Good morning and welcome to Bunge Limited's Second Quarter 2018 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and instructions, I'd like to turn the call over to Mark Haden, Bunge's Director of Investor Relations. Please go ahead, sir.

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 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 Soren Schroder, Chief Executive Officer; and Thom Boehlert, Chief Financial Officer. I'll now turn the call over to Soren.

Thank you, Mark, and I'm turning to slide 3. Bunge remains on course for a very good year despite changes in trade policy and the significant uncertainty in both commodity and financial markets that we saw during the second quarter. While Agribusiness came in somewhat below our expectations when considering the $125 million of new negative mark-to-market in soy crush and the temporary $24 million foreign currency impact in Grains, we've been active in securing excellent margins for the balance of the year. With only small amounts of soy crush capacity left open, we have a high degree of confidence in our full year guidance, supported by our forecast for a very strong second half. As reflected in the increase of working capital during the quarter, we have deliberately increased inventory of Brazilian soybeans, allowing us to secure physical crush margins in both Brazil and China for the next quarters. During the quarter, as markets reacted to the evolving trade talks, we concluded that a quick resolution would be negative to the value of our forward soy crush capacity and the physical beans we were accumulating in Brazil. As a result, we took the prudent step to position ourselves long in futures as a hedge. Futures subsequently went lower, offsetting gains on our bean basis ownership. However, this provided us an opportunity to benefit from increasing our forward crush coverage at significantly better margins. This benefit will be visible in Q3 and Q4 as we execute on our soy crush capacity. In Food & Ingredients, milling performed well, led by Brazil, and we believe we have turned the corner in both margins and volumes in Brazil and Mexico, and therefore, expect a strong performance in milling for the balance of the year. With the exception of Loders Croklaan, which is…

Thank you, Soren, and good morning, everybody. Let's turn to the earnings highlights on page 4. The reported second quarter loss per share from continuing operations was $0.20 compared to earnings per share of $0.48 in the second quarter of 2017. Adjusted earnings per share was $0.10 in the second quarter versus $0.17 in the prior year. Pre-tax notable charges totaled $46 million during the quarter, primarily resulting from costs related to the Global Competitiveness Program and recognition of a loss on the sale of an equity investment in Brazil. Pre-tax results also included the negative impact of approximately $125 million of new mark-to-market losses on our forward soy crush commitments, reflecting the strong soy crush environment. Total segment EBIT in the quarter was $71 million versus $73 million in the prior year. On an adjusted basis, segment EBIT was $117 million. Excluding the mark-to-market impact on soy crush commitments, adjusted EBIT would have been $242 million. Agribusiness adjusted results increased significantly in the second quarter, with adjusted EBIT of $118 million compared to $18 million in the second quarter of 2017, primarily due to an improvement in Oilseeds, with soy crush margins remarkably higher than 2017's levels. This was driven by the combination of strong soymeal demand, lower crush rates in Argentina due to the drought, and increased availability of U.S. soybeans as the U.S.-China trade dynamics evolved. Soy margins continued to expand over the quarter, resulting in new negative mark-to-market of approximately $125 million relating to soy crush commitments beyond the second quarter. In the first quarter, we had negative mark-to-market of $120 million, approximately half of which reversed in the second quarter. As the contracts related to future crush capacity commitments are executed over the balance of the year, we expect the second quarter mark-to-market, as well…

I'm on slide 11 now. Lots of positive changes are taking place within Bunge, bringing heightened focus and fresh energy. The Global Competitiveness Program is not only exceeding our expectations financially, but equally important, we have global teams focused on the things which matter most commercially, crush, B2B oils, commodity flows and risk management, and growing our customer relationships. We are well on course to achieving a significant transformation within Bunge, which will drive major benefits for years to come and which is a tribute to the hard work and continued commitment of our colleagues around the world. As mentioned earlier, we expect a very strong second half as we realize the benefits of a much improved soy crush environment, accelerate earnings in both milling and oils, and drive increased savings and efficiencies from our Global Competitiveness Program. Agribusiness growth fundamentals are intact, which is evidenced by the strong demand we are currently experiencing, as well as a spike in soy crush margins. This along with our initiatives to grow our value-added business, of which Loders is a big part, and our cost programs provide us with a number of drivers for growth beyond the current year. With that, I'll turn the call over to the operator for your questions.

Yes. Thank you. We will now begin the question-and-answer session. And this morning's first question comes from Ann Duignan with JPMorgan.

Hi. Good morning and thank you.

Morning, Ann.

Morning. My question, Soren, is to you. You sound very confident in the second half performance, given the performance of the first half. Could you talk about in each segment, where are the biggest risks? And, in particular in Agribusiness, you talk about crush margins should be strong into 2019. If Argentina ramps back up the way it did a couple of years ago, is that a risk also for 2019? If you just put it into context first that will be helpful.

Sure. You're right. We do have a great deal of confidence in our second half forecast and it is really anchored in the visibility we have and the amount of crush we've already locked up. It's an unusual amount for us for this time of the year and we have pretty clear line of sight to how we get to the end of the year in crush the way that we're describing it here. The biggest risk I would say is probably still related to grain origination and the impact on changes in trade policy that may or may not occur as we go through the balance of the year. But of course, the ultimate, let's say the agreement on how to proceed with freight pricing in Brazil. Those will be the two big ones. We feel good about our food ramp-up by the end of the year. Milling, as we talked about, is showing very good signs of having come back to normalized margins, and then oils should be very strong finish to the year, led by less pressure on, let's say, crude oil in the global marketplace as crush weights particularly in Brazil taper off. So, we feel very good about visibility for the forecast that we've given. Origination and grain trading is probably where the risk lies. I don't think it's big, but that's what it would be. Looking to next year, you're right that if we return with a normalized Argentine crop, there's likely to be more competition in the global marketplace for Mill and Oil as we get into the late part of the second quarter, and that could have a somewhat dampening effect on soy crush margins. But we do see the ability to lock up a fairly sizable amount of our first half…

Okay. Thank you for that, Soren. And then as a point of clarification and a follow-up, you noted freight costs in Brazil. I know you said you've procured your soybeans...

Yes.

...but I'm assuming you haven't lost in your freight costs. So, is that a risk into the back half?

There is some risk. We don't believe that it is material, but there is some risk. As others have done in the industry, we found ways to continue to do business, so to speak. Farmers are delivering some of the grain instead of us picking it up. We have very strong relationships within the industry, particularly with farmers in all parts of Brazil that's helping us navigate through this period now where there really is no clarity. So, I think we'll end up in a good place. The industry is working in unison to come up with a reasonable solution to all this. I think more importantly really is how this might impact the pace of pricing of the new crop, soybeans in particular, but also corn where very, very little has been priced so far. Very little has been commercialized with the 2019 crop, which will, in all likelihood, will be a big one. And so, if there's a definition on that, the freight pricing, so that we can start extending into next year and help farmers commercialize their crops, there could be some positives also in the second half of the year. But I think we've done a good job mitigating the impacts of the truck disruption so far and I suspect that we'll continue to do so.

Okay. Thank you. I appreciate that. I'll get back in line.

Okay. Thanks, Ann.

Thanks.

Thank you. And the next question comes from Heather Jones with Vertical Group.

Good morning.

Hi, Heather.

I had a couple of questions, but I was hoping that if you could help me understand better. So, the grain trading distribution losses in Q2, what decisions did you guys make that drove that loss? Because I mean, the conventional wisdom was that a China-U.S. trade disruption would benefit Bunge but it sounds like you all made decisions going into that that made it a negative. So, I don't know if I'm misinterpreting that. So, I just first want to just understand it better, exactly what happened?

Yeah, okay, for sure. I'm glad to try and put some light on that. First of all, if you add the $24 million in foreign exchange mismatch that Thom talked about, the Grains for the quarter was actually a positive. But you're right. It was not what you would have expected, given it's a peak quarter in South America and so forth. So, to sort of try and play the movie throughout the quarter where there are lot of gives and takes and lot of volatility. About middle of the quarter, we found ourselves in a situation where we were originating a fair amount of soybeans in Brazil, where the gross margin outlook for the balance of the year was good, was healthy, was actually improving from where we had been previously, and we wanted to find a way to try and protect all this in the best way that we could. And we concluded that a quick resolution to the trade talks, which would have driven a lot more demand back to the U.S., particularly in soybeans, but really across the board, would have put carry-outs in the U.S. at a fairly low level right ahead of the growing season. And we felt that would have been very bullish, positive to futures, which in turn, would have put pressure on the basis long that we had accumulated in Brazil and, no doubt, also put pressure on board crush. So, we concluded, weighing the pluses and the minuses, that we are better off trying to protect for that event. And the best way to do that was by being biased long, flat price, or in futures across the board as we then went into the second half of the quarter. As it turned out, the trade talks did not result…

So, you're saying that this grain trading and distribution loss that you call out in Grain, so, yeah, it was a loss for the quarter, but you made it up in the basis gains on the Oilseeds side.

Well, some of the basis gains...

That would...

...some of the basis gains would have been in Grain as well. Some of them, of course, would sit in in the oilseed crushing accounts in Oilseeds. So, it's a little bit in both places, but we definitely made up for it overall with the basis length that we had in Brazil, both within the crush franchise and also within the trading franchise. And moreover, the most important thing is that it allowed us to secure, let's say, even better crush margins for the part of the capacity that we had open for the second half of the year. And as Thom mentioned, we have the majority of it now locked up or hedged.

Okay. And this is a complicated question, but it just gets to – so, if I adjust your Q2 for your mark-to-markets in these forex contracts, and then I look at your back half, including your comment on North American exports, I'm honestly confused. Now, I understand you guys are not as big as ADM and Cargill in U.S. exports, but you still have a decent size position in NOLA and a decent size position in PNW, and you're obviously sizable in Brazil. And both of your peers called out both of those regions as being good and bullish outlook on the back half. And so, if you look at their Q2 results and look at you alls and then your back half commentary on the caution of surrounding U.S. exports, I'm just having difficulty jiving the two. And like you said, Q2 should be a peak quarter for South America. So, just how I may understand the disparity between the two?

Okay. Well, let's start with what we feel very strong about, that's the Oilseeds piece of our business. And so, the forecast for the year that you would imply from the commentary we've given would lead you to somewhere between $750 million and $800 million. So, it will, all in all, likely would be a record result in crush, which is what we've been focused on. On the Grains side of the equation, it is correct that the second quarter should've been the peak in South America, and in many ways, it was. The basis gains that you would've normally assumed would be embedded in the performance were offset for the reasons that I just mentioned. So, it's really about looking forward now. And you can certainly paint a picture, whereby if things get back to normal in Brazil, given our size of activity in Brazil, market shares, and also given the significantly undersold farmer for next year's crop, that the second half could be better than what we are indicating here. But we don't know how the freight situation is going to turn out. And, therefore, we're being a bit cautious, I suppose, is the right way to put it. On the Grains side in the U.S., we have exposure primarily to the export points. Our business in the Center Gulf is really from St. Louis in south and in New Orleans. And on the West Coast, it's the elevator in Longview. We do not have, as some of our competitors have, large storage facilities in the interior, particularly in the Wheat Belt, where you can earn large big carries. That is not how Bunge is set up. So, we are very dependent upon the export margin going through those facilities in either New Orleans or on the West Coast. At the moment, there is no definition in those markets. It is entirely dependent upon trade policy and whether or not China returns to the U.S. market. If things remain as they are now, which is what we are assuming in our forecast, it's going to be a skinny export season out of the U.S., both off the West Coast and in New Orleans, and we will not have a great fourth quarter there. We could end up having it in South America instead. But we won't have the large carry income to compensate for that as others perhaps do. So, that's why we're a bit hesitant in putting too much optimism into the second half in Grain. We are very optimistic. We are very confident in Oilseeds. That is really what's driving this year's result. It's where we are focused. It's where we've locked up margins. We've been very prudent. We knew we had to deliver and we will. On the Grains side of things, we will have to see how it all turns out. There are just too many uncertainties at the moment. But, obviously, we're all hoping for something that's better than that we're guiding.

Okay, okay. Thank you so much.

All right.

Thank you. And the next question comes from Vince Andrews with Morgan Stanley. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Thank you and good morning, everyone. I kind of just want to dial in on the Chinese tariff situation because if I understood your remarks correctly, and please correct me if I did not, but some of the hedging activity that's taken place year-to-date or positioning activity was a function of a view that if the Chinese tariff didn't go through, markets would change. And so, my assumption is that your belief is that the Chinese tariff or at least the threat of it was helpful to the operating environment for you and now obviously, it's gone through. So, can you just help us understand what you think the risk is, and let's assume that the tariff situation is resolved at some point, whether it's in the back half of this year or at some point next year, what does that mean to the back half of the year, and maybe the answer is nothing because you've locked so much in. But what would it mean next year in terms of how your opportunity set in the operating environment would evolve and what would the pluses and minuses be?

Yeah. I think the answer is what you just gave yourself is it probably doesn't mean much because so much at least of the Oilseeds part of the equation has been locked in. And the further the clock rolls forward, the more of that is the case. So, don't expect big changes from this. I'd say 30 days to 60 days from now, the year should be more or less as we've laid it out. Obviously, a return to the U.S. for China in the late months of the year could be very beneficial, but we don't know what's going to happen. Looking into 2019 and beyond, our basic premise is that none of this is good. We prefer an environment where there is no trade obstructions, where goods flow free, and where farmers make planting decisions based on the right economics and so forth. I think our – although the proof in the pudding is in the next two quarters in terms of our results, our footprint, the way we have set up, our balance around the world in terms of assets, will allow us to operate well in any environment. But our belief and our support is for resolution, for sure, that it is better in the long run for everybody. But that's how I'd characterize that. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Okay. But you don't think there was some sort of benefit to you in terms of just sort of some urgency that came into, let's say, the Brazilian market in the first half of the year ahead of the tariffs that sort of allowed an opportunity, a margin opportunity, or a positioning opportunity present itself that you've taken advantage of that maybe goes away if the tariffs are resolved?

No. No, not really. No. I mean, I think the opportunity that was created out of the, let's say, the lack of a trade resolution was the expanding board crush in particular that we've capitalized on to the extent that we could. So, I think, we've done what we could to optimize the portfolio. But it is not visible in our first half results. It's coming. It will be visible in Q3 and Q4. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Okay. Thanks very much. I'll pass it along.

Thank you. And the next question comes from David Driscoll with Citi Research.

Great. Thank you and good morning.

Hi, David.

Hi, David.

So, I just wanted to start off with the guidance itself and make sure I understand kind of what's happened here. I believe that the midpoint of the segment guidance was raised. I think you've basically taken Agribusiness up $100 million, Sugar down $60 million and Edible Oils down $10 million for a net $40 million positive change to your segment EBIT guidance. Do I have that right, guys?

Yeah, yeah. That's about right. Yeah.

Okay. So, the basic answer here is even though we have this remarkably deviant answer on second quarter's $0.10 versus consensus over $1, you guys are saying that, no, the full year numbers are still quite good and midpoint goes up. So, Soren, then others have tried to ask this so far on the call, but your two biggest competitors reported really strong second quarter results. And there's then a lot of folks just asking us why is Bunge so different. Why does second quarter come out so different than the peers? And so far, I think what you've answered is that Bunge doesn't have U.S. interior grain storage, and that affects the way your U.S. Grain operations work versus those peers in a negative fashion. And then secondly, there was this complicated hedge that you put into place related to U.S. and China trade. It didn't work out. You had "an offsetting factor with bean basis", but nonetheless, the net answer here is negative perhaps versus what peers did. I think so far, those are the two pieces of explanations that I understand that would explain the differential between Bunge's second quarter results and those of peers. Do I have that right and is there anything in addition that you could add?

No, I think you have it broadly right, David. But just to complete the piece about South America and how we chose to, let's say, hedge the enterprise, the benefit of this is not visible now, but it will be visible as we execute our crush in Q3 and Q4. So, the net-net of what we decided to do was a positive and you'll see that play out. But other than that, I think you got it broadly correct.

Okay, okay. Well, I appreciate it. I'll pass it along. Thank you.

Okay.

Thank you. And the next question comes from Adam Samuelson with Goldman Sachs. Adam Samuelson - Goldman Sachs & Co. LLC: Yes, thanks. Good morning, everyone.

Hello, Adam. Adam Samuelson - Goldman Sachs & Co. LLC: Continuing on the guidance, just to be clear, how things have changed within Agribusiness. I believe previously within the $800 million to $1 billion range, you had the Grain business up $100 million. And what are the specific guidance points now for Oilseeds and Grains as we think about the balance of the year? And within that Oilseeds, what's the kind of assumed crush margin now? And I imagine you've got a pretty good handle on it, given the hedging position.

Okay. Well, as I said, we are saying that Oilseeds in total, which includes both soy and soft, is in the range of $750 million to $800 million. For the balance of the year, so the second half of the year, the crush margins we're assuming in that forecast is somewhere around $50 to $55 a ton. Soft seeds, still a little bit too early to see how all that plays out, but peg soy in the $50 to $55 a metric ton, and Grains will make up for the difference. And if you take our last year's Grain result and you adjust for what we guided earlier on, you get above $1 billion in Agribusiness earnings for the year. And given the uncertainty that we've described around the freight situation in Brazil and how trade evolves over the next months, we've decided to be just a bit cautious on that one. So, we're rounding down a bit on the grain guidance to get us into the upper end of the range, but not above. But that all remains to be seen, of course, how it plays out. Adam Samuelson - Goldman Sachs & Co. LLC: Okay, all right. That's helpful. And then just a question on the Brazilian operations in both the second half comment, but also a bit kind of longer-term as you think about how – you talked about the freight impact and people kind of just managing to do business, and wondering how do you perceive that, the truck strike, impacting kind of the longer-term competitiveness there? I mean, it would seem to further enhance the competitiveness of rail out of Mato Grosso and probably incent a larger kind of proportion of take-or-pay again, which created some bad competitive behavior in the past. And wanted to just get your perspective on the medium-term implications of the truck strike and the uncertainty around logistics, and how that could change some of the competitive behavior in getting the beans out. Thank you.

Yeah. I think it's too early to make any conclusions around what this might mean for long-term rail versus truck. I mean Brazil is still massively dependent upon truck movement. And I don't think our approach to take-or-pay is going to change any because of what's going on. But the decision we made last year to build more flexibility into our rail commitments has worked out well for us this year, and I suspect that we'll continue on that path for the next. But I think over the long haul, so I'm talking – you're talking a decade probably, Brazil needs to invest in rail infrastructure. That's very clear. That's the missing link. And I think it's been talked about for at least 10 years of how that would be one of the most significant and important infrastructure investments in the country. And not all that much has happened. Some has occurred, but still far behind the original plans. So, I think that will continue, but it won't make any difference, I believe, over the next couple of years. Adam Samuelson - Goldman Sachs & Co. LLC: Okay. That's all very helpful. I'll pass it on. Thanks.

Thank you.

Thank you. And the next question comes from Robert Moskow with Credit Suisse. Robert Moskow - Credit Suisse Securities (USA) LLC: Hi. This is really a follow-up regarding your comments about your concerns about U.S. exports. You mentioned it's because of your footprint in Washington State and in the Gulf. But my understanding was that there's a lot of foreign countries that are trying to load up on grain and beans to kind of backfill the demand from China that China is no longer seeking from the U.S. Why wouldn't Bunge benefit from that kind of dynamic or am I overstating what's happening there? I think even Brazil was thinking of importing a bunch of beans to backfill the demand. Thanks.

Right. Well, there are different schools of thought on how all this can play out. Our belief is that it is not possible to replace the lack of Chinese demand in soybeans with other destinations. It's simply too big. Of course, there will be some switching. There already is. Market prices are telling you that those who can should be bringing their business to the U.S. instead of other places that prices do the job. But the magnitude of the Chinese demand in a normal year is simply too big to replace with other destinations. So, the net impact would be negative. Now, having said that, corn exports look favorable and there is potentially a wheat story brewing out there that will be felt sometime next year, not in the fourth quarter. But the net of it all in a normal situation would be significantly reduced overall U.S. exports. And that's why we are being a bit hesitant in trying to set expectations for what export margins would be out of the U.S., particularly in the fourth quarter. Who knows what happens when you turn the clock to 2019. But that's how we look at it. Robert Moskow - Credit Suisse Securities (USA) LLC: Soren, I mean you can see the data coming in on corn exports. I mean it's really accelerating. Do you view that as just kind of a pulling forward demand and then there really won't be anything...?

Yeah. I think it's probably a matter of business that normally would be supplied out of Brazil has flipped to the U.S. But there's still corn to be exported out of Brazil that will end up competing later. And in soybeans, well, there's just been no real new business of consequence. And I think the gap in soybeans to where we would normally be, will widen significantly between now and the middle of September. So, at this point, if you just look at the export sales figures, you may not see a big divergence, but that will be building unless something changes in trade between now and the time that we get into middle of September. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. Thank you.

Sure.

Thank you. And the next question comes from Farha Aslam with Stephens.

Hi. Good morning.

Hello, Farha.

Hi, Farha.

Continuing on the grain story, as you see the crop develop in Argentina for next year, you could – China could source out of Argentina. Is that a benefit for Bunge or is the tax regime in Argentina such that the farmer will continue to hold on to their grain?

That remains to be seen. I think it very much depends on the economic situation and the outlook for inflation and foreign exchange once we get there. And there's still a differential export tax on soybeans with these products that would encourage crush. But, of course, in theory, it's possible that the Chinese would take some Argentine beans as well, but it would be more logical that they direct their efforts towards Brazil and there should be plenty of beans in Brazil to supply them certainly in the first three or four months of the crop, starting in February. So, it's really a matter of the Chinese, so to speak, being able to stretch themselves into February-March, and then Brazil should be there in full force. There's also talk, as you might have heard, about meal imports to China to try and make up for some of the shortfall in crush that could happen towards the end of this year and the beginning of next. That's obviously something that we would welcome. That would be positive, but still in the talking stages.

That's helpful. And you highlighted strong meal demand currently and a strong outlook longer-term. We're hearing of the Chinese changing the mix of feed to reduce protein in animal diets. Can that have a longer-term impact on meal demand and impact the market and Bunge's potential longevity in these soy crush margin?

Well, I think the impact of what you're talking about would be felt in domestic Chinese crush, where we have participation, but it's a small share of the total. I think the impact on Bunge from that perspective would be fairly muted. And the flip side of that, of course, would be that if there is for some reason less demand, relative demand, for soybean meal because of formulation changes, it would result in less bean imports and that would free up more beans for crush at the origins, which is where most of our capacity is located. So, I don't feel too threatened by that. And I've heard the same thing. So far, I have not seen or heard from our people any indication that it's actually taking place, that it is still economics of least cost formulation that drives decisions to buy one ingredient or the other. I think what might be confusing a little bit at the moment is that there's a significant glut of both soybeans and soybean meal in the Chinese market, record imports over a long period of time here maybe in anticipation of this trade issue building up has oversupplied the market. And that could give the appearance that demand is not as good as it really is. But from what we can tell, demand for soybean meal in China is still intact. The growth rates have come down a bit. You're probably talking 2% or 3% per year now as opposed to the usual 7%, 8%, but still positive. And as far as we can tell, it is still the same economics that are driving feed formulation. So, so far, it is, I will say, business as usual. But it is an interesting dichotomy in that the market that ultimately will be in the shorter supply, China for soybean meal at the moment feels the heaviest because imports upfront have been accelerated to the extent that they have and the crushing plants have been running at full speed. So, all that has to clean itself up over the next three to four months and, we believe, it will.

And final question is on soft seeds. You highlighted that your soft seed crush is improved. Kind of about how much of a benefit will that be in fiscal 2018? And into 2019, do you expect that to be an incremental positive, or is flat the best we can expect?

No, it's difficult to say, but our soft seed business should be, as we evolve into balance of this year and next year, $100 million-plus type of activity. And it certainly was above that for several years in the past when we had ample seed supply and strong demand for oil to biodiesel. And we see some of that returning now. And again, the kicker could be getting back to China, the extent to which China supplements their protein demands by buying canola meal, rape meal, and sunflower seed meal, and we know that they've recently approved exports of sunflower meal from the Ukraine with pretty much all the plants in that country having been approved by the Chinese authorities. So, there are some positives in soft seeds that I think are developing over the next six to 12 months in Europe. The commitment to biodiesel is seemingly intact and demand is up because imports from Argentina are down. So, I think that soft seed could be a positive. The magnitude is a bit difficult to gauge at the moment, but I'd hope we can get back to more normalized run rates as we get into late 2018 and then 2019 and beyond.

Thank you very much.

Thank you. And the next question comes from Ken Zaslow with Bank of Montreal.

Hey, good morning, everyone.

Hi, Ken.

Ken.

So, a couple of questions. One is, do you think that Bunge is positioned to fully capitalize on the current operating environment, and do you think there's any leakages that has happened through the operations, or do you think you'll be able to fully capitalize on it?

In the case of Oilseeds in crush, I would say we feel very strongly about being able to make this a year that reflects a strong environment. So, I have little doubt about that. Grains is just a different – it's a different mix of assets and exposure for us, and the uncertainties we've discussed around the truck freight in Brazil and the trade issues are real, and the impact of which are to be determined. But for sure, we will be able to show that we made the best out of the environment that we could have in Oilseeds.

Okay. Let me just understand this. If you did not take the hedge position, would your results be better, worse, or any different from what you're looking at?

I think they would have been – at the end of the year, once we execute the crush that we've now margined up at higher levels, I will say if we had not done it, the net result would have been lower than what it will be.

Okay. And how is your positioning in soft seeds relative to your peers?

You mean in terms of assets?

Yeah. Would you be a bigger winner in the soft seed industry or would you be in the same camp as the logistics? I'm just trying to measure it and understand the relative magnitude. As, again, you guys...

Yeah, I would say we are very well-positioned both in Canada and in Eastern Europe, in particular, in sunseed. So, I think Eastern Europe sunseed and Canadian canola, we are very well-positioned relative to the industry.

And my last question is how much forward have you locked in your margins, your crush margins, in the U.S. and other regions? Is it through 2018? Is it through first half of 2019? How far have you done that?

Excuse me, Ken. We've done close to 75% of our total crush capacity for the balance of the year, and we're starting to chip away at next year. So, when we see particularly board crush that we can use to lock some of the U.S. and European capacity, we start chipping away at that.

Okay, great. With that, thanks.

Okay.

Thanks. And the next question is a follow-up from Heather Jones with Vertical Group.

Thanks for taking the follow-up. So, I just wanted to clarify, for the back half, potential upside is if we get a quicker-than-expected resolution on freight, and then on the soft seed. That will be the two key things that could drive upside to your projection?

I think that's about right. Yeah.

Okay. And then looking out to 2019 and the crush that you're locking in, I mean if you look at the strip, there's pretty good margins at least in the U.S. for months out. Could you help us understand what the liquidity is like as you go into Q1, Q2 of 2019, I mean, with the feasibility of actually locking in a sizable chunk of that?

The liquidity diminishes quite rapidly the further out you go. That's a fact. So, it is about picking, like Thom said, chipping away, picking the moments when there's a bid. But, of course, we would prefer to do this in the form of physical business to our customers. And those businesses come in waves. I would expect that by the time we get into the second half, people will already begin to margin up some of the physical business in the U.S. and in Europe. That's typically where you have the longest strings of real activity. So, I don't expect that we will be margined up completely or even 50% just through futures. That's unrealistic. A lot of it will have to come from the interaction with our customers on the meal side and oil side, and of course, farmers on the beans side. But what we can and when there is a bid and we see that it fits the outlook, we will chip away on it, but it's not something you just do.

And aren't you seeing greater willingness by the end users to do that, given you mentioned it earlier the wheat story that's brewing, just the wheat and corn balance sheets tightening up. Are you seeing a greater willingness by customers to lock in?

I think that you will definitely see some of that, and I think mostly to Europe where we are feeling the brunt of the decline in the wheat crop. So, both the Black Sea, but particularly the European wheat crop, is off significantly which will result in probably more corn feeding and incremental soybean meal. So, it's a kicker for soybean meal demand in Europe without a doubt. It's kind of the opposite of what we saw two or three years ago. And so, yeah, I would expect that as we get into the – I don't know whether it's the third or the fourth quarter, but we should expect to see the European consumer extend a bit further out than the normal locking in. But it's still very attractive soybean meal prices. They are by historical measures and certainly in relationship to other feed ingredients attractively priced.

Okay. Perfect. Thanks so much.

Okay.

Thank you. And as there are no more questions, I would like to return the call to Mark Haden for any closing remarks.

Great. Thank you and I appreciate everyone joining us this morning.