Bunge Global S.A. (BG) Q3 2011 Earnings Report, Transcript and Summary

Welcome to the Q3 2011 Bunge Limited Earnings Conference Call. My name is Monica and I'll be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the call over to Mark Haden. Mr. Haden, you may begin.

Great. Thank you, Monica. Thank you, everyone, for joining us this morning. Welcome to Bunge Limited Third Quarter 2011 Earnings Conference Call. 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, www.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 2 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 Alberto Weisser, Bunge's Chairman and Chief Executive Officer; and Drew Burke, Bunge's Chief Financial Officer. I'll now turn the call over to Alberto, and he'll begin with Slide 3.

Good morning, everyone. It was a difficult quarter with lower results in all segments except Fertilizer. This particular volatile period was marked by significant price movements and a combination of external factors that resulted in markets moving at times differently than underlying fundamentals. Managing risk in our agribusiness and sugar & bioenergy segments in this environment proved to be challenging. Lower than planned sugar milling volume, due to the impact of adverse weather conditions in each of the past 2 seasons on our sugarcane yield, also weighed on our results. However, looking forward, we expect results to improve in the fourth quarter and see optimistic signs for Bunge in 2012. While the global macroeconomic environment presents uncertainties, there are reasons to expect resilience in our businesses. First, many of our products are basic staples needed to feed the world's growing population. USDA forecast that demand for global soybean meal and vegetable oil will increase by 5% and 4%, respectively. In fact, global vegetable oil consumption has increased for 31 straight years. Second, global commodity stocks-to-use ratios remain relatively tight, particularly in feed grains and vegetable oils. Even in this scenario of lower economic growth, the world needs additional supplies of crops while prices should remain at attractive levels, providing farmers with good economics. Growing demand should encourage increased planting, increased fertilizer use and increased trade, which Bunge's global network is well equipped to handle. We also expect a much stronger performance in our sugar & bioenergy segment in 2012. Sugar and ethanol prices in Brazil should remain strong due to the continued uncertainty about the development with the Brazilian center-south cane crop where approximately 90% of the country's sugarcane is grown, and importantly, the region needs to expand production to support global sugar trade and the growth in domestic ethanol demand. With those factors in mind, we are on track to have 50,000 hectares of newly planted sugarcane ready for the next harvest, which puts us near the top of the industry. This will provide needed raw material to operate our mills closer to capacity and enable us to demonstrate the potential of this business. Fertilizer are getting closer to our targets for the business. We are managing risk in the business well. Volumes are picking up, and we are working on more opportunities to reduce costs. I'm confident that next year, this business will deliver on its potential. Now we will turn it over to Drew, who will discuss our third quarter financial results and outlook.

Thank you, Alberto. Let's turn to Page 4. Our net income in the quarter was $140 million versus $212 million in a strong prior-year quarter. On a year-to-date basis, our net income was $688 million versus $339 million in the prior year adjusted for the $1.9 billion gain on the sale of our fertilizer nutrients business and other notable items. Volume in the quarter increased from 34.6 million tons to 38 million tons, primarily due to higher processing and origination volumes in Brazil and more exports out of the Black Sea. Agribusiness reported results of $159 million versus $313 million in a strong 2010 quarter. On a year-to-date basis, agribusiness has earned $731 million versus $463 million in the prior year. Adjusting for notable items, the comparison would be $694 million in 2011 versus $503 million in 2010. The decline in our agribusiness EBIT compared to the 2010 quarter results primarily from our grain merchandising business. 2010 had strong margins resulting from the supply dislocation related to the Black Sea drought. While volumes improved in 2011, margins in risk management results were lower. Oilseed results were slightly above prior year as better results in Brazil were offset by reductions in North America and Asia. Sugar & bioenergy incurred a loss of $43 million in the quarter. We were at a loss in our sugar merchandising business, a $29 million charge related to foreign exchange impacts on forward sales of sugar. Foreign exchange related losses were reversed as the sales were executed. Our industrial business was profitable in the quarter. Sugar crop in Brazil continues to come in below expectations for Bunge and the industry. This lower level of cane availability means that our business has not been able to realize its earning potential despite strong demand and pricing for our products. The loss in our merchandising business occurred in the quarter as we were not able to generate sufficient margins to cover high logistics cost in Brazil due to poor congestion and their operating expenses. Mark-to-market loss of $29 million is related to foreign exchange hedges of forward sales of sugar. Mark-to-market impact were reversed and appear as profit as we execute the sales. In food & ingredients, we earned $46 million adjusted for the sale of the Montreal facility versus $90 million on an adjusted basis excluding notables in the prior year. The main reason for the decline was our wheat milling business. In 2010, wheat milling benefited from an inventory gain as we sold stocks that have been purchased prior to the significant increase in wheat prices. Volumes were also down as we emphasized margin management. The edible oils business in Brazil and Europe also experienced a decline as competitive pressures resulted in reduced margins. The European business was also impacted by higher raw material cost, resulting from a smaller crop in the prior year. Our corn milling business continues to perform well. The fertilizer business earned $23 million in the quarter as both our Brazilian and Argentine businesses performed well. Brazil continues to progress on its transition. Focus remains on increasing volumes while maintaining margins. We continue to look for opportunities to reduce cost. Adjusted for notable items, our fully diluted EPS was $0.86 per share in the 2011 quarter versus $2.26 in the prior year. On a year-to-date basis, our EPS is $4.15 versus $2.15 in the prior year. Let's turn to Page 5 in our balance sheet highlights. Overall, balance sheet levels are down due to the devaluation of the Brazilian real and the reduction in commodity prices. Our debt net of cash decreased by $300 million as we generated significant cash from operations. In addition to reducing our net debt, cash from operations was also used for $705 million of capital expenditures, $145 million of dividends and $120 million in our share buyback program. Our equity balance declined by $525 million primarily due to currency translation adjustments related to the devaluation of the Brazilian real offset by our net income. During the quarter, we repurchased 1.9 million shares of stock for $120 million. We have now spent approximately $474 million of our $700 million stock repurchase program. We have $226 million remaining on that program. Turning to our cash flow statement. Funds from operations were $1.3 billion, and it's primarily generated by our net income of $688 million plus depreciation, depletion and amortization of $398 million. Our CapEx year-to-date is $575 million and that is in line with our targets for the year. We turn to Page 7. Our liquidity position remains comfortable. At the end of the quarter, we had $3.3 billion of committed credit facilities, of which $2.9 billion was unused and available at September 30, 2011. If we turn to Page 8 and discuss our outlook, we expect a good close to the year and a stronger 2012. In grains, the significant dislocation of the prior year no longer exists but the supply-demand balance is still relatively tight and there is need to move substantial quantities from origins to destinations. The large grain crops in open markets in both the Ukraine and Russia should provide near -- good near-term opportunities. South America is expecting large crops in 2012. If you take a look at our oilseed processing business, the outlook is mixed. In Europe, we expect strong sunseed margins as they have had a large crop and demand is strong as the rapeseed crop has been smaller and will a little bit short. In the U.S., margins are improving with a higher utilization, past utilization during harvest but they do remain under pressure as there is overcapacity in the market and there is sales supply available from South America. In Canada, the canola gross margin should remain very good. There is a big crop, and the demand for canola oil remains strong. In China, margins have improved but are still at low levels. The positive long-term trends remain in place. USDA is forecasting 10% year-over-year growth in soybean meal consumption in China. In South America, we expect good margins as the new harvest is realized. If we turn to sugar & bioenergy, we're reducing our full year sugarcane milling expectations to 14 to 14.5 million tons due to the impact of the adverse weather in both last year and this year on the development of the sugarcane crop. For 2012, we expect to mill 17 to 19 million tons as we are completing a strong planning program of 50,000 hectares. We will have another major planning program next year and should be positioned to use our full crushing capacity of 21 million metric tons in 2013. Pricing is expected to remain strong as demand for sugar continues to grow, as well as for Brazilian ethanol, and there continues to be some concerns about what the size of the Brazilian center-south crop will be. We do still expect to continue to earn $8 to $10 per ton of EBIT in this business. If we look at food & ingredients, the competitive environment in Brazil is easing a little bit, which should give us some opportunity for better margins. In Europe, we'll benefit from the large sunseed crop as there is much more oil available for processing and should let us expand our margins a bit. Our milling businesses should continue to perform well. In fertilizer, farm economics remain good. As Alberto said, we'd still need large crops and there should be large planning, so our volumes have been improving, and we expect they will continue to improve in the fourth quarter and throughout 2012. Our margins in fertilizer remains solid. Overall, we expect a solid finish to the year and a stronger 2012. Agribusiness and food should continue to grow and earn solid profits. Fertilizer's transition should be near completion, and profit should hit our target levels. With a much larger sugarcane crop, our sugar business should be able to show its potential. I'll now turn the call back to Monica and we would be happy to take your questions.

[Operator Instructions] Our first question comes from Bryan Spillane of Bank of America.

It's actually Ryan filling in for Bryan. I guess last quarter, you gave kind of a profit outlook for sugar slightly below, I guess, your $8 to $10 target. Can you update us what that would be, I guess, for this year?

The $8 to $10 we talked about is for next year. So the fourth quarter should be good.

Will it be in that range or slightly below?

You remember, it starts -- we are soon stopping to mill and we are selling from our inventory. So we have to see what kind of volumes we also keep in inventory to sell in the first quarter. So it's a little bit complicated. I prefer to talk it on an annual basis and more for next year, but it should be positive.

Okay, but you think even though you're below your full capacity next year, you could still get to that target in 2012?

Yes, that's exactly what we are saying. Yes.

Okay. And then I guess just for the quarter, could you -- is there a way to breakout, could you give us an idea of what the industrial profit was versus the merchandising profit or how bad merchandising was? Because I think it would be interesting. I mean, this is one of the first quarters where it's a clean comparison between you and what your comparison would be to the industry more I guess on the industrial side in terms of what your profitability is. Can you give us a breakdown of what that was?

We don't break those numbers out specifically, but let me try to help you a little bit. The loss in the quarter was $43 million, and we said the biggest piece of that loss is coming from the foreign exchange mark-to-market charge, which is really a timing difference between charge being relating -- occurring now on the mark-to-market and the foreign exchange derivative and the profit coming when we sell the product, so that will reverse as we go forward. If you take that out of the $43 million, that brings you down to, I guess, $14 million. And we said it was a small profit on industrial. So if you balance that altogether, you can kind of get a feel for how it played out.

And you can think in terms of merchandising business sugar & bioenergy is -- normally, the profitability is something between $3 and $5 per metric tons, and we originate and distribute around 5 million tons. So that gives you an idea that the trading and merchandising business is not a very large contributor on the profitability.

Our next question comes from Christina McGlone of Deutsche Bank.

Alberto, when I look at agribusiness and I look at the gross profit per ton, it was a lot weaker than I expected, and I guess what I want to understand is if I think about merchandising, prices are -- it seems like margins are more muted than they were last year than the first half and we still have overcapacity in North America. I just want to know what -- are there any pockets of strength globally and what are they? And then what's the fundamental catalyst in the areas that are weak to change things so that we can see this profitability improve?

I would say that the main reason in this quarter was really the high level of volatility and there were -- prices moved fast all over the place, and therefore, we and also farmers and customers were much more spot and on a spot basis and there were less opportunity to earn higher margins especially in the green area. And oilseed processing was a little bit better, but it's still not at a very attractive level. So I think it was a little bit unique this quarter because of the volatility and everybody taking risk off the table. But when I look forward the fourth quarter and I look next year, we continue seeing solid demand, the balance, supply and demand of both oilseed and grain, are being tight, giving us good opportunities. So I think this was a little bit unique this quarter.

And Christina, just to add a little more, it's the catalyst going forward. I think there is going to be a large export volumes out of the Black Sea region this year. Their harvest is much better and the markets are free. We added the Nikolayev port during the year and that will be running at or near -- at full capacity or very near it in the fourth quarter as those crops come through our port, and Russia is doing well on that basis. So I think the whole Black Sea region, near term in the grain business, is getting some real opportunity. And I think you saw in the first half of the year the grain business out of South America has become a lot more attractive. It's not that active in the fourth quarter but as next year's harvest come in, we think that area will again be very attractive and those products will be demanded around the world. So I think the grain merchandising business overall has a solid future. It's just if you look at where the demand is and you look at the amount of product that's got to be moved from origin to destination, there's a lot of opportunity.

Speaking of the ports, can you give an update on Longview and when we'll see that contribute?

Longview is nearly ready, so the construction is nearly ready. So we are starting to receive first shipments. So it is on the ramp up phase. So we should see some contribution next year. This year, we should not see anything yet.

Okay. And Alberto, I guess just more of, kind of a bigger picture question, it seems like we've seen a lot more on-storage facilities built in the U.S., and so right now, you're seeing farmers hold on to their grains more than usual. And I'm wondering if that changes anything in terms of origination profitability in North America, kind of like when silo bags became -- used in Argentina to a much bigger extent. Does that alter your profitability? And if you could comment on basis and what does that mean for the fourth quarter.

Yes. We don't expect that, Christina, because it is more a reaction of the additional demand, and grain needs to be -- there needs to be more grain exported into Asia. So we don't expect that to have a negative impact on margins.

And basis in the fourth quarter?

I would comment more on the margin side. We expect it to be solid as we have a good crop, and a large crop, that needs to be shipped, and there was less volume in the third quarter as farmers and customers were all a little bit more shy because of the uncertainties in the market and it now needs to be moved. We feel good about the fourth quarter.

And last question, Drew, on foreign exchange, it seems that maybe you had hedged out the Brazilian currency because it didn't seem to have as big of an impact on SG&A as I saw it. I don't know if that's the case, but if it is, would you -- are you going to able to benefit from the weaker real in the fourth quarter and in '12?

One -- Christina, a couple of things. First, our business is a little bit less real-dependent than what you think of historically, because the fertilizer business was much more currency driven than the sugar business is. The sugar business is more of a real and more of a domestic business. When you come back and look at agribusiness, certainly, a devalued currency will provide some opportunity for us and that should flow to our results.

You have to remember that the average exchange rate last year, I think, was 1.74. This year, the average was 1.66. So we did not see as a benefit. The increase was more towards the end of the quarter.

I guess, I didn't see SG&A as high as I would have thought given that year-over-year strengthening.

Yes.

Yes. I think -- the reason it didn't go as high as you would have expected, I think, is a credit to our Brazilian team who has done a very good job in reducing G&A expenses. So the real base is lowered, and I think that's why with the strengthening, you didn't see the increase we have taken. Necessary actions will offset that.

Our next question comes from David Driscoll of Citi.

First question, I just want to go back to volatility. So typically, Alberto, and I always think that volatility is good for your business and that, really, your game is to be a good risk manager. You made comments in the press release and on the prepared script about risk management did not go favorably in the quarter. So really, 2 questions here. The first one is, does risk management results in the third quarter, do they have implications in the fourth quarter? And then secondly, 1 million people are going to call and just simply ask what actually did go wrong in risk management. Can you talk a little bit about that? I believe in one of our competitor's results, they've talked about ocean freight went heavily against them while they had good corn trading. So those kinds of comments, I think, are helpful.

Look, there were a lot of complex uncertain external factors, weather, macro uncertainties, crop reports, just to name a few, which influence the commodity crop markets during the quarter, which made it more -- much more challenging to navigate. The oilseed prices were not necessarily reflecting underlying fundamentals. It makes positioning much more challenging, but we all operated more cautiously and we walked away from some businesses that in a different environment, we might have executed. We conducted much more back-to-back transactions. Counterparty exposure becomes a concern. So as a result, margins in merchandising were lower. So it was really very erratic movements, 4 or 5 times, it went all over the place. So you take risk off. You are more careful. Now for me, this is very real that it's so much like this. So you are naturally more careful. I don't think this has -- you should not see this being repeated in the next quarter. I think the next quarter should be more normal. It's really that it happens like it happened in the third quarter.

On sugar, high sugar prices -- conceptually to me, given that you have -- you own farmland and are processing sugarcane, they seem like to be a good thing, but of course, the past 2 years in the third quarter, you keep reporting losses and problems here. Just for a lot of people out there, can you just talk about this and really address the issue here that this -- I believe, high sugar prices are good for you guys. This is a risk management issue that's going on at the company that I believe you can correct. So -- well, first off, do you agree with my statements? Would you characterize it differently? And thus, is the confidence in 2012 very high?

Look, we feel very comfortable about the business. Last year, at 13 million tons, we had a small loss in the industrial side. So this time, this year, it is positive. So the trend is clearly in the right direction because this business has a huge amount of fixed cost. So it is very dependent on volumes. So 14 million tons, 14.6 million tons, whatever, 14.5 million tons is low for our capacity. So as we were able to significantly invest in planting and replanting this year, these 50,000 hectares was a good yield because these are new fields and it makes us very confident about getting an ideal situation. We should be able to get to 19 million tons, but we are being a little bit careful in saying it might be a little bit less if there are some weather issues, and the impact is immediately to the bottom line because contribution margin is high. So I feel very good. All the mills -- all the 8 mills have been running. The problems we had last year were fine. If we did not have this issue on the merchandising business and the foreign exchange, it would have been a very solid quarter already, but obviously, we are not yet at full potential because we need to get closer to our capacity. As you remember, our capacity is 21 million tons. We have fixed cost related to 21 million tons. All our efforts are increasing at the moment, both the agriculture side and increasing also, cogeneration, which is a very good contributor of profit. So we feel very good about it as we look into 2012 and '13.

Just last statement then or question. So really boiling it down, volatility hit Bunge negatively in the third quarter but the fourth quarter should improve. There is no carryover from that. 2011 grain tightness continues, and that's fundamentally positive for the business. Crushing margins get better in the fourth quarter and into 2012 because of the demand outlook. And then sugar, simply put, this should get tremendously better in 2012 and even show improvement in the fourth quarter. So do you agree with those statements? And then does that all then simply say that earnings in 2012 are improved over '11 directionally?

I would agree with that. I would add that fertilizer would also be delivering on its potential as we ramp up. I think we have the risk management part and the margin management is -- we are very, very comfortable. We have now many, many months where it gives us the confidence that we have this completely under control and managing well. Volumes are ramping up, and we are doing better on volumes. We continue finding opportunities to reduce the cost of fertilizer. So I would add fertilizer should also contribute much better next year.

Our next question comes from Christine McCracken of Cleveland Research.

First, just to follow up on that fertilizer line of questioning, it seemed like volumes, obviously on a easy comparison, were up pretty strongly, but was there any pull forward of sales in the quarter that might actually drive faster results in the fourth quarter?

No, not at all. We are seeing a very, very normal pattern of the volumes.

And then just I think about how fertilizer prices have increased. I think you saw some benefit from an early buy of fertilizer this year. Wouldn't it make it more difficult next year on a relative basis?

Look, this is no different for us because we don't have the mines anymore. We are managing this very, very tightly. We are trying to keep the minimum in terms of inventory. So all of our focus is much more on really earning the spread. So it's positive and negative. So if prices go up, we will benefit less, but when prices go down, we will also be harmed less. So our focus is much more like we're doing on the grain and the oilseed business. It’s much more on the margin.

Good to hear. And then just on the outlook for demand on your crushing business, as I think about global livestock liquidation in several areas, with the exception of the expansion in China, can you talk about what your assumptions are around how that demand might look for next year? It sounds like you're relatively optimistic that demand, in fact, will continue at kind of historical growth rates, but is there some reasons to think that maybe it'll be a little slower next year?

Look, we share the view of USDA that meat demand should grow 2.5% next year and meal, 5%. So we share that view. We think that, that is in line.

Okay. And you're not seeing any quality issues in the U.S. meal supply that might affect kind of overall demand?

At the moment, you're probably talking about lower protein content. Look, you might see something like that, but we don't think this is going to have any impact on margins or earnings.

Our next question comes from Diane Geissler of CLSA. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: I have a question on -- for sugar next year, what's your production estimate?

It's ideally 19 million tons, but we're giving a range from 17 to 19 million tons of sugarcane. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: Okay, and so given the ongoing or lingering impact and we kind of really won't know until March, can you give us an idea in terms of the rootstock, the health of the rootstock, et cetera? Is there a probability there that you're going to hit the low end versus the high end?

We have seen it this year, so we have to be careful. But this year, we really -- whatever needed to be done and replanted from the damage of last year, we did it. So that is why the 50,000 hectares is a combination of something like half and half of replanting and new area, and we feel quite good about the quality of the fields. We have seen that also, on relative terms, we have been probably one of the ones who have invested the most in replanting in the industry. So we are feeling quite confident about next year. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: Okay. And then just moving over to the merchandising side of the business. The port situation there is sort of always problematic. Is there any reason to think that merchandising will get any easier next year or am I missing something?

No. I think it will improve. I think what you had is a little bit higher cost than usual in the Brazilian situation on the one hand. And secondly, with all the volatility, et cetera, we didn't earn typically the size margins we would expect to earn at a gross profit level. So you had lower gross profits than you would expect on the transactions and elevated costs on the logistics at the same time. I would certainly expect the margins to come back to historical levels next year. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: Okay. And then I just -- I have sort of the broader question that I get from investors quite a bit. The biggest complaint about Bunge is, we can't predict the earnings. And I guess when I look at your business and I think about sort of the other companies that compete in your space, it is a fairly consolidated space in terms of companies that have asset networks that are as large as yours. I know feedstock, et cetera, shifts from company to company, but my general question is, why is it given the consolidation in this industry and your critical plays on the chain between the farmer and kind of the users of what the farmer is growing? Why can't we see better margins even on an operating basis? So -- I know it's sort of subject to the whims of global demand on soybean meal or whatever. I mean, pick your feedstock. If you would think that there are only 3 global crushers, you would be able to get a better margin. I think that's kind of another sort of source of frustration with investors in addition to the earnings. Can you just maybe comment on that like why in a consolidated industry we're not seeing sort of richer margins?

I would say 2 comments to -- in this regard. First of all, I would say there is much less volatility when you look at the earnings on a yearly basis. First, look at the last 5 years on agribusiness, on food and ingredients. It's true. Profitability moves sometimes from one quarter to the other. On a quarterly basis, it's problematic. Look on a yearly basis, it's pretty stable. It is -- obviously, it's more volatile than some other industries, but we feel that on a yearly basis that we have a relatively good visibility. Obviously, there are some variations there but it's not as large as we're on a quarterly basis. We feel good about that, and if there is some disruption, it is often very, very clear, like in the case of sugarcane with the production. Now in terms of margin structure, people tend to forget that there are a lot of smaller players also all over the place. There's 2.5 billion tons of grains worldwide. So when you take the top 5 largest players, if you take the whole crops worldwide, it is fragmented. People tend to think that it is much more consolidated than it really is. I hate to admit it so. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: So you're just saying the smaller players kind of exist to...

They do make a difference. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: To keep the big players honest.

Yes, they do make a difference. Look at it. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: Not quite, is that it?

No. They do make a difference.

The next question comes from Vincent Andrews of Morgan Stanley.

I've got 2 questions. One on sort of the USDA Grain Stocks reports and another on sort of what's happening with the CFTC. Alberto, you kind of commented on this yourself in your some discussion about agribusiness in the quarter, but there is a lot of controversy over the -- particularly the most recent Grain Stocks report and there has been about other ones particularly this year. That report sort of said that there was an incremental 200 million bushels of corn relative to what people thought. Was that consistent with sort of what you see in your inventory or what you were seeing coming in, or what have you? Or how did you view that report? It obviously had an impact on how do you market things at the end of the quarter.

I think the whole industry was a little bit surprised. Obviously, we were -- everybody was a little bit surprised here. There was so much talk there.

And just sort of as a follow-up to it, people have always argued that 5% stocks to use in corn is sort of that bare minimum level. Do you think that level might actually be higher now that the ethanol industry has grown and so forth? And 5% was the floor number that was hit back in the 90s, but do you think maybe it's closer to 6% or 7%, which is sort of where the USDA thinks we are now?

It could be, Vincent. I think the reflection on the prices indicates that it is too tight. Despite all of these -- the fact that we found more inventories but the commodity prices are where they are, it's an indication it's a little bit too tight.

Yes. I guess what I was getting at was that they said we had more inventory and presumably, that should have meant that your sales and some of your competitors should have looked and said, "Oh, we have more corn than we thought." It doesn't sound like that -- that was the case. And I'm just wondering if from your perspective -- because those types of reports can be disruptive to your business, if you're communicating at all with the agency in terms of how that type of information should be gathered and reported going forward.

No. The only thing we never liked is that the report comes out at the end of the quarter. If it would be 1 day later, it would be much easier and because everybody becomes very careful at the end of the quarter. So okay, it is what it is.

Okay. And then my next question is just on the CFTC, the initial legislation that's come out. Can you help us understand how that might change, assuming that it goes through as is, how that might impact your ability to run of the agribusiness segment, if at all?

Yes. I think, Vincent, we'd rather wait and see the final regulations issued before we comment on what the exact impacts have been. As you would expect, we've been very active with our industry groups and with the regulators in trying to make sure the regulations are written in a way that accomplishes the agency's objectives and are fair to the industry and lets us operate as appropriate. And we're hopeful that when we see the final regulations, they will reflect that.

Okay. And maybe could you just give us broad-brush highlight of what the existing restrictions are on your business in terms of hedging and things like that, if there are any?

Under the current regulations, we have hedge exemptions, which I'd expect will be in the new regulation. So as far as our ability to hedge, I think we'll be fine.

Your next question comes from Ken Zaslow of BMO Capital Markets.

What is your interpretation of what's going to happen with the CWB and how do you think it's going to affect your positioning in Canada?

It's difficult to assess, Ken, if it will go away or not because farmers voted that they want to keep it. But like it happened in other parts of the world, I think over time, companies like us and others would be part of the process. But it is very early to say. So these processes take time.

Would you be an active consolidator in that industry?

I think we will continue participating. We have already an operation there in eastern Canada with 6 silos and terminal, and we have one silo in western Canada. I think we would expand. We have a nice important origination of canola, so it would be very natural that we would also do some origination of grains.

In terms of -- we're definitely a firm believer of what happens in the quarter that kind of stays in the quarter, but there is some commentary that kind of leaves me a little bit away from that for a second. One is, why have merchandising margins come down? Is this more of a secular? I know you addressed this in the first quarter of the year. We had a discussion on that. My fear or my caution here is, is there less opportunity in terms of the dislocation which is now reverting back to more of a normalized merchandising margin? And I know we can't track it, but can you give us some commentary on that?

I will say it is more -- it's clearly a situation of the quarter. When you look at the price charts, it is really very erratic, all over the place, and everybody in the chain becomes cautious, the farmer, the customer, we, everybody. So that really makes -- gives you less opportunities. And obviously, I will say that's the main reason. When I think about -- when I look forward in terms -- I'm sure you are commenting more on the grain side than on the oilseed. We see strong demand, increased demand from Asia and more volumes, and we will need to expand in more assets. That all means that we will have to have higher margins to process all this grain. So we feel comfortable about the future.

When you say there's higher demand, which parts of the world are you seeing exports and what grains are you seeing exports growing year-over-year? Because we're not exactly seeing that structure exactly the way you're laying out. I'm just trying to figure out. Even in Brazil, year-over-year, it seems to be a little bit lighter, kind of in par, where do you see the growth year-over-year on the export demand?

Look, just think about the way the population is growing and income is growing. You have -- when you think about -- let me take the very big picture. If you take the estimates of the SAO [ph] by 2050, you will need 1.7 billion tons of additional grain, and this is going to be -- this is 70% more than the world produces today. Now because there will be more production in certain areas and the demand is in different areas, there will be more than 100% increase in trade, more than Africa, Middle East. They all will need more wheat from the Black Sea region. Asia will need more corn from U.S., from South America. So it will -- you will see us increase in trade. That is why we built Nikolayev. That's why we bought Nikolayev. That's why we built Longview in the Pacific Northwest. That's why we built Ramage [ph] in Argentina. So you'll see South America, North America and you also will see Eastern Europe are the main areas of expansion in grains. In North America, it's not land. It's technology.

My last question is just to understand it. When you give the view that things will improve from the -- are you talking about from the operating level in 3Q, in the third quarter? Are you talking about from 2010? I mean -- because improvement from $0.86 is probably not something -- I mean, I don't think anybody would disagree that from $0.86 -- so what level do you kind of use to say, "Hey, look we're going to be improving from the current level"? And I know you don't want to give guidance, but can you give us -- I mean, the improvement from $0.86 is a lot different than improving from the quarter before of $1.80 or $1.78. I'm just kind of figuring out what you're actually implying.

Yes, I think and I want to avoid giving guidance a little bit, but if you look at what we see going forward, certainly, the food business was weak in the third quarter because you had very tight supplies in Europe. We've had a new harvest in Europe, so the food business should have a significantly better quarter than this one. Our sugar business, we certainly don't expect the loss again. We'd expect to be subtly profitable in the fourth quarter and next year at least profitable in the fourth quarter. Fertilizers should be fine. In agribusiness, we think there is room in improvement both in the fourth quarter and this year. I mean, oilseed processing, third quarter is not the net strong either year and the fourth quarter has been strong, and that trend seems to be the case again because we get the northern harvest. Oilseed should be very good. North America should be improved due to the harvest season. I wouldn't call it very good, but improved from where we've seen it. And it seems like China is coming around for the fourth quarter and into next year depending on a couple of factors, but the demand certainly there in China, it's what the macros go ahead and do. On the grain business, I know everybody would like us to give a standard profit per ton and say "It's regular and comes all the time." The grain margins do shift based on the opportunities, which are in large part due to what happens with crops. And unfortunately, we can't accurately predict crop to crop, what the weather's going to be and what happens. So you do see some periods of higher margin when there's been a lot of dislocation. Our global network is more valuable. And sometimes, lesser margin were less than dislocation. But over time, the average margins gives pretty strong results, and I think that's why Alberto is referring you to a annual number versus a quarterly number because it kind of ends to average all of that stuff out and get you back to what more of a baseline would be.

And when you think about next year, it's significantly -- you think about the contribution from sugar. It's very little this year, and it should be significant last year. And there should be also an important improvement in fertilizer. So we feel very good about 2012.

Your next question comes from Jeff Farmer of Jefferies & Company. Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division: Just following up on those last 2 comments. So fertilizer first, in terms of your efforts to increase market share, what type of visibility do you have on that going into 2012?

We have dramatically changed it, so we are going very carefully. This year, we should accomplish some of it and next year more, and we have reduced significantly the amount of customers we work with in order to have the right balance between risk and reward, but with the plants that we refurbished and we built -- so we feel quite comfortable that we will increase. I would not say how much, but we will increase our market share next year. Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division: But is it safe to assume that, that market share number has been moving steadily higher over the last couple of quarters as you've reworked the business?

Very, very slowly. We are giving clear preference. It's risk reward. So we are not doing volume at any cost. Jeffrey D. Farmer - Jefferies & Company, Inc., Research Division: Okay. And then just following up on sugar, to be beat the dead horse here. So that 17 to 19 million ton number, outlook for 2012 -- just to really make this simple, how much of that outlook is based on sort of the Brazilian sugarcane world getting better in general versus your company-specific efforts? So how much of your destiny is in your own hands in 2012 as it relates to that number jumping back up to -- or jumping to 17 to 19 million tons?

Look , our estimate is clearly 19 million if the weather is normal and -- but you have to consider a couple of disruptions here, sometimes a little bit too much rain, a little bit drought here and there, that is already included. So when we say it's 17 to 19 million tons, it also includes downside scenario and -- but I would say this is pretty much based on all of what we are doing. So it doesn't -- a significant portion of that is from our own cane, and around 2/3, more or less 2/3, is what we planted or we can control. Weather, we obviously can't control. We feel relatively good about this number.

Our last question comes from Rob Moskow of Crédit Suisse. Robert Moskow - Crédit Suisse AG, Research Division: I wanted to ask about dried distiller grains. Maybe this has been asked months in the past, but I saw an interesting report that said that the supply of DDGS should continue and that there is a structural threat to soybean meal as livestock producers keep shifting the mix and it's not just a 1-year thing but it could have a multiyear effect on soybean meal. And then the other element is, you kind of touched on it, that South America should have a strong year. But if South America has a strong year and there's more soybean meal out of Argentina -- they are the low cost producer, so they can serve the world demand for meal at a lower cost than North America can. So given all that, what is your view about how attractive North American soybean meal is in the global market? And is there anything structural we should be concerned about?

I don't think so, Rob, that we should be concerned because there is no meal that has the kind of quality and protein as soybean meal and you have to see DDG as a cheap alternative. It's more of a question of price and as -- over time, the crops increase and soybean meal prices come to a more normal level, there will be -- it's clearly the preferred alternative from a nutritional point of view. DDGS are making their way into the rations more because of a question of price. The protein content is much, much lower in DDGS. Now people, obviously, find ways to include them. And especially on poultry and hogs, they always are going to have something with high protein content. There is no substitute for soybean meal. Now it's a fact it's available because of the ethanol demand. But also, we are getting closer to the mandate level that we should not see an expansion in ethanol from corn production. So we should then will not see anymore an increase in DDGS.

And, Rob, just to highlight, one part of your question doesn't impact us too much. We have very strong positions in Argentina and Brazil. So if meal production shifts to Argentina and Brazil, we'd benefit there even though we may -- and it will be a little more difficult in the U.S. And I think your premise is right. The U.S., in the near term, will be a little bit pressured on soy meal exports, but from our perspective, we'll just shift it to a different Bunge location and do the business from there.

You have to remember also how people don't remember how small contribution of soybean crushing in North America is part of the total mix. So you, all the time, adjust yourself. Look how much we have expanded canola, rapeseed, sunseed. So you -- all the time, your adjusting your business model. So the contribution of soybean crushing in North America is very small in the overall picture. Robert Moskow - Crédit Suisse AG, Research Division: I get it. And as I listened to your comments today, a lot of it is similar to last quarter where you said that -- well, that the Black Sea is coming back and as a result, your volume will be up in your Russian business. It sounds like something similar might be happening here in Argentina. But if you think about the last 12 months, the margins were so good and it was specifically related to the dislocation that happened in those markets. I guess that's what people kind of struggle with. It's that on one hand, it's good to see the volume coming back, but on the other hand, it comes at the expense of dislocation and it probably causes lower margins. Does that -- when you think about planning for 2012, is that kind of like the puts and takes that you're thinking through as well?

Perhaps a little like that. Obviously, it's a little bit more complex. And the way -- when you look at the history, these businesses earn their cost of capital. So if they don't earn their cost of capital, people exit and you get the right capacity utilization in the industry. So you might have had, in the past, perhaps a little bit more margin in grain and less in oilseeds, but before, it was the other way around. So what we expect is that probably by the second half of next year that we should have a much better capacity utilization in oilseed processing as demand continues growing at 5% in meal and 4% in oil and less capacity is added. So we will get a better balance there, and margins will improve in oilseed processing. You might have a little bit less margin in grain but overall, the agribusiness, we think, will be in line to always cover their cost of capital. Now these locations, when you go back, you have all the time. All the time, there is something. Remember, it was in Australia, then it was in Argentina, then it was southeast Europe, then it was Russia. You always have that. That is exactly the advantage of a company, of the large companies where they have a large network, where you take advantage of that, and source fast and provide the customer with their needs. Obviously, it also allows us to have an expansion in the margins. We expect agribusiness to be covering cost of capital plus 1% or 2% points all the time. There will be one or the other year where it might be less, but we feel good about the next years.

You have a follow-up question in queue from Bryan Spillane of Bank of America.

Drew, can you give us a tax rate for the fourth quarter and for 2012 or an expectation?

I think we're looking at an annual tax rate now below the 10% that we had previously forecast as we've seen what the earnings mix is going to look like for the year. We're earning a little bit less in some of the higher tax rate jurisdictions that will drop our rate a little bit. For next year, maybe 9% to 12%. I hate to get too specific because as you've seen, it can jump a couple of percent pretty quickly. It's not a shift in our earnings mix, but that range, I think, would be about right.

And then Alberto, could you just also remind us of your appetite for acquisitions and the criteria, I guess, that you would go through in terms of what you're looking for in terms of size, accretion, geography, segments?

We continue always looking at opportunities, and our first priority is to strengthen our core businesses where we are in, and so you'll see from time to time in our grain, our oilseed processing, edible oils, milling and so on, but we also look at some adjacent businesses where we can use our capabilities. And one of the reason you have not perhaps seen so much activity is, obviously, we are also very careful in this environment and our hurdle rates are steep. So if the price is not right, we don't move, but we think we have a very strong balance sheet and we are ready to move whenever it's necessary. So we are all the time looking at opportunities. But I have to say, in this environment, this volatile environment, we feel quite good that we have this strong balance sheet.

We also have another follow-up question from Christina McGlone of Deutsche Bank.

Alberto, I had wanted to ask about the South American crush margins, in general. It seemed strong. I mean, seasonally, maybe they're a bit weak but they seem much better than, say, in North America. And ADM is putting on this facility in Paraguay in the middle of next year and then they are also dramatically increasing their biodiesel capacity, and I'm just wondering if the market can bear those 2 new facilities.

Yes. There is no question that the domestic meat demand in Brazil has been very strong and also -- because the U.S. exported less meal, there was more room for Brazil to export. I think there is room for it. Biodiesel demand in Brazil and in Argentina has gone up like in U.S. as well, so we are not worried about excess capacity there.

We have no further questions in queue. I will now turn the conference call back over to Mr. Haden for any closing remarks.

Great. Thank you, Monica, and thank you, everyone else. And if anyone experienced any technical difficulty with the slideshow today, I apologize. We had some issues with the service. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.