BrasilAgro - Companhia Brasileira de Propriedades Agricolas (LND) 2026 Q1 法說會逐字稿

Hello. Good morning. We are here to talk about our earnings in the first quarter of our '25, '26 Harvest of BrasilAgro. I'm here with Andre Guillaumon, our CEO; and Gustavo Lopez, CFO of BrasilAgro. If you're watching us -- the presentation in chat, I would like to say good morning, everyone, and pass the floor to Andre.

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 about these results and also providing more details on sugarcane, et cetera. But anyways, in the net revenue of our first quarter, we reached BRL286.6 million and adjusted EBITDA of BRL64 million and a net loss of BRL64.3 million.

So basically, the first quarter, and then we'll get into a bit more details 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 sugarcane, mark-to-market 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 -- Gustavo talks about the operations and the numbers. We had the strategy of bringing soy to the second semester, and this strategy seems to be very good due to all of the commercial discussion between China and the US and we had Chicago back there that was basically intending to improve prices of basis.

And then we had this decision of taking soy in the second semester. We're going to show you this later. Basically, this price is very much influenced by basis and just more recently by this turnaround with the agreement with the US and China, you have Chicago go up and basis weakens a bit.

But we basically sold all of it before this agreement. So 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% less 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 of beef to the US, but this analysis is pretty limited, ethanol as well.

And as we 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 slide, but we're imagining a soy harvest in Brazil, it's pretty good. Some of the best offices are considering 178 million, 180 million tons.

There's also a pretty significant concern, although Mato Grosso is advancing a lot with plantation. We're going to see some examples soon of some other locations and some states in Brazil. I always mentioned that besides being an open-air industry, we'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, 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%, 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 and battery production, and it's a market that is pretty firm. Chloride is (inaudible)

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 the 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 seesaw of prices. Of course, (inaudible) 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 could already have a view of how the next harvest is expecting to be designed and performance of the costs 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 phosphates and defensives were a little cheaper considering this in dollar, not only currency than last year, seeds kind of moved sideways, not much of a modification, but you see the harvest about BRL4,000, BRL4,200 per hectare.

And next, please. Well, now we already get into a little bit of the sugarcane topic and the assets for the harvest. And as you can see what's estimated in the actuals, (inaudible) tons. This is for September 30, in the company, the harvested area, the estimates also 26,000.

And the biggest surprise, let's say, contributing to this a bit is TCH, a company that has historically been delivering good results, and we had two events that really marked the TCH for some units. Mato Grosso, not that much.

But when we take a look at the (inaudible) block in the state of Sao Paulo, considering the icing events in Sao Paulo and Sao Jose due to more rigorous winter, we had a reduction of TCH in the company.

And in (inaudible) we had to harvest sugarcane after the -- so you're going to have to harvest the sugarcane that were affected by 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 sugarcane.

So we had to accelerate this process and that brought in a reduction in productivity, especially in the region of (inaudible) Well, I think here in the next quarters, you'll see a reduction in the amount of numbers and the number of [pods]. And this is a bit of the reflex I showed you the slide on the commodities.

And when you see this company, 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 (inaudible) 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 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 is not what's for the first three months for the full year because these three months actually initially are the full drought period.

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 GMV starts going up, you have 500, 700 and then you have 470 grams per kilo.

But 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, we sold over BRL350 million per year of farm assets.

And it's a company that even with the significant demobilization of assets, which make total sense for the company's shareholders, has been really keeping up with the plantation area very closely, right? And so this graph shows you what our breakdown is and how we have the 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, beginning of October, we had this window of one week. And it was a drier week where some units we had to stop plantation and then we got back to planting from the second to the third week of the month of October.

So the beginning of the plantation in Mato Grosso. In Mato Grosso, we start planting and we never stop again, but this is like an interval in some of our units.

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 Maranhao and Piaui areas and in Bahia as well. So more recently, Bahia, Maranhao and Piaui, we started off in the end of the month of October and Bahia began in the month -- 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 La Nina 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 (inaudible) 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 credit perspective, it's very similar to the '15, '16 harvest.

Next, please. Here, you can see the status of the schedule in the graph you already know due to this shutdown in Mato Grosso and as I mentioned in Maranhao and Piaui 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 a 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 cold chambers, that's been demonstrating to be very efficient.

So it's another alternative for cost reduction. And we currently have about 34% of the planted area advancing. And in the beginning of November 10, 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 Piaui and Maranhao.

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 and the premiums are -- 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 bet on this very well.

And so we took soy to the second semester. We knew there was going to be a pressure on this agreement. So we really believe that this would come along then up ahead as we believe as well, we -- the company sold, and we captured this really well on basis. So the soy I'm showing you here is for this harvest now. And this harvest already has 56% sold at [$1,072].

And it's worth mentioning all these sales were contributing with the margin with the (inaudible) 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 per cotton is at [BRL665] and 52%. And then we see ethanol as well, 50% sold at (inaudible)

Corn is what's most late, let's say, but we saw a recovery in the last few days and prices were going up in certain markets. And then on the right side, a very important calculation, which is the receivables. The company has over BRL650 million in receivables of sales in farms and almost 6 million sacks of soy to be received.

And this is the P&L we monitor along. So part of the soy we have 50% are sold at [BRL1,068] with a currency of BRL616, 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 for four or five years. And then after Gustavo will explain this, this is the biggest effect we had on the balance sheet since it's a bigger period, the dollar from the (inaudible) 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 marking receivables of farm sales.

So then I'll pass the floor to Gustavo now.

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

So Andre has already anticipated that we have some issues with productivity and that (inaudible) the issue we also had, right? And so with -- from then on, you start also providing more influence in results and starting off here with the net operational revenue of BRL302 million, 7% below what was last year.

And this is impacted not because of the ethanol price that was really good during the entire half, but also the ATR level, right? And so historically, the company was reaching indicators that were close to 140. Now we have 135, 136 kilograms. And so we're going to close this year will have an impact that's very significant, right? So -- but even so, this could be offset by some costs reduced and also good productivity, which also helps dilute the Real per ton.

And when we see our operational EBITDA at BRL64 million, we can see that when we compare with the same period, BRL61.4 million, they're very similar. And so if we monitor the adjusted EBITDA and so you can see this on the right side of the (inaudible) 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 sugarcane is BRL20 million negative lead to an impact in tons of ATR and the costs 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 our margins, adjusted EBITDA margins, then there's a difference of BRL169 million compared to BRL164 million. And that's mainly farm sales as well.

And in the previous year, we had accounted for this sale. And at this moment, we don't have many purchases to account for. But when we see the final results of those BRL64 million negative, what calls our attention is how an EBITDA that's operational, that's very similar to the previous case, we can see the graph in the previous part of the financial results.

And Andre mentioned, for example, that we have the two main effects, right, updating the fair value BRL40 million, 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 BRL6 million as Andre mentioned, (inaudible) and every quarter, we have to perform the mark-to-market.

And during this quarter, we had volatility and a price in our soy prices that back about 3% to 4%. And the Real value and also the basis that had a negative effect. And all of this impacted the BRL40 million. 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 of leases.

All the leases to remeasure 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 in the operation that should be remeasured and that also has an impact. So all of this is brought to present value, we understand that there's also interest that don't keep up at the same levels, and this generates movement within these results.

So basically BRL54 million. And as we always mentioned, it's not a cash effect, but a purely accounting launch, and this is what most impacted our results and our net losses here that we're considering, right? So when we see the revenue for financial investments, and we see we have a cash between BRL250 million, BRL260 million. Interest rates are a little higher as well. We had a bit more profitability, and we see the interest.

We have a stock of debt of the other (inaudible) with interest at 15%. And so we see the cost 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 debt in Paraguay to perform the terminals in the property and the real also gained value as well, and that generated a revenue of approximately BRL4.5 million because part of this 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 we had bought the fertilizer in the month of April and March, and we had a bit on the real gaining value.

And so we had booked payments in August, September, November now in this month as well. And this is -- at that moment, we were considering the BRL580, BRL590, we would be able to perform the BRL535, BRL538 and that generated a very positive result.

So finally, when you consider the over part, you can see how that impacted the difference between BRL97 million and BRL74 million as losses in this period. And the main difference is the prices we had mentioned, the volumes that we're going to consider in sugarcane and the savings in costs and we'll see the fair value as well.

And that can be confusing, right? We can see the estimates, so we have the sugarcane expectations as well that kind of distort the analysis. And so -- and the financial results minus BRL39 million, and that explains this variation, right?

So it's a very complicated quarter. I remember in December, we had to also perform an in-depth explanation about the impact when the real had reached BRL6.20. Then we were able to prove on the June 30, 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're 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 BRL30 million, a margin of 32%. This margin is getting better because although if you compare the price opportunity, it's about 3.5% below, it's smaller right than the first quarter, and this is mainly due to a reduction of BRL100 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 used to have about 40,000 tons sell to the businesses in a quarter and the gross result is about BRL10.5 million.

The margin so far is about 40% and the volume commercialized is similar to the previous one, 84,000 tons approximately, the prices recovered as you can see about 50% of (inaudible) that for 2023 and the market has been practicing approximately between 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 see sugarcane 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 below this low level of sugar also impacts the price, BRL168 to BRL159. 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 by 5% 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 challenged due to the volatility of the production. We are still searching for ways to stabilize for cattle raising. 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 smaller size.

So of course, then we'll get into the company's debt level, cash of [BRL36 million] and the debt is BRL895 million, and you can see the cost of about 90.8% CDI, and that's a rate that's pretty good. The net debt of BRL650 million. The schedules as well. As you can see, we have the amortization (inaudible) BRL372 million. And the working capital to plants and BRL408 million, which are two to five years.

Basically those that have CRA debentures to be able to finish the transformation of these different areas in Brazil that were already complete and part of Paraguay 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. And we have another 1,000 hectares to finish implementing. And so these are all our 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 6 million [sets] to receive, and the present value is BRL651 million. The nominal value -- so we haven't had much of an impact in these variables. The basis interest rates are also pretty high, and that still generates pressure within. So then also the -- when you consider the agriculture margins, you have -- 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 we consider sales of 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 EBITDA. 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 the parliament for the payment of -- sorry, the approval in the General Shareholders' Meeting of BRL75 million. And that's -- we already plan to start this in the November 28.

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 the 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 will hop into Q&A.

Thank you, Andre. Thank you, Gustavo. The first one comes from Guilherme from BTG Pactual.

Hi guys. How's it going? Good morning. Two questions here from our side, please. 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 sugarcane plantation, right?

So I wanted to discuss how you consider this scenario in regards to the total scenario in the market. Because when we look at this, 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 until the end.

And so I wanted to understand if you think this is because there is -- 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 of the land and how this market is doing. In the last Investor Day, you said there were a lot of opportunities. So I wanted to understand how this has been advancing.

Well, Guilherme, that's the $1 million question you just gave us. 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 have 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 bonds. You guys can be sure of this. And I believe it's really in line with what we were talking about, right?

Although we have, as Gustavo mentioned 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 as 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 when that was in a good condition, right? So we would expect this. But as I was like reinforcing, we get into this cycle that more opportunities for purchases than for sale.

And the last few years I had major opportunities, and the company was also really efficient in obtaining this. And so as an admins management, we were able to reduce not much, but we just reduced a little. So yes, we did suffer. And this is really being important because of the BrasilAgro's operation that broke down at more than 20% than what was estimated because of the freezing and ice in the plantation.

And so when we see the sugarcane start having to review all of the balance throughout the year, and we saw what the differential is in Maranhao and the beginning of the rain period was not that intense, right? So when you look at Brazil, I actually joke about this.

And in the Investor Day for BrasilAgro, 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 -- I think it was Guilherme that set the bet. I'm not going to forget that. We have a lunch. And anyways, this number is -- 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 point -- pain point is the sugar levels or the sugar rates. This is something that everyone has the consensus in the market. We're like 2 points to 3 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 or we're waiting to have sugarcane recover at the end of the harvest, but we see that 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, Andrea.

Now we're going to find the next question here, which -- so we have from (inaudible) with the next question.

Hi, Andre and Gustavo, good morning. We have two questions. We have two questions. First, about the agreement for imports in soy in China, it was really clear how this strategy seems to be very assertive. But we wanted 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 harvested this that should bring in more competitiveness to our country, right?

So we want to understand if there's any risk of maybe displacing this origination of the soy in US and China that could impact the distribution of our production next year -- was a year with such a strong harvest as 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 this 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, sugarcane crushing project could make an area more feasible. Then as a consequence, we've also been in areas that are not accounting for grain that could 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 2 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 -- commercial discussion that we have with the company every 13 days, and we were looking at China's position. And our first reading is although the first -- we believe -- we consider there's still going to be some favorable 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 soy at almost 200 positive bps. So we don't expect this. But we do expect the month of January with a perspective of basis points it's looks good. And in the harvest, we expect, once again, that there is 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 soy to the second semester.

We should have 150 basis points, 200 basis points. But I think we're going to recover most of this in the second semester, and maybe not bad about this 150, but maybe some enclosure to 100 points.

So I think this is our vision that we're considering, looking at the coverage. And the biofuels agenda, I actually talked about this a while back. This is the agenda that's here to stay. And it's -- 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 BRL50 million already biodiesel crushing. In Brazil, the issue is a little slower, but with corn ethanol, you're very straightforward in your statement, right? It started off generating profitability in regions where you have logistic issues to truck -- to carry a ton -- charges pretty much the same price, right? And so made us start -- and actually, there's another factor also in this story.

The (inaudible) logistics, what they did in the past made you have -- when you install corn, you place DGG there, and this rearrangement is redimensioning the logistics and spray and everything we know in Brazil is that we know as it is a continental country, right? So yes, we've been studying certain thinking.

And a lot has mentioned, this is kind of in line with everything. People ask each other about up until which point corn ethanol, right? But no one has a crystal ball, but there's a limiting factor, right? And this issue with biomass. And so I want to -- 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 sugarcane is pretty tight. So just as when corn is cheap, corn and 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 Piaui and Bahia, where we assessed even the some projects there and 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 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 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 really stable, in a very stable manner with starting to plant with an expectation of 139, 140 reaching harvest of 150. And so corn is really stable. And then also that's bringing a lot of liquidity. So corn, chicken and pig operate in the future markets, right? So that's really bringing in more liquidity to BML.

And in the past, if you were to see this maybe 10 years ago, BrasilAgro 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 with different regions. There's regions where you have the corn, but you don't have the cows.

And this is also the case with Maranhao, for example. Maranhao is closer to Para. You even have some cows close. But anyways, you have huge challenges there. But I do believe it's generating liquidity and improving the logistics.

Very clear, thank you, Andre.

Pedro Fonseca, XP.

Good morning, Andre, Gustavo, and Ana. Great to speak with you, and thank you for this opportunity.

I wanted to get back to the sugarcane topic a little bit. And I think your view on this harvest was very clear, but I wanted to understand your view for the next period, right? And so after all of these climate situations, everyone's effort, we see better climate conditions. And what do you guys expect for TCH recoveries? And also how this should be translated if there is 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 BRL93 million that I have seen in the stock, we don't have this quality issue anymore, right? So I wanted 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 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's strategy was very certain.

But what I want to look into the 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.

Sugarcane. 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, November and all of December, January and February, soils, its full field capacity, and the soil really drenched. So [BRL100 million] more rains won't do anything.

And what really makes a difference in sugarcane is going to be the rain in 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. That's the first module. And then it makes sugarcane coming quicker and grow more in the month of December, January.

So in May or April, the sugarcane starts losing weight and dehydrates. And then when you have a longer summer that rains well, then you have an extension or postponing of this hydro 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 (inaudible) 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 sugarcane conditions are a lot better than what it was last year. Due to the rain in October in Maranhao, that started off now and the rain was a little bit later there. October there wasn't as good as there was in Sao Paulo in the Midwest, but that's the point.

Now what's the main game here? What's going to happen and -- when the rain stop? So from now on, we have no more water blacking. Soil has already started drenching and life goes on. But the challenge here is going to be this, right?

So the perspective indicate 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 sugarcane for TCH, and we can be sure that, that's going to be recovered.

In Maranhao, 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.

But Mato Grosso and Sao Paulo, things are doing really well and Maranhao. We're going to extend this a little bit more with irrigation into November. And that's where we normally start like on the [10, 10] and that we're going to extend this about 10 or 15 days more to offset this deficit in October.

And for cotton, basically, we had a cotton in Bahia. And so the company has been highlighting this. And that's where we're headed to irrigated cotton. Cotton -- irrigated cotton has been -- we've been reaping or harvesting over 380, 390, 420, 430. And so we're going to see this crop has a 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 product effect and the value of -- but at this time, we've been very attentive to this crop, because there's a return that's really worse than corn or soy, so due to this, we've been keeping our eyes open.

And we expect productive, we expected better productivity, because there's a lot less dry cotton and basically almost all of our cotton is irrigated, we have just one unit that plants about 1,000 hectares of dry cotton, but the rest is all irrigated, then for the offseason corn now, well, Andre, just a minute, let me hop in here, within our stock, we still have about 15%.

Some areas that in Mato Gross that where we also had some productivity problems as well, sorry, quality problems, so from this amount, let's say about 10% and 15%.

Perfect, thank you, Gustavo, that's great, so about our offseason corn, two things happen here, one is since we are reducing this cotton area, we threw more offseason corn in areas that were already cotton before, so we have a really positive expectation for offseason corn, because these are areas that used to be occupied by cotton and they were restructured, they were really well fertilized and in the last few years, and now these areas are going to be used for corn due to -- I think we mentioned, the risk of productivity of the dry cotton.

And the return on investments for cotton is also a bit tight, so we've been migrating into corn, but we would expect pretty good recovery in these areas and high productivities in corn, because there are areas that come from this management of the area, but in regards to [nitrogen].

That's the discussion Pedro that we were discussing, which is that card we like keeping till the last minute, right, we're going to really keep up with the price of corn and how we can sell that, and then for corn, as I was mentioning, corn is also (inaudible) and it responds very well to nitrogen, so our idea is we'll monitor this, but producers do the same thing, right, if the price of the corn is recovered, then you need to add more nitrogen fertilizer, right, it's very well responsive, but if the price of corn is tight, then fertilizing is going to be a little tighter as well.

But in some way it's kind of an escape valve that we always have at this time, right, so our strategy was defined to work on this commercialization, so that we could really have a better exchange ratio, so if you were to ask me, yesterday I was even talking about this, I'm more optimistic in the next harvest with the price of corn than with the price of soy, we're coming from a pretty good harvest, I don't think it's going to be 150 million tons and once again I don't think it's going to be like that but on the other hand, you have a beef that's going up a lot more with better prices, which gives us a good umbrella effect.

For our considering our pork, our swine, and our chicken, and poultry, and so as a company, we're betting more on corn than in soy in the last in the next harvest when it comes to profitability due to some characteristics of these peculiarities and then in our case, that's we're also occupying some better areas for cotton that should bring in more productivity in the offseason harvest.

Well, when it comes to this point here. What we consider as an estimate for cost is a reflex of what was mentioned in your quote and especially considering currency for fertilizers and chemicals about 590 now. We've been expecting in dollars and between fertilizers and chemicals, about 3% lower than what was in this budget, right?

And then you have the currency variation as well. So as I mentioned, fertilizers, we're paying about $1 an average of $5.40, $5.50. And for chemicals, we have the date until April, but we're trying to anticipate this, if possible, considering that at that time we're going to be in the beginning of the campaigns for the elections in Brazil, and there could be some turbulence and so we're trying to see if we can also have an anticipated payment of these chemicals.

Okay, very clear, guys. Thank you so much for the explanations.

Now we have one last question here in writing.

And this is coming from [Reynaldo Verissimo] about the rain period and how we're how much we're expecting as rain in this window of January, and what would be the adequate level for a good profitability in the harvest in the specific [BrasilAgro] portfolio.

Yield as harvest in BrasilAgro. So that's what everyone would like to control from the millions, but let me try to clarify a bit. So the challenge are two. I just kind -- I just stated in the call that we start the harvest in January in Mato Grosso. So we want rain.

So there's not a lack of rain, but we don't want too much rain. So there is enough rain for the rest of the harvest. So historically, when we look at the first Maranhao, Piaui and Bahia, those are months where we have 180, 200 millimeters of rain. That's the history of the regions.

In Maranhao and Piaui, we have a more rainy week and March, so much of that, that when we get corn in the case of corn, as I showed, the plantation of corn on the 20 is exactly that. When we get the rainy season in March with corn ready for harvest, if you get it too early, then we lose a lot of corn.

So for everyone, we have the rain. So we wait for the rainy season with low humidity 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.

In 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 to 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.

It's 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 predictability. So we look at 15 or 17, and that's what the volumes are that I'm talking about.

Excellent. Thank you so much, Andre 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 BrasilAgro starts in July and goes to the June 30. So there's still a lot of things to happen in this year. So until the next quarter.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.