UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

BUNGE LIMITED

(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o  No x

As of August 1, 2008 the number of common shares issued and outstanding of the registrant was:

Common shares, par value $.01: 121,617,081

BUNGE LIMITED

Table of Contents

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PART I– FINANCIAL INFORMATION

Item 1.           FINANCIAL STATEMENTS

BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(United States Dollars in Millions, except per share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(United States Dollars in Millions, except share data)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUNGE LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(United States Dollars in Millions)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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BUNGE LIMITED AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.                                      BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Bunge Limited and its subsidiaries (Bunge) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended (Exchange Act).  Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation have been included.  The consolidated balance sheet at December 31, 2007 has been derived from Bunge’s audited financial statements at that date.  Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of the results to be expected for the year ending December 31, 2008.  The financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2007 included in Bunge’s 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on March 3, 2008.

Restatements – Subsequent to the issuance of the Quarterly Report on Form 10-Q for the period ended June 30, 2007 and as disclosed in Bunge’s 2007 Annual Report on Form 10-K, Bunge corrected errors in its previously issued 2007 unaudited quarterly condensed consolidated financial statements.  The errors, which resulted in an overstatement of net sales and costs of goods sold, had no effect on Bunge’s previously reported volumes, gross profit, net income or earnings per common share.  As a result, amounts for the three and six months ended June 30, 2007 contained in this Quarterly Report on Form 10-Q have been restated.  See Note 16 to the condensed consolidated financial statements.

Bunge also re-evaluated the classification of two employee benefit plans in Brazil and concluded that such plans should be properly disclosed as a multiple employer pension plan and a postretirement healthcare plan.  Bunge included such amounts under the headings “Foreign Pension Benefits” and “Foreign Postretirement Healthcare Benefits.”  This correction did not have an effect on Bunge’s consolidated balance sheet at December 31, 2007, or its condensed consolidated statements of income for the three and six months ended June 30, 2007 and condensed consolidated statements of cash flows for the six months ended June 30, 2007.

In addition, in connection with an increase in short-term borrowings with original maturities greater than 90 days, Bunge has now presented on a gross basis certain short-term borrowings which had been presented on a net basis in its condensed consolidated statement of cash flows for the six months ended June 30, 2007.

Reclassifications – Certain reclassifications were made to the prior period condensed consolidated financial statements to conform to the current period presentation.

2.                                      NEW ACCOUNTING PRONOUNCEMENTS

Adoption of New Accounting Pronouncements – In 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS No. 157).  SFAS No. 157 defines fair value, provides enhanced guidance for using fair value to measure assets and liabilities under current U.S. GAAP standards and expands the disclosure of the methods used and the effect of fair value measurements on earnings.  SFAS No. 157 applies whenever other U.S. GAAP standards require (or permit) assets or liabilities to be measured at fair value.  SFAS No. 157 does not expand the use of fair value in any new circumstances.  SFAS No. 157 became effective for Bunge on January 1, 2008.  In February 2008, the FASB issued FASB Staff Position FAS 157-1, Application of SFAS No. 157 to SFAS No. 13 and Its Related Interpretative Accounting Pronouncements that Address Leasing Transactions (FSP FAS 157-1) and FASB Staff Position FAS 157-2, Effective Date of SFAS No. 157 (FSP FAS 157-2).  FSP FAS 157-1 excludes SFAS No. 13, Accounting for Leases, and its related interpretive accounting pronouncements that address leasing transactions, with the exception of fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of SFAS No. 157.  FSP FAS 157-2 delays the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at

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fair value in the financial statements on a recurring basis (at least annually).  FSP FAS 157-1 and FSP FAS 157-2 became effective for Bunge upon adoption of SFAS No. 157 on January 1, 2008.  See Note 9 to the condensed consolidated financial statements.

In 2006, the FASB issued SFAS No. 158, Employer’s Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) (SFAS No. 158).  SFAS No. 158 amends SFAS No. 87, Employer’s Accounting for Pensions, SFAS No. 88, Employer’s Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits, SFAS No. 106, Employer’s Accounting for Postretirement Benefits Other Than Pensions, and SFAS No. 132(R), Employer’s Disclosures about Pensions and Other Postretirement Benefits.  SFAS No. 158 requires an entity which sponsors defined postretirement benefit plans to: (1) recognize in its statement of financial position the funded status of a defined benefit postretirement plan, (2) measure a defined benefit postretirement plan’s assets and obligations that determine its funded status as of the end of the employer’s fiscal year and (3) recognize changes in the funded status of a defined benefit postretirement plan in comprehensive income in the year in which the changes occur. On December 31, 2006, Bunge adopted the recognition and disclosure provisions of SFAS No. 158.  The requirement to measure a defined benefit postretirement plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008, and as a result of the adoption of this measurement provision on January 1, 2008, Bunge recorded approximately $4 million as a reduction to retained earnings to reflect the transition period of the new measurement date.

In 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159), which permits an entity to measure certain financial assets and financial liabilities at fair value.  Pursuant to SFAS No. 159, entities that elect the fair value alternative will report unrealized gains and losses in earnings at each subsequent reporting date.  The fair value alternative may be elected on an instrument-by-instrument basis, with a few exceptions, as long as it is applied to the instrument in its entirety.  The fair value alternative election is irrevocable, unless a new election date occurs.  Assets and liabilities that are measured at fair value must be displayed on the face of the balance sheet.  SFAS No. 159 was effective as of January 1, 2008.  Bunge has not elected to measure financial assets or liabilities at fair value which previously had not been recorded at fair value.

New Accounting Pronouncements – In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133 (SFAS No. 161), which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, by requiring expanded disclosures about a company’s derivative instruments and hedging activities, including increased qualitative, quantitative, and credit-risk disclosures, but does not change the scope or accounting of SFAS No. 133. SFAS No. 161 also amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments, to clarify that derivative instruments are subject to the concentration-of-credit-risk disclosures of SFAS No. 107.  SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early adoption permitted.  Bunge is evaluating the provisions of SFAS No. 161 to determine the potential impact, if any, the adoption will have on its consolidated financial statements.

In April 2008, the FASB issued FASB Staff Position (FSP) No.  FAS 142-3, Determination of the Useful Life of Intangible Assets.  The FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No.142, Goodwill and Other Intangible Assets.  The FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years.  Bunge is currently evaluating the impact FSP 142-3 will have on its consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ("SFAS No. 162"). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP (the "GAAP hierarchy"). SFAS No. 162 makes the GAAP hierarchy explicitly and directly applicable to preparers of financial statements, a step that recognizes preparers' responsibilities for selecting the accounting principles for their financial statements, and sets the stage for making the framework of the FASB Concept Statements fully authoritative. The effective date for SFAS No. 162 is 60 days following the SEC's approval of the Public Company Accounting Oversight Board's related amendments to remove the GAAP hierarchy from auditing standards, where it has resided for some time.  Bunge does not expect the adoption of SFAS No. 162 to have a material impact on its financial statements and results of operations.

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3.                                      INVENTORIES

Inventories consist of the following:

(1)   Readily marketable inventories are agricultural commodities inventories that are readily convertible to cash because of their commodity characteristics, widely available markets and international pricing mechanisms.

(2)   Agribusiness inventories carried at lower of cost or market.

4.                                      BUSINESS ACQUISITIONS

On June 23, 2008, Bunge and Corn Products International, Inc. (Corn Products) announced that they have entered into a definitive merger agreement in which Bunge will acquire Corn Products International, Inc. in an all-stock transaction.  Under the terms of the merger agreement, approved by the Boards of Directors of both companies, Corn Products stockholders will receive common shares of Bunge with a market value of $56.00 for each share of Corn Products common stock that they own, subject to adjustment as described below.

Under the terms of the merger agreement, each share of Corn Products common stock will be converted into the right to receive a fraction of a Bunge common share determined by dividing $56.00 by the volume weighted average closing price of a Bunge common share on the New York Stock Exchange for the 15 trading days ending on and including the second trading day prior to the date on which Corn Products’ stockholders meeting to adopt the merger agreement is held, provided that if this average closing price is equal to or greater than $133.10, each share of Corn Products common stock will be exchanged for 0.4207 of a Bunge common share, and if this average closing price is equal to or less than $108.90, each share of Corn Products common stock will be exchanged for 0.5142 of a Bunge common share.  The exchange of shares in the transaction is expected to qualify as a tax-free reorganization, allowing Corn Products stockholders to defer any gain on their shares for U.S. income tax purposes.

The preliminary estimated purchase price for Corn Products’ common stock is approximately $4,380 million, based on Corn Products’ stockholders receiving common shares of Bunge having a value of $56.00 for each share of Corn Products stock owned.

The merger is subject to customary closing conditions, including the approval of stockholders of Corn Products and the shareholders of Bunge and receipt of certain regulatory approvals.  Subject to these conditions, Bunge currently expects that the merger will close during the fourth quarter of 2008.  Upon closing of the transaction, Corn Products will become a wholly owned subsidiary of Bunge.

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5.                                      OTHER CURRENT ASSETS

Other current assets consist of the following:

(1)          Bunge provides cash advances to suppliers, which primarily are farmers of soybeans and other agricultural commodities, primarily in Brazil, to finance a portion of the suppliers’ production costs.  The advances are largely collateralized by future crops and physical assets of the suppliers, carry a local market interest rate and settle when the farmer’s crop is harvested and sold.  In addition to current secured advances, Bunge has non-current secured advances to suppliers, primarily farmers in Brazil, in the amount of $338 million and $379 million at June 30, 2008 and December 31, 2007, respectively, that are included in other non-current assets in the condensed consolidated balance sheets.  The repayment terms of the non-current secured advances generally range from two to three years.  Included in the secured advances to suppliers recorded in other current assets are advances that were renegotiated from their original terms, equal to an aggregate of $72 million and $41 million at June 30, 2008 and December 31, 2007, respectively.  Included in the secured advances to suppliers recorded in other non-current assets are advances that were renegotiated from their original terms, equal to an aggregate of $26 million and $48 million at June 30, 2008 and December 31, 2007, respectively, mainly due to crop failures.  These renegotiated advances are largely collateralized by a farmer’s future crops and a mortgage on the land, buildings and equipment.

Also included in non-current secured advances to suppliers are advances for which Bunge has initiated legal action to collect the outstanding balance, equal to an aggregate of $277 million and $245 million at June 30, 2008 and December 31, 2007, respectively.  Collections being pursued through legal action largely reflect loans made for the 2005 and 2006 crops.  The allowance for uncollectible advances totaled $88 million and $52 million at June 30, 2008 and December 31, 2007, respectively.

Interest earned on secured advances to suppliers of $10 million and $13 million for the three months ended June 30, 2008 and 2007, respectively, and $23 million and $30 million for the six months ended June 30, 2008 and 2007, respectively, is included in net sales in the consolidated statements of income.

(2)          Bunge has a recoverable taxes balance of $197 million and $191 million at June 30, 2008 and December 31, 2007, respectively, which is included in other non-current assets in the condensed consolidated balance sheets.  The balance of current and non-current recoverable taxes is net of the allowance for recoverable taxes of $142 million and $135 million at June 30, 2008 and December 31, 2007, respectively.  In addition, in May 2008, Bunge received a favorable ruling from the tax authorities in Brazil, related to certain transactional taxes, confirming that it was entitled to a higher credit rate for a certain category of raw material purchases made by Bunge since the third quarter of 2004.  As a result, Bunge recorded recoverable taxes (current and non-current) in cost of goods sold $128 million of related tax credits, which it allocated $117 million and $11 million to its agribusiness and its milling products segments, respectively.  Bunge will apply the credit as an offset against future Brazilian tax liabilities incurred in the ordinary course of business and expects that the credit will be fully utilized over the next 12 to 18 months.

6.                                      GOODWILL

At June 30, 2008, the changes in the carrying value of goodwill by segment are as follows:

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(1)   In the six months ended June 30, 2008, Bunge acquired a European margarine producer based in Germany for a purchase price of approximately $31 million, which consisted of $25 million in cash and $6 million of assumed debt.  Assets and liabilities acquired consisted of $6 million of cash and $4 million of historical other net assets.  As of June 30, 2008, Bunge had not completed the purchase price allocation valuation of the acquired assets and liabilities and has preliminarily recorded $21 million of goodwill in its edible oil products segment related to this acquisition.  In addition, Bunge recorded an additional $7 million of goodwill as a result of a resolution of a contingency in the purchase price relating to its 2007 sugarcane and ethanol mill acquisition.

(2)   One of Bunge’s Brazilian subsidiaries has tax deductible goodwill in excess of its book goodwill.  For financial reporting purposes, the tax benefits attributable to the excess tax goodwill are first used to reduce recorded goodwill and then to reduce intangible assets prior to recognizing any income tax benefit in the condensed consolidated statements of income.

7.                                      INVESTMENTS IN AFFILIATES

In the six months ended June 30, 2008, Bunge invested $61 million in cash for a 50% ownership interest in its joint venture Bunge Maroc Phosphore S.A.  The joint venture was formed to produce fertilizers in Morocco for export primarily to markets in Latin America.  Bunge Maroc Phosphore S.A. is accounted for under the equity method of accounting.

8.                                      OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

9.                                      FINANCIAL INSTRUMENTS

Adoption of SFAS No. 157, Fair Value Measurements—Effective January 1, 2008, Bunge adopted SFAS No. 157, which provides a framework for measuring fair value.  SFAS No. 157 also eliminates the deferral of gains and losses at inception associated with certain derivative contracts whose fair value was not evidenced by observable market data.  SFAS No. 157 requires that the impact of this change in accounting for derivative contracts be recorded as an adjustment to opening retained earnings in the period of adoption.  Bunge did not have any deferred gains or losses at inception of derivative contracts and therefore no adjustment to opening retained earnings was made upon adoption of SFAS No. 157.

SFAS No. 157 defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in Bunge’s principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Bunge determines the fair market values of its readily marketable inventories, derivative contracts, and certain other assets based on the fair value hierarchy established in SFAS No. 157, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.  Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity.  Unobservable inputs are inputs that reflect Bunge’s own assumptions based on market data and on assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The standard describes three levels within its hierarchy that may be used to measure fair value.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.  Level 1 assets and liabilities include exchange traded derivative contracts.

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Level 2: Observable inputs, including Level 1 prices (adjusted); quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Level 2 assets and liabilities include readily marketable inventories and over-the-counter (OTC) commodity purchase and sales contracts and other OTC derivatives whose value is determined using pricing models with inputs that are generally based on exchange traded prices, adjusted for location specific inputs that are primarily observable in the market or can be derived principally from or corroborated by observable market data. 

Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities.  In evaluating the significance of fair value inputs, Bunge gives consideration to items that individually, or when aggregated with other inputs, generally represent more than 10% of the fair value of the assets or liabilities.  For such identified inputs, judgments are required when evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification and disclosure.  Level 3 assets and liabilities include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation.

The following table sets forth by level Bunge’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2008.  Pursuant to FSP No.  FAS 157-2, Effective Date of FASB Statement No. 157, Bunge will delay the adoption of SFAS No. 157 for its nonfinancial assets and liabilities that are recognized on a nonrecurring basis, including goodwill and intangibles and asset retirement obligations.  As required by SFAS No. 157, assets and liabilities are classified in their entirety based on the lowest level of input that is a significant component of the fair value measurement.  The lowest level of input is considered Level 3.  Bunge’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels.

(1)   Other assets include primarily the fair values of firm commitments for the use of ocean vessels under time charter agreements.  These firm commitments are hedged by derivative instruments which are designated as fair value hedges and are included in other current assets in the condensed consolidated balance sheets.

Derivatives—Exchange traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1.  Bunge’s forward commodity purchase and sale contracts are classified as derivatives along with other OTC instruments relating primarily to freight, energy and foreign exchange.  Bunge estimates fair market values based on exchange quoted prices, adjusted for differences in local markets.  These differences are generally valued using inputs from broker or dealer quotations, or market transactions in either the listed or OTC markets.  In such cases, these derivative contracts are classified within Level 2.  Changes in the fair market values of these contracts are recognized in the consolidated financial statements as a component of cost of goods sold, foreign exchange gain or loss or other comprehensive income.

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OTC derivative contracts include swaps, options and structured transactions that are valued at fair value and may be offset with similar positions in exchange traded markets.  The fair values of OTC derivative instruments are determined using quantitative models that require the use of multiple market inputs including quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets which are not highly active, other observable inputs relevant to the asset or liability, and market inputs corroborated by correlation of other means.  These valuation models include inputs such as interest rates, prices and indices to generate continuous yield or pricing curves and volatility factors.  Where observable inputs are available for substantially the full term of the asset or liability, the instrument is categorized in Level 2.  Certain OTC derivatives trade in less active markets with less availability of pricing information and certain structured transactions can require internally developed model inputs that might not be observable in or corroborated by the market.  When unobservable inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3.

Readily marketable inventories—Bunge’s readily marketable commodity inventories are valued at estimated fair market values.  These commodities are readily marketable, have quoted market prices and may be sold without significant additional processing.  Bunge estimates fair market values based on exchange quoted prices, adjusted for differences in local markets.  Changes in the fair market values of these inventories are recognized in our consolidated statements of income as a component of cost of goods sold.

Readily marketable inventories are valued based on the fair values of the commodities, including exchange quotations, broker or dealer quotations, or market transactions in either listed or OTC markets.  In such cases, the inventory is classified within Level 2.  Certain inventories may utilize significant management judgment or estimation to measure fair value.  In such cases, the inventory is classified as Level 3.

If Bunge used different methods or factors to estimate fair market values, amounts reported as unrealized gains and losses on derivative contracts and readily marketable inventories in the consolidated balance sheets and consolidated statements of income could differ.  Additionally, if market conditions change subsequent to the reporting date, amounts reported in future periods as unrealized gains and losses on derivative contracts and readily marketable inventories in the consolidated balance sheets and consolidated statements of income could differ.

Level 3 Valuation—Bunge’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy.  In evaluating the significance of fair value inputs, Bunge gives consideration to items that individually, or when aggregated with other inputs, generally represent more than 10% of the fair value of the assets or liabilities.  For such identified inputs, judgments are required when evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification and disclosure.  Because of differences in the availability of market prices and market liquidity over their terms, inputs for some assets and liabilities may fall into any one of the three levels in the fair value hierarchy or some combination thereof.  While SFAS No. 157 requires Bunge to classify these assets and liabilities in the lowest level in the hierarchy for which inputs are significant to the fair value measurement, a portion of that measurement may be determined using inputs from a higher level in the hierarchy.

Transfers in and/or out of Level 3 represent existing assets or liabilities that were either previously categorized as a higher level for which the inputs to the model became unobservable or assets and liabilities that were previously classified as Level 3 for which the lowest significant input became observable during the period.

Level 3 Derivatives—The fair values of Level 3 derivative instruments are estimated using pricing information from less active markets.  Level 3 derivative instruments utilize both market observable and unobservable inputs within the fair value measurements.  These inputs include commodity prices, price volatility factors, interest rates, volumes and locations.

Level 3 Readily marketable inventories—Readily marketable inventories are considered Level 3 when at least one significant assumption or input is unobservable.  These assumptions or inputs include exchange quotes and certain management estimations regarding local markets.

The table below presents a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during 2008.  Level 3 instruments presented in the table include readily marketable inventories and derivatives, which were carried at fair value prior to the adoption of

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SFAS 157.  These instruments were valued using pricing models that, in management’s judgment, reflect the assumptions a marketplace participant would use at June 30, 2008.

(1)          Derivatives, net include Level 3 derivative assets and liabilities.

The table below summarizes changes in unrealized gains or losses recorded in earnings during 2008 for Level 3 assets and liabilities that were held at June 30, 2008.

(1)           Derivatives, net include Level 3 derivative assets and liabilities.

Interest rate derivatives—The interest rate swaps used by Bunge as hedging instruments have been recorded at fair value in the consolidated balance sheets with changes in fair value recorded currently in earnings.  Additionally, the carrying amount of the associated debt is adjusted through earnings for changes in the fair value due to changes in interest rates.  Ineffectiveness, as defined in SFAS No. 133, is recognized to the extent that these two adjustments do not offset.  The derivatives Bunge enters into for hedge purposes are assumed to be perfectly effective under the shortcut method of SFAS No. 133.  The differential to be paid or received based on changes in interest rates is recorded as an adjustment to interest expense.  The interest rate differential on the swaps settles in cash every six months until expiration.

In the three months ended June 30, 2008, Bunge entered into interest rate swap agreements with an aggregate notional amount of $250 million maturing in 2011 for the purpose of managing its interest rate exposure associated with its $250 million three-year term loan due 2011.  Under the terms of the interest rate swap agreements, Bunge makes payments based on the average Federal Funds rate and will receive payments based on fixed interest rates. Bunge has accounted for the interest rate swap agreements as fair value hedges in accordance with SFAS No. 133.

(1)  Interest is payable in arrears based on the average Federal Funds rate.

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In January 2008, Bunge terminated its outstanding interest rate swap agreements with a notional amount of $1,150 million maturing in 2014, 2015 and 2017 and received approximately $49 million in cash, of which a gain of $48 million on the net settlement of the swap agreements will be amortized to earnings over the remaining term of the debt.

Foreign exchange derivatives—Bunge uses net investment hedges to partially offset the translation adjustments arising from remeasuring its investment in its Brazilian subsidiaries.  For derivative instruments that are designated and qualify as net investment hedges, Bunge records the effective portion of the gain or loss on the derivative instruments in accumulated other comprehensive income (loss).  At June 30, 2008 and December 31, 2007, Bunge had outstanding cross currency swaps with a notional value of $76 million for both periods to hedge a portion of its net investment in Brazilian assets.  Bunge pays Brazilian reais and receives U.S. dollars using fixed interest rates, offsetting the translation adjustment of its net investment in Brazilian reais assets.  The swaps mature in 2008.  At June 30, 2008, the fair value of these currency swaps was a loss of $26 million, which was recorded in other current liabilities in the consolidated balance sheet.  At December 31, 2007, the fair value of these currency swaps was a loss of $17 million.  For the six months ended June 30, 2008, Bunge recorded a $9 million loss as an offset against foreign exchange translation adjustment in accumulated other comprehensive income (loss) that related to the change in the fair value of the outstanding net investment hedges.

10.                               LONG-TERM DEBT

During the six months ended June 30, 2008, Bunge entered into a $250 million term loan facility with a lending institution.  The term loan bears interest at a fixed rate of 4.33% per year and matures in 2011.  Bunge used the proceeds from this facility to repay outstanding indebtedness.

In addition, during the six months ended June 30, 2008, Bunge entered into a $650 million, three-year revolving credit facility with a number of lending institutions.  The interest rate applicable to borrowings under the revolving credit facility may range from LIBOR plus 0.65% to 1.50% based on the credit ratings of Bunge’s long-term unsecured debt at the time of borrowing.  Borrowings under the revolving credit facility bear interest at LIBOR plus 0.80% based on Bunge’s current credit ratings.  Borrowings under the revolving credit facility, which matures in 2011, may be used for general corporate purposes.  There were $550 million of borrowings outstanding under this facility at June 30, 2008.

11.                               RELATED PARTY TRANSACTIONS

Bunge purchased soybeans, related soybean commodity products and other commodity products from its unconsolidated joint ventures (primarily its North American joint ventures), which totaled $263 million and $141 million for the three months ended June 30, 2008 and 2007, respectively, and $526 million and $277 million for the six months ended June 30, 2008 and 2007, respectively.  Bunge also sold soybean commodity products and other commodity products to its unconsolidated North American and certain European joint ventures, which totaled $55 million and $37 million for the three months ended June 30, 2008 and 2007, respectively, and $109 million and $72 million for the six months ended June 30, 2008 and 2007, respectively.  Bunge believes these transactions were recorded at values similar to those with third parties.

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12.                              EMPLOYEE BENEFIT PLANS

In 2007, Bunge re-evaluated the classification of two employee benefit plans in Brazil and concluded that such plans should be properly disclosed as a multiple employer pension plan and a postretirement healthcare plan.  Bunge included such amounts under the headings “Foreign Pension Benefits” and “Foreign Postretirement Healthcare Benefits.”  This correction did not have an effect on Bunge’s consolidated balance sheet at December 31, 2007 or its consolidated statements of income for the three and six months ended June 30, 2007 and cash flows for the six months ended June 30, 2007.

In addition, in the six months ended June 30, 2008, Bunge recorded a $20 million accumulated benefit obligation related to certain postretirement medical costs required to be paid by employers under Brazilian law as a result of recent court decisions which have impacted employer interpretations of the related laws and regulations.

In the six months ended June 30, 2008, Bunge made contributions to its U.S. and foreign defined benefit pension plans totaling approximately $6 million and $4 million, respectively.  In the six months ended June 30, 2007, Bunge made contributions totaling approximately $5 million to its U.S. and approximately $2 million to its foreign defined benefit pension plans.

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In the six months ended June 30, 2008, Bunge made contributions totaling approximately $1 million and $2 million to its U.S. and to its foreign postretirement benefit plans, respectively.  In the six months ended June 30, 2007, Bunge made contributions totaling approximately $1 million to its U.S. and approximately $1 million its foreign postretirement benefit plans.

13.                               COMMITMENTS AND CONTINGENCIES

Bunge is party to a large number of claims and lawsuits, primarily tax and labor claims in Brazil, arising in the normal course of business.  Bunge records liabilities related to its general claims and lawsuits when the exposure item becomes probable and can be reasonably estimated.  After taking into account the liabilities recorded for the foregoing matters, management believes that the ultimate resolution of such matters will not have a material adverse effect on Bunge’s financial condition, results of operations or liquidity.  Included in other non-current liabilities at June 30, 2008 and December 31, 2007 are the following accrued liabilities:

Tax Claims—The tax claims relate principally to claims against Bunge’s Brazilian subsidiaries, including primarily value added tax claims.  The determination of the manner in which various Brazilian federal, state and municipal taxes apply to the operations of Bunge is subject to varying interpretations arising from the complex nature of Brazilian tax law.

Labor Claims—The labor claims relate principally to claims against Bunge’s Brazilian subsidiaries.  The labor claims primarily relate to dismissals, severance, health and safety, salary adjustments and supplementary retirement benefits.

Civil and Other—The civil and other claims relate to various disputes with suppliers, customers and other third parties.

Bunge has incurred certain costs relating to crude sunflower oil supplied to Bunge by third parties and sold by Bunge in Europe that has been subject to a withdrawal from the market due to non-conformity.  To date, such costs have not been material and Bunge does not expect the withdrawal to have a material adverse effect on its financial condition or results of operations.

In July 2008, the European Commission commenced an investigation into whether certain traders and distributors of cereals and other agricultural products in the E.U. have infringed European competition laws.  In this regard, on July 10, 2008, the European Commission carried out inspections at the premises of a number of companies, including at Bunge’s office in Rome, Italy. No other Bunge offices were inspected. The European Commission’s investigation is at a preliminary stage and therefore, Bunge is, at this time, unable to predict the outcome of this investigation, including whether the European Commission will ultimately determine to commence formal proceedings against Bunge. Bunge is cooperating with the European Commission in relation to this investigation.

Guarantees—Bunge has issued or was a party to the following guarantees at June 30, 2008:

(1)         Prior to January 1, 2003, Bunge issued a guarantee to a financial institution related to debt of its unconsolidated joint ventures in Argentina, which are its unconsolidated affiliates.

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The term of the guarantee is equal to the term of the related financing, which matures in 2009.  There are no recourse provisions or collateral that would enable Bunge to recover any amounts paid under this guarantee.

(2)         Bunge has issued guarantees to third parties in Brazil related to amounts owed these third parties by certain of Bunge’s customers.  The terms of the guarantees are equal to the terms of the related financing arrangements, which are generally one year or less, with the exception of certain Brazilian government programs, primarily from 2006, where remaining terms are up to five years.  In the event that the customers default on their payments to the third parties and Bunge would be required to perform under the guarantees, Bunge has obtained collateral from the customers.  At June 30, 2008, $185 million of these financing arrangements were collateralized by tangible property.  Bunge evaluates the likelihood of the customer repayments of the amounts due under these guarantees based upon an expected loss analysis and records the fair value of such guarantees as an obligation in its consolidated financial statements.  The fair value of these guarantees is recorded in accrued liabilities at June 30, 2008.

In addition, Bunge Limited has provided full and unconditional parent level guarantees of the indebtedness outstanding under certain senior credit facilities and senior notes entered into, or issued by, its 100% owned subsidiaries.  At June 30, 2008, debt with a carrying amount of $4,902 million related to these guarantees is included in Bunge’s consolidated balance sheets.  This debt includes the senior notes issued by two of Bunge’s 100% owned finance subsidiaries, Bunge Limited Finance Corp. and Bunge N.A. Finance L.P.  There are no significant restrictions on the ability of Bunge Limited Finance Corp., Bunge N.A. Finance L.P. or any other Bunge subsidiary to transfer funds to Bunge Limited.

Also, one of Bunge’s subsidiaries has provided a guarantee of indebtedness of one of its subsidiaries.  The total debt outstanding as of June 30, 2008 was $101 million and was recorded as long-term debt in Bunge’s condensed consolidated balance sheet.

14.                               COMPREHENSIVE INCOME (LOSS)

The following table summarizes the components of comprehensive income:

15.                               EARNINGS PER COMMON SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding, excluding any dilutive effects of stock options, restricted stock unit awards, convertible preference shares and convertible notes during the reporting period.  Diluted earnings per share is computed similar to basic earnings per share, except that the weighted average number of common shares outstanding is increased to include additional shares from the assumed exercise of stock options, restricted stock unit awards and convertible securities, if dilutive.  The number of additional shares is calculated by assuming that outstanding stock options, except those which are not dilutive, were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting period.

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In addition, Bunge accounts for the effects of convertible securities, using the if-converted method.  Under this method, the convertible securities are assumed to be converted and the related dividends are added back to earnings, if dilutive.

Bunge has 862,500 mandatory convertible preference shares, which are outstanding as of June 30, 2008.  Each mandatory convertible preference share has a liquidation preference of $1,000 per share.  On the mandatory conversion date of December 31, 2010, each mandatory convertible preference share will automatically convert into between 8.219 and 9.6984 of Bunge Limited common shares, subject to certain anti-dilution adjustments, depending on the average daily volume weighted average price per common share over the 20-trading day period ending on the third trading day prior to such date.  At any time prior to December 31, 2010, each mandatory convertible preference share is convertible, at the holder’s option, at the minimum conversion rate of 8.219 common shares (which represents 7,088,888 Bunge Limited common shares, subject to certain anti-dilution adjustments).

In addition, Bunge has 6,900,000 convertible perpetual preference shares outstanding as of June 30, 2008.  Each convertible perpetual preference share has an initial liquidation preference of $100 per share and each convertible preference share is convertible, at any time at the holder’s option, initially into approximately 1.0846 Bunge Limited common shares (which represents 7,483,740 Bunge Limited common shares), based on an initial conversion price of $92.20 per convertible preference share, subject in each case to certain anti-dilution adjustments.

The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2008 and 2007:

(1)         Approximately 1 million stock options and contingently issuable restricted stock units were not dilutive and not included in the weighted average number of common shares outstanding for the three and six months ended June 30, 2008, respectively.  Approximately 2 million stock options and contingently issuable restricted stock units were not dilutive and not included in the weighted average number of common shares outstanding for the three and six months ended June 30, 2007, respectively.  In addition, the weighted average number of common shares for the six months ended June 30, 2007 excludes 7,483,740 weighted average common shares issuable upon conversion of the convertible perpetual preference shares as the effect of the conversion would not have been dilutive.

16.                               SEGMENT INFORMATION