Canola: Competing in the World Food Oil Market

Canola: Competing in theWorld Food Oil Market

Carl HausmannPresident and CEO

Bunge North America

A Brief History

• 1818: Founded in Amsterdam by Johann Peter Bunge

• 1884: Bunge y Born established in Argentina by grandson, Ernest Bunge.

• 1905: Bunge y Born expanded into Brazil.

• 1923: Bunge North American Grain Corporation founded in New York City to trade raw agricultural commodities.

Recent History

• 1993: Professional management brought in to focus on core businesses

• 1997: Acquisition of Ceval, expansion of fertilizer in Brazil

• 2000: Bunge Global Markets formed

• 2001: Initial Public Offering • 2002: Acquisition of Cereol,

including Central Soya andCanAmera Foods

A Growing Company

1997 2004

Volume (MM tons) 24 109

Net Sales (MM$) $7,484 $25,168

Net Income (MM$) $83 $469

Ownership Private NYSE Listed

Global Scope(countries)

12 32

Focus Origin processor Integrated from farm to end customers

Growth through Acquisition

Bunge Oilseed Processing

Mill

ion

tons

1997 1998 1999 2000 2001

8

14 15

20•Acquisition

of Ceval

•Acquisition of La Plata Cereal

•New US plant

2002

15 BrazilBrazil

ArgentinaArgentina

2003

36

•Brazil capacity expansion

•Acquisition of Cereol

17

North America

Europe

Bunge Operating Companies

• Bunge Global Markets• Bunge Europe• Bunge Argentina• Bunge Brazil

– Bunge Alimentos– Bunge Fertilizantes

• Bunge North America

Decentralized and Integrated

…with superior geographic balance and reach…

Future consumption growthNo.1 in key

producing regions

No.1 in imports of soybean products

No.1 in soybean meal

imports

Future consumption growthNo.1 in key

producing regions

No.1 in imports of soybean products

No.1 in soybean meal

imports

500+ production & industrial facilities25,000 employees

…capturing value though our vertically integrated chain…

Bunge is growing and changing

World Oil markets are also growing and

changing…

World Oil Supply Growth

0

20

40

60

80

100

120

140

1999/00 2004/05 2009/10

4% growth per yearMMT

89109

133

World Oil Supply Growth

CAGR2000-2010

Palm 7.63%

S. American Soy 6.21%

All others 1.46%

Total Veg Oil 4.14%

World Soybean Oil Supply

05000

10000150002000025000300003500040000

1999/00 2004/05 2009/10

Worldw/o N. Amer.N. Amer.

World Rapeseed Oil Supply

02000400060008000

100001200014000160001800020000

1999/00 2004/05 2009/2010

WorldCanada

Supply & Demand Trends

• Europe

• North America

EU 15 Oil Production

0100020003000400050006000700080009000

10000

1999/00 2004/05 2009/10

RapeseedSunSoybeanTotal

EU 15 Oil Imports

0500

1000150020002500300035004000450050005500600065007000

1999/00 2004/05 2009/2010

RapeseedSunSoybeanPalmTotal

EU 15 Oil Exports

-100100300500700900

11001300150017001900210023002500

1999/00 2004/05 2009/10

RapeseedSunSoybean PalmTotal

EU 15 Oil Consumption

02000400060008000

10000120001400016000

1999/00 2004/05 2009/10

BiodieselFoodFeed & TechTotal

EU 15 Supply & Demand

• Demand driven by biodiesel• Demand less impacted by:

– Trans fat issue– GMO

• Supply driven by:– Palm Imports– Rapeseed Production

Supply & Demand Trends

• Europe

• North America

Canadian Oil Production

0

500

1000

1500

2000

2500

1999/00 2004/05 2009/10

CanolaSoybeanOther*Total

* Sun, Cottonseed, Olive, Groundnut, Corn, Palm, Coconut, Palm Kernel

2.87%

2.46%

CAGR

U.S. Oil Production

0

2000

4000

6000

8000

10000

12000

1999/00 2004/05 2009/10

CanolaSoybeanOther*Total

* Sun, Cottonseed, Olive, Groundnut, Corn, Palm, Coconut, Palm Kernel

5.97%1.07%(.07%)0.95%

CAGR

Mexican Oil Production

0200400600800

1000120014001600

1999/00 2004/05 2009/10

CanolaSoybeanOther*Total

* Sun, Cottonseed, Olive, Groundnut, Corn, Palm, Coconut, Palm Kernel

1.45%

CAGR

North American Consumption

02000400060008000

1000012000140001600018000

1999/00 2004/05 2009/10

U.S.CanadaMexicoTotal

1.41%1.95%3.59%2.13%

CAGR

North American S & D

02000400060008000

1000012000140001600018000

1999/00 2004/05 2009/10

Supply Demand

North America moves from small surplus position to an oil deficit of approximately1.4 mmt.

North American S & D

02000400060008000

1000012000140001600018000

1999/00 2004/05 2009/10

Supply Demand

Supply growing at 1.2% CAGR, demand growing at 2.13% CAGR.

North American S & D

02000400060008000

1000012000140001600018000

1999/00 2004/05 2009/10

Supply Demand

Oil deficit of 1.4 mmt expect to be met by an increase of palm imports into Mexico based on price and imports into the U.S. based on trans mitigation.

North American S & D

02000400060008000

1000012000140001600018000

1999/00 2004/05 2009/10

Supply Demand

No increase in biodiesel production factored in to supply deficit projection.

Supply & Demand Influencers

• Biodiesel

• Trans Fat Mitigation

Biodiesel

Technology• 5% blends are approved by all European car

manufacturers– Has a positive balance on air quality– Functional use as lubricity enhancement

Adoption• EU consumption expected to grow to 4 mmt/yr

– Usage represents less than 2% diesel substitution• Brazil considering 5% mandate• U.S. poised to adopt 5-8 billion gallon mandate (ethanol,

biodiesel, biomass)

Biodiesel

Supply• 1 mmt of crude oil 1% as diesel consumption in U.S.• World demand for veg oil pushing production• Annual global edible oil production = 100 mmt

– Daily global petroleum consumption = 10 mmt– 10 day energy supply?

Supply & Demand Influencers

• Biodiesel

• Trans Fat Mitigation

Trans Fat/Hydro Oils

Market• North America vegetable oil consumption ~14 mmt• Amount of oil hydrogenated ~3.5 mmt

Issues• Will there be a reduction in hydrogenated oil?• How big a reduction?• What oils will substitute for hydrogenated oil?• Will there be a reduction in veg oil consumption?

Supply of Trans Alternatives

• High oleic canola– Estimated production – 1.7 million acres in 2005

(all providers)• Low linolenic soybean

– 2007 production estimated at 1.3 billion pounds (all providers)

Canola’s Role

• Trend favors canola– Healthy Oil Attributes– Oil Content

• Growth Opportunity– Global Markets– North American Demand

Summary

• North American oil markets are becoming a big niche market– South American soy and palm are becoming the

principal internationally traded oils to China, India, Pakistan, Iran, etc.

• More canola and soy available in North America for processing market sends pricing signal to add crush– What will be the competitive response?

Summary

• Biodiesel and Trans are outside forces that will impact North American oil markets– Do you know the outcome?

• Specialty oils through genetic modification is current trend to address health issues– What is the impact on commodity oils?

Our ability to understand consumer trends will be key