UPDATE 1-Bunge, Itochu to invest $800 mln in Brazil ethanol

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SAO PAULO, Sept 23 (Reuters) - The Brazilian unit of top grain processor Bunge Ltd (BG.N) and Japanese trading house Itochu (8001.T) said on Tuesday they will invest about $800 million in two ethanol and sugar joint ventures in Brazil.

Itochu will acquire a 20-percent stake in Santa Juliana mill, which was bought by Bunge in 2007 at Minas Gerais state.

The mill's crushing capacity, currently at 1.6 million tonnes of cane per year, will be expanded to 4.2 million tonnes, the companies said in a statement.

In a second joint venture, both companies will build another sugar and ethanol mill. Bunge will have 80 percent of this plant and Itochu, the remaining 20 percent, but other details of the greenfield project were not disclosed.

Brazil is the world's top sugar and ethanol exporter.

The purchase of Santa Juliana mill was Bunge's first step into Brazil's ethanol industry.

This sector has attracted a lot of foreign investment over the last few years amid a boom in local demand for cane-based ethanol since the launch of flex-fuel cars, which can run on any mixture of ethanol and gasoline.

The prospect of rising ethanol exports as more countries adopt the biofuel as an alternative to fossil fuel is also attracting foreign investment.

Bunge announced last week it had bought a majority stake in another sugar and ethanol mill in Brazil's center-west region. This plant is expected to become operational in 2009.

The company is a top soybean processor and grain trading house in Brazil, with an annual turnover of 22.5 billion reais ($12.3 billion). It also has business in wheat, fertilizers and animal nutrition.

($1 = 1.829 real) (Reporting by Inae Riveras; Editing by Marguerita Choy)