## management’s discussion and analysis of financial condition and results of operations 

Management’s Discussion and Analysis provides a narrative explanation of the Company’s financial results and condition that should be read in conjunction with the accompanying financial statements. 

## introduction 

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

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

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

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

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

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

## foreign currency exchange rates 

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

