10.FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Bunge’s various financial instruments include certain components of working capital such as cash and cash equivalents, trade accounts receivable and trade accounts payable. Additionally, Bunge uses short and long-term debt to fund operating requirements. Cash and cash equivalents, trade accounts receivable, trade accounts payable and short-term debt are stated at their carrying value, which is a reasonable estimate of fair value. See Note 12 for deferred purchase price receivable (“DPP”) related to sales of trade receivables. See Note 7 for long-term receivables from farmers in Brazil, net and other long-term investments and Note 11 for long-term debt. Bunge’s financial instruments also include derivative instruments and marketable securities, which are stated at fair value.

The majority of Bunge’s exchange traded agricultural commodity futures are settled daily generally through its clearing subsidiary and, therefore, such futures are not included in the table below. 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.

The following table sets forth, by level, Bunge’s assets and liabilities that were accounted for at fair value on a recurring basis.

	Fair Value Measurements at Reporting Date
	March 31, 2016								December 31, 2015
(US$ in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Readily marketable inventories (Note 5)	$	—	$	3,227	$	730	$	3,957	$	—	$	3,421	$	245	$	3,666
Trade accounts receivable(1)			10				10		—		6		—		6
Unrealized gain on designated derivative contracts(2):
Interest rate	—		11		—		11		—		—		—		—
Foreign exchange	1		16		—		17		—		30		—		30
Unrealized gain on undesignated derivative contracts (2):
Foreign exchange	10		441		—		451		9		176		—		185
Commodities	231		601		89		921		252		696		220		1,168
Freight	62		—				62		65		—		—		65
Energy	11		—		—		11		7		—		1		8
Deferred purchase price receivable (Note 12)	—		80		—		80		—		79		—		79
Other (3)	42		371		—		413		68		176		—		244

Total assets	$	357	$	4,757	$	819	$	5,933	$	401	$	4,584	$	466	$	5,451

Liabilities:
Trade accounts payable(1)	$	—	$	348	$	291	$	639	$	—	$	399	$	44	$	443
Unrealized loss on designated derivative contracts (4):
Interest rate	—		—		—		—		—		3		—		3
Foreign exchange	—		184		—		184		—		15		—		15
Unrealized loss on undesignated derivative contracts (4):
Interest rate	—		1		—		1		—		—		—		—
Foreign exchange	—		201		—		201		1		605		—		606
Commodities	306		381		70		757		402		304		52		758
Freight	57		—		1		58		56		—		—		56
Energy	15		3		2		20		31		—		2		33

Total liabilities	$	378	$	1,118	$	364	$	1,860	$	490	$	1,326	$	98	$	1,914

(1)

Trade accounts receivable and payable are generally stated at historical amounts, net of write-offs and allowances, with the exception of $10 million and $639 million, at March 31, 2016 and $6 million and $443 million at December 31, 2015, respectively, related to certain delivered inventory for which the receivable and payable, respectively, fluctuate based on changes in commodity prices. These receivables and payables are hybrid financial instruments for which Bunge has elected the fair value option.

(2)

Unrealized gains on designated and undesignated derivative contracts are generally included in other current assets. There are no such amounts included in other non-current assets at March 31, 2016 and December 31, 2015, respectively.

(3)

Other includes the fair values of marketable securities and investments in other current assets and other non-current assets.

(4)

Unrealized losses on designated and undesignated derivative contracts are generally included in other current liabilities. There are no such amounts included in other non-current liabilities at March 31, 2016 and December 31, 2015, respectively.

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 over-the-counter (“OTC”) derivative instruments relating primarily to freight, energy, foreign exchange and interest rates, and are classified within Level 2 or Level 3 as described below. Bunge estimates fair values based on exchange quoted prices, adjusted as appropriate 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.

OTC derivative contracts include swaps, options and structured transactions that are valued at fair value generally 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 or 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.

Exchange traded or cleared derivative contracts are classified in Level 1, thus transfers of assets and liabilities into and/or out of Level 1 occur infrequently. Transfers into Level 1 would generally only be expected to occur when an exchange cleared derivative contract historically valued using a valuation model as the result of a lack of observable inputs becomes sufficiently observable, resulting in the valuation price being essentially the exchange traded price. There were no significant transfers into or out of Level 1 during the periods presented.

Readily marketable inventories — RMI reported at fair value are valued based on commodity futures exchange quotations, broker or dealer quotations, or market transactions in either listed or OTC markets with appropriate adjustments for differences in local markets where Bunge’s inventories are located. In such cases, the inventory is classified within Level 2. Certain inventories may utilize significant unobservable data related to local market adjustments to determine fair value. In such cases, the inventory is classified as Level 3.

If Bunge used different methods or factors to determine fair values, amounts reported as unrealized gains and losses on derivative contracts and RMI at fair value 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 RMI at fair value in the consolidated balance sheets and consolidated statements of income could differ.

Level 3 Measurements — 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. Bunge’s policy regarding the timing of transfers between levels is to record the transfers at the beginning of the reporting period.

Level 3 Derivatives — Level 3 derivative instruments utilize both market observable and unobservable inputs within the fair value measurements. These inputs include commodity prices, price volatility, interest rates, volumes and locations. In addition, with the exception of the exchange cleared instruments, Bunge is exposed to loss in the event of the non-performance by counterparties on OTC derivative instruments and forward purchase and sale contracts. Adjustments are made to fair values on occasions when non-performance risk is determined to represent a significant input in Bunge’s fair value determination. These adjustments are based on Bunge’s estimate of the potential loss in the event of counterparty non-performance. Bunge did not have significant adjustments related to non-performance by counterparties at March 31, 2016 and December 31, 2015.

Level 3 Readily marketable inventories and other — The significant unobservable inputs resulting in Level 3 classification for RMI physically settled forward purchase and sale contracts, and trade accounts receivable and payable, net, relate to certain management estimations regarding costs of transportation and other local market or location-related adjustments, primarily freight related adjustments in the interior of Brazil and the lack of market corroborated information in Canada. In both situations, Bunge uses proprietary information such as purchase and sale contracts and contracted prices for freight, premiums and discounts to value its contracts. Movements in the price of these unobservable inputs alone would not have a material effect on Bunge’s financial statements as these contracts do not typically exceed one future crop cycle.

The tables below present reconciliations for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the three months ended March 31, 2016 and 2015. These instruments were valued using pricing models that management believes reflect the assumptions that would be used by a marketplace participant.

	Level 3 Instruments
	Fair Value Measurements
	Three Months Ended March 31, 2016
				Readily			Trade Accounts
	Derivatives,			Marketable			Receivable/
(US$ in millions)	Net (1)			Inventories			Payable, Net(2)			Total

Balance, January 1, 2016	$	167		$	245		$	(44	)	$	368
Total gains and (losses), realized/unrealized included in cost of goods sold	(85		)	11			5			(69		)
Purchases	—			537			(195		)	342
Sales	—			(248		)	—			(248		)
Issuances	—			—						—
Settlements	(66		)	—			—			(66		)
Transfers into Level 3				192			(57		)	135
Transfers out of Level 3				(7		)				(7		)

Balance, March 31, 2016	$	16		$	730		$	(291	)	$	455

(1)

Derivatives, net include Level 3 derivative assets and liabilities.

(2)

Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

	Level 3 Instruments
	Fair Value Measurements
	Three Months Ended March 31, 2015
				Readily			Trade Accounts
	Derivatives,			Marketable			Receivable/
(US$ in millions)	Net (1)			Inventories			Payable, Net (2)			Total

Balance, January 1, 2015	$	(2	)	$	255		$	(33	)	$	220
Total gains and (losses), realized/unrealized included in cost of goods sold	92			20			—			112
Purchases	—			482			(1		)	481
Sales	—			(310		)	—			(310		)
Issuances	—			—			(285		)	(285		)
Settlements	(18		)	—			—			(18		)
Transfers into Level 3	1			316			(171		)	146
Transfers out of Level 3	6			(88		)	1			(81		)
Balance, March 31, 2015	$	79		$	675		$	(489	)	$	265

(1)

Derivatives, net include Level 3 derivative assets and liabilities.

(2)

Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

The tables below summarize changes in unrealized gains or (losses) recorded in earnings during the three months ended March 31, 2016 and 2015 for Level 3 assets and liabilities that were held at March 31, 2016 and 2015:

	Level 3 Instruments
	Fair Value Measurements
	Three Months Ended
				Readily			Trade Accounts
	Derivatives,			Marketable			Receivable and
(US$ in millions)	Net (1)			Inventories			Payable, Net(2)		Total
Changes in unrealized gains and (losses) relating to assets and liabilities held at March 31, 2016
Cost of goods sold	$	(79	)	$	(24	)	$	1	$	(102	)


Changes in unrealized gains and (losses) relating to assets and liabilities held at March 31, 2015
Cost of goods sold	$	21		$	(20	)	$	—	$	1

(1)

Derivatives, net include Level 3 derivative assets and liabilities.

(2)

Trade Accounts Receivable and Trade Accounts Payable, net, include Level 3 inventory related receivables and payables.

Derivative Instruments

Interest rate derivatives — Bunge, from time-to-time uses interest rate derivatives, including interest rate swaps, interest rate basis swaps, interest rate options or interest rate futures. During 2015, Bunge entered into interest rate swap agreements for the purpose of managing certain of its interest rate exposures. The interest rate swaps used by Bunge as hedging instruments have been recorded at fair value in the condensed consolidated balance sheets with changes in fair value recorded contemporaneously in earnings. These swap agreements have been designated as fair value hedges. Additionally, the carrying amount of the associated hedged debt is adjusted through earnings for changes in the fair value arising from changes in benchmark interest rates. Ineffectiveness is recognized to the extent that these two adjustments do not offset.

In February 2016, Bunge entered into one year interest rate swap agreements, having a total notional of $500 million that requires Bunge to pay interest at a fixed rate and receive interest at a variable rate. The interest rate swaps do not qualify for hedge accounting, and therefore Bunge has not designated these swaps as hedge instruments for accounting purposes. The interest rate swaps have been recorded at fair value in the consolidated condensed balance sheets with changes in fair value recorded contemporaneously in earnings.

As of March 31, 2016, Bunge had fixed-to-variable interest rate swap agreements having a total notional amount of $500 million that requires Bunge to pay interest at a variable rate and receive interest at 3.5%. These interest rate swap agreements are designated as fair value hedges of $500 million of its 3.5% 2020 Senior Notes.

	March 31, 2016
	Notional Amount of		Notional Amount
(US$ in millions)	Hedged Obligation		Derivative (3)
Interest rate swap agreements	$	500	$	500
Weighted average rate payable - 3 month LIBOR plus 1.91% (1)
Weighted average rate receivable - 3.5% (2)

(1)

Interest is payable in arrears semi-annually based on three-month U.S. dollar LIBOR plus 1.91%.

(2)

Interest is receivable in arrears based on a fixed interest rate of 3.5%.

(3)

The interest rate swap agreements mature in 2020.

Foreign exchange derivatives - Bunge uses a combination of foreign exchange forward, swap and option contracts in certain of its operations to mitigate the risk from exchange rate fluctuations in connection with certain commercial and balance sheet exposures. The foreign exchange forward and option contracts may be designated as cash flow hedges. Bunge may also use net investment hedges to partially offset the translation adjustments arising from the remeasurement of its investment in certain of its foreign subsidiaries.

Bunge assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in hedge transactions are highly effective in offsetting changes in the hedged items.

The table below summarizes the notional amounts of open foreign exchange positions.

	March 31, 2016
	Exchange Traded
	Net (Short)		Non-exchange Traded					Unit of
(US$ in millions)	& Long (1)		(Short) (2)			Long (2)		Measure
Foreign Exchange
Options	$	—	$	(222	)	$	234	Delta
Forwards	—		(7,791		)	3,534		Notional
Futures	284		—			—		Notional
Swaps	—		(697		)	91		Notional

(1)

Exchange traded derivatives are presented on a net (short) and long position basis.

(2)

Non-exchange traded derivatives are presented on a gross (short) and long position basis.

Commodity derivatives - Bunge uses commodity derivative instruments to manage its exposure to movements associated with agricultural commodity prices. Bunge generally uses exchange traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on its agricultural commodity inventories and forward purchase and sale contracts, but may also from time-to-time enter into OTC commodity transactions, including swaps, which are settled in cash at maturity or termination based on exchange-quoted futures prices. Forward purchase and sale contracts are primarily settled through delivery of agricultural commodities. While Bunge considers these exchange traded futures and forward purchase and sale contracts to be effective economic hedges, Bunge does not designate or account for the majority of its commodity contracts as hedges. The forward contracts require performance of both Bunge and the contract counterparty in future periods. Contracts to purchase agricultural commodities generally relate to current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of agricultural commodities generally do not extend beyond one future crop cycle.

The table below summarizes the volumes of open agricultural commodities derivative positions.

	March 31, 2016
	Exchange Traded
	Net (Short) &		Non-exchange Traded			Unit of
	Long (1)		(Short) (2)		Long (2)	Measure
Agricultural Commodities
Futures	(818,387	)	—		—	Metric Tons
Options	(20,920	)	(8,899	)	—	Metric Tons
Forwards	—		(29,644,774	)	23,948,974	Metric Tons
Swaps	—		(5,564,218	)	1,755,394	Metric Tons

(1)

Exchange traded derivatives are presented on a net (short) and long position basis.

(2)

Non-exchange traded derivatives are presented on a gross (short) and long position basis.

Ocean freight derivatives — Bunge uses derivative instruments referred to as freight forward agreements (FFAs) and FFA options to hedge portions of its current and anticipated ocean freight costs. Changes in the fair values of ocean freight derivatives that are not designated as hedges are recorded in earnings. There were no designated hedges at March 31, 2016 and December 31, 2015, respectively.

The table below summarizes the open ocean freight positions.

	March 31, 2016
	Exchange Cleared
	Net (Short) &		Non-exchange Cleared		Unit of
	Long (1)		(Short) (2)	Long (2)	Measure
Ocean Freight
FFA	3,040		—	—	Hire Days
FFA Options	(282	)	—	—	Hire Days

(1)

Exchange cleared derivatives are presented on a net (short) and long position basis.

(2)

Non-exchange cleared derivatives are presented on a gross (short) and long position basis.

Energy derivatives — Bunge uses energy derivative instruments for various purposes including to manage its exposure to volatility in energy costs. Bunge’s operations use substantial amounts of energy, including natural gas, coal, and fuel oil, including bunker fuel.

The table below summarizes the open energy positions.

	March 31, 2016
	Exchange Traded
	Net (Short) &		Non-exchange Cleared		Unit of
	Long (1)		(Short) (2)	Long (2)	Measure (3)
Natural Gas (3)
Futures	11,981,693		—	—	MMBtus
Swaps	—		—	6,874,101	MMBtus
Options	—		—	—	MMBtus
Energy—Other
Futures	(15,012	)	—	—	Metric Tons
Forwards	—		—	7,108,552	Metric Tons
Swaps	244,100		—	—	Metric Tons
Options	—		—	—	Metric Tons

(1)

Exchange traded and cleared derivatives are presented on a net (short) and long position basis.

(2)

Non-exchange cleared derivatives are presented on a gross (short) and long position basis.

(3)

Million British Thermal Units (MMBtus) is the standard unit of measurement used to denote an amount of natural gas.

The Effect of Derivative Instruments on the Condensed Consolidated Statements of Income

The table below summarizes the effect of derivative instruments that are designated as fair value hedges and also derivative instruments that are undesignated on the condensed consolidated statements of income for the three months ended March 31, 2016 and 2015.

		Gain or (Loss) Recognized in
		Income on Derivative Instruments
		Three Months Ended March 31,
(US$ in millions)	Location	2016			2015
Undesignated Derivative Contracts:
Foreign Exchange	Foreign exchange gains (losses)	$	147		$	(262	)
Foreign Exchange	Cost of goods sold	242			(85		)
Commodities	Cost of goods sold	(230		)	327
Freight	Cost of goods sold	(6		)	1
Energy	Cost of goods sold	(1		)	(1		)

Total		$	152		$	(20	)

The table below summarizes the effect of derivative instruments that are designated and qualify as cash flow and net investment hedges on the condensed consolidated statement of income three months ended March 31, 2016.

	Three Months Ended March 31, 2016
			Gain or			Gain or (Loss)
			(Loss)			Reclassified from
			Recognized in			Accumulated OCI into				Gain or (Loss) Recognized
	Notional		Accumulated			Income (1)				in Income on Derivatives
(US$ in millions)	Amount		OCI (1)			Location	Amount			Location	Amount (2)

Cash Flow Hedge:
Foreign Exchange (3)	$	145	$	16		Foreign exchange gains (losses)	$	(6	)	Foreign exchange gains (losses)	$	—

Total	$	145	$	16			$	(6	)		$	—


Net Investment Hedge:
Foreign Exchange (3)	$	1,878	$	(200	)	Foreign exchange gains (losses)	$	—		Foreign exchange gains (losses)	$	—

Total	$	1,878	$	(200	)		$	—			$	—

(1)

The gain (loss) recognized relates to the effective portion of the hedging relationship. At March 31, 2016, Bunge expects to reclassify into income in the next 12 months approximately $16 million of after-tax gain (loss) related to its foreign exchange cash flow hedges and zero for net investment hedges.

(2)

There was no gain or loss recognized in income relating to the ineffective portion of the hedging relationships or relating to amounts excluded from the assessment of hedge effectiveness.

(3)

The foreign exchange contracts mature at various dates through November 2020.

The table below summarizes the effect of derivative instruments that are designated and qualify as cash flow hedges on the condensed consolidated statement of income for the three months ended March 31, 2015.

	Three Months Ended March 31, 2015
			Gain or			Gain or (Loss)
			(Loss)			Reclassified from
			Recognized in		Accumulated OCI into					Gain or (Loss) Recognized
	Notional		Accumulated			Income (1)				in Income on Derivatives
(US$ in millions)	Amount		OCI (1)			Location	Amount			Location	Amount (2)

Cash Flow Hedge:
Foreign Exchange (3)	$	329	$	(53	)	Foreign exchange gains (losses)	$	(13	)	Foreign exchange gains (losses)	$	—

Total	$	329	$	(53	)		$	(13	)		$	—


Net Investment Hedge:
Foreign Exchange (3)	$	1,249	$	95		Foreign exchange gains (losses)	$	—		Foreign exchange gains (losses)	$	—

Total	$	1,249	$	95			$	—			$	—

(1)

The gain or (loss) recognized relates to the effective portion of the hedging relationship. At March 31, 2015, Bunge expected to reclassify into income in the next 12 months approximately $(53) million of after-tax gains (losses) related to its foreign exchange cash flow hedges.

(2)

There was no gain or loss recognized in income relating to the ineffective portion of the hedging relationships or to amounts excluded from the assessment of hedge effectiveness.

(3)

The foreign exchange contracts matured at various dates in 2015 and 2016.