Mark Haden - Director - Investor Relations Soren W. Schroder - Chief Executive Officer & Director Andrew J. Burke - Chief Financial Officer.

Adam Samuelson - Goldman Sachs & Co. Ann P. Duignan - JPMorgan Securities LLC Farha Aslam - Stephens, Inc. David C. Driscoll - Citigroup Global Markets, Inc. (Broker) Evan Morris - Bank of America Merrill Lynch Robert Moskow - Credit Suisse Securities (USA) LLC (Broker) Kenneth B.

Zaslow - BMO Capital Markets (United States) Neel Kumar - Morgan Stanley & Co. LLC.

Good morning and welcome to the Third Quarter 2015 Bunge Earnings Conference Call. My name is Vanessa, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. And I will now turn the call over to Mr.

Mark Haden, Director of Investor Relations. Sir, you may begin..

Thank you, Vanessa, and thank you, everyone, for joining us this morning. Before we get started, I want to inform you that we have prepared a slide presentation to accompany our discussion. It can be found in the Investors section of our website at bunge.com, under Investor Presentations.

Reconciliations of non-GAAP measures disclosed verbally on this conference call to the most directly comparable GAAP financial measure are posted on our website in the Investors section.

I'd like to direct you to slide two and remind you that today's presentation includes forward-looking statements that reflect Bunge's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties.

Bunge has provided additional information in its reports on file with the SEC concerning factors that could cause actual results to differ materially from those contained in this presentation and encourages you to review these factors.

Participating on the call this morning are Soren Schroder, Chief Executive Officer; and Drew Burke, Chief Financial Officer. I'll now turn the call over to Soren..

Thank you, Mark, and good morning to everybody. During the third quarter, Bunge delivered a solid EBIT and returns in a challenging market. While some headwinds could persist, we anticipate that our 2015 performance will be stronger than 2014 with growth in earnings, core returns well above WACC and progress across all aspects of our strategy.

The Ag and Food market environment continues to be a mixed bag. On the positive side, global demand for Bunge's core products is growing solidly, soy crush margins are strong, and local farmer selling and a strong export pool have extended the Brazilian Agribusiness season, which plays in to one of our core strengths.

At the same time, farmer retention in the Northern Hemisphere and spot buying by customers, have pressured margins in some places. This is clear in the softseed complex in Canada and in Europe where margins are down 40% to 50% from 2014.

Conditions are unlikely to change in the short-term given the reduced rate in canola crops, so we're adjusting crush rates accordingly. And in the U.S. a speedy harvest, farmer retention and a significantly smaller export book have pressured grain origination and export margins.

In addition, the operating environment for Food & Ingredients in Brazil continues to be extremely weak. Reduced consumer demand, inventory reduction across the value chain and the domestic oil surplus have pushed edible oil gross margins down 35% to 40% and volumes about 10% when compared to last year.

In the face of all these challenges, our teams delivered higher EBIT than in 2014 and combined returns in Ag and Food of 10.3%, three points above our WACC. We managed risk effectively recovering from the second quarter price spike.

We capitalized on good opportunities including the significant pickup in farmer pricing for both old and new crop grain in Brazil, and generated important savings in our efficiency and productivity efforts.

In Agribusiness, we're making very good progress on operational improvements in both crush and logistics with about $35 million realized so far this year.

Combined with continued focus on working capital, flow and risk management, especially in regions where margins are weak, our Agribusiness EBIT should exceed $1 billion this year along with strong returns. And despite a somewhat weaker margin structure, we expect to grow EBIT again in 2016.

In Foods, milling is performing best with solid returns and results in Mexico and stable earnings in the U.S. In Brazil, we are holding margins steady to higher in local currency and we are managing cost tightly. However, we've not been able to overcome the 8% drop in volume driven by the weak environment.

As I mentioned before, our oils business especially in Brazil is under significant pressure in both margins and volumes because of the economic slowdown and we're accelerating efforts to reduce cost and improve our footprint.

Operational improvements are a key part of our Food & Ingredients strategy and even more important in the face of headwinds as we're experiencing now. So far this year, we have generated approximately $40 million in benefits and now expect an annual run rate of about $50 million, up from earlier estimates of $40 million.

Foods should finish the year with EBIT between $200 million and $225 million, which is clearly below our targeted run rate. In 2016, we expect an increase of $50 million from our improvement program in addition to the gains as Brazil stabilizes and returns to growth. We're committed to our strategy of increasing the share of added value in Bunge.

With the wheat milling acquisition of Pacifico in Brazil, Bunge will improve its leading national milling footprint and B2B offerings. In the U.S. where our integrated oils business is performing well, we added Whole Harvest Foods which produces specialty oils for the foodservice and retail segments.

This fits well in the healthier choices and natural origins elements of our Food & Ingredients strategy and expands our ability to address the emerging consumer requirements for health and functionality.

In Sugar & Bioenergy, the quarter was lower than expected, but we continue to improve our milling business, and the recent increase in ethanol prices in Brazil will benefit us in Q4. There is always weather risk, but we should end up the year EBIT and cash flow positive.

With the recovery in sugar prices and the competitiveness of ethanol next spring, the margin outlook is favorable. Looking ahead, we will stay disciplined on cost, capital allocation, and focused on execution.

We have a strong balance sheet, a clear strategy, a winning footprint, and a great team which will deliver solid earnings this year along with excellent returns and a path for solid growth into 2016. With that, I will turn it over to Drew for more details on the financials..

Thanks, Soren, and good morning. Let's turn to slide four in the earnings highlights. Total third quarter segment EBIT was $414 million versus the prior-year quarter of $316 million. This year's quarter includes a $47 million gain on the sale of certain Canadian grain assets to G3 Global Grain Group.

Excluding this gain on sale, adjusted EBIT was $367 million versus the prior year of $316 million, driven by our performance in Agribusiness. On a year-to-date basis, adjusted EBIT is up 10% to $892 million.

For the quarter, Agribusiness adjusted EBIT was $322 million versus $186 million in the prior year due to higher results in both Oilseeds and Grains. Oilseeds EBIT was $106 million versus $68 million in the prior year. Soy crushing results were strong with increases in the United States, Argentina, and Europe and continued good performance in Brazil.

Processing margins were supported by strong global demand for soybean meal. Asian processing margins and results remain depressed. Oilseeds margins and profits were down due to farmer retention in both Canada and Europe. Grains third quarter EBIT was $216 million versus $118 million in the prior year driven by strong farmer selling in Brazil.

Other regions' origination businesses performed at a similar level to last year, but were not significant contributors to results due to low levels of farmer selling.

Results in our trading and distribution business which included the recovery of the approximately $50 million of losses on open positions at the end of the second quarter were good and they performed at a level similar to last year.

Our global team managed risk well during the quarter as crop prices declined reflecting good harvest and inventories built in most regions. On a year-to-date basis, Agribusiness adjusted EBIT was $786 million versus $576 million last year as both Oilseeds and Grains performed well above prior year.

Our Foods business quarterly EBIT was $45 million versus $74 million in the prior year with most of the decline occurring in our operations in Brazil as a result of the difficult macroeconomic environment and significant currency devaluation. Edible Oil's quarterly EBIT declined from $37 million to $13 million.

Performance improved in our North American business due to higher margins in both refining and packaging. Our performance improvement initiatives continued to produce savings. In Brazil, margins and volumes were pressured due to the rapid contraction of consumer demand and the significant devaluation of the real.

While volumes are rebuilding from lower levels, margins will take time to recover. Results in our European operation were also down in the quarter largely due to the weak economic environment in certain countries which more than offset the savings from our performance improvement initiatives.

Current quarter milling EBIT was $32 million versus $37 million in the prior year. Our Mexican wheat milling business performed well as higher margins and volumes more than offset the impact of currency devaluations.

Our Brazilian wheat milling business was impacted by lower volumes and margins due to the rapid contraction of customer demand, particularly from the foodservice channel and a significant devaluation of the real. In local currency, our team managed to hold margins similar to last year's levels. U.S.

corn milling results were down on lower margins; however, volumes increased in the quarter. Sugar & Bioenergy recorded EBIT of $3 million versus $44 million in the prior year. There was a swing of $19 million in mark-to-market effects as we recorded a gain of $12 million last year versus a loss of $7 million this year on sugar industrial hedges.

The $7 million should reverse into income in the fourth quarter. Milling results were lower year-over-year as higher volumes were offset by lower pricing and decreased sugar content in the cane. While production volumes increased, they were below expectations due to more rain days than normal which reduces milling time.

Trading and merchandising results were below a strong prior year period as margins declined. Our adjusted earnings per share was $1.24 in the third quarter of 2015 versus $1.31 in the prior year.

Our EPS was negatively impacted by a higher tax rate as our earnings mix has shifted towards our Brazilian Agribusiness operation, which has a high marginal tax rate and away from Asia where we have lower statutory rates.

We have also taken a $15 million valuation allowance against certain tax assets we have in Asia as our ability to use those assets is uncertain. For the nine-month period, our adjusted earnings per share have increased from $3 to $3.36 a share. Let's turn to slide five and our return on invested capital. This remains a key area of focus for us.

Our trailing four-quarter return adjusted for certain gains and charges for Bunge overall is 8.3%, which is 1.3% over our cost of capital. For our core Agribusiness and Foods businesses, our return was 10.3%, well over our cost of capital and the 8.4% at December 31, 2014.

The increase reflects both an increase in earnings and a reduction in asset levels. Moving on to slide six, and our cash flow highlights, cash provided by operating's activities was $633 million year-to-date in 2015. Funds from operations were $745 million.

Changes in working capital was an outflow of $102 million due to increases in our advances to farmers and inventories, reflecting an increase in our origination activities. We continued to maintain strong liquidity with $4.3 billion available under committed credit lines.

Turning to slide seven and the capital allocation process, maintaining a BBB credit rating remains our primary focus, and we always ensure we maintain the appropriate financial and balance sheet strength.

After that, we allocate funds between capital expenditures, mergers, and acquisitions and returning funds to shareholders based on the alternative that provides the highest long-term value to our investors. To-date, we have spent $365 million on capital expenditures and are projecting an annual spend of approximately $750 million.

This is below our original forecast of $875 million and is partly due to the deferral of spend to future years. Key projects underway include the wheat mill in Rio de Janeiro, a port and crushing project in the Ukraine, and a maintenance rebuild of our port in New Orleans. We have spent $97 million on acquisitions this year.

One of our priorities is to continue to expand our capabilities in value-added food businesses. To that end, we acquired Heartland Harvest, a U.S. producer of extruded die cut food pellets earlier this year.

And in the fourth quarter, we had closed on the acquisition of Whole Harvest Foods, a leading refiner and packager of expeller pressed commercial cooking oil. In the fourth quarter, we expect to close on the acquisition of Pacifico, a major wheat mill in Santos, Brazil.

In the third quarter, we also made a major step-forward in our Canadian grains business as G3 Global Grain Group, our joint venture with Saudi Agricultural and Livestock Investment Company, known as SALIC, acquired the former Canadian Wheat Board business and combined it with Bunge's Canadian grain business to establish a formidable Canadian grains franchise.

We have returned $478 million to shareholders this year through dividends and shared buybacks. In the third quarter, we purchased $100 million of shares bringing our year-to-date total to $300 million. Let's turn to slide eight in the outlook.

We expect 2015 return on invested capital of approximately 10%, which is three percentage points over our cost of capital. We continue to expect the Agribusiness to achieve a full year EBIT of over $1 billion. Demand for soybean meal and oil is strong with the USDA projecting 6% growth in global meals consumption and 5% in oil.

Gross margins have come down a bit from the recent highs in the United States and Brazil that are still good. In the United States, strong domestic meal demand, increased biodiesel production and increased exports with the arrival of the harvest are the key drivers.

Brazil is benefiting both from increased domestic demand from the poultry and the hog sectors as well as strong export demand. Argentina's performance is dependent on farmer selling, which we do not anticipate to be strong in the fourth quarter. China margins remained depressed despite good demand growth.

Sunseed margins are improving with the arrival of new crop and increased farmer selling. Rape and canola margins remain challenged due to smaller crops and soft demand. Arrival of new crops will bring increased utilization in our United States and Black Sea grain facilities.

United States grain margins have been lower than usual and are likely to remain so throughout the quarter. However, our Brazilian grain assets are benefiting from higher utilization and export demand due to the large safrinha corn crop and its low cost position. Turning to slide nine.

In Foods, as Soren indicated, we expect full year EBIT to be in the range of $200 million to $225 million. We continue to place strong emphasis on operational efficiency and supply chain optimization to offset the impact of difficult macroeconomic and market conditions in Brazil and certain Eastern European markets.

European margins should see some recovery with the arrival of new crop. Our North American businesses should continue to perform well. In Sugar, we continue to expect to finish 2015 EBIT and cash flow positive, assuming weather cooperates so we can crush our targeted volumes.

Brazil is, once again, the world's low cost sugar producer and there is strong domestic demand and an improving price outlook for ethanol. Our tax rate, excluding notables is projected at 28% to 30% given our anticipated earning mix in 2015. Going forward, we would expect this rate to decline.

I will now turn it back to the operator to take your questions.

Vanessa?.

Thank you. And we have our first question from Adam Samuelson with Goldman Sachs..

Thanks. Good morning, everyone. So, I guess my first question is on the Agribusiness guidance and the outlook. The profit of an excess of $1 billion implies you're going to be above $214 million of profit in the fourth quarter, which seasonally is a bigger quarter given Northern Hemisphere harvests.

Last year, you were $319 million, but that included an $80 million mark-to-market hedge, and a $30 million loss on your Chinese soy crush inventory.

I'm wondering if you could think about some of the pieces in the outlook that you talked about Soren, why would the guidance be just better than down 50% on the base business for 4Q and maybe think about what's really better and worse year-over-year..

Yeah. Okay, thank you for that question. It's a good one in the context of what is clearly a bit of a more mixed environment than what we had at the same time last year.

The way we are framing is we bracket the downside, so when you talk about the gap between the $1 billion and where we are now, that is a conservative number, and we did frame it by saying that the outlook for the year will be at least $1 billion. So, in reality, we expect something better than that.

How much better is a little hard to tell at the moment when you look at the sort of mosaic of what makes Agribusiness. We clearly have the outlook for another good quarter in soy crushing both in North America, I'll say also in Brazil, Southern Europe; although it is probably not as excellent as it was last year, it is still very favorable.

Softseeds on the other hand is a headwind both in Canada and particularly in Western Europe in rapeseed. So, that's an offset. And I'd say you have to compare Brazilian grain origination and exports which will be strong throughout the fourth quarter against what is clearly a weaker environment in North America.

So, on balance, I would say that we will end up better than the downside bracket that we've indicated, but how much? I really – we don't want to get too far ahead of myself on that. But it is likely to be something better than that $214 million difference.

But probably a bit shy of the Q4 last year if you include the $80 million mark-to-market that you just added back in. So, somewhere in between that..

Okay. That's helpful. And then you also said that you think Agribusiness EBIT would grow in 2016 despite a weaker margin structure.

And I'm hoping you could elaborate on that thought a little bit, both in terms of the areas where the margin structure you think is going to be worse as well as what gives you confidence on the growth side?.

Yeah. I mean, we'll walk into 2016 I think with a continued pressure on North America grain handling margins. I don't think that will change much. But Brazil should be very good starting early in the year and then carrying on through the summer. And Argentina, of course, is a little bit of the wild card. But it does represent upside.

I don't think you – you look back over the last couple of years in Argentina, in many ways, it really has been insulated from participating in the global flows in a big way. And I think almost irrespective of who wins the election at the end of November, Argentina should open back up in a favorable way for us. So, I'll say Brazil, Argentina, U.S.

soy crush are the positives, North America grain handling and softseed crush in Europe and Canada for the first couple of quarters will still be the offsets, but on balance I think with discipline on how we manage risk, cost, a lot of our improvement efforts around logistics and just how we manage flows, really carry through to the bottom line as well, increased volumes, I think we can be pretty confident that we can grow earnings into 2016 even though the margin environment is a bit of a mix..

All right. Great, that's very helpful. I'll pass it along. Thanks..

Okay. Thanks, Adam..

And thank you. Our next question comes from Ann Duignan with JPMorgan..

Hi. Good morning..

Good morning, Ann..

Hi, Ann..

Normally, you reiterate your target for 2017, $8.50. I don't think I heard it but I might have missed it.

Are you backing away from that or is that still the target?.

I'd say, we should break it into the components a bit and say that in Agribusiness, we see the path to roughly $1.4 billion that is implied in that $8.50, which we put forward in December last year. It will be incremental improvement every year. Our performance improvement programs will play a big part on this.

And in many ways, the footprint we have should get us there. So, Agribusiness we feel comfortable with the path to the $1.4 billion, where I'd say we probably have a little bit more pause and caution is around how quickly we can ramp up the Food & Ingredients income to the $475 million, which was implied in the $8.50.

Given the setback in Brazil, in particular this year but also in the Ukraine and in Russia, Eastern Europe in general, it is probably going to be a little bit short of that $475 million target. I don't want to give a specific number. But let's put it this way.

The $8.50 is intact, but it might take us another year to get there than what we had put forward last year. But the Agribusiness component, we feel good about, and as I mentioned, Food, in the current context, we probably need another year to get there..

And that's difficult for us to project because once Brazil and those Eastern European countries' economies stabilize, they get some growth back into those markets, we would expect the Food margins to return to their historical levels in those markets. And if they do come back to the historical levels, we could meet the $8.50 for 2017.

I think we're just expressing some caution that we're not so sure how rapid that recovery will be and it may hold it off for a longer period. But if you look at the base businesses and what we're accomplishing in running those businesses, it feels like we're on track..

Okay. I appreciate that. That's good color. And then, just secondly, as we look globally, the world has adequate burdensome supplies of most commodities. This should be the ideal environment for Bunge to be operating in.

What's been the biggest surprise to date in this environment?.

It is volume-wise a favorable environment that is correct, and demand is growing at a rate that is at least as big, if not bigger than we had expected. But I will say that the biggest overall surprise is probably the amount of farmer retentions we have globally. It's not just North America. It is pretty predominant throughout most of the world.

Farmers don't like lower prices. They're putting the grain away or the seeds away, and that has had probably more of an impact in compressing margins than we would have expected despite the big crops. So if you're looking for one surprise, that's probably it. That being said, grain handling volumes are going to be up.

Crush volumes, particularly in soy, are very favorable. So there are many aspects of the business that are doing very well as you can tell from our results and our outlook despite this circumstance..

Great. I'll leave it there. Thanks. I'll get back in line..

And thank you. Our next question is from Farha Aslam with Stephens, Inc..

Hi. Good morning..

Morning..

Morning..

Could we talk about your crush margins and profitability in China? How does that look going out into the fourth quarter and into next year?.

Okay. China is I'd say much improved this year compared to last year for sure. But I'd say it's still on the road to recovery. Margins, they've been on the positive side most of the year, probably something close to forecast, but in reality most of the time covering variable plus a little bit more.

As we get into the fourth quarter here, we're talking margins that are somewhere between variable and fully loaded cost. So better, but still not where they should be. But we have seen a return of, say, more discipline. You can see it reflected also in the way that the Chinese market in general is buying soybeans.

This time last year we had a phenomenal amount of soybeans pre-bought for future shipments. This year a lot of the demand, which is still very strong, is taking place on a stock basis. So, the market, in general is a little bit more cautious and disciplined.

I would think that as we get into 2016 and 2017, more normal conditions will return into China in terms of crush. In other words, conditions we saw prior to last year, which means that China should enjoy margins that are forecast plus.

And that will obviously help the industry and Bunge in particular, and also help us with earnings mix, because clearly China has been – or Asia in general, has been one of the regions where we underperformed this past year relative to our expectations, but it feels like it is on the right path..

And my one follow-up on that one is there's a lot of M&A that's happening in the food space, particularly in potentially Agribusiness.

Are you still kind of thinking sub-$500 million?.

Farha, yes, our main focus has been to look at the bolt-on acquisitions available in our space, particularly as we look to grow out our value-added foods businesses and add capabilities in that area.

And that's where you've seen us go and then where we've had opportunistic chances, or not opportunistic, but chances to strengthen our Agribusiness origination footprint. We obviously look at transactions of that nature, which for the most part are in the bolt-on category, too, such as the Canadian Wheat Board.

So our focus here has really been to build up those two strengths. We continue to look primarily at those type of transactions. And I know there's a lot in the press about our industry and possible transactions. But we don't comment on any speculation around what might happen in the industry as far as transactions goes..

Sure. I was just trying to understand, historically you've just said that for now you're just going to stick on to tuck-on acquisitions..

Yes..

Is that going to be contained in your pocket?.

Yes. And I'll say that is so far still the case as evidenced by what we've done so far, the two acquisitions we mentioned, Pacifico and Whole Harvest Foods, plus what we did with Canadian Wheat Board.

The bottom line is that we have an Agribusiness and also in Food a five-year strategy that fills in the gaps, let's say, the winning footprint without having to do big things. The Canadian Wheat Board acquisition with SALIC is clearly a beginning to a bigger play in Canada that we will build upon over the next couple of years.

And so we have the plan how to complete Bunge, let's put it that way, without having to reach for bigger deals..

That's helpful. Thank you..

And thank you. Our next question is from David Driscoll with Citi Research..

Great. Thanks a lot. Good morning, everybody..

Morning, David..

I wanted to talk a little bit more about food products. You gave a lot of good information, but I want to try to pull a couple things together. So the $200 million to $225 million, correct me if I'm wrong, that's a reiteration of what you told us last quarter..

Right..

So if I'm right about that, if my memory is right, how come – maybe you don't tighten that one up a little bit kind of given the third quarter performance. It feels okay, it feels good, it feels like you should be saying $225 million. But I always get a little nervous when the ranges don't change and you have a quarter in the bag.

What's kind of on the bubble here as we go in the fourth quarter food products?.

I think, David, what's happening there is we've got markets that are recovering and margins that are recovering, and it really has to do with the pace of the recovery and how quickly it comes, and we're just trying to give the range of what it could fall into and be on the conservative side.

So I don't think we have any big worries, but these are markets that are moving quickly and we've seen them come back. So there's nothing in particular, no particular worry.

It's just how strong the margins would come in and I would say we've just tried to bracket kind of the upside and downside for you versus being too precise in an environment that's a little bit uncertain..

We've said that the fourth quarter should be a sequential improvement to the third quarter, which we believe it will. And the question is, is it a $20 million or $30 million sequential improvement. That we really won't know until the end of the quarter, but it is in that order of magnitude..

Okay. So I think that math would still put us kind of closer to the upper end of this range than the lower end of the range. And what I really care about here is 2016, but the fourth quarter run rate I think matters. Food products has never been a business that was crazy seasonal.

So if the fourth quarter number is at that kind of $60-ish million plus million or $70 million type level, I feel like I want to take that one, extend it into 2016 and then add on to it the cost savings that you're going to continue to produce in that business.

So, again, if my thinking is right, then having a number in kind of a $300 million to kind of $330 million for 2016 would be kind of somewhere in the ballpark of what this thing is likely to do? Is my logic at least reasonable?.

Your logic is reasonable but the timing of all this pretty much depends on Brazil. And the way that we are thinking about it here is that the turnaround in Brazil really probably won't happen until the second half of next year.

And so I think you might be a little bit on the optimistic side with the $300 million to whatever you said, $320 million or $330 million. It's likely to be $300 million on the top side with a little bit of a bracket to the down. So I don't want to give too much guidance.

But where we end up this year, pick a number, call it, $215 million or $220 million, add the $50 million and then some amount for the recovery and some of our East European and Brazilian businesses as the year goes through, and you'll probably end up with, again, I'm giving you a range here, $270 million to $300 million is probably about right..

All right. That's really helpful. And then on the tax rate, guys, I've been covering this name here since you came public. And I tell you what, the tax rate is like the rollercoaster from hell.

Can you give us any comments here, Drew, on this tax rate? I mean a 400-basis-point movement here in your full-year tax rate in the new guidance this morning kind of what happened in the third quarter? And it's not too much criticism. I understand the geographies move all around and this is really brutal.

But as hard as it is for you guys, it's like impossible on the outside. So I really need to go to 2016 and beyond that for some kind of semblance. I mean should we be in the 30% zip code, the 25% area, and I know food products recovery is probably very germane to the answer here.

But why don't you fill in the details?.

Yes. Thank you, David. For this year we're looking at between 28% and 30%, and I think our guidance back in June was to around 26% where we were looking forward to be. So, as you say, we get a pretty significant jump. I think two things cause that jump in the short term; one is Brazilian Agribusiness has performed very well.

We expected it to have a good year. But as the devaluation rolled through and farmer selling has really stepped up, we expect a very strong second half from our Brazilian Agribusiness operations. At the marginal rate, Brazil is a high tax jurisdiction country at about 34%.

So, while our overall rate in Brazil is below that, the incremental extra dollars comes in at pretty high number. The other thing to remember for Brazil, just to remind people about Brazil, is that we have significant tax assets in Brazil from prior years. The exact amounts are disclosed in our SEC filings.

But it means that we pay very little cash taxes in Brazil. We're mainly using net operating loss carry-forwards in tax credits that we have to pay those taxes. On the other side, we did expect Asia to have – particularly China to have positive margins in the back half of this year.

We had thought the soybean excessive inventories that had gone out of the country to a large extent with the financial players pulling back and that we would get back to a more historical margin structure where we're actually earning margins above our cost. That didn't happen and that is a very low tax rate jurisdiction.

So while the overall profit number maybe don't seem from the outside like they have moved a tremendous amount. Between those two places and a couple other places, there has been significant movement and the tax differential on those numbers is up in the 30% range. So it moved it quickly.

If we look forward – I mean, we started this year saying 25% and then around June we thought about 26%. That would come out of a model – something in that range should start to come out of a model of a normalized earnings structure for us and looking at the way we're structured for next year.

So, we still feel comfortable with that range and feel comfortable with a couple years for everything we're doing to be in place for the rates to go a bit lower than that, but you've seen us put up very low rates and very high rates, so it depends on where it goes, but I would think a rate in that range for the long-term or mid-term is about right and then longer-term I think it might turn down from there..

I really appreciate the guidance and understand the complexity there. I'll pass it along. Thank you..

Thanks, David..

And thank you. Our next question comes from Evan Morris with Bank of America Merrill Lynch..

Good morning, everyone..

Good morning..

Good morning..

Just your comments that you made on the U.S.

market, the weak origination export, can you just talk a little bit more about that? Is it just a timing issue and things will reverse themselves? Is there something more structural? If it is a timing issue, when do you expect that environment to look a little bit better? If you can just give a little bit more color around that?.

Yes. It's a bit complex in the sense that we do have on the export side a clear shift of exports away from the U.S. to, for example, Brazil and the Ukraine in the case of corn, a significant shift.

Brazil is really taking the world stage in export in corn here for the next – well, has been and will be for the next several months, and that's definitely the biggest single change. Wheat exports U.S. just hasn't been competitive throughout the entire season, and so it's the Black Sea and Europe that's taking most of that.

So there is a clear shift away from the U.S. to some of the more, let's say, competitive origins, and Brazil clearly has been that one. A lot of that has had to do with the weaker exchange rate and the higher prices in local currency that farmers like, so that we will not get back. That being said, soybean exports will remain strong out of the U.S.

for the fall and into the beginning of next year, but that extra, that 10 million tons of flow that will go elsewhere for the first three or four months of the season, it is one of the reasons why export margins have been under pressure and that is unlikely to change this year.

Now it's possible that as we get into the middle of the second quarter, the corn export demand will swing back to the U.S. and we'll get a bit of a revival. But for the fourth quarter, I think the stage is kind of set and it won't get much better.

The second aspect of this really is the fact that farmers just don't like prices, and they have the capacity and they've invested on farm storage for the last several years and they're putting their crop away.

That has narrowed carries, so they are earning revenue on storing grain for the industry in a fairly dramatic way, the fact that we haven't really had much tension in the transportation sector, so whether that's barge, freight or rail. So far there's harvest and harvest is all but done.

It means that the ability to earn big carries on storing grain for the commercial industry is also not there. That is I believe also structural for this year. Now, next year all kinds of things can change. But I believe that for the sort of 2015-2016 campaign, the stage is kind of set and it's unlikely to recover by a lot.

Now, next year – we will see how things turn next year. But for the next couple of quarters that is what we have to look forward to..

Okay. That was really helpful. And then just shifting back down to Brazil to your sugar and bioenergy business. The environment there has certainly improved a bit and certainly better than was a year ago. So, it sounds like you're getting a little bit incrementally positive at least on the profit outlook.

So, I guess, one, could you give us a sense as to how much better things are getting incrementally? And as we look into 2016, sort of based on what you know now versus what it was like six months ago, what that could mean for profit? And secondly, if the environment is improving, how does it change the outlook or the possibility of a sale of those assets as you continue that process?.

Okay. You're right that the environment for Brazilian cane crushing, sugar production and ethanol is definitely better now than it was a year-ago. And it looks like it's going to get sequentially better in 2016. And, of course, a lot of it has to do with the reduced cost of producing sugar in dollars.

So, the cost of production if you look into next year now is probably somewhere around $0.12 a pound or maybe a little bit more depending on location. But well below where you can actually hedge sugar. And so, I'd say for the first time, when you look into a future campaign, you can actually secure reasonable margins as a sugar producer.

And then the question is really to what extent does ethanol follow? But ethanol, if you look into next year's new crop, April, May, Brazilian ethanol is the most competitive ethanol in the world. So, you think that there'll be good demand for that as well.

So, it is different in the sense that you can actually, as a producer, look into the following crop and secure margins that are quite reasonable. And in that sense, we are optimistic that we will end up this year positive in EBIT, positive in cash flow and next year should be a bump up from that.

How much of a bump, it's still too early to tell, but it'll be sequentially better. In terms of our view on how to position the business, we are still in the mode of finding ways to reduce exposure as we've said.

But given the fact that Bunge as a whole now has returns that are well in excess of our cost of capital, and the business fundamentals are improving, we'll take our time to find the right solution, and we're working on that and I can't give you any timing on it. But, the business is not a drain to Bunge. We can see signs of improvement.

And the industry will probably take another year or so to recover. And, we'll be keeping a sharp eye out for opportunities but without feeling pressure to do anything in a hurry..

Perfect. Thank you..

And thank you. Our next question comes from Robert Moskow with Credit Suisse..

Hi. Thanks. I guess you just kind of answered my question I was going to ask on sugar and how to position it, potentially for a sale. But my understanding is that the conditions in the ethanol market are getting much stronger, and you've said yourself that sugar, Brazil is the low cost producer in the global export market.

Would it be possible for Bunge to consider running the business for more than just breakeven? You said you wanted to work on reducing your exposure even further I think is what you said.

But if conditions in the market are good, why reduce it further? Why not try to capture a little bit of the upside?.

Well, I mean, that's why we're not putting a timing on this. We'll see how the industry develops over the next year; all the signs are favorable. And, so, we will be patient in how we essentially optimize and find the best value for shareholders through this path, through this period. And, indeed, the market conditions are turning quite favorable.

So, no date, no timing, but in the long run a reduced exposure to the milling piece of the business is what we are still seeking and that can take many shapes and forms..

Okay. Thank you very much..

Thanks..

And thank you. Our next question comes from Ken Zaslow with Bank of Montreal..

Hey. Good morning, everyone..

Morning, Ken..

Hey, Ken..

Obviously, a lot of questions asked. Just to make sure I get a couple of understanding. One is I know you increased your tax rate.

What is the impact on cash?.

Ken, as I said earlier, we pay the majority of our tax, or the most taxes in Brazil by far, and that is a market where we have significant tax attributes from prior years both in the terms of NOL carryfowards, tax credits, tax receivables, which were all disclosed in our filings. So, in the end, we would pay very little cash tax in Brazil.

So, we don't pay a significant amount of cash taxes. Certainly, we don't pay the whole portion in cash taxes, but certainly there are jurisdictions where we do pay cash taxes..

So, the increase in tax rate really is somewhat meaningless in the scheme of your operations.

Is that fair?.

It's meaningless in terms of the way the cash would flow. I want to be careful to say it's meaningless because eventually it comes around and you use your tax attributes up. So the rate is higher in this year. It's higher in a place where we've got tax credits, so we're not having a big impact on cash.

But over time, we certainly want to take the steps and have the business structure for the rate to come down. I don't want to imply in any way that it's not an area we're focused on. But the particular driver of the increase this year is not in an area where we pay cash taxes..

Okay. The second question is, you talk a lot about farmer retention around the world. I guess, what I'm trying to figure out is, okay, so Brazil, they're releasing.

Argentina, after the election will they release you expect? And how long will it take for them to release?.

Yeah. Argentina is the wild card. I think there are various theories as to how the devaluation will take place post election depending on who the candidate is. I think everybody is in agreement that there will be devaluation of the peso in some form. I'm not going to handicap what the election outcome will be.

But I think it's fair to say that we all believe that starting sometime in the first quarter, the Argentine farmer will start letting loose on some of the soybeans that are accumulating.

They'll be sitting on over 10 million tons of beans as it looks right now as we move into the new crop and some of that should come out in the first quarter prior to their new crop harvest. And the pace with which it comes out is really dependent upon the election outcome and so forth.

But Argentina will undoubtedly be more of a factor this year than it was last year. In all likelihood, it will impact crush rates and exports of products. My view, probably on the other side of March. So, the U.S. should still have a decent share or its continued share of global meal exports for the first couple of months of the new year.

But Argentina will be one place in which we look for an increase in farmer selling, no doubt..

Okay.

So, they can't hold it through the whole year, right? We will see soybeans have South America come to market?.

For sure they will, but I mean, I think they....

But....

But you're talking probably – sometime in Q1. I don't expect it to be in December necessarily..

Again, I don't think it matters. I mean, 2016 is – I think it's fine..

Yeah. Yeah..

In the U.S., can the farmer hold soybeans for a year, two years? How long can they hold it for?.

I don't know how long they can hold it. But your guess is as good as mine on that. But I would say that this is now the second large crop in a row. You would expect that some of this will come to market prior new crop plantings which will be March and April. So, there should be a wave of farmer movement as we get into the end of the first quarter.

And then we'll see from there. But so far, the harvest came and went very, very fast. It was over in two weeks. And a lot of the grain got put away. So, I would say, in general, farmers probably surprised the industry by their ability to hold grain longer than we all expect. And so I wouldn't handicap it too much..

I guess, my point that I'm trying to get at is, so although right now that you see farmer retention, the reality is in 2016, we're going to see Brazil, Argentina and the U.S. all release some soybeans somewhere through the year next year. So....

Yeah. That's correct..

Okay.

So, your caution on next quarter is irrelevant for 2016? Is that a fair assumption?.

Every quarter plays out a little differently. I think for the fourth quarter, the one we're in right now, retention is a clear factor. This can change very quickly with price, with currencies as we get into the first quarter, and it might even change with currencies in the fourth quarter.

Brazil, for example, is supersensitive to the foreign exchange movements. The same thing is true in places like the Ukraine. So, I don't think you can make a unilateral statement about how the timing of farmer selling will be throughout next year.

The crops will come to market, that's clear, either because farmers – prices will eventually have to get to the point where farmers like them or cash flow will tell them that they have to market their crops. So, the timing of that takes as many facets and some of them are price, some of them are cash flow, some of them are currency related.

But, in general, I think it is fair to say that with large crops globally 2016 should be a year where we all handle ample crops across the geographies..

Okay. And my final question is on your $8.50 guidance, I guess that I think most people understand that the food product was at risk the whole way.

I guess what I'm trying to figure out is, if there's a way that you can bracket the impact you think if we stay at these current levels, how much did that knock off the $8.50? Is it $0.50 or is it $1.00 or some sort of parameters to kind of put it in? Because our calculation is about $0.50. I didn't know if it was larger or smaller than that..

So, I think your range is right. It's probably $0.50 to $0.75 looking at 2017. That's the order of magnitude translated into the delta in our Food & Ingredients performance relative to the $4.75 we indicated to you back in December last year..

Great. I appreciate it. Thank you very much..

Okay. Thanks..

Thank you. And we have our next question from Vincent Andrews with Morgan Stanley..

Hi. This is Neel Kumar calling in for Vincent. I was just wondering if you could elaborate a little bit more on the timing of your CapEx spend changes..

We've extended things out for two reasons. In a couple of cases as we look at the markets and when a capacity is needed, we don't want to get ahead of that, so we've deferred some projects a little bit.

In a couple of other projects, we've deferred just as the normal spending time of when it makes the most sense to do the construction and for engineering reasons. So, you've had two deferrals for those reasons that'll reduce our spend by about $125 million this year.

Some of that will come back into next year as those projects ramp up, and we go ahead and do them..

Got it.

I guess my second question was, could you just talk a little bit more about the impact of the Brazilian farmer getting less credit? Does that mean you will have to barter more and is that what we're seeing in the changes in working capital?.

No. These are minor amounts, but it is true that you will probably have to. We already are stepping up our either bartering or lending to very select farmers. And so, it's not a full-fledged program, but we are selectively helping farmers expand their production where the credit is warranted.

As banks in particular in Brazil have stepped back from extending credit, we are filling part of that void, but in a very, very selected way..

Got it. Thanks..

And thank you. We have no further questions at this time. I will now turn the call back over to Mark Haden for closing remarks..

Great. Thank you. If there's no more further questions then we'll close the call now. Thank you, everyone for joining us..

And thank you, ladies and gentlemen. This concludes today's conference. We thank you for participating and you may now disconnect..