commodities risk We operate in many areas of the food industry from agricultural raw materials to the production and sale of branded food products. As a result, we use and produce various materials, many of which are agricultural commodities, including soybeans, soybean oil, soybean meal, wheat and corn. Agricultural commodities are subject to price fluctuations due to a number of unpredictable factors that may create price risk. We are also subject to the risk of counter-party defaults under forward purchase or sale contracts.

We enter into various derivative contracts, primarily exchange-traded futures, with the objective of managing our exposure to adverse price movements in the agricultural commodities used for our business operations. We have established policies that limit the amount of unhedged fixed-price agricultural commodity positions permissible for our operating companies, which are a combination of quantity and value at risk limits. We measure and review our sensitivity to our net commodities position on a daily basis.

We use a sensitivity analysis to estimate our daily exposure to market risk on our agricultural commodity position. The daily net agricultural commodity position consists of inventory, related purchase and sale contracts, and exchange-traded contracts, including those used to hedge portions of our production requirements. The fair value of that position is a summation of the fair values calculated for each agricultural commodity by valuing each net position at quoted average futures prices for the period. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in prices. The results of this analysis, which may differ from actual results, are as follows:

Year Ended December 31,
(US$ in millions)					2004						2003
	Fair      Value			Market Risk			Fair      Value			Market Risk
Highest long position	$	414		$	41		$	517		$	52
Highest short position		(13	)		(1	)		(50	)		(5	)

currency risk Our global operations require active participation in foreign exchange markets. To reduce the risk of foreign exchange rate fluctuations, we follow a policy of hedging net monetary assets and liabilities and transactions denominated in currencies other than the functional currencies applicable to each of our various subsidiaries. Our primary exposure is related to our businesses located in Brazil and Argentina and to a lesser extent, Europe and Asia. To minimize the adverse impact of currency movements, we enter into foreign exchange swaps and option contracts to hedge currency exposures.

When determining our exposure, we exclude intercompany loans that are deemed to be permanently invested. The repayments of permanently invested intercompany loans are not planned or anticipated in the foreseeable future and therefore are treated as analogous to equity for accounting purposes. As a result, the foreign exchange gains and losses on these borrowings are excluded from the determination of net income and recorded as a component of accumulated other comprehensive income (loss). The balance of permanently invested intercompany borrowings was $961 million as of December 31, 2004 and $681 million as of December 31, 2003. The balance of permanently invested intercompany borrowings increased $280 million in September 2004 as a result of the acquisition of an additional 15% interest in the outstanding shares of Bunge Brasil. Included in other comprehensive income (loss) are foreign exchange gains of $96 million in the year ended December 31, 2004 and foreign exchange gains of $118 million in the year ended December 31, 2003, related to permanently invested intercompany loans.

For risk management purposes and to determine the overall level of hedging required, we further reduce the foreign exchange exposure determined above by the value of our agricultural commodities inventories. Our agricultural commodities inventories, because of their international pricing in U.S. dollars, provide a natural hedge to our currency exposure.

Our net currency positions, including currency derivatives, and our market risk, which is the potential loss from an adverse 10% change in foreign currency exchange rates, are set forth in the following table. In addition, we have provided an analysis of our foreign currency exposure after reducing the exposure for our agricultural commodities inventory. Actual results may differ from the information set forth below:

December 31,
(US$ in millions)			2004			2003
Brazilian Operations
	(primarily exposure to U.S. dollar):
Net currency short position, from financial
	instruments, including derivatives	$	(1,091	)	$	(1,080	)
Market risk			(109	)		(108	)
Agricultural commodities inventories			988			1,063
Net currency short position, less
	agricultural commodities inventories		(103	)		(17	)
Market risk		$	(10	)	$	(2	)
Argentine Operations
	(primarily exposure to U.S. dollar):
Net currency short position, from financial
	instruments, including derivatives	$	(81	)	$	(32	)
Market risk			(8	)		(3	)
Agricultural commodities inventories			93			71
Net currency long position, less
	agricultural commodities inventories		12			39
Market risk		$	1		$	4
European Operations
	(primarily exposure to U.S. dollar):
Net currency short position, from financial
	instruments, including derivatives	$	(320	)	$	(239	)
Market risk			(32	)		(24	)
Agricultural commodities inventories			283			254
Net currency (short) long position, less
	agricultural commodities inventories		(37	)		15
Market risk		$	(4	)	$	2