME J. DUFAULT*
- ------------------------------ Director November 8, 1996
Aime J. Dufault

STEVEN M. GOODWIN*
- ------------------------------ Director November 8, 1996
Steven M. Goodwin

COURT G. HANSON*
- ------------------------------ Director November 8, 1996
Court G. Hanson

LONN M. KIEL*
- ------------------------------ Director November 8, 1996
Lonn M. Kiel
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- ------------------

<C> <S> <C>
DAVID KRAGNES*
- ------------------------------ Director November 8, 1996
David Kragnes

WAYNE LANGEN*
- ------------------------------ Director November 8, 1996
Wayne Langen

DUANE LIEN*
- ------------------------------ Director November 8, 1996
Duane Lien

PATRICK D. MAHAR*
- ------------------------------ Director November 8, 1996
Patrick D. Mahar

BARRY W. MALME*
- ------------------------------ Director November 8, 1996
Barry W. Malme

ROBERT NYQUIST*
- ------------------------------ Chairman November 8, 1996
Robert Nyquist

G. TERRY STADSTAD*
- ------------------------------ Director November 8, 1996
G. Terry Stadstad

ROBERT VIVATSON*
- ------------------------------ Director November 8, 1996
Robert Vivatson
</TABLE>

* Daniel J. McCarty, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named directors of the Registrant pursuant to a
power of attorney duly executed by such persons.

By: /s/ DANIEL J. MCCARTY
- ------------------------------------

Daniel J. McCarty,
ATTORNEY-IN-FACT

II-5
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBITS PAGE
- -------- ----
<C> <S> <C>
*3(i) Restated Articles of Incorporation of American Crystal Sugar Company.

#3(ii) Restated By-laws of American Crystal Sugar Company.

#5.1 Opinion of Doherty, Rumble & Butler Professional Association.

#10(f) Growers' Contract (5-year Agreement).

*10(g) Growers' Contract (Annual Contract).