Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Hello, good morning. We are here to talk about earnings in the first quarter of our 2536 harvest at Bresa Agro. I'm here with José Yamo, our CEO, and Gustavo Lopes, CFO of Bresa Agro. If you're watching us, the presentation is in chat. I would like to say good morning, everyone, and pass the phone to André.

Good morning.

Thank you very much, Ana Paula.

Thank you all for being with us once again.

Thank you for being with us and presenting our results. This is a quarter that historically has not too much revenue. So we're at this moment with the end of the sugarcane harvest, and then we also have our harvest being planted. So theoretically, it's a period where you have results that may be a bit weaker, but we'll bring in some points that brought these results. and also providing more details on sugar cane, et cetera. But anyways, in the net revenue of our first quarter, we reached $186.6 million, and adjusted every day of $64, and a net loss of $64.3. So basically the first quarter, and then we'll get into a bit more details of where this is coming from. Basically, a lot of what we're going to see in this quarter is a mark-to-market and IFRS mark-to-market of sugar cane, mark-to-market of soy receivables. And so our receivables account is pretty big. And you know that. Next slide, please. So now we can see an overview of how the year has been behaving with a lot of volatility. And I'm going to quickly look at the contracts, all the operations and the numbers. We had this strategy of bringing soy to the second semester, and this strategy seemed to be very effective. Good. Due to all of the commercial discussions between China and the U.S. and we had Chicago back there, that was basically intending to improve prices of bases. And then we have this decision of taking soy to the second semester. We're going to show you this later. Basically, this price is very much influenced by bases and just more recently by this turnaround with the agreement with the U.S. and China. You have Chicago go up in bases weekends a bit. But we've basically sold all of it a little bit before this agreement. Corn is also a market that's been pretty stable in the last few months, mainly due to the ethanol industry. Cotton is also a commodity that's been in a curve that's dropping. We had a 14% loss in price. For cattle raising, there's some recovery ever since back then. It's been recovering. There was an expectation of even being a little better due to the tariffs and export restrictions to the U.S., but this analysis is pretty limited. Ethanol as well. And as you all know, what affects us and other players in the market, right? Sugar, due to all of the expectation of production all around the world, there's been a lot of loss in prices. So this is an overall photograph. We're going to talk about what we have ahead in the next slides, but we're imagining a soy harvest in Brazil. It's pretty good. Some of the best offices are considering 178 million tons. There's also a pretty significant concern. Although Mato Grosso is advancing a lot with the plantation, we're going to see some examples soon of some other locations and some states in Brazil. I always mention that besides being an open-air industry, you're also a cost taker and not a price maker, let's say. And we always bring this here to show a bit of our decision-making moments. and how we got this right. So the first graph, we show the map curve, and the purchases are these little balls, which are the moments the company understood that, once again, what's most important for us is the contribution margin. So when we block costs, we're also blocking the sale of certain products, and we were very assertive with this purchase. This year, when we look at the curve and we consider the decision-making moment, that was a really good decision. When we look at the last harvest, we have practically 4% or 5% more price. Phosphate is a product that in some way has stabilized prices a lot due to all of the demand that exists for phosphoric acid in battery production, and it's a market that is pretty firm. Chloride is the second. We've been also getting this right. There was a moment where we understood it really made sense to come in with this, so we were able to buy Chloride this year. at levels of prices that were better than last year, not much of a difference, about 3%, but really demonstrating the assertiveness of our company. So back then, we were able to close this really well on nitrogen products. which are really connected to petroleum. But that's like the see-saw of prices. Of course, there's Moho. We had the best purchase. And then on the right graph, you can see the percentage of what's already closed. We already advanced with chloride, phosphate, and NPK and other... fertilizing we still have some things to be closed for defenses and nitrogen-based products mainly due to the second harvest with corn the bottom graph shows the exchange ratio when we see this year you can already have a view of how the next harvest is expecting to be designed and performance of the cost as well so I'd say this is very close to the cost of the previous harvest. Some are a little bit more expensive and phosphated. The benzes were a little cheaper, considering this in dollar, not only the currency. And then last year, seeds kind of moved sideways, not much of a modification, but you can see they harvest about 40,000, 40,200 reais per hectare. And next, please. Well, now we already get into a little bit of the sugarcane topic and the estimates for the harvest. And as you can see, what's estimated in the actuals, 1,558,000. This is for 30th of September in the company, the harvested area. The estimate's also 26,000. And... the biggest surprise let's say uh contributing to this a bit is tch the company that has historically been delivering good results and we had two events that really uh marked the tch for some units um not that much But when we take a look at the Serra block in the state of São Paulo, considering the icing events in São Paulo and São José, due to more rigorous winter, we had a reduction of TCH in the company. And in Brotas, we had to harvest sugarcane after the... So you're going to have to harvest the sugarcane that were affected by the... the snowing or the icing that took place, and then you have to produce the alcohol. If not, you're going to have fermentation in the actual, inside the actual sugar cane. So we had to accelerate this process, and that brought in a reduction in productivity, especially in the region of Brazos. Well, I think here in the next quarters, you'll see a reduction in the amount of numbers and the number of paths. And this is a bit of the reflex here. I'll show you this slide on the commodities. And when you see this company that's diversified, it's diversified. And this is very good for our operational results. But you can see that there was significant recovery, and we were able to, in the end of this period, complete the sale of the Ferenc farm. As you mentioned, this is a very significant sale. It's a property that didn't have that much liquidity, but when you see here in other commodities, that makes sense, because when cattle raising improves, you can generate more liquidity, so diversification in the productive aspect, but also in the has really made a big effect in the company so the amount of cattle heads were pretty stable and then in the first three months what's estimated for the year Now, what's for the first three months, for the four years? Because these three months actually initially are the full drought periods. So July, August and September, we have the low CMVs and about 180 grams, basically, right, per day at the drought period. So when I start the rain period and the CMV starts going up, you have a 500, 700, and then you have 470 grams per day. Here you can see a photograph of the company and in the last few years we've been taking advantage of commodities. It's a company that has been historically in the last five years sold over 350 million reais per year of farm assets and it's a company that even with the significant demobilization of assets, which makes total sense for the company's shareholders, has been really keeping up with the plantation areas very closely, right? And so this graph shows you what our breakdown is and how we have this split. Soy is really the most significant. Then we have sugarcane with 17%. Then we have corn and the corn harvest and all the other products. And on the right side graph, you can see how things have been designing. In the beginning of the rain period in Mato Grosso, I'd say it's... rain arrived early as it arrived in other years right but every year in mato grosso we start planting and this year we were able to start planting at the end of september the beginning of october we had this window of one week and it was a drier week where some units we had to stop uh plantation and then we got back to party from the second to the third week of the month of october so the beginning of the plantation in mato grosso um In Mato Grosso, we start planting and we never stop again, but this is like an interval in some of our units. The rains got back now, and then we also had rain coming back in the northeast of Brazil, and we also already initiated the plantation in the Maranhão Piauí area and in Bahia as well. So more recently, Bahia, Maranhão Piauí, we started off in the end of the month of October. And Bahia, we began in the end of the weekend, and we started the plantation in Bahia with a good rain regime. So we're in this year with non-linear, low intensity. And phenomenons in our experience indicate not too much. What indicates is the more, what's more significant is the intensity. It's a monolinear. It was very similar to what we had in the 15-16 harvest. If you're at the farm and you want to take a look at how this year will be from a climate perspective, it's very similar to the 15-16 harvest.

Next, please.

Here you can see a status of the schedule and the graph you already know. Due to this shutdown in Mato Grosso and, as I mentioned, in Maranhão and Piauí, starting a little bit later than usual, we started at the last week of the month of October, and now we have a status of 34% planted in the company. The good news is that everything is very well planted. The replantation index was, the rework index was very low. Another pleasant surprise, as you've heard also in our product for our own seeds in the Chaparral unit, this year we were able to have pretty good level of our own seeds in the company and this is actually giving us a real show let's say after the investments we've performed in full chambers that's been demonstrating to be very efficient so it's another alternative for cost reduction and we currently have about 34 percent of the planted area advancing and In the beginning of November 10th, this is scheduled for the beginning of next week, and we'll start planting. And then when we talk about December, we're talking about corn and summer, especially Piauí and Maranhão. In the rest of Brazil, we have corn, but it's a second season harvest, and that's going to be starting to be planted in the beginning of January. This year, I think it's going to be the year where... We started off the plantation really early, and we should already start harvesting soy in Mato Grosso, and then we'll have a little bit more energy also for the harvesting. That's a year that we've been starting to work on, and that really favors prices, and as you can see, we're in full volumes in the premium start.

We have a lot of soy to harvest there, especially in the end or beginning of January.

And so now about the crops and commodities. We have a big challenge with a lot of volatility this year. This year, the volatility is coming from the other side, right? At any moment, you could sit down with Trump and Xi Jinping and have an agreement, and Chicago would go up and the basis would go down. So I think the company and you really took a bet on this, and we betted on this very well. And so we took sword to the second semester. We knew there wasn't going to be a pressure on this agreement. So when we really believed that this would come along, Then up ahead, as we believed as well, the company sold and we captured this really well on a basis. So the story I'm showing you here is for this harvest now. And this harvest already has 56% sold at 10.72. And it's worth mentioning all these sales were contributing with the margin, with the claretto and the map that I mentioned in the first graph. also a lot of volatility. And at this moment, we were really deciding to block the contribution margins. We were able to have over 45% of the currency, even knowing that it's a year of a lot of volatility up ahead. But we believe that this currency position was really assertive. On the right side, we have cotton, 53% closed. And also, In cotton, you have a second advantage, right? You have that volatility moment. And since we sell forward in cotton, our dollar for cotton is at 6.65% and 52%. And then we see ethanol as well, 50% sold at 2.600. Corn is what's most late, let's say. But we saw recovery now in the last few days. and prices were going up in certain markets. And then on the right side, a very important population, which is receivables. The company has over 650 million in receivables of sales and farms, and almost 6 million sacks of soy to be received. And this is the P&L we monitor a lot. So part of the soy we have... 50% are sold at $10.68 with a currency of $6.60. And these are significant values that really help us have a positive contribution of these receivables in the company's balance sheet. These receivables have significant volumes and the sale for 26, but we have receivables that are for four or five years. And the metric was able to explain this. This is the biggest effect we had on the balance sheet. Since it's a bigger period, the dollar from the moment we sold here, it's been dropping a lot, and that's really making a difference. But then an exchange in the next quarter, we'll have good news that Chicago is going to go up again. So it's going to be a year of a lot of volatility when it comes to marketing receivables for farm sales. So then I'll pass it over to Gustavo now.

Thank you, André.

Good morning, everyone. And thank you for your presence with us today in the presentation. And André has already mentioned that we sell most of our stock, that we continue the next exercise. And we had this decision of providing a loading of soy, and we have almost 70 or 80,000 tons of corn. that are still 50,000 to be sold. And the biggest issue here in these results are normally sugarcane, right? So Andres has already anticipated that we have some issues of productivity.

And...

and that considers the history we also had right and so with from then on you start also providing more influence and results and uh starting off here with the net operational revenue they have 302 million seven percent uh below what was last year and this is impacted not because of the ethanol price that was really good during the entire harvest but also the ATR levels, right? And so historically the company was reaching indicators that were close to 140, now we're at 135, 136 kilograms. And so what we're going to close this year will have an impact that's very significant, right? But even so... This could be offset by some costs reduced and also good productivity, which also helps dilute the reais per tons. And when we see our operational EBITDA at 64 million reais, we can see that when we compare with the same period, 61.4 million reais, they're very similar. And so... if we monitor the adjusted epidemic. And so, as you can see this on the right side of the, with the behavior in soy and corn, and I believe that was a crop that last year had been hindered a lot by price and productivity in our case. in the Mato Grosso region. And this harvest, we were able to have very good productivity that really helped reduce part of the cost, as well as fertilizers that had taken on a setback when we compare with the previous harvest. So when we see sugar, Pretend this attorney may react like it is. lead to a impact in tons of ATR and the cost also increased because of fixed value as well and the expectation with productivity as well. So we have an investment in fertilizing and this also made the reduction of tons lead to an increase in cost. When we see margins, adjusted epidemic margins, then there's a difference of 169 million reais compared to 164 million reais.

And that's mainly farm sales as well.

And in the previous year, we had accounted for this. And at this moment, we don't have many purchase to account for. But when we see the final results of those 64 million reais negative, what calls our attention is how an epidemic that's operationally very similar to the previous case, we can see

and the previous part of the financial results.

And Andrea mentioned, for example, that we have the two main effects, right? Updating the fair values, 40 by 40 million reais, basically the effect we were talking about here within the impact of the financial results and that represents all of the receivables of bond sales. We have six million sacks, as Andrea mentioned, 360 million sacks, and every quarter we have to fund the market. And during this quarter, we had volatility in our soy prices that set back about 3% to 4%. And the real had been at value, and also the faces that had a negative effect. And all of this impacted the 40 million U.S. And when we see what happened last year, practically we had a quarter without this type of variation or variable taking place. And the second point is the updates on the fair value releases. All the releases we... have to re-measure the period represented and account for this and all the variations that this has. And they should also, of all the contracts that are already under operation, that should be re-measured. And that also has an impact. So all of this is brought to present value. Don't we understand that there's also interest, but they don't keep up at the same levels. And this generates... movement within this result, these results. So basically a 54 million reais. And as we always mentioned, it's not a cash effect, but a yearly accounting launch. And this is what most impacted our results and our net losses here that we're considering. So when we see the revenue for financial investments and we see We have a cash between 250 and 60 million reais. Interest rates are a little higher as well. We had a bit more profitability and we see the interest. We have the stock of debt of the other 850 million reais with interest at 15%. you see the costs below CDI, and then you have a very positive effect. So as other revenues and expenses that represent currency variations, especially in Paraguay, we have about $8 million in our debts in Paraguay to perform the terminals in the property, and the Rial also gained value in Guarani as well, and that generated a revenue of approximately 4.5 million reais, because part of the debt we ended up paying off there, and then also currency variations that we were finding at the moment when we were paying for fertilizers, and in April, We had bought this fertilizer in the month of April and March, and we had a bet on the real gaining value. And so we had booked a payment in August, September, November. Now, in this month as well, and this is, at that moment we were considering the real 580 by the 90, and we would be able to perform the planer at 535, 538, and that generated a very positive result. So, finally, when you consider the over part, you can see how that impacted the difference between 97 million reais and 74 as losses in this period. And the main differences are prices we had mentioned, the volumes. that we're going to consider in sugarcane and the savings and costs, and we'll see the fair value as well.

And sometimes that can be confusing, right?

We can see the estimates and we have the sugarcane expectations as well that kind of distort the analysis a bit.

And the financial results are minus 39 million Reais.

And that explains this variation, right? So it's a very complicated quarter. And I remember in December, we had to also perform an in-depth explanation about the derivative impacts The real had reached 620, and then we were able to prove on the 30th of June what was not a cash effect, and we were able to get back to numbers that were a little more reasonable. On the next page, you can see here that what we were discussing, soy, corn, sugarcane, and I think those are the most important crops. We were considering commercializing, and in soy, we have the total gross earnings of $30 million, a margin of 32%. This margin is getting better because although if you compare the price and opportunity, and it's about 3.5% below, It's smaller, right, than the first quarter, and this is mainly due to a reduction of 100 reais per ton of cost. And so those volume also about 1,400 tons more. So corn is the result up until now, because here we're still waiting for about 60,000 tons, and... For soy, we still have about 40,000 tons to sell to commercial, to businesses in quarter. And the gross result is about 10.5 million reais. The margin so far is about 40%, and the volume commercialized is similar to the previous one, 24,000 tons. Approximately, the price is recovered, as you can see, about... And you can see that for 2023. And the market has been practicing approximately 10 and 15% better than the previous harvest. And most of this variation is the provisions that were very positive, right? The lower cost of fertilizers, such as I've already mentioned, and good productivity contribute to this improvement also, the margins with cost reductions. And when we see sugarcane, We'll see sugar cane and the results, the gross results are 17.3 and the margins are 14%. And so low sugar rates and that's impacting the lower quantity of tons, commercialized we have 20,000 tons basically. And this low level of sugar also impacts the price, 168 to 159. And so the values that you can see of ethanol are very similar to what they were last year. And just the ATR is reducing the composition of the unit price. And the cost, which increased percent by percent due to the reduction in tons and low productivity that impacted the treatment of the crops. So beans are not too much volume. Cotton is also a challenge due to the volatility of the production. We are still searching for ways to stabilize. most of this has always been considered also part of the biological assets, but very firm prices and really having profitable activities for the company. with a with a smaller size right so um of course then we'll get into the company's debt level with cash of 236 million and the debt is 895 million reais and you can see the cost of about And that's a rate that's pretty good. The net debt of 658 million reais. The schedules as well, as you can see, we have the amortization of these debts. 372 million reais and the working capital also to plants and 408 million reais which are two to five years. Basically those that have CRA interventions to be able to finish the transformations of these different areas in Brazil that were already complete and part of a paragraph that we're also finishing to develop. And for the irrigation project, which is also a project where the phase we were planned for this year has already been completed, and we're at this phase where we're working on the plantations. We have another 1,000 hectares to finish implementing. And so these are all of the debts and we're already waiting on cash flow to be able to start amortizing these debts.

So it's also important to highlight that

we have six million facts to receive and the present value is 651 million rights these nominal values so we haven't had much of an impact in these variables the base is interest rates also pretty high and that still generates pressure within uh so then also the when you consider the agriculture margins the cost of credit is really complicated and that generates a lot of pressure as well especially in companies that have high leverage as you can see here we understand that as we consider sales uh farms that we still haven't received We basically have a net debt of zero, but we can see, as a company, each point of CDI represents this amount. And we can see how hard it is in agriculture to find margins, positive margins, and the size of the operational epiderms.

And so...

we can see that these interests are really hindering the sector. And then we can see here that we had the approval in Parliament for the payment of – sorry, the approval in the general shareholders' meeting of 75 million riyals, and we're already planning to start this on the 28th of November. And so here, once again, as always, we have our commitment to continue to be a dividend-paying company. And we can see our average in the last five years, and we understand that for the type of sector we're in with its cycles, we continue to be... a very attractive company.

And so I think here we have another page.

Okay, great. Well, thank you so much, and now we'll hop into Q&A. Thanks, Gervais. Thank you, Gustavo. The first one comes from Guilherme from BTG Petrol. You can open up your mic, please.

Hi, guys.

How's it going? Good morning. Two questions here from our side. First, we want to understand a little bit about the sugarcane scenario. So from what was listed, you guys are waiting for or expecting about 10%. more tons harvested by the end of this harvest year in regards to your sugar cane plantation, right? So I wanted to discuss how you consider this scenario and the total scenario in the market, because when we look at this, at the rest of the market and the current estimates by the consulting firms and other entities, they say They talk as if you're still going to have to harvest about 20% or more from the beginning of October till the end. And so I wanted to understand if you think this is because your sugarcane plantation was more impacted from the average or maybe because the market estimates are too optimistic. And that's the first point. Then secondly, I want to understand if you guys could give us a little update on the purchase and sales scenario for land and how this market is doing. In the last investor day, you guys said there were a lot of opportunities. So I wanted to understand how this has been advancing. Well, Glennie, that's a $1 million question you just gave us, huh? But let's try. So I'm going to start backwards and then answer the first one. So I think the first question is going to be a little more discussion. But first, when it comes to sales, no doubt we're advancing and working towards this. The company is not going to stop selling as long as you guys can be sure of this. And I believe it's really in line with what we were talking about, right, Gustavo? Although we have, as Gustavo mentioned, a new business that's really being hindered by interest rates, we see a scenario of a lot of stability, but there's still some big liquidity opportunities like such a Bahia with a lot of irrigation projects and other regions also that we discussed. We never imagined to sell preference in a year. We actually expected that we would sell it to agriculture. uh when that was in a condition right so we would expect this but as i was like reinforcing we get into this cycle that's um more opportunities for purchases than for sale and the last few years had major opportunities and the company was also really efficient in obtaining these And so, as a administrative management, we were able to reduce not much, but we just reduced a little.

And so... And so, yes, we did suffer.

And this is really being important because of the brotas operation that broke down at more than 20% than what was estimated because of the freezing and icing in the plantation. And so... When we see the sugarcane, we start having to review all of the balance throughout the year and we saw what the differential is in Maranhão and the beginning of the rain period was not that intense, right? When you look at Brazil, I actually joke about this, and in the investor day for Bidagro, I had a bet with the guys there, and I said, I don't think we're going to get to this number. I still think, and I think it was Guilherme that said the bet. I'm not going to forget that. You owe us a lunch. Anyways, this number, I was very skeptical about it, right? And I wanted to really see how this number would close, right? Maybe it's not the 505 that I was considering, but sugarcane has really been suffering a lot. And another pain point is the sugar levels or the sugar rates. This is something that everyone has a consensus in the market, we're like two to three points below, right? But our vision is that we suffered more because, and I believe that, I don't know if we, are taking too long to get these results. We're waiting to have sugarcane be covered at the end of the harvest, but we see plants stopping, right? And so a lot of these are stopping, right? So we have an accumulated result, but I think we're going to have a quick drop as well. Okay, perfect. Thank you, Andréa. Now we're going to find the next question here. So we have Bruno Bazzetta from Itaú BBA with the next question. Hi, André, Ana and Gustavo. Good morning. We have two questions. First, about the agreement for imports and so in China, and it was really clear how this strategy seems to be very assertive. But we wanted to afford to approach the perspective from now on and also the timing of this negotiation, right? Because this expects a volume of imports that would have to be fulfilled for this harvest, but also by the end of 2026, we would already have a harvest of this that should bring in more competitiveness to our country, right? So we want to understand if there's any risk of maybe just chasing this origination of the soil in the U.S. and China. that could impact the distribution of our production next year with such a strong harvest that I mentioned. Then we have a second question about M&A, and that was a great overview, but also trying to give you a bit more of a long-term discussion, and we have a discussion on biofuels and crushing projects, et cetera. So we want to see how this can affect this M&A that the company has and different views also on the project. Also from a profitability perspective, a sugarcane crushing project could make an area more feasible. Then as a consequence, there's also been areas that are not accounting for grains that could maybe be used for biomass production and how this discussion could bring in more possibilities. Well, two questions that are really good. Well, first, we have two points here. Up until December, we have the imports of about 12 million tons and 25 million tons next year. Yesterday, we were in a discussion, a commercial discussion that we have at the company. It was 15 days. And we were looking at China's position. Our first reading is, although the first...

We believe... we consider there's still going to be some fitful basis.

And last year, we started the harvest with plus 40, then zero. Then we ended the year with the tariff effect, and we started selling soil at almost 200 positive beats. So we don't expect this. But we do expect the month of January with the perspective of basis points that it looks good. And in the harvest, we would expect once again that there's a negative base point. And it's going to once again be a year where we're going to really bet on this. and everything that Gustavo mentioned, right, the efficient cost of capital, and we're going to try to carry on a bit of the story to the second semester. We shouldn't have 150, 200 basis points, but I think we're going to recover most of this in the second semester. Maybe not at about these 150, but maybe something closer to 100 points. So I think this is our vision that we're considering, looking at the coverage and the biofuels agenda. Actually, we talked about this a while back. This is the agenda that's here to stay. And thank God it's here to stay, right? If not, I would never imagine what we would be doing with so much soy. So... We have 50 million already going to biodiesel crushing, right? In Brazil, the issue is a little slower, but with the corn ethanol, you're very straightforward in your statement, right? It started off generating profitability in regions where you had logistic issues to... a truck to carry a ton of trash is pretty much the same price, right? And so made us start – and actually there's another factor also in this story. The worst logistics, what they did in the past, made you have to – When you install a quorum, you place DGG there, and this rearrangement is redimensioning the logistics and freight and everything we know in Brazil that we know as it is a continental country, right? So, yes, we've been studying certain things. and a lot is mentioned uh this is kind of in line with everything people ask each other about up until which point um no one has a crystal ball but there's a limiting factor right and this issue with biomass And so maybe I can plant biomass, but there's going to be biomass maybe five or six years from now. So we know that the cost matrix of a product versus a sugarcane is pretty tight. So just as when corn is cheap, corn ethanol is super profitable. But when corn becomes expensive, then corn ethanol is not profitable. There's a big challenge here. But yes, we've been looking into this, some units that could benefit from this, and we start having a lot of provocation in the region in Piauí and even in Bahia, where we assessed even some projects there in the units close by. But we have really been keeping our eyes open and watching closely. Then we'll get into a very significant volume of the corn harvest, and that's important. So with these, if we didn't have the 30 million tons, we wouldn't have chicken or pigs to eat so much corn, right? So I think the business is here to bring... greater linearity and i see this very positively because the corn ethanol industry has a crushing maybe 365 days a year and that brings stability to prices right so i think the first graph i showed you was showing you that You can see corn operated in a very stable manner with starting to plant with an exit rate of 139, 140, reaching a harvest of 150. And so corn was really stable. And then also that's bringing in a lot of liquidity. chicken and pig don't operate in the future markets right so that's really bringing in more liquidity to be a matter and in the past if you were to see this maybe 10 years ago bisagra would sell most of the corn contracts right but today we start having liquidity there so i believe this is here to stay there's a limit of course And I don't think we're going to be a country that just produces corn ethanol. Everyone believes it could reach 40% or 50% of the total volume with these points I mentioned, right? So you have biomass issues of different regions. There's regions where you have the corn, but you don't have the cows. And this is also the case with Maranhão, for example. Maranhão is closer to Pará. You even have a... some cows close but anyways you have huge challenges there but i do believe it started generating liquidity and improving uh the logistics very clear thank you our next question is from pedro fonseca at xp you can um open this mic please

Good morning, André, Gustavo, Ana.

Great to speak with you, and thank you for this opportunity. I want to take you back to the sugarcane topic a little bit. André, I think your view on this harvest is very clear, but I wanted to understand your view for the next period, right? and so after all of these climate situations everyone suffered we see better climate conditions and what you guys expect our tch recoveries and also how this should be translated if there's a possible drop in costs in the production of sugarcane for the next harvest that's my first question then my second question is we saw the actual price of cotton that was a little worse, and it was very clear that this was due to cotton with worse quality. And so what I wanted to understand in the comment you mentioned about this cotton position with worse quality from those 93 million that I had seen in the stock, we don't have this quality issue anymore, right? So I want to confirm this understanding and also understand if the cotton that had problems with quality was the cotton in the off-season harvest in Bahia. So I want to have a better understanding here on the composition of the estimates. of costs for the off-season harvest and so when i see this there was a slight increase in the cost expected for the off-season harvest but there's also is a percentage of nitrogen based products that were not bought So we saw improvements in the ratio of exchange in the last weeks, and the company strategy was very certain. But what I want to look into as a calculation is that maybe this increase you guys placed here of the off-season harvest could be reversed as you guys advance in the acquisition of the nitrogen-based products, just to understand what's in frame for the revision of the off-season harvest. Thanks, guys.

It's on mute, André.

Pedro, three questions here that could almost make a dissertation thesis here, man. But let's go, let's try.

What's important with sugarcane? Well, what's important with sugarcane is the beginning of the rain period and the end of the rain period. So November, let's say 15th of November, and all of December, January, and February, It's full field capacity, and the soil is really drenched, so 100 million more rain and it won't do anything. And what really makes a difference in sugarcane is going to be the rain and the inflow and the outflow. and so that's where you start having a quicker process and then you get the lighting which is december and january and that's where you it grows a little bit more uh that's the first module um and then it makes sugar cane uh come in quicker and grow more in the month of december january

So in May or April, the sugar cane starts losing weight and dehydrates, and then when you have a longer summer,

It rains well, then you have an extension or spawning of this hydric stress. So having said that, it's important to mention what we're seeing. We saw that there was rain coming in, especially in Sao Paulo and in Pacuari. That was a lot better this year. So we had a month of October that was a lot better for rain. And what I'm trying to say here is that the sugar cane conditions are a lot better than what it was last year due to the rain in October. In Maranhão, that started off now and the rain was a little bit later. October there wasn't as good as it was in Sao Paulo and the Midwest, but that's the point. Now, what's the main game here? What's going to happen? And when the rain stops? So from now on, we have no more water lacking. Soil has already started drenching and life goes on. But the challenge here is going to be this, right? So the perspective indicates that we could have April or maybe the beginning of May with a bit of rain. due to this La Nina effect with low intensity. So I want to say that we're expecting significant recovery in our sugar cane for TCH, and we can be sure that that's going to be recovered. In Maranhão, what we're doing also is, as we had October a little less intense, we are extending our irrigation once again there. We should be operating in November almost all entirely, although we have been stopping the plant there, but we have a supply agreement. We're going to postpone irrigation there a little bit more in November. and possibly we could even anticipate this irrigation a little bit if we see that we have this hydric need there up ahead.

Mato Grosso and São Paulo, things are doing really well.

And Maranhão, we're gonna extend this a little bit more with irrigation into November. And that's where we normally start, like on the 10th, the 5th or 10th, and that's where we're gonna extend this about 10 or 15 days more to offset this deficit in cotton. Basically, we had cotton in Bahia, And so the company has been highlighting this, and that's where we're headed to irrigated cotton. Irrigated cotton has been reaping or harvesting over 280, 290, 420, 430. And so we're going to see this crop has very high production costs. and that's really tight so we can't play around with productivity in cotton although we always say that for us cotton has two effects one is the productive effect and the value of the land

with a much worse soil, much worse than corn. So, based on that, it is to be expected that we have a much better productivity than it, because we have much less dry cotton, a reduction in the cotton area, and basically almost all cotton is irrigated. We only have one unit of ours that plants approximately 1,000 hectares of dry cotton. The rest of this unit is irrigated cotton too. Miro, Miro Safrinha.

André, let me complement there another question. Within the stock that we have, we still have 15% of also some areas that in Mato Grosso we also had some problem of productivity, of quality. So, from that amount, more or less, you can consider between 10% and 15%. Perfect.

Thank you, Gustavo. Well remembered. Well, Miro Safrinha. two things happened here. One, as we are reducing this cotton area, we threw more saffron corn in areas that were already cotton. So, we have a very positive expectation of saffron corn, because they are areas that were occupied with cotton, areas that had a very good restructuring, had levels of heavy adubation in recent years, and these areas are going to corn now, due to what we talked about, the productivity risk of dry cotton, and the cotton field is also tight, we are migrating these areas to corn. So, it is to be expected that we have a good recovery in these areas, or a recovery, no. We have high productivity in corn, because these are areas that come from cotton cultivation. Regarding nitrogen, nitrogen is that discussion, Pedro, that is that letter that we like to keep until the last moment. We will follow the price of corn and how we can sell it. And corn, as I was talking about soy, which is a C4, corn is also a C4 and it responds very well to nitrogen. So our idea, if we follow this now, And the producer does the same thing I'm telling you. If the price of corn recovers, put more nitrogenated fertilizer, because it is extremely responsive. If the price of corn is tight, fertilization is a little more fair. But, in a way, it is a waste valve that we always have at this moment. Our strategy was right to push this commercialization so that we have If you ask me, yesterday I was saying that I am more optimistic in the next harvest with the price of corn and soy. We are coming from a very good harvest, we will not necessarily have a harvest of 150 million tons. On the other hand, you have meat rising much more, with better prices, which makes a rain guard effect for our pork meat, our chicken meat. So, in general, we as a company bet more on corn than on soy in the next harvest, in terms of profitability, based on some characteristics of these peculiarities. And in our case, it is also occupying better cotton areas, which should bring greater productivity in the harvest.

Pedro, and also to complement that question, what is estimated in terms of costs is a reflection of what our budget was. And it was mainly with a type of change for fertilizers and chemicals of 5.90. Today, to more or less update, we are expecting in dollars, fertilizers and chemicals, a 3% lower than it was in that budget. And there is, in addition to that, a change in variation, right? As I mentioned earlier, Fertilizers we are not paying, that is, we are going to pay with a dollar and a half of 5.40, 5.50. And chemicals we have a payment date in April and we are trying to see if we can anticipate. Given that at that moment it will be the beginning of the electoral campaigns in Brazil and it may have volatility, perhaps Renzi also considers making an anticipated payment of those chemicals.

It is very clear.

Thank you for the explanations. We have one last question here, written. It comes from Reinaldo Veríssimo, regarding the rains. How much are we waiting for rain during the window of January and how much more or less would be the appropriate yield of the harvest in brazil

So that's what everyone would like to control from the minions, but let me try to clarify a bit.

So the challenge are two.

I just stated in the call that we start the harvest in January in Mato Grosso, so we want rain so there's not...

Lack of rain, but we don't want too much rain, so there's enough rain for the rest of the harvest.

So historically, when we look at the first Maranhão, Piauí, and Bahia, those are months where we have 180, 200 millimeters of rain. That's the history of the regions. In Maranhão and Piauí, we have a more rainy week. And March, so much it's that, that when we get corn, in the case of corn, as I showed, the plantation of corn on the 20th is exactly that. When we get the rainy season in March with corn ready for harvest, if you get it to... And early, then we lose a lot of corn.

So for every one, we have the rain.

So we wait for the rainy season with low... and then there will be less grains that are lost in the harvest. So there's no way to do it in the second harvest. So when there's so much rain, 300 millimeters, it's very difficult for you to have a monthly distribution of 300 millimeters where there's not enough room for harvest. That's what we're more concerned with is January with more than 300 millimeters. The past, they would say it's good when it rains at night and it's sunny during the day. That would be the ideal world. But what I'm saying is that in the predictions, when we start having a January that's over 300, 200 millimeters, then you have problems with harvest in Mato Grosso. In the other regions where we don't have, it's our expectation that What do we do when we see the intensity of the phenomenon? That's important for everyone. For anyone who has a farm or a company, that's what they do. The intensity is similar to summer.

So the last summer, what was the behavior during that summer?

That's what we have to have more visibility. So we look at 15 or 17, and that's what the volumes are that I'm talking about.

Excellent.

Thank you so much, Andrea and Gustavo, once again, everyone who stayed with us until the end to accompany the results of the first quarter. It's important to remember that we are just getting started our harvest years, that the year of Brazil Agro starts in July and goes to the 30th of June, so there's still a lot of things to happen in this year. So until the next quarter.