Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Good morning, everyone, and welcome to the third quarter earnings call, the first nine months of the 25-26 period at Bizarre Agro. Thank you for waiting. We started a little bit late today, and we have André and Gustavo to present our earnings. If you're in English, this presentation is also available on the chat. And before we begin the call, I want to start off by saying, first of all, that Bazaar Group's completing anniversary, we're completing 20 years of history, and we're really happy with this milestone. No one imagined 20 years ago that a PowerPoint would become such a big company that's so significant in the sector and in the future. You'll also see we have a new visual identity to celebrate this anniversary, and we're really happy to share our anniversary. So now I'm going to pass the floor to André to start the call.

Hi, can you hear me now?

Great. Sorry about that. We had some technical issues here. Ana, thank you for the introduction. Thank you all for being with us 20 years, as mentioned by Ana Paula, of a lot of resilience and a lot of lessons learned. A lot of achievements and mistakes, of course, but that's what makes a company mature and really have results. And no doubt the points right were a lot greater than the wrong points. And so that really helps us to become a better company. So that enabled, we also enabled the growth of many people and the development of many regions. So when we left behind and this is a region of a lot of happiness for us, how many people were able to achieve support for their families, how many regions were transformed. and thousands of kilometers of roads and electrical networks were implemented. So now these 20 years, we're going to get into a little bit of what this history of 20 years is all about and how we built this. And we definitely did this with people who worked and your trust. There's no work without trust, and there's also not only trust, right? So the combination of trust in the company's investors and analysts in these 20 years and the work on our behalf really made us reach the point we're in and work in this direction, right? So that's what makes. everyone really happy as they are part of the company today. So we're going to talk about our results, and it's a really complex year due to the interest rate and other factors, but let's look at what we have under our own control, which is technology, plantations, productivity, and we know agribusiness has its cyclical nature and today we're experiencing a low cycle moment and we're going to talk about this and the good things and the bad things and that's why we're we're really going to be available to respond to this right so let's talk about the numbers of the first nine months 637 million of net revenue it's really important to uh when we look at the first nine months last year There were sales that were also accounted for, and we have an adjusted EBITDA of 42.8, and an interest rate, and with all of this, we reached those nine months with 76 million of net losses. So this is really influenced by the financial expenses and sugarcane in the second half of last year, and thankfully, sugarcane is doing really well this year, but we've had very positive perspectives here and we actually were able to close some harvests that we'll be able to demonstrate here when it comes to soy. So on the next slide, please. Here we can see, once again, the resilience of the company to continue to sell land in Paraguay. It's a small sale, but it's really important to demonstrate that we have liquidity and that it is a project that in the last few years suffered a lot climate issues, but this year has been really well. So when you have a good productive year, you attract liquidity, right? And we were able to complete a sale in Paraguay, not very big, but very significant when it comes to internal return rates. We're talking about 23% in reais within our historical averages and 14% of the internal return rate in dollars, right? So no doubt Paraguay This year we have very positive production and we'll have a lot of success from a productive and real estate perspective as well. Next please. Here's a little bit of the scenario and here's what we asked to share here which is this line over here at the end of each one where we began the, where we had the beginning of the war in Iran. And then what we see is soy is kind of moving sideways ever since the conflict began. Corn as well is really connected to this. And the only commodity where there was a significant recovery after this was cotton. And we know why. because of the connection that cotton has and the synthetic fibers have with oil subproducts really made cotton pull this, the prices.

And we have cattle raising following a very positive cycle

We have a restricted supply in Australia and in the U.S. and in Brazil with an increase of the rate due to the GDP. And so we have more meat, more food The costs still take nine months for pregnancy, right? And so this is going to take a while. But ethanol was another commodity we expected would react positively, as occurred in cotton due to the umbilical cord kind of connection and the price of gasoline. But we know that political years are always difficult. And we see the quality of the imports that is not really... We saw petroleum go from 65 and reach 130 or 90, and we haven't seen a recovery in the price of gasoline. And so we do expect this to happen in the end of the second half if the complex really perpetuates all the way there. But the sugar cane has been following a short historical series. And however, we're going to talk about the climate. We're going to talk about perspective. We're going to see the coming along really strongly and that really increases the intensity of this discussion on sugar production in India and Thailand. And so we're not optimistic that prices are going to get back to 18, but we think that the bottom of the well is kind of locked in there and it should be. an upside for gasoline and for the production of sugarcane as well. And whenever you have a geopolitical conflict or discussion, you have the cost matrix and the revenue matrix. Unfortunately, until now, the only thing that was really impacted was the cost matrix. As we've shown you in the commodities, the only cost was where we had an alteration in the matrix just one minute. So here, just one second. All right. Can you see? Yes. So thankfully, we're not ITF specialists and we don't work with this, right? Farmers, we're just the farmers and the agronomists. But anyways, as I was saying, we have this cost situation that was impacted by the war, especially for phosphate fertilizers and they, went from prices at $600 reaching almost $800. Chloride as well went up a lot, and urea also, and those inputs that I really can't see, natural gas went up a lot. So potassium chloride, we had already basically by about 70% at the beginning of the harvest with fertilizers, we already had a pretty big position. And when you look at the 43, that represents the first harvest, right? Sorry, it represents the total amount of fertilizers, not only the first harvest. And so in the first harvest, The fertilizers that we're going to need in the month of September, October, November, we have a much greater percentage of both because we estimate and expect that the complex should be cooling down a bit in the next month. So in the first harvest, we already have most of it of the phosphate inputs bought. But when you look at the off-season harvest, plantation of sugarcane in the first half of next year those phosphate subproducts are not purchased but we also see a change ratio that's kind of skyrocketing so the complex generated only an increment in the cost matrix but it still has not led to an increment in the revenue matrix say if the conflict finishes today no doubt we will have a significant impact in this cost and we won't necessarily have a revenue benefit, so we must all hope that this cools down as quick as possible. So then here about the planted area, so the harvest is 25, we closed at 168,000 acres. Then it's important to highlight here that the company in the last few years has been a seller and basically we've been able to continue to keep a significant production area For soy, we're basically keeping about 94% harvested. We lack very little and what's missing is Paraguay especially. All the rest has already been harvested and Paraguay is doing really well. This year, we have a fair variety in positive surprises and we've already started to harvest. And we're starting the beginning of the harvest for corn in the summer. And generally, central Brazil has a rain distribution that's really positive. And for sugarcane, we already started harvesting in two units, especially in the Serra block and Atacori. and we started off with the first harvest with a lot of adherence. It's an El Nino year, and a bit of what I started saying is the biggest concern we have is that the Northeast region tends to suffer a bit more, and it's a year with a lot of caution when it comes to the next harvest, right? The harvest that's gonna be planted around October, November, where we have to critically look at this and be careful when it comes to how we're going to allocate capital and especially when we start seeing the risks are very low. And we've been working on this carefully in the company to really exclude some areas that historically lead to some production issues, right, because we're seeing a significant El Nino year up ahead. Great, so now just a bit about the hedge position in the company. And we're sharing basically this harvest that the soy we already mentioned, we harvest it. It's a year of a lot of volatility, but I think the company was able to position itself positively. And we'll see the numbers now, right? So it's worth mentioning that when we were still defining the budget last year, we were talking about soy at about $10.60, $10.70. And we had a currency rate at about six reais. So that was the company's budget. And ever since we have been locking in some operations, we had a currency rate that was almost at about 490. So what is important to consider here is basically what we have as a hedge locked in. We have a currency that's 65% locked in at about 590 almost, 589. and that's what we have locked in as. As a currency, Chicago's at $10.85, but of course, what we need to lock in still is being locked in at about $12, but then that's going to lead to a really interesting combination, because even with the currency dropping, we should be able to have an average currency of about $5.65, $5.70, and the Chicago will also be able to recover, right? So cotton is a crop. where the currency is a lot better actually due to an area reduction when we saw a major concern with the cost of capital this year with a crop that we can't put capital at risk. We had already performed some sales back then and we had about 60% of the cotton sold at a title currency of about 6.65 spectacular dollar and we've also seen about 76% of the commodities sold. And then for ethanol, we've been working on volume. And ethanol, we've already, you see corn is about 54% sold. And farm receivables, which is also very significant. The company has over 600 million reais in this line here in the company. It's a super significant account. We're working on it in the P&L. And there's a currency that's really adherence to the harvest. which is 586, and in Chicago, about 1079. Next, please. So then, Gustavo, now, that was the intro, but we can get into the numbers now. I'm just going to close my camera real fast here and pass on the mic.

Thank you.

Thank you, Andre. And, well, thank you all for your presence and doing this presentation of the results. And this exercise starts off in the beginning of July, and then it goes up until 30th of July. We consider about 76 million reais within the highlights. And last year in the same period, We had presented a positive result of 76 million reais with total revenue of about 27% and I want to remind you that we already had mentioned on the 31st of December with the impact and that impacted the revenue and the results. And we also saw that we also had a sale in the farm performed previously in this year. We at the moment just accounted for this transaction limit that I was mentioning in the beginning of our presentation. And the adjusted EBITDA in this period was 42 million reais. 42.8 million U.S. and prior to this is 195 million U.S. And on the graph we presented this with the main movement in these two periods that we have. one part that's on the right side here at the center, and we see soy and corn. But it's important to highlight also that everything we have here up until the 31st of March was basically stocks and productions that were performed in 2025. with everything that would be like the new harvest that Andrea mentioned, the 240,000 tons of soy, and we only sold about 55,000 tons in this quarter, so the decision of carrying on this a little more up ahead due to the fact that in the beginning of the war we had this expectation of a short-term solution that we saw. Freights started to pressure a bit, including the excellent harvest that goes in as well, as well as due to this increment and this increase we have at the logistics level. So we decided to hold this a bit more and see if we could find opportunities that were better for logistics because the products are already practically all sold, about 60% compromised already. But we're just searching for the best moment for all of this. But until the 31st of March, we had already sold only the stocks. And then we had 11 million reais sold in soy and 22 million reais in corn. And then sugarcane was the difference. that we have presented in the 31st of December when we talked about the ice period we and the frost we had in the region of Sao Paulo and issues also with burns in the northern region and the prices also that started pulling us downwards. We had a harvest in some areas with losses and that led to reducing the amount of hectares that were planted during this new harvest and the farm sold on the other administrative costs and then especially when you can see this in sugar cane and the farm, and that explains the main differences between the ejected EBITDA, right? So when we see the results of this, exercise in the top part of the graph bar you can do 76 million positive and negative and then you see the price of sugarcane and cotton and that represented a variation of about 36 million negative the lower volume of sugarcane as well which added to this 19 million reais and there was a reduction in the cost as well with some soy corn crops that we should have some kind of a saving because of the productivity in the past but we can see the fair value um when you can see the performance of everything we've been marking to market at fair value and the impact of the prices as well presented for ethanol and sugar that really impacted this generating an impact with a lower result and the sale of farms and also an impact that was positive for this period of 35, 37 million reais of financial results, which we can only see at the bottom part last year during these nine months. 2025, we had 93 million reais, and this year, this impact represents 56 million reais. And I always want to remind you that the first line of financial investments, we have the minimum cash.

And we see our...

interest on liabilities as well which is the cost of debt that the company has and so we see approximately 55 million reais and in the last year this effective 15 minus 59 was smaller because of uh of a lower interest rate at a percentage level and then after we saw that for these nine months, especially for marks-to-markets, which are the updates to fair value and the other variations as well, practically, at a null effect, but to complete this, we are presenting the 76 million reais that are negative.

And you can see this performance that we've had in sugarcane as well.

So next, here you can see the gross results once again. mentioning that everything that was commercialized here, with the exception of soy, which is 55,000 cents, all of the rest are the sale of stock of the prior harvest. And soy, as you can see, there's an improvement in the gross earnings and results as a consequence of better cost per cent. And for corn as well, we also see the price and cost, leveraging the results of the products and looking at the unit results, considering rice per cent, and that would be the potential. So with the increase in volume, not only for the soy but also the corn, we had an increment When we looked at sugarcane, which is to the right side on the left here, to the right, you can see how this performance was of 1,341,000 cents for 2025. And for 2526, we have 971,000 cents. And that really brought in this difference that's so significant We also see the unit price, not only because of the price of the ATR but also considering the concentration of the kilogram of sugar that we considered in the provision and that led to our margins which are normally stabilized, 3,000, 3,500 hectares, which keep a lower margin as a consequence of this impact on productivity. So when you see cotton as well, we had, as we mentioned, part of this cotton was we performed sales and commercialization, which are produced in irrigation areas that were very positive. And we had other areas that did not have irrigation that had very negative impacts. But besides having productivity that's very low, we also had an issue with quality, which made the unit price be a lot lower than what we normally had achieved through a hedge that led to these results of a 9.9 million rise, but the discount made the price be a lot lower. So this was the main engine, let's say, that made us decide to reduce the purpose for this harvest that we're working with now. Then we can also see the net debt for the company, a total of 1 billion reais, The cash level, 887 million reais and then this debt is at 93.2% CDI with the maturities considering those periods. We have the receivables at the farm, 678 million reais that we still have to receive. And here, what's important to mention is we are at a moment where all costs were already incurred, and from now on, we're going to be commercializing and transporting and receiving all of the receivables for production. So then here, when we consider soy, for example, we have to receive over 280 million reais, and as we have mentioned in the beginning of this exercise from now on, will begin reducing the level of leverage, especially considering the understanding that the production of interest would happen. throughout this year and the next year but after the beginning of the war and as you saw the central bank was reducing their their pace we will make a decision to search for a reduction in our level of investments and try to be more efficient as well and how we place in the production But we are at this moment confirming the ONU for the climate conditions in the next harvest. So I think with that, we wrap up our presentation, and now we'll get into Q&A. Thank you. Thank you, André. Thank you. well i just wanted to get back to one discussion on the cost of fertilizers that i had already mentioned uh in the beginning of the conversation but this has been a central point here for discussion and i think it's worth reinforcing right so we had a comment for management on the news today that uh Maybe a reality is more appreciated. It could compensate this and maybe amortize a headwind and maybe bring in an inflation year over year. That could be lower than what the market feared, right? But I wanted to understand what are the assumptions behind this and what are the prices of product inputs, nitrogen-related inputs that you could maybe be more inclined to accelerate purchases for and what would be the timing for this since you have the logistics and the flow required to reach the farms. And I imagine this is probably smaller for farmers, but I would imagine that would maybe consider the stabilized level. that would already encourage this kind of movement, right? So then to bring in this discussion on the cancellation there of the bond that we saw last month with the worst scenario from the counterparty and how are you considering the risk for the receivable portfolio? any other possibilities of cancellations that are concerning you and just if you could give us a little more visibility on this would be interesting for the market thank you okay bruno uh how are you doing um well For fertilizers, you know it's an area I love and I've been working in this sector. I worked in this sector for 12 years, but I want to share a little bit of the expectations here. So, what are we working on from a timeline perspective? The sugarcane harvest started off in April in some areas and it's going to go on until the month of November. There's a period in sugarcane where you're harvesting it, the sugarcane we're harvesting in these months where you still have humidity in the soil. And that's still like the remaining from the rain period. And also when you talk about Sao Paulo, you could have some humidity in the month of May or so. And when you get into a region like Mato Grosso, things are a little more complicated, right? to get rain and then you get back to having rain in September. And so the fertilizers and nitrogen-based products that we have the need to work on, we're gonna be buying, considering this and we're gonna be harvesting, we're gonna be fertilizing these sugarcane plantations, right? So the discussion we've been working on to try to balance out this impact is if we should have the full dose of fertilizer. When you put in this fertilizer for the sugarcane, you have an absorption curve, and this happens in the months of January, February, and March, where you have most of the dry material accumulated. So when you're fertilizing sugarcane right now, while not fertilizing, this is bad because it won't have the availability of the nutrition that it needs, but it's throwing About 100% as we do every year for an operational matter, you're going to kind of fertilize about 100% in the sugarcane. And due to this significant movement with the crisis, sugarcane is going to be harvested now that has humidity in the soil or protected through rain in the next month, we're going to treat. How are we gonna treat this? Well, it depends on this year. We would already start off with like a full dose or maybe installments, right? When we have a full dose applied, normally older sugarcane where you don't wanna have such a small installment or part, right? In the younger sugarcane, we're gonna throw this down to try to bring this a little bit before the sugar season. Sorry, before the rain season for the sugarcane. The sugarcane we treat and harvest. The sugarcane you're harvesting now, you should treat. But what you're going to harvest in August or the end of July, September, that fertilizer you put in the soil is just to help you operationally because the sugarcane won't absorb that. They're only going to absorb the fertilizer or any crop. It only absorbs this when you have water. So if you're going to fertilize sugarcane in August and no rain, no humidity, the fertilizer is going to be stabilized on the surface. and it won't absorb it. So we would do this every year when we had another stable price situation, right? When you have price volatility, then you throw this up ahead of it. So when you look at the timeline of the sugar gain, that's an idea. And as I mentioned, phosphate products you already have good positioning for, and it's important to see this impact when you get into the discussion on the complex. The biggest damage is for the nitrogen-based products, right? and 35% of this goes through the Strait, right? So, the Armus Strait. So, when you look at phosphate-related products, then you could have an increase in the cost matrix, right, with natural gas prices going up, et cetera, but it's less than 15% of the phosphated fertilizer that goes through the Strait of Armus. So, we would, it wouldn't be, And yes, we're going to have a cost issue considering the increment of the cost of a natural gas, which is the basis of everything. So for fertilizers, I try to answer this a bit. And I can add on as well a bit. What we are looking at here is that last year for a hectare of soy, we were talking about 4,100 reais of direct cost, right, per hectare. But all of this confirmation of cost was considering a dollar of almost six reais. So what has happened during this period, we're in this process of starting off a new budget, and we see that the appreciation of the dollar has really pulled the cost especially for defensives. And since we've already purchased part of the chloride, almost 70% and everything with the phosphated products and everything for soy and corn. And we still, although we have some prices pushed upwards, let's say in any of these, such as the urea for the off-season harvest, we can see that this impact and the appreciation of the real has made costs be very, very similar from one year to another. So then the big challenge here when we see this in reais and sacks per hectare with the costs here that are normally 30, 35, historically, we see that it's kind of at the ceiling, the 35. And the big challenge up ahead is how we are going to position ourselves, right? At a moment where we bought the chloride, we already sold a bit of soy and that would give us a sack of soy approximately with like four or 5% better than the previous year, right? So when we saw this through the margin, It was actually a little bit better, but of course from now on we have to see what's gonna happen and if this will impact the services especially. But when we consider the first version of the budget we had seen before, between March and April, just as presented here, and in fact the prices for the fertilizers and we're kind of stabilizing there and from then on we saw possibility to begin the negotiation right so when you have scale to buy you can have some sort of uh discount right but also the doses we're talking about 130 140 150 per hectare and when you see the impact of all of this uh of the price and the fertilizers, there's not much of an incidence, right? So that's the vision we have. And we can see this impact in the fertilizers. Great. And so I'll just answer Bruno, the second part of the question here on financial risks. And I think that we were very quick in solving this. And so there's two ways to... And we would be able to sell this, right? So I like looking at the half... We were buying an area. And so, yes, this transaction, we had a reduction. This asset will get back to our shareholder base and, sorry, our asset base, and it is within our base, and we're going to be searching for ways to do good business with it, right? We're not going to get into the details here, but I'd say that this asset that came back was one of the assets we had of a buyer. I don't think we had a detailed credit analysis, but it's a buyer that has a leverage rate that's a lot higher than the others in our portfolio. So generally, our portfolio... We always sell farms to farmers that already have a big portfolio and this farmer that we canceled this business, they didn't have such a big portfolio and so their liquidity capacity was smaller but that's not what happens in our portfolio with our other creditors so we're really keeping our eyes open to this and it's always worth mentioning that the transactions we have protect the risk for this to happen and that's something we just demonstrated, right? So, if you have a huge challenge and you can see our horizon here where there's no possibility of timeframe, in the sense we have an asset registered in the company and it's a lot easier for us It's a sale where you can sell the asset and this is what we consider a, you deliver the title but, you deliver the property but not the title and that's where we can guarantee the solvency of our transactions. There was a creditor where we already had a relationship of leased properties. That was one of the worst in our portfolio. And I'd say that our portfolio, we're very confident about the receivables as well. That's great. Thank you very much. Very complete answer. Thank you, guys.

Thank you, Bruno.

Now we're going to open up Thiago Duarte's mic from BTG Pactual.

Good morning.

Hi, good day, André, Gustavo, Ana. Pleasure to speak with you always. As always, I wanted to take advantage of this topic on the fertilizers and also hear a little bit of your guys' opinion as well as André's about a more market-based issue and this graph on the exchange that you present in the presentation from two years from now, basically, if we were to extend this decades later, that would be maybe not as favorable for commodity. We had the war in Ukraine and then in 2027, 2028. And my question here, my answer, my question here to you, Andres, how you understand that this ratio will get back to the historical average? Do you understand that it'll be a retraction in the demand for fertilizers and a bit of what you guys shows as how you're going to work with them eventually and maybe bring this downward? Or will it be for the recovery of prices and commodities as you've already presented is happening? But the truth is that this happened very little when you look at the grain specifically. And so my question to you is first, do you understand that this should get back to the average? Or do you think the sector will have to handle these very unfavorable exchange ratios for a while? So that would be my question to you. Thank you. Tiago always has the intelligent and difficult questions here. He wants to take advantage of my past experience in the industry of fertilizers, but just to understand here what I'm going to explain a bit about production just so we can understand how this will accommodate this.

So nitrogen fertilizer industry is one of the most beautiful things.

The air we're breathing here has more nitrogen than oxygen. So what the fertilizer industry is all about is they need energy and that's why you have the natural gas story. And we capture nitrogen from the atmosphere and through this process that is external, adding energy into the molecule so they can shock. We produce gas, which is called ammonia, NH3, and this gas is where you start all of the production of the fertilizer industry. So when you look at the ammonia and you, NH3 and you react with SO4, this is sulfate. And when you say, when you react to NO3, you have this ammonia nitrate. And when you get ammonia and... you react again to another molecule. You have CO2 and NH2, which is the molecule of urea, and it's really important to understand, right, to understand the fertilizer production, and that starts off with the production, and you need to have this fundamental element, which is natural gas, and this natural gas is going to be where everything starts.

So what's the response rate? umbilical with natural gas because you need ammonia to produce it. So, what do you need? What is the most widely used phosphatized fertilizer in the world today? It's DAP. DAP is a reaction of a NH3 molecule, which I just mentioned how we get it, with two phosphoric acid molecules, H3PO4. So, when you react two NH3 molecules with one NH2 molecule, you form the DAP. Brazil uses very little DAP, Thiago, we use a lot of MAP. So, what is MAP? MAP is one NH3 molecule with one H3PO4 molecule, phosphoric acid. So, just this clarification to say, we are dependent on the natural gas industry, period. What did we see? We saw a price of oil that, in turn, followed the natural gas. And he followed it in a very critical moment. I always say, Thiago, I think you've heard me say this, that the most intelligent way to store natural gas is by making nitrogenated fertilizers. But what happened in this... We had a war, a rise in oil, and a cold northern hemisphere. So, in a great... 70% of the natural gas production in the North Hemisphere goes to heating, to the industry and to heating. How do we see it? We are leaving now. So what happened? It took a war, combined with an increase in oil prices, which naturally raises the price of natural gas, and automatically took the moment of greatest demand for natural gas, which is the gas used for heating in the North Hemisphere, in the winter months. So, we had a combination of two factors. It is important to understand this. We had a combination of two factors, which was the price of oil rising to the price of natural gas and, on the other hand, superheated demand due to winter in the northern hemisphere. Answering the second part of the question, what can happen now? First, The demand for natural gas in the North Hemisphere falls due to the arrival of summer. So, the demand falls by itself, you take a factor from the account. The second factor you brought is a factor of what we are doing, everyone will do, that is, to adapt and seek reductions and seek efficiency. So, I would say that in the case of nitrogen, which is a fertilizer that responds a lot, it is not like a phosphate or a chlorine that you have a reserve in the soil, Nitrogenate you put in the culture this year, it absorbs and is not residual for next year. Different from a phosphate and a potassium, which is residual. So if you get a farmer from Paraná and reduce 15% of phosphate or potassium fertilization, it will produce in the first year the same soy. It should not have an effect on the soy productivity. In nitrogenate, no. If you plant a corn, instead of throwing 100 kg of urea, throw 80, there is no discussion. It will produce less corn. This reduction of nitrogenate that we put, and I'm talking about the cane too, if you reduce the nitrogenate of the cane, it will produce less. What we are going to do is not reduce, we are escalating this fertilization. Instead of putting everything in the dry moment, we will share this to try to get a lower price. So, I would tell you that in the case of nitrogenate, I do not visualize a reduction of the technological package, because it has a direct effect. What will the farmer do? He will say, okay, I can't reduce the nitrogen of my corn that I plant there in Paraná, but I can reduce the level of potassium. I can reduce my fossil level and I will try to compensate for it. It's the farmer's head and it's what the farmer should do. And that, for sure, when you have a reduction like that, you take the demand and in a short time you should also have a correction. But I think these movements, they are much less price-influencers than the very issue of natural gas supply, and we're leaving the winter and going now to the summer, where natural gas starts to soar.

Okay, Tiago? Always very clear. Thank you, André.

Thank you. I don't have a camera here, but I think you're listening to me well. There's one last question here, just so we don't spend too much time on the chat, which is about how we are preparing for events like El Nino, which we mentioned here at the beginning of the call, and about the effects of the war on costs. I think we talked a lot about the fertilizer here, but only if André and Gustavo want to give another panorama closing this time.

Let's go. I'll start with Elninha here. If Gustavo, along, remember a little bit of the cost panorama, we'll put it for you. I think the effect of the war, a little bit of cost, we just talked a lot here about fertilizers, which is the main one. This is very clear. Just one other thing that we know, every time you have a conflict process, a geopolitical tension, you have an interruption of natural fluxes. So, as much as there you have the ship stuck, you have, for sure, you must have a problem along the container chain, for example. And then you're talking not about fertilizers, but you're talking about chemical products. The company has also been taking the position of the products that are most necessary at the beginning of the harvest. The products that we saw that had a level of criticism, so the company has already bought 100% of the glyphosate of the coming harvest, the company has already bought a large part of Mancozeb and the products that we saw a little bit of criticism, we have already taken a position. Just to complement this issue of scarcity, the war effect that comes ahead. Come on, the El Nino effect. The El Nino effect, without a doubt, is what it causes. it causes the start of the rainy season to be more delayed. So, it is not to be expected that the rain will arrive earlier, as it happened this year. And as it happened this year, it is a very good perspective of planting. How is the company preparing for this? We are being very critical, especially in cover crops. In other words, those areas where we understand that you do not have the ideal straw, to establish a new crop, either these areas will leave the system or these areas will be planted later. It is not a year that you can risk a crop in an area without coverage, without that straw, the coverage I'm talking about is straw, without that adequate straw so that this adequate straw maintains moisture in the soil and we can get the plant to emerge. It is always worth remembering that, in general, we start the planting process in the years when you have between 70 and 100 mm of rain accumulated on the soil. Now, when you have 70 mm and a good straw, you have a condition for this crop to germinate well. When you have 70 mm and a weak straw, you have an important risk in the germination of this crop. And what we are looking at is this focus, that is, targeting some areas that do not have straw, or they go to another crop. I will give an example of what can be done. André, there is a situation similar to this in a farm in Piauí. A farm in Piauí has a crop of corn in the summer and it has soy. So, we are not going to plant soy in an area that has this situation. We are going to leave it to plant corn, because corn is a window a little later. Corn in Piauí is a window that starts Because... Even if that area has no...

In the case of sugarcane, it's what I talked about, we would have to have fertilization. So since there is a time where the rain will take longer, it gives us more favorable time for the fertilization of nitrogen for sugarcane. So we are working on this. for next year. Okay, to complement the costs that were mentioned, all of this previous budget that we inaugurated has a cost for all of the crops very similar to what we had last year. And because of the appreciation of the HEAO, defenses are cheaper.

And fertilizers are costing $180.

Now it's $80 with more chloride.

So we are anticipating some changes because of that.

The concern that we have for the future The CCT may have some kind of impact, some material impact if we maintain the diesel price over 160 reais. This is the only crop that we are more concerned with. But there are still a lot of things that can happen. We still have contracts with service providers to make. and it will be the beginning of a harvest where we need to be very attentive and be able to control the costs that are still going to close.

Thank you for those answers.

Thank you everyone for your questions and for your time with us this morning. We will be closing this call, so if anyone has any questions, please contact us through our investor relations team, and see you next quarter.