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THE EMERGENCE OF BIOFUELS Our markets are driven by global food consumption, but they are also dynamic-new issues can and do emerge. In the past 18 months, no development has been more notable than the increase in production and consumption of biofuels. Biofuels have long been part of our industry. In fact, Bunge has produced biodiesel since 2002. But with increased government incentives and mandates, the market for biofuels has grown quickly and should continue to do so. The International Energy Association (IEA) estimates that world biofuel production will reach 54 million metric tons by 2015, up from 16 million metric tons in 2004. By 2009, global biodiesel use could equal nearly 30 percent of the world's trade in vegetable oil. In 2006/2007, U.S. use of corn for ethanol could exceed the average amount of the nation's annual corn exports. These figures show the growing influence of biofuels on Bunge's core markets. This influence adds a new and material source of demand for our core products. Higher commodity prices caused by this demand can help boost farmer incomes and prompt greater planting and larger purchases of crop inputs, including fertilizer. Recent events in Brazil offer an example. Incremental demand will serve as another driver of Bunge's business. As such, we have made joint venture investments in biodiesel and ethanol plants in Europe and North America. These plants will be located near our oilseed processing plants and grain elevators. Bunge will supply raw materials and provide risk management and other services. We believe this is the best way to share in the additional value created by biofuels production, while staying true to our focus and core competencies. Beyond greater demand for crops and higher income for farmers, developing biofuels from food crops can help diversify the world's energy supply and reduce greenhouse gas emissions. At the same time, government and industry will need to remain cognizant of the overall potential of these fuels and the possibility for competition among users of agricultural commodities. In a best case scenario outlined by the IEA, biofuels will amount to 5 percent of the world's transport fuel use by 2030. To reach this level will demand a large amount of inputs, and this will create competition for resources and a linkage between food and energy prices. A shortfall in agricultural production-and these happen periodically-could have implications. There are also environmental considerations. Agriculture needs to expand in a sustainable way-balancing essential increases in production with environmental impacts and resource use. Looking ahead, for biofuels to have a meaningful impact on energy and a smaller impact on our food supply and environment, it will be necessary to diversify the raw materials used to create them. This is certainly possible if society continues to invest in next-generation biomass, waste and cellulose technologies and promotes the efficient use of existing agricultural lands through seed technology and productivity enhancements. The biofuels industry holds significant potential for both society and the agribusiness industry. It will continue to grow and evolve, and Bunge will invest in a focused way to participate in it.

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