introduction
We are an integrated agribusiness and food company. We conduct our operations in three divisions: agribusiness, fertilizer and food products. Our results of operations are affected by the following key factors in each of our business divisions:

agribusiness In the agribusiness division, we purchase, process, store, transport and sell agricultural commodities, principally oilseed products. In this division, profitability is principally affected by the relative prices of oilseed products which are, in turn, influenced by global supply and demand for agricultural commodities and industry oilseed processing capacity utilization, and the volatility of the prices for these products. Profitability is also affected by energy costs, as we use a substantial amount of energy in the operation of our facilities, and by the availability and cost of transportation and logistics services, including truck, barge and rail services. Availability of agricultural commodities is affected by weather conditions, governmental trade policies and agricultural growing patterns, including substitution by farmers of other agricultural commodities for soybeans and other oilseeds. Demand is affected by growth in worldwide consumption of food products and the price of substitute agricultural products. Global soybean meal consumption grew by approximately 5% per year on average over the last 20 years. We expect that population growth and rising standards of living will continue to have a positive impact on global demand for our agribusiness products.

From time to time, there may be imbalances between industry-wide levels of oilseed processing capacity and demand for oilseed products. Prices for oilseed products are affected by these imbalances, which in turn affects demand for them and our decisions regarding whether and when to purchase, process, store, transport or sell these commodities, including whether to reduce our own oilseed processing capacity.

fertilizer In the fertilizer division, demand for our products is affected by the profitability of the Brazilian agricultural sector, agricultural commodity prices, international fertilizer prices, the types of crops planted, the number of acres planted and weather-related issues affecting the success of the harvest. For the past 13 years, the Brazilian fertilizer industry has grown on average at a rate of 9% per year. The continued growth of the Brazilian agricultural sector has had, and we expect will continue to have, a positive impact on demand for our fertilizer products. In addition, our selling prices are influenced by international selling prices for imported fertilizers and raw materials, such as phosphate, ammonia and urea, as our products are priced to import parity.

food products In the food products division, which consists of our edible oil products and milling products segments, our operations are affected by competition, changes in eating habits and changes in general economic conditions in Europe, the United States and Brazil, the principal markets for our food products division, as well as the prices of raw materials such as crude vegetable oils and grains. Competition in this industry has intensified in the past several years due to consolidation in the supermarket industry and attempts by our competitors to increase market share. Profitability in this division is also affected by the mix of products that we sell.

In addition, our results of operations are affected by the following factors:

foreign currency exchange rates
Translation of Foreign Currency Financial Statements Our reporting currency is the U.S. dollar. However, the functional currency of the majority of our foreign subsidiaries is their local currency. We translate the amounts included in the consolidated statements of income of our foreign subsidiaries into U.S. dollars on a monthly basis at weighted average exchange rates, which we believe approximates the actual exchange rates on the dates of the transactions. Our foreign subsidiaries' assets and liabilities are translated into U.S. dollars from local currency at year-end exchange rates, and we record the resulting foreign exchange translation adjustments in our consolidated balance sheets as a component of accumulated other comprehensive income (loss).

Included in other comprehensive income for the year ended December 31, 2004 and 2003 were foreign exchange net translation gains of $217 million and $489 million, respectively, representing the net gains from the translation of our foreign subsidiaries' assets and liabilities. Included in other comprehensive income (loss) for the year ended December 31, 2002 were foreign exchange net translation losses of $403 million representing the net loss from the translation of our foreign subsidiaries' assets and liabilities.

Foreign Currency Transactions Certain of our foreign subsidiaries, most significantly those in Brazil and Argentina, have monetary assets and liabilities that are denominated in U.S. dollars. These U.S. dollar monetary items are remeasured into their respective functional currencies at exchange rates in effect at the balance sheet date. The resulting gain or loss is included in our consolidated statements of income as foreign exchange gain or loss.

Due to the global nature of our operations, our operating results are vulnerable to currency exchange rate changes. However, our inventory of agricultural commodities, because of their international pricing in U.S. dollars, provides a natural hedge to our exposure to fluctuations in currency exchange rates. In addition, historically, our fertilizer and food products divisions also have been able to link sales prices to those of U.S. dollar-linked imported raw material costs, thereby minimizing the effect of currency exchange rate fluctuations in those segments.

Argentina and Brazil The volatility of the Argentine peso and Brazilian real affects our financial performance. Devaluations of these currencies against the U.S. dollar generally have a positive effect on our results, as local currency-denominated costs are translated to U.S. dollars at weaker real or peso to U.S. dollar exchange rates resulting in lower U.S. dollar costs. In addition, commodity inventories in our agribusiness segment are stated at market value, which is generally linked to U.S. dollar-based international prices. As a result, devaluations cause gains based on the changes in the local currency value of the agribusiness inventories. Conversely, devaluations generate offsetting net foreign exchange losses on the net U.S. dollar monetary position of our Brazilian and Argentine subsidiaries, which are reflected in foreign exchange losses in our consolidated statements of income. Our effective tax rate is also favorably affected by the devaluation of the Brazilian real as we recognize tax benefits related to foreign exchange losses on certain intercompany loans.

Appreciations generally have a corresponding negative effect on our results when local currency costs are translated to U.S. dollars at stronger real or peso to U.S. dollar exchange rates and losses are generated based on changes in the local currency value of our agribusiness segment commodity inventories. Conversely, the appreciation of the real and peso generates offsetting net foreign exchange gains on the net U.S. dollar monetary position of our Brazilian and Argentine subsidiaries, which are reflected in foreign exchange gains in our consolidated statements of income. Our effective tax rate is unfavorably affected by the appreciation of the Brazilian real as we incur income taxes related to foreign exchange gains on certain intercompany loans. However, as management deems prudent, we use derivative instruments to offset the foreign exchange gains on intercompany loans, which reduces the income tax expense resulting from the appreciation of the Brazilian real.

The real appreciated 9% and the peso devalued 2%, against the U.S. dollar in the year ended December 31, 2004, compared to an appreciation of the real and peso of 22% and 15%, respectively, in the same period in 2003.

We use long-term intercompany loans to reduce our exposure to foreign currency fluctuations in Brazil, particularly their effects on our results of operations. These loans do not require cash payment of principal and are treated as analogous to equity for accounting purposes. As a result, the foreign exchange gains or losses on these intercompany loans are recorded in other comprehensive income (loss) in contrast to foreign exchange gains or losses on third-party debt and short-term intercompany debt, which are recorded in foreign exchange gains (losses) in our consolidated statements of income.

European Operations We operate in countries that are members of the European Union and several countries that are not members of the European Union. Our risk management policy is to fully hedge our monetary exposures in those countries to minimize the financial effects of fluctuations in the euro and other European currencies.

acquisitions In 2004, we acquired the remaining 17% of the outstanding capital stock of Bunge Brasil that we did not already own for $314 million in cash. As a result of the acquisition, we now own 100% of Bunge Brasil and its subsidiaries, Bunge Alimentos S.A. and Bunge Fertilizantes S.A. We have consolidated the operating results of these entities since 1997. We accounted for the acquisition under the purchase method as a step acquisition of minority interest.

income taxes As a Bermuda exempted company, we are not subject to income taxes in our jurisdiction of incorporation. However, our subsidiaries, which operate in multiple tax jurisdictions, are subject to income taxes at various statutory rates.

In 2003, the sale of our Brazilian soy ingredients business to Solae for a gain of $111 million did not result in taxable income and therefore no income tax was provisioned.

We have obtained tax benefits under U.S. tax laws providing tax incentives on export sales from the use of a U.S. Foreign Sales Corporation, or FSC, through 2001. Beginning in 2002, due to the repeal of the FSC-related legislation, we were required to use the tax provisions of the Extraterritorial Income Act (ETI) legislation, which were substantially similar to the FSC-related legislation. The U.S. Congress has recently passed, and the President has signed, the American Jobs Creation Act of 2004 that ultimately repeals the ETI benefit. Under the new legislation, the ETI will be phased out with 100% of the otherwise available ETI benefit retained for 2004, 80% of the ETI benefit retained for 2005, 60% of the ETI benefit retained for 2006 and the ETI benefit phased out completely in 2007. The current tax legislation lowered our overall tax liabilities by approximately $17 million in 2004. The ETI benefit has been replaced with an income tax deduction intended to allocate benefits previously provided to U.S. exporters across all manufacturers when fully phased in. Although most of our U.S. operations qualify as "manufacturing," we expect that this new tax legislation will be less beneficial to us than the prior one primarily due to our U.S. tax position.

inflation Inflation did not have a material impact on our business in 2004, 2003 or 2002.