Bunge Limited Management Discusses Q4 2013 Results - Earnings Call Transcript

Feb.13.14 | About: Bunge Limited (BG)

Bunge Limited (NYSE:BG)

Q4 2013 Earnings Call

February 13, 2014 10:00 am ET

Executives

Mark Haden

Soren W. Schroder - Chief Executive Officer and Director

Andrew J. Burke - Chief Financial Officer and Global Operational Excellence Officer

Analysts

Vincent Andrews - Morgan Stanley, Research Division

Ann P. Duignan - JP Morgan Chase & Co, Research Division

Adam Samuelson - Goldman Sachs Group Inc., Research Division

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Diane Geissler - CLSA Limited, Research Division

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

Kenneth B. Zaslow - BMO Capital Markets U.S.

Michael Picken - Cleveland Research Company

Michael E. Cox - Piper Jaffray Companies, Research Division

David C. Driscoll - Citigroup Inc, Research Division

Matthew J. Korn - Barclays Capital, Research Division

Robert Moskow - Crédit Suisse AG, Research Division

Giovana Araujo - Itaú Corretora de Valores S.A., Research Division

Operator

Welcome to the Q4 2013 Bunge Earnings Conference Call. My name is Tricia, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I would now like to turn the call over to Mark Haden. Mark, you may begin.

Mark Haden

Great. Thank you, Trish. And 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 Drew Burke, Chief Financial Officer. I'll now turn the call over to Soren.

Soren W. Schroder

Thank you, Mark, and good morning, everyone. Bunge had a solid quarter and our core business has performed very well. Combined, the agribusiness, edible oils and milling segments earned $422 million of EBIT and delivered a record annual result of approximately $1.3 billion with returns above cost of capital. Our agribusiness team performed well, effectively managing risks as markets transition from extreme tightness, especially North America, to large crops and strong demand with the arrival of the U.S. new crop, corn and soybeans. We capitalized on strong soy crush margins in the United States, Europe and in China, as well as in rape and canola crush in Europe and Canada.

Export demand for corn and soybeans increased significantly in North America and we enjoyed strong corn and wheat flows through the black seaports. Global merchandising volumes and margins were up in Europe, in the Middle East and in Asia. And ocean freight moved higher throughout the quarter, supporting a higher value for our logistics network.

In food and ingredients, we achieved record quarterly and full year results, with all regions reporting higher year-on-year earnings. In milling in Brazil, Mexico and United States we're improving our cost structure by delivering high-quality and better margin products. In edible oils across Bunge, we have new product introductions in both bottled oils and margarines and we continue to innovate with our customers in the B2B segments to bring them better functionality and health profiles. Our food team has really made big strides in its efforts to extract more value from operations by supporting the growth of our customers.

Sugar and ethanol trading & merchandising operations performed well in the quarter and for the full year. We have a strong risk management and flow capability and we have established a global presence over the last couple of years, which complements both agribusiness customers and capabilities.

Our Brazilian sugarcane milling operations continued to be impacted by the depressed global sugar prices, low sucrose cane content and capped ethanol prices in Brazil. As a consequence, we reported a loss for the quarter and for the year. Despite significantly lower sugar prices year-on-year, we did increase segment performance by $84 million on a full year basis.

Many improvements have been accomplished in our sugar milling operations over the last year and despite the difficult market environment, our team is dedicated and focused on delivering more. We have a solid team that has grown stronger throughout the year and we are impressed with the progress they're making.

As mentioned during the third quarter call, the volatility and capital intensive nature of the milling business is making us review strategic options how to best maximize returns. And in that regard, we have engaged a financial advisor to help us with the process. We'll keep you posted on progress as we make it.

Since the middle of last year, all of Bunge is focused on improving returns by managing working capital better and optimizing results. We have rolled out a performance management system that allows us to track performance in a more granular way and to quickly identify areas in need of improvement. It's a team effort for continued accountability and direction. It extends globally and starts with the executive committee where we have had several changes and which is fully focused on delivering returns and growth to Bunge.

Our objective is to grow smartly by delivering returns well above our WACC, which we did in 2013 in our agribusiness, food and fertilizer segments and we expect 2014 will show growth from there. Lastly, we believe our strong balance sheet and credit metrics provide us the opportunity to return capital to our shareholders as part of our balanced approach to capital allocation. As a result, commencing in the first quarter, we intend to repurchase $200 million of our common shares.

Now I'll turn the call over to Drew, who will provide greater detail on the quarter of the year and the outlook. And he will also walk you through a more detailed presentation of our capital allocation framework, which we introduced in our last quarterly earnings call. Drew?

Andrew J. Burke

Thank you, Soren. Let's turn to Page 4 in the earnings highlights. We had a strong finish to the year, with total segment EBIT-adjusted of $404 million in the quarter versus a prior year result of $140 million. On a full year basis, total segment EBIT-adjusted was $1.3 billion versus $1.1 billion in the prior year. The annual result of our combined agribusiness and foods businesses was a record.

Our earnings per share from continuing operations diluted was $0.75 in the quarter and $0.90 for the year. Adjusted earnings per share was $1.35 in the quarter and $4.78 for the year. These numbers were negatively impacted by high income tax expense. 2013 tax expense was $904 million. This includes $512 million related to valuation allowances on deferred tax assets, where management has determined that utilization of the tax benefits related to net operating loss carryforwards is uncertain. The majority of this amount pertains to our sugar businesses.

There are also $78 million in charges related to the tax years 2008 to 2010 in Brazil. Our tax rate for the full year, excluding valuation allowances and discrete items, was 30%. This rate is higher than previous projections due to the current year impact of losses in legal entities where we have established the valuation allowances. When these legal entities have losses, we do not provide a tax benefit. This means income before taxes is reduced, while our tax pace -- expense is unchanged, increasing the tax rate. In the fourth quarter, our tax rate was elevated due to this factor and our earnings mix is we had strong earnings in legal entities with higher tax rates.

Looking forward to 2014, we are forecasting a tax rate of approximately 23%. The reduction from the 2013 rate is due to an expected reduction of losses from the legal entities, where we have valuation allowances, primarily our sugar entities and the implementation of certain tax planning and capital structure initiatives. Higher than forecast performance in our industrial sugar businesses will come with a very low tax expense and reduce the tax rate, while below forecast performance will come without a tax benefit and increase the tax rate. A change in our earnings mix by legal entity can also cause our rate to vary.

Agribusiness adjusted EBIT in the quarter was $346 million versus $134 million in the prior year. Large Northern Hemisphere harvest led to stronger volumes in margins in both oilseed processing and grains origination and distribution. Oilseed processing margins were strong in North America, Europe and China due to the larger crop, strong demand and the absence of significant export volumes from South America.

Our merchandising business results benefited from strong export programs to Asia, the Middle East and Europe. For the full year, agribusiness adjusted segment EBIT was $1 billion, slightly below last year's record. Our Brazilian business had a record year, driven by our ability to handle and process a record crop. Our network of logistics and processing assets and a strong experienced team provided an advantage in managing the logistical and risk management challenges. Our Northern Hemisphere businesses had a strong finish to the year with the arrival of the new crop.

Our sugar & bioenergy business had a loss in the quarter of $35 million on an adjusted basis versus a loss of $49 million in the prior year. While improved from last year, the result was below our expectations due to the impact of lower ATR, which is the sucrose content in the cane. Our emphasis in the quarter was to continue to reduce our fixed industrial costs and increase our agricultural productivity. To reduce our fixed costs, we have reduced headcount by about 10% between May 2013 and January 2014. Additionally, we have reduced our harvester fleet by 5% going into 2014, reflecting the productivity improvements we have made. On a full year basis, the sugar & bioenergy segment had a loss of $34 million versus a loss of $118 million in the prior year. This improvement reflects a strong performance by our sugar and ethanol trading and distribution businesses, where we have continued to build a stronger global team, origination and distribution network and customer base.

Our foods & ingredients business had a record quarter and year. Adjusted quarterly EBIT was $84 million versus $49 million in the prior year. Results in both milling and edible oils were driven by higher gross margins and reflect our focus on margin management, achieving industrial efficiencies and new product introductions. Both wheat and corn milling performed well in the quarter and above prior year levels. Wheat milling benefited from increased margins in Brazil and the strong performance of our Mexican wheat milling business. Edible oils had a strong quarter, led by stronger volumes in margins in our European business. On a full year basis, food & ingredients adjusted EBIT was $280 million versus $166 million in the prior year. The improvement was broadly based across all our food businesses, but was strongest in Brazil.

Our fertilizer business had adjusted segment EBIT of $9 million in the quarter and $37 million year-to-date. The main contributors are our Brazilian port operation in Argentine fertilizer business.

Let's turn to Page 5 in our return on invested capital. The chart shows 3 scenarios. The first column is our return on invested capital based on our results as reported, including the charges for notable items. This yields a return on invested capital of 1.1%. The second column represents our return on invested capital adjusting for the notable items included in the press release tables, making these adjustments you'd come to an effective tax rate of 30%. This results in a return on invested capital of 5.8%, which is below our cost of capital of 7%. The below cost of capital returns are primarily due to our industrial sugar businesses. For illustrative purposes, we have calculated the return on invested capital, excluding the notable items in the assets and results of our sugar & bioenergy segment. The effective tax rate in this calculation is also 30%. This results in a return of 7.5%, which is above our cost of capital of 7%. We remain committed to achieving a return 2% above our cost of capital as we continue to improve returns in foods and agribusiness, complete our strategic review of sugar & bioenergy and take the consequent actions and our tax rates returns to the expected long-term level.

Let's turn to Page 6 in the cash flow highlights. Cash flow from operations in 2013 was $2.2 billion. Funds from operations were approximately $1.2 billion. This reflects our net income, depreciation and amortization and the fact that the notable tax charges were noncash charges. We also had a cash inflow of approximately $1 billion due to changes in our operating assets and liabilities. The inflow from operating assets reflects our continued focus on optimizing working capital levels and a decline in commodity prices.

Our liquidity position remains strong. At December 31, we had $4.3 billion of capacity available under committed credit facilities. Our capital expenditures for the year were approximately $1 million and in line with our expectations.

Let's turn to Page 7 in the outlook. As Soren said, our agribusiness and food & ingredients business entered 2014 with good momentum. Agribusiness markets are transitioning from tightness to emerging surpluses, as large Northern Hemisphere crops are being followed by large South American crops. Demand for products is strong, supported by moderating product prices and good livestock production economics. The Northern Hemisphere will be the primary supplier of export markets in the first quarter. Oilseed processing margins are solid and there's still a sizable amount of corn to come to market in the United States. South American harvest will be large and they will become the world's principal supplier during the second and third quarters. Brazil will once again be challenged by logistics, but this plays to our logistics goal and risk management strengths.

Please turn to Page 8. In sugar & bioenergy, we are forecasting a breakeven result for this segment. We expect a continued solid performance in both our sugar and ethanol trading and merchandising operations. The overall environment for the industrial sugar business is challenging. Gasoline prices in Brazil remain below international parity, putting a cap on ethanol pricing. Sugar pricing is depressed as the global market is in surplus. Our forecast for improved results is based on our productivity efforts continuing to reduce cost, a higher crush volume and an improvement in the ATR. We would also like to note that the early weather conditions have not been favorable and this may result in reduced sugarcane yields. If there is a small reduction in yields, the impact is not severe as we have a buffer supply of cane that would let us crush at or near anticipated levels. A drop in yields that require a reduction in our crush capacities would have a larger impact. As a reminder, industrial sugar results are heavily weighted to the second half of the year following the normal seasonal pattern. The first quarter is likely to be weaker than usual as we're carrying in relatively high-cost inventories from the 2013 crop.

In foods & ingredients, we expect to continue to grow our earnings as demand for our core products is strong in most geographies and will continue to benefit from joint growth initiatives with our customers, product innovation and operational efficiencies. We will also have incremental profits from our acquisition of Grupo Altex wheat mills. As a reminder, the fourth quarter is generally slower in our food business for seasonal reasons.

Overall, we remain confident that our agribusiness in foods businesses will continue to grow and increase returns. In sugar & bioenergy, we remain focused on increasing productivity and lowering our cost structure to put us in a position to benefit when market conditions improve. We will also continue to work toward completion of our strategic review.

Now I would like to spend a few minutes talking about our capital allocation priorities. If you would please turn to Slide 11. Last quarter, we introduced our capital allocation framework indicating our priorities, as shown on this chart. Now I want to go a little deeper into each of these 4 areas: first, balance sheet strength; second, reinvesting in the cap -- in the business or capital expenditures; third, M&A; and fourth, returning capital to shareholders. The key principle underlying our approach is that we will always choose the alternative that we believe maximizes value to our shareholders.

Turning to Slide 12. As we have consistently stated, our first priority is to have a strong balance sheet as defined by a BBB credit rating. Due to the nature of our business, where relatively sudden commodity price spikes can occur without much warning, we feel it is essential to have a strong and flexible balance sheet. When prices spike, markets are encouraging farmers around the world to sell, not just their current inventories, but their future production as well. This provides opportunities for us. And the degree that we can take advantage of these opportunities requires readily available liquidity and access to capital. We view this as a competitive advantage in our industry. As you can see, our core credit metrics all improved in 2013.

Moving to Slide 13. We hit our targeted 2013 capital expenditures spend of $1 billion, which was $200 million lower than we originally targeted at the beginning of the year. Looking at 2014, we are decreasing our capital expenditure further and are targeting about $900 million. Our capital expenditure target is based on a bottoms-up assessment, which starts with maintenance. Those investments needed to keep the operations running reliably and safely and producing the quality products that our customers expect from us. Next we prioritize productivity, profit-enhancing project. These projects tend to be low risk with short paybacks.

Lastly, our investments in growth projects. Each year, we have a long list of project submitted by our operating companies. The projects that are ultimately are approved are those with the most attractive returns that fit our strategy with consideration to payback period. The hurdle rate used to evaluate a specific project is unique to the particular business unit, reflecting the nature of the business and country of operation. In other words, a crush plant in Canada will have a different hurdle rate than a similar crush plant in Ukraine. The level of growth of capital -- of growth capital expenditure can vary each year. It will depend on the products, the market environment and be assessed against alternatives, such as returning to capital to shareholders that may have a more attractive risk-adjusted return.

Moving to Slide 14. You can see the split of our capital expenditures by segment, as well as by geography, indicating our balanced approach to investment. The diversification is an important aspect of how we manage risk. And comparing to 2012, the major differences are a reduction in total investment of about $300 million and a significant decrease in the amount invested in our sugarcane milling operations in Brazil, where we are now only investing in maintenance to support our plantation and industrial assets and select productivity projects that can enhance our cost structure.

Turning to Slide 15. This shows a representation of the major projects that we're bringing online during 2014 and also those projects in which we will begin construction during the year. Priorities are in logistical assets, such as ports and crushing capacity in selected markets. To build the crush plant typically takes between 18 and 24 months.

Moving to Slide 16. Mergers and acquisitions have been an important part of our strategy over the years and will continue to be. We tend to prefer acquisitions over greenfield investments as it helps maintain balance in industry supply and demand and immediately provides cash flow. Our current priorities are filling gaps in our agribusiness global network and expanding in food & ingredients. Examples of this would be our recent investments in wheat milling assets in Mexico and our export terminal in Ukraine. Acquisitions are subject to the strict hurdle rates and are assessed against the alternatives of reinvesting in organic growth or repurchasing shares.

Turning to Slide 17. We recognize that dividends and share repurchases are an important overall component of value creation for shareholders and they are part of our capital strategy. We have increased our dividend every year since our IPO in 2001, averaging an 11% increase over that period. Looking forward, we intend to target maintaining increases in line with this historical average. With respect to share repurchases, we have an existing program of $950 million, with approximately $500 million available. As Soren mentioned earlier in his comments that commencing in the first quarter, we intend to repurchase $200 million of our common shares under this authorization.

Turning to Slide 18 and to summarize the capital allocation portion. First, we will maintain a strong balance sheet as a top priority. Dividends and share repurchases will be an ongoing component of our overall value creation framework to maximize shareholder returns. M&A will continue to be a part of our growth strategy, with agribusiness and foods being priorities. And CapEx is not set in stone at a specific level. It is a bottoms-up approach, starting with maintenance and prioritizing shorter payback profit-enhancing projects. Growth projects will vary depending on specific project opportunities. The market environment and in targeted investments, such as returning capital to shareholders.

That concludes my comments and now we will open the call for your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Vincent Andrews from Morgan Stanley.

Vincent Andrews - Morgan Stanley, Research Division

We've been hearing about another step-up in logistical cost in Brazil year-over-year. So it sounds like plus 20% this year over last year's big increases. In the press release, you sort of talked about the tough logistics with the larger record crop being sort of an opportunity. What's changed this year about the ability to sort of deal with that higher trucking expense versus last year, or was it really kind of a headwind?

Soren W. Schroder

Well, last year, it was fully truly unexpected. That's the first thing. And secondly, keep in mind that roughly 60% of our flows to the ports are by rail. So we have a little bit of a different exposure to truck freight than maybe many others. So far, I will say that truck rates are absolutely in line with what we expected as we entered the crop. That doesn't mean it's going to stay that way. It could be that as we get into the peak sometime late April, early May, that there'll be some variation. But the early flows and the rates we're paying and have secured are absolutely in line with what we've been forecasting. So, so far, we don't feel any particular pressure.

Vincent Andrews - Morgan Stanley, Research Division

Okay. And then just as a follow-up, the Argentine farmer has been holding on to a lot of beans. Could you talk about how that sort of impacted your fourth quarter and how you see that -- what you expect them to -- when they're going to release those beans and how that might impact your first half?

Soren W. Schroder

Yes, it's had both good and bad impact, so to speak. In Argentina, obviously, we've been running our plants and our export facilities at lower-than-desired utilization and margins. The flipside of that is it pushed demand into the Northern Hemisphere, U.S. in particular, where we enjoy better margins. On balance, probably a small negative, but not significant. What to expect? Well, that's a good question. I don't think anybody really knows. What we believe is that as we get into, let's say, the early part of March or middle March, through May and maybe into early June, we will see a normal flow of new crop beans and corn into the marketplace from Argentina. The carryover is significant in soybeans and farmers do need to free up cash. Beyond that, I will say beyond June, it's really anybody's guess again and it will depend largely on the sort of the macroeconomic and political situation in Argentina.

Operator

Our next question comes from Ann Duignan from JPMorgan.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

I have 2 questions on your sugar business in Brazil. First one, there's a lot of talk in the U.S. that if the EPA lowers the mandate for U.S. ethanol, that suddenly, the U.S. will export more ethanol, competing with the Brazilian ethanol market. Can you just talk a little bit about that and the dynamics and whether Brazilian ethanol can be as competitive as the U.S. on the export market?

Soren W. Schroder

Yes, I think it is. I think it is fair to say that U.S.-based ethanol with corn prices that are -- will be on our lower will compete more favorably into markets that don't distinguish between the sustainability angle of the origin of ethanol. So for most destinations, U.S. ethanol will be favored because of price and Brazil will have a hard time competing in those markets. And that's why we believe that the long-term, let's say, solution to the Brazilian ethanol equation really is a domestic one and one that's pretty obvious and would be remedied the moment that fuel prices in Brazil are equalized with global prices. So Brazil should become more of a domestic fuel market and the U.S. is in the process of capturing a larger share of global ethanol trade.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

Okay, that's helpful. And then on the valuation of the sugar business. Can you talk a little bit about directionally what the changes in the European cap, where they will not eventually be subsidizing their own domestic sugar industry? Does that enhance the value of your business, or does that negatively impact the valuation?

Soren W. Schroder

No, I think on balance, I think it will be a positive. European sugar prices will eventually mean that cheaper origin sugars will make their way into Europe rather than expensive domestic ones.

Ann P. Duignan - JP Morgan Chase & Co, Research Division

Okay. And when would you anticipate giving us the next update in terms of the strategic review that you are undergoing? Is that next quarter or do you think it'll take 6 months? How long do you think the review will take?

Soren W. Schroder

Well, the process has started, as we've mentioned. It's very difficult to predict how long it will take. We will tell you when we know something.

Operator

Our next question comes from Adam Samuelson from Goldman Sachs.

Adam Samuelson - Goldman Sachs Group Inc., Research Division

Maybe first, excluding sugar, the company earned a 7.5% return on invested capital in 2013, clearly below your long-term targets. But I'm just wondering, how below your targets relative to your expectations did you actually come in? Because the operating environment is very large crop in Brazil. You had pretty good crush margins in the second half of the year in the Northern Hemisphere. And I'm just trying to understand kind of the delta versus your own expectations on the return performance.

Soren W. Schroder

Yes, I think this -- Drew can comment in detail, but the 7.5% return is with a 30% tax rate. So I think if you normalize for our forward-looking tax rate of 22%, 23%, you would bump that by how much, Drew?

Andrew J. Burke

Half a point, a little bit more.

Soren W. Schroder

Yes, so you get to 8%, which would have been well in line with our expectations. So I think we achieved more or less as we expected. And going forward, getting from, let's say, a normalized return based on that forward-looking tax rate of 8% to the 9% that we desire is absolutely within reach.

Adam Samuelson - Goldman Sachs Group Inc., Research Division

Okay. And maybe along those lines, I mean, the 4Q performance in agribusiness, were those actually in line with your own expectations? I know you characterized them as solid. I'm just trying to recognize, I mean, I would have thought the margin performance in the Northern Hemisphere could have made it a bit better.

Soren W. Schroder

I think overall, agribusiness in Q4 did very well across all regions. And don't forget it was the second to the best year we've ever had. One area where I think we -- there could have been upside was probably in the U.S. grain handling, where farmer retention, particularly in corn, meant that the carry income that did not come that we normally would have in the fourth quarter didn't materialize. And as you might know, there were some significant logistics snags, particularly in the Western Corn Belt, that impacted returns of the export pipeline there. So that's probably the only area, I would say, that we could have expected more and didn't get it, but really beyond our control.

Operator

Our next question comes from Ryan Oksenhendler from Bank of America.

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

I just -- just a follow-up on that. I guess, thinking about the outlook for agribusiness next year, you have another record harvest coming in Brazil. It sounds like -- seems like there's going to be some more grains moving in the U.S. Why won't next year be a record year in profits? It seems like the first quarter should get off to a really good start in the Northern Hemisphere for crush margins and then you've got Brazil coming online in the second, third quarter.

Soren W. Schroder

Well, there's no reason it couldn't be a record year, that's for sure. And the conditions you mentioned are clearly favorable. Good margins starting out in the Northern Hemisphere. Canadian canola margins were excellent. We are in front of a record crop in South America with good margins. Rate margins in Europe are good and all likely will produce another very large soft-seed crop in Europe. Grain handling volumes should be up. So yes, the conditions are there for a very good year in agribusiness.

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Okay. And then just -- I guess, just thinking about the drought conditions going on in Brazil. I know you did mention it could impact sugar. Is it having any impact on the soybean crop at all? And I guess, how might it impact the safrina?

Soren W. Schroder

I think the overall soybean crop will be -- definitely be a record one. The northwestern part of Brazil is probably better than people expect and there are some parts of the south that are a little bit worse. But on average, the soybean crop in total looks to be really just an excellent one. Plantings of the summer corn crop in Mato Grosso is well under way and looks good. The area is in Parla, where we do have dryness and -- but I also know that we expect rains over the next 10 days. So that's probably a little bit too early to call. But overall, the bean crop I think is more or less secure and we should still, under any circumstance, have a very solid safrina corn crop.

Ryan Oksenhendler - BofA Merrill Lynch, Research Division

Great. And then just last question is, in terms of the share repurchase, obviously, appreciate returning cash to shareholders, but why is $200 million the right number and how did you guys come up with that? And if there's $500 million left under the authorization, could it be higher than that if maybe some M&A doesn't develop? And I guess, can you just talk about the timing?

Andrew J. Burke

The timing is, we're going to commence the repurchase this quarter, so pretty soon to buy the $200 million and we'll do that over a reasonable period of time. As to why $200 million, it was the amount we are comfortable with at this point. We're going to go ahead and complete that program. And then we'll use our capital allocation project and can -- process and continually review whether we wanted to add to that or not. As you indicated, we would still have $300 million of availability under our current authorization.

Operator

Our next question comes from Diane Geissler from CLSA.

Diane Geissler - CLSA Limited, Research Division

So first of all, I appreciate the detail on your thoughts on capital allocation, the list of projects and how you've bucketed the spending. I'm just kind of about, so to the extent that you're looking at the sugar business and you've hired a financial advisor to help you assess that, can you, first of all, tell me what's the current carrying value of the sugar business? I know you've had some asset impairments, et cetera. And then to the extent that you do sell that business, how should we think about the proceeds? Does it flow into your regular capital allocation process that you've articulated this morning, or are you more inclined to pay it back to shareholders? The reason behind my question is because investors have sort of held your stock for the last few years with the promise that sugar is going to get better. It's bad this year because we had drought, next year it will be better and that's never really materialized for shareholders. So I guess, the -- what I'm asking is kind of a philosophical question, like how are you going to kind of make that right with shareholders if you do, in fact, sell the business eventually?

Andrew J. Burke

Thanks, Diane. I don't want to give a precise number on the sugar business because it obviously moves based on how much inventories we have at any point in time or that type of thing. But it's typically between $2 billion and $2.5 billion of book value in the sugar business. As to what we'll do with the funds, we will go through our capital allocation process and we will allocate it to what brings the biggest return to the shareholders. So what brings the biggest return to the shareholders is return of capital to shareholders, we'll do that. If what brings the biggest return to shareholders is an investment somewhere in our business, we would do that. But we will go through that same process we described earlier and are open to all the options in -- with the primary principle of being able to maximize value return to shareholders.

Diane Geissler - CLSA Limited, Research Division

Okay. And in light of that statement, can you just talk to me a little bit about how you -- you have elaborated on a number of projects here that you have going on globally. Can you give us a little bit more clarity on sort of where you think the weaknesses are in your asset base. So is it we need more exposure in Asia and China in particular, or we need to have more assets in the Baltic region? I mean, can you give us an idea about sort of where you think you’re relative -- I guess, where you're not very strong, where you would be looking to grow on a geographic basis or on a feedstock basis? If you think, well, we really need to be in palm, for instance, et cetera? Could you just give us a little bit more color on that?

Soren W. Schroder

Sure. I will say that the -- in agribusiness, we really do have a nicely well-rounded global footprint, but with a couple of gaps. One is in Australia and you see one project, I believe, in the schedule that talks about Bunbury, which is the first of our investments in Australia. We need to build that out more. So Australia is a work in progress. Western Canada is another piece of the equation that we still have to fill in. So those would be the 2 areas that we are currently looking at that we are not represented in. Other than that, I would say it's about continuing to strengthen our network in Brazil. Brazil will remain the powerhouse. And whilst we have a fantastic presence already, we still need to build infrastructure to support our new export terminals and activities in the northern part of Brazil. And in the Black Sea, we'll continue to look, particularly to the Ukraine, to solidify our position. But where we have blank spots, I will say it's Canada and Australia. And the rest of it, really, is a matter of tailoring additional -- or timing additional capacity to when the market needs it and not to look -- to get too far ahead of the demand curve, which is one of the reasons we've been able to reduce CapEx a bit, delaying some additional capacity projects in markets we already established. So Diane, let me just finish. So that's on the agribusiness. And I wanted to make just one comment on food & ingredients, which is an important piece of our business. You can see it from the results this past quarter and last year. And we really do believe that we have a role to play in milling, in particular, whether it's wheat, whether it's corn, whether rice milling, but wheat milling is probably top of mind. And there, we are looking to solidify our position in Brazil and Mexico and I will say in the Americas, in general. And where we can bolt on acquisitions that makes sense and fit in our network, we'll be doing that.

Operator

Our next question comes from Tim Tiberio from Miller Tabak.

Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division

Just a very quick question on the milling side of the business. I really like the fact that you're adding more cash flow stability into the overall operating model. But I think it would be helpful to give at least some perspective what the incremental EBIT contribution could be now that you've made quite a few acquisitions in the space during the second half of 2013. Is there any color that you can provide there?

Soren W. Schroder

Well, the Altex acquisition will give a run rate EBIT of about $35 million. So that's the addition from that acquisition. Across all of our milling activities, Brazil and the existing ones in Mexico, we also do expect a lift in earnings as we become more efficient and as we improve margins in general. How much that is, remains to be seen. But it's another positive on top of the 35. So say 35 plus, I can't really give much more guidance on that, but we believe there is upside in our existing business as well.

Operator

Our next question comes from Ken Zaslow of Bank of Montréal.

Kenneth B. Zaslow - BMO Capital Markets U.S.

Just a very high level question. How do you frame 2014 agribusiness outlook relative to past years?

Soren W. Schroder

I'll say it's favorable. It's -- I think we just had to comment. It has the potential for being a record year. So...

Kenneth B. Zaslow - BMO Capital Markets U.S.

In terms of the margin structure -- that's the margin structure then you overlaid capacity expansions on top of that. That's what I'm trying to get, the 2 pieces together, right? There's one piece on the operating environment margin structure and then all that you've spent over the last 3 to 4 years.

Soren W. Schroder

Yes. There are a few very interesting projects that are coming onstream that are on the map or the slide that Drew showed you. One is the port in the Brazil, Kafroun up by Berlin. That will give us an additional 1 million to 1.5 million tons of export capacity in a region that really needs it. So that will be in addition to, let's say, the -- whatever the baseline you want to use. You've got Altona, which is a new crushing plant in Canada. That's coming onstream with almost 3,000 tons of the daily capacity and perhaps, will be a very favorable margin environment. So those are a couple of big projects that are coming onstream in the first few months of this year. That should have positive impact on the underlying business. And in addition to that, I think the overall environment is just one where we will have a better margin structure in general throughout the world and not just in one region. And grain flows and grain trade, in general, should be improving.

Kenneth B. Zaslow - BMO Capital Markets U.S.

Great. You mentioned in your prepared comments that you have put in systems to spot certain weaknesses across your portfolio. Can you talk about what it is now so far?

Andrew J. Burke

I think, Ken, in a broad way, as we take a look across the portfolio, we have operations in a lot of different countries. And as we go in, we compare their operation metrics and returns. We find opportunities in 2 regions. One is to drive our best practices across the company and to get all our facilities, manufacturing facilities, ports, logistic networks performing at the same high levels. So we take the lessons from our best performers to the weaker performers and try to close those gaps, which is very efficiently, because when we get productivity improvement and operating efficiencies of that nature, it comes right to our profits. The second thing we do and we've always done is we take a hard look at the underperforming businesses that we have. We always have some markets that are performing better than others and in some businesses that are performing better and we're trying to be quicker and more consequent in addressing the ones that are performing below targets. So I would think in the early-stage, those are the 2 big things we've seen and we're going to continue to work that process and pull out as much of that value as we can.

Kenneth B. Zaslow - BMO Capital Markets U.S.

And another question I have is, in your slide deck, you kind of put together your mix of maintenance CapEx and your productivity and your growth. And I was able to go back to past presentations where you -- the other slides were -- I was able to compare. But I couldn't figure out -- I couldn't find any type of slide that showed that relative to past. So how much actually did that mix change, say, 3 years ago to today? Because it sounds like you're making changes. I'm just trying to document what the changes have been. And if there's any color that you could lead -- help us out with that, that would be helpful, because it seems like productivity has become a greater part and growth has been smaller or could you just talk to that, the changes there?

Andrew J. Burke

Yes. I think, Ken, the big factor change over the last couple of years is we've introduced more spend and we're kind of putting a cap on our spending relative to the amount of assets we have that was grown over the years. So you're seeing the total decline. And we look to take that decline in 2 main areas. One is actually in our maintenance CapEx. We've had a major predictive maintenance program in place that we started a couple of years ago that is now starting to produce dividends and a dividend that should produce is that we get better at it and we have to do less major capital process in that arena and do more in advance. So we're looking to bring down the maintenance point at par, because while it is essential, it is isn't always value-adding. So we'd like to minimize that and I think the other place you've seen us shrink a bit is in growth CapEx because at the beginning of last year or mid-last year, we decided to pull down what we're investing to really go at the higher return things and make sure markets caught up for the need to go to new capacity. So I think those are the 2 areas where you're seeing the change in what's happening.

Kenneth B. Zaslow - BMO Capital Markets U.S.

Great and my final question is what are your other options besides selling the sugar business? What are you exploring? Can you just give us color, along your list of products that we can think about?

Soren W. Schroder

It's really a full range of options and I don't want to get into any details at this point.

Operator

Our next question comes from Michael Picken from Cleveland Research.

Michael Picken - Cleveland Research Company

I would just want to see, it sounded like you guys closed the plant down in Brazil for some tax reasons, an oilseed crushing plant and I just wanted to sort of get a sense for the thought process behind that and if it's a short-term thing or a longer-term decision.

Andrew J. Burke

The facility you're referring to is idled. It is not permanently closed. There is a shift occurring in Brazilian tax laws with how we monetize tax credits that we earn when we produce when we crush beans and sell the end products. And the quickness, on which we're paid obviously reflects the return on investment when we operate. And that particular plan -- plant does not have its high margins as others. So payments are slower. We do not have a good return until we see the new Brazilian system work and the money come back at the pace it is supposed to, we'll idle that plant. I also noted the oil season in Brazil, so we're not at the peak of harvest as we've idled the facility.

Michael Picken - Cleveland Research Company

Okay, terrific. And I guess, as we sort of think out over the next couple of years. I know logistics are always an issue in Brazil, but with the World Cup and the Olympics coming up, I mean, how do you think that's going to impact your business or the availability of access, supports, road congestion, that kind of thing?

Soren W. Schroder

The only impact that I can think of, really, is it might have some -- it'll probably have a positive impact in foodservice and food processor demand for basic food & ingredients, but that's probably it. In terms of agribusiness flows and logistics, I don't see it having an impact.

Michael Picken - Cleveland Research Company

Okay, terrific. And then just flipping over here to the U.S., I mean, the crushing margins have obviously been really strong. There's been recent uptick in kind of the PEDV and just sort of your thoughts on the sustainability of the crushing margins, bearing in mind that there's the PEDV and potentially more competition coming from South America relatively soon.

Soren W. Schroder

Yes, I think it's -- the U.S. crushing business will be very seasonal just like it was this past year. But demand is strong. Protein demand is strong despite the hog disease, poultry, the margins have been good and demand in that sector has been excellent. So overall, demand for protein will stay strong in the U.S. well into the spring. Sometime probably mid-March, late March, the U.S. will stop being an exporter of South America. We'll replace it and it will become a domestic market exclusively as we saw last year and with that, margins will probably come off somewhat and we'll be running the industry at significantly lower rates of capacity than we have for the last 6. So expect good margins through the first quarter and then a transition into the summer and then in all likelihood, a fairly good fourth quarter again. Maybe not as good as this past year but still a solid Q4. But very seasonal and very similar to last year and we are as it turns out, running a soybean stock scenario that is not dissimilar to last year, which means it'll be quite volatile as we get into the spring and summer.

Operator

Our next question comes from Michael Cox from Piper.

Michael E. Cox - Piper Jaffray Companies, Research Division

My first question is on working capital and I understand by virtue of your business model that there's going to be volatility. But if we were to assume that grain prices remain relatively stable, is it fair to assume that working capital is a bit of a push here in 2014? Or are there certain elements that we should be aware of for working capital that irrespective of grain prices would move up or down?

Andrew J. Burke

I think the -- I think, one, we've got a lot of emphasis on working capital. So I think clearly they'd be as efficient as we were last year or more efficient. The one thing that could cause a little bit of a working capital increase is if the markets go from an inverse to a carry. You may be in a situation where there's a return investment to keep some more inventories in storage. And if that's being the case, we -- if the return was there, we would probably do so. One would cause it to move up a little bit but it would come with a corresponding income. But other than that, there's no fundamental reason we shouldn't be able to operate at the inventory levels we did last year.

Soren W. Schroder

No, I agree with that. And we continue to show year-over-year improvements in our cash cycle and that is because of the particular emphasis we have on working capital across all our operating companies.

Michael E. Cox - Piper Jaffray Companies, Research Division

Okay. That's very helpful. And then -- and looking at your agribusiness, total volumes grew at a pretty healthy double-digit rate and given some of the tailwinds you have from surplus of crop, is it fair to assume that we see that at least some level of double-digit growth in, say, the first half of 2014 as you begin to process North American crop?

Soren W. Schroder

I will say for the full year, you should expect agribusiness volume growth probably in the 5% to 10% range up.

Michael E. Cox - Piper Jaffray Companies, Research Division

Okay. And then just one last quick one, following up on the share repurchase questions that have been asked already, is there -- could you perhaps talk just longer term in terms of the thought on the buyback? Is this the start of a broader commitment to repurchasing shares each quarter? Or just how you think about this from a longer-term perspective?

Soren W. Schroder

I think it is exactly as Drew laid it out. It 's part of our capital allocation framework when we look at share buybacks, dividends, M&A and CapEx on an equal basis with an objective of maximizing shareholder value. So I wouldn't say that it is not new from that perspective. It is consistent with what we announced back in October and what we are now executing on. And so on an ongoing basis, this doesn't happen once a year. This happens all the time. We will value and find the best use of our cash inflows.

Operator

Our next question comes from David Driscoll from Citi.

David C. Driscoll - Citigroup Inc, Research Division

First, I'd just like to acknowledge the slide deck is vastly, vastly improved over prior decks and I really do hope that you keep putting in balance sheet information and return on invested capital. Drew, that was nicely done. So first, just like to start off on sugar for a moment. First question is, Soren, I believe you said that if our BOB prices in Brazil, if they would equilibrate to international prices, that's what you need to solve the problem over there for Brazilian ethanol. USR BOB is like $2.75 a gallon. What is the discount within Brazil versus a U.S. price that approximates world prices?

Andrew J. Burke

David, I am not adverse in the statistics to the exact points of reference you're giving. But fundamentally, Brazil gasoline prices are about 25% below international parity at the moment. They don't use the U.S. refined prices as the measure. It's done based on a delivered basis and in Brazil.

Soren W. Schroder

Maybe another way to say it, David, if you take the $2.75 or $2.80 and you take the logistic transportation cost to Brazil and a discharge in tanking cost and you calculate what that is in reais per cubic meter and you compare to where retail gasoline is being priced. So, a, gasoline you will come up with that 25% discount that we're talking about.

David C. Driscoll - Citigroup Inc, Research Division

Okay, one other question on this one. So when I look at Brazilian ethanol prices and compare them to U.S. ethanol prices, Brazilian ethanol prices, local prices are higher than U.S. ethanol prices. U.S. corn ethanol producers are making very good margins right now. So there's a little bit of a head-scratch here because it's, I would say, a very unfavorable situation that at substantially higher ethanol prices locally in Brazil, you can't make money. I mean, how do you see your way clear kind of going forward in this operation that I have no great hope that the Brazilian government, politically speaking, is going to jack up local prices for gasoline. So if you can't make money at these substantially higher prices, what's the prognosis here for any real improvement over the flat numbers that you've guided to for 2014?

Soren W. Schroder

Well, first of all, there is still room for us and for the industry to improve efficiencies and we are working on that. It takes time. We've come a long way. Drew mentioned some of the more dramatic measures we have taken and industry has taken to get in a better spot. The weaker currency is helping on top of that. That has been a headwind for the industry for a few years up until recently. But I'd also say that the current price of ethanol, the intra-crop prices that you are referring to are quite good. In other words, if we could project the year out with those prices, we would largely bridge the gap we're talking about. When we say that ethanol is challenged, it's because we believe, as is seasonally typically the case, that once you get into the peak crushing period in May, June, July, ethanol prices have to actually go to a below-sugar equivalent to buy enough demand in the domestic market. And that is where this problem with the imbalance between the world price and the domestic price of gasoline comes in. So just to be clear, the current prices that you referred to as being good, they aren't being good. They're very record. We wish they would continue.

David C. Driscoll - Citigroup Inc, Research Division

Okay. Final question on sugar for me is the cogen issue. When you bought this, there was a critical expectation that by adding cogen, these would be very, very high-return projects. You stipulated on prior calls that you want to reduce your capital investment within sugar and hence, this comment about strategic review. Why aren't the cogen projects still very high return, given the power problems in Brazil? Why wouldn't you add that particular capital to those sugar operations? It seems to me that, that -- I don't see why that piece of logic is -- fails.

Andrew J. Burke

David, we have done some cogen projects and we have -- and we are adding capacity at the Moema mill and a couple of the other bills. So we have not abandoned them in their entirety. We have not started new ones. I think they would calculate on our return on investment, but we don't want to be committing to new investment in the sugar business till we get through this strategic review and understand where we're going. But we do think long term, cogeneration does pay. But it's a long-term investment. It's not an investment for the short term, so we need to know what the long-term strategy is.

Soren W. Schroder

Right. That being said, David, we are going to see growth in our cogen-generating ability. Last year, we generated about 300 megawatts; 2014, we're about 550 and we'll get to 7 -- little over 700 by '15. So we are in a rapid ramp-up in cogen and it will have a positive impact on our bottom line.

David C. Driscoll - Citigroup Inc, Research Division

All right. That's crucial. Two more questions for me. On agribusiness, just to be super clear, I really like Ken's question on this one and I echo the comments about what the forecast is for 2014. 2013 had a lot of different challenges in it. I mean, it seems to be that your statement to be should be super clear that profits will grow in agribusiness. But I feel like you've hedged on the call a number of times. Do you think profits grow in agribusiness in '14?

Soren W. Schroder

The potential is there for them to be excellent and for us to set another record year, but you know the nature of this business, as well as I do. It is very difficult to predict this far out. Were only in the beginning of February, but the potential is there.

David C. Driscoll - Citigroup Inc, Research Division

You're the big man in the hot seat, so you get the question. Final question is on tax. Drew, I got to say this tax is awfully tough. Explain to me in 2014 why I shouldn't be worried about further valuation allowance issues, why there isn't going to be other write-downs. It's kind of disappointing to see such incredible volatility within the tax line and maybe no guidance that those events might be coming. So, notwithstanding what's happened in the past, looking forward to '14, what's the opportunity here that this tax rate is greatly varying it from the 23% guidance?

Andrew J. Burke

I think, David, I don't want to answer too specifically. I'll come to the '14 rate, but I think to put it in perspective and to take it to one example, when we took the decision to take a valuation allowance on our sugar tax assets, that means in -- that means we took a valuation allowance and took a onetime charge for the balance at the end of last year. When we have losses this year, we do not take a tax benefit. The impact that has on the tax rate is sugar reduces the profit before tax by its loss, but it does not reduce the -- change the amount of tax we play. There's not a reduction. So because sugar polls are down mathematically, your tax rate is moving up if there's a loss on that business or any other business with the valuation adjustment. So part of it is that factor. The rate going into -- from '13 to '14, has 2 major impacts that bring it from the 30% down to be approximately 23%. The first is we are projecting a near or breakeven performance in our sugar industrial business and other businesses where there are valuation allowances and the second is that we are implementing certain tax planning and capital structure initiatives. The 2 of them combined will bring down the tax rate to that 23% level. If sugar were in other business with losses -- has greater losses, it won't increase our taxes, but it will increase our tax rate because you'll have the same effect of pulling down the profit before tax. So that's the factor at play there and that will exist going into next year. But if you look at the forecast profits we have by entity and you apply the tax rate by legal entity that we have, you come to the 23% rate at the moment, but it does vary based on how each entity moves. As to your question on the likelihood of future valuation allowances, obviously at the end of each year, we take a look across our business portfolio, across our asset portfolio and we record the necessary valuation allowances or charges we think are necessary. We recorded everything that we're aware of at the end of this calendar year. And we do not, at this moment, expect anything else. And I know you've read all our filings. We do have active tax matters around the world, including tax claims about us in governments that are in courts. In those situations. We have external legal opinions that say we are more likely than not to prevail, so we don't record any liabilities for those. But anything that is in the court system, there is an inherent amount of uncertainty around it. We also have and that is some of what we took this year -- we've looked at some of those court cases and said, "We will probably have a liability." We may lose and have recorded the liability. So to the best of our judgment, we have recorded everything we should and all those valuation allowances are in place, but we'll see how it plays out over the next years.

Operator

Our next question comes from Matthew Korn from Barclays.

Matthew J. Korn - Barclays Capital, Research Division

It's late in the call and the weather outside is offering its own sense of urgency, so I'm just going to ask one. We talked a lot about the cost side, all your ongoing attempts to improve efficiency, optimizing assets, take out the cost structure, take the whole platform. Could you describe a little bit more on how you're benchmarking your progress? I mean, your footprint in assets have been so wide. You've got integration, cost structure in the downstream, it's very substantial. So you maybe -- when you're measuring yourself maybe against your peers in the different businesses and different markets, where are you pleased, where are you most challenged, how would you -- how are you doing that right now?

Soren W. Schroder

The benchmarks we are using are partly internal and they're partly external. Within Bunge, we are measuring likeness of these units against the best-in-class in Bunge. So like business units, whether it will be oilseed crushing, grain origination or whether it would be in food, milling, packaging plants, whatever, are being benchmarked against the best we have in Bunge and the best practices we have in Bunge. In some cases, they'll be calibrated for age and location. But we believe that within the Bunge network, we have some of the best in the world. But it may not be everywhere. So that is our starting point. To the extent that we have external data and we do have some, we'll use that in its place. That's what we call the gap analysis and it's part of the performance management process that we started back this fall and build our current budget around. It is work in progress. So we'll perfect it through the next business cycle, but it is really this exercise of measuring all our facilities and activities against the best we know. And this is an exercise that is now led by our global segments because the other one is we have global visibility and also have access and knowledge of external benchmarks and believe it's a very strong process that will really come into full fruition as we roll out the program this year.

Matthew J. Korn - Barclays Capital, Research Division

And as you've gone through this, are there particular regions or particular businesses where you can see a substantial lag versus where you want them to be?

Soren W. Schroder

There are some that stand out, but I don't really want to comment on them right now.

Operator

Our next question comes from Robert Moskow from Crédit Suisse.

Robert Moskow - Crédit Suisse AG, Research Division

I'm trying to model first quarter to the extent that it's possible. And I think I wanted a little more clarity on the corn export programs in the U.S. Do you think that those will ramp up again in first quarter as farmers sell? And what you -- the opportunity that you might have missed in fourth quarter spills over into first, how are you looking at first quarter right now?

Soren W. Schroder

I don't know whether corn exports out of the U.S., in particular, will make a significant difference to Bunge. Probably not. But I would say that the U.S. has captured global market share in corn, maybe a little bit more than the market and people expect it. It is competitively priced and you can see from the weekly export sales that continues. So first quarter should be very strong in corn exports out of the U.S. and we should benefit from that. I think the more important part is probably that the oilseed crushing environment for the first quarter in North America remains very favorable. That has a bigger impact on us.

Robert Moskow - Crédit Suisse AG, Research Division

But Soren, when you mentioned what you missed in fourth quarter, you did talk about the corn export program. Is that -- just to be clear, is that because you were positioned to benefit from the carry and the trade or were you benefiting from the volume?

Soren W. Schroder

I was trying to refer to 2 separate things. One was the income that we and the industry, in general, makes by carrying corn out of the crop into the new year. So that's more about storage, okay? That was not the same as you would have expected in normal years simply because of the retention of farmers and the market structure didn't really allow for that. So that's a source of revenue that I think, in general, the industry just didn't get. The other thing I commented on was specifically the logistics snags in the rail transportation that worked to the West Coast, where the industry, in general, really suffered from port turn times and bad logistics and lack of power, frankly, by the railroads. And we hope that will not be repeating itself as we get into the first quarter here. So those were the 2 impacts that I talked about in the fourth quarter. I think in the first quarter of this year, things are looking a little bit better, although the logistics are still challenged on the West Coast. But in general U.S. exports should be good for corn.

Robert Moskow - Crédit Suisse AG, Research Division

Because I think that's what people are kind of struggling with is this year's U.S. corn crop was really, really big and most of us were forecasting big results because of it. But the carry trade, the normal movement in prices, I guess, didn't happen the way people thought. And that's separate from the volume. So I guess, I'm trying to -- Anderson's had a disappointing quarter and ADM had a disappointing quarter in agribusiness and it sounds like some of it just isn't going to happen. Some of it will because the volume just has to move, but some of the potential benefit just didn't happen.

Soren W. Schroder

We've come out of 2 really tight years with poor crops and so this was the first crop in 3 years where the system really had a chance to replenish pipelines and in the meantime, farmers have built more storage. So the impact of this year's large crop probably wasn't felt the way that you would have normally expected it in terms of developing large carries that would have added storage income to the industry. I think another large crop next year you'll get back to something that's more normal, but this is really in many ways a transition year in the U.S., both for corn and soybeans.

Operator

Our next question comes from Giovana Araujo from Itaú BBA.

Giovana Araujo - Itaú Corretora de Valores S.A., Research Division

My first question is about the pace of commercialization of grains here in Brazil. The current expectations for the grains crop in Brazil in 2013, '14 is that the growth will be more concentrated in soybeans than corn. Second, corn crop will probably be affected by the drought here in Brazil. And the pace of commercialization of beans is behind last year. So my question is, do you see a change in the seasonality of your commercialization in 2014 or the back of that?

Soren W. Schroder

Well, it is correct that the industry, in general, has bought less beans, priced beans this time compared to the last year. But the pace of buying or the pace of selling from the farmer is picking up. So with the weaker currency and in general, better futures, we have seen over the last couple of weeks a pickup in farmer selling and pricing and we expect that will continue. So expect that by the end of March, we'll be back to sort of the same level as last year. So a lot of fresh pricing is coming into the market right now, which is good. And as regards to corn, we are buying some of the, let's say, the winter crop corn, very little of the new crop, if any, of the new crop. Safrina corn has been commercialized so far. That's still ahead of us.

Giovana Araujo - Itaú Corretora de Valores S.A., Research Division

Okay. And my second question is about the sugar and ethanol business. It seems there are more sellers than buyers of assets in Brazil nowadays and then prices are too depressed and the situation might not change in the next year or 2. So maybe the better time to make a divestment or a merger it's not now. What do you think about that?

Soren W. Schroder

Well, we -- I don't have any particular comment on that. We're exploring the full range of options, so I don't want to get nailed down to one particular one. One thing we are doing and that's very important for everybody to know is that we're relentlessly going after costs and improvements in our existing business. That is really what we are spending day and night on, putting ourselves in the best possible position for whatever comes.

Operator

We have no further questions at this time. I would now like to turn the call back over to Mark Haden for closing remarks.

Mark Haden

Great. Thank you, Tricia. And thank you, everyone, for joining us today on our fourth quarter call.

Operator

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

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