BrasilAgro - Companhia Brasileira de Propriedades Agricolas (LND) 2026 Q2 法說會逐字稿

Good morning, everyone. We are here once again in our earnings call at BrasilAgro. Today, we're going to be presenting our earnings for the second quarter of the harvest of '25, '26. For those of you who are watching in English, the presentation is available on the chat. Now I'll pass the floor on to Andre Guillaumon, our CEO, to begin.

Thank you so much, Ana Paula. Thank you, everyone. Once again, it's a great pleasure to be with you here. And I think this call has been disrupted, right? This call is done directly from a farm.

We had agenda challenges here at Chaparral, and I hope the internet has no issues. We have everyone hoping for the best here. Let's hope the provider is good, but I am sure it's going to work well. And we're connected with telemetrics, and we hope things work well.

And if this works well, I'm going to do all of my calls from the farm because then I won't be stuck in Sao Paulo, just be straight from our operations. But, once again, thank you for being with us today. We're going to be disclosing our earnings for the semester. Before we talk about the semester, we saw that we had included the slides up ahead of the climate conditions, but I'm going to give you a quick overview.

I believe that overall, you've seen this, and it was a year with a bit more of regular rain conditions, but we -- our replanting needs were very low, and we had good efficiency in choosing when to plant the right crops. And we've been working on development ever since then. That's been very positive in Mato Grosso with rains that are good and not getting in the way so much as what happened in the last harvest last year. And the last harvest was really difficult.

But now so far, we're doing really well. We have a lot of units as well, doing well, Mato Grosso and Bahia, in here, and it's always a huge challenge. The plantations are doing really well, spectacular. We have the last rain five days ago in the farm.

We're expecting another rain period this week. So this is an overall panorama. Sugarcane has been recovering a lot as well. I came from the Sao Jose Farm yesterday. I was in many different sugarcane areas there, and the sugarcane is doing really well.

They're expanding well with replantation rates that's very good. We accelerated the plantation of sugarcane. We planted a bit more sugarcane now during summer even to give us a bit more time as well. And we're doing really well overall in all of the crops.

The big challenge is, and I think it's worth mentioning was the implementation of telemetrics in all of our operational units in the company. We've implemented this in Parana. We're just waiting on Bolivia to have the full telemetrics. All of our units in Brazil are 100% covered by telemetric monitoring, and we have a lot of efficiency when we add these technologies, and we can improve systems a lot.

So the application of defensives are all connected as well in all of our 16 units we operate. So we're really happy with this challenge we overcome, and the team is able to deliver, and now we want to improve more and more of the accuracy in telemetrics. So we also opened up COE in Palmas, that's doing really well. And there, we've also been monitoring all of the operations in the company.

So we talk about the first six months in the company, we had a revenue of BRL470 million and adjusted EBITDA of BRL71.3 million. And this loss of BRL61.8 million, we're going to get more details into this soon, but six months are going to be pretty tough because you don't have the classification of some of the assets yet. You have all of the incurred expenses into the cost base. So it's a huge challenge this semester, but we're going to get into more details in a bit.

And the company will also show us how they're working and what they've been doing. So one more slide, please. Well, this has been the biggest challenge for the entire agricultural sector. The supply of soy has been a surplus in the supply. We see the stocks a lot higher than they were a few years ago.

We reached stocks that are over 50 million tons. And Brazil is, once again, heading to a super harvest. A few houses was talking about 179 million to 182 million tons. And as things are moving, that's really the reality. Soy here and in Maranhao & Piaui have been going around -- the soy plantations are really spectacular.

A lot of the soy have been above 65, 70 sacks. So this number that was an uncertainty in the market in the past two weeks, really has been demonstrating more signs of confirmation, and this has impacted prices, but also the premium perspectives. Then corn has a very regional specificity. The ethanol plants are changing all of this logistical network.

It was a cereal that used to have a big significance in the logistics when it's a low added value product, logistics makes a huge difference. So the distribution of the ethanol plants. We'll see that we're being able to sell corn with a premium in some markets, and this has been very interesting. We've also seen when we look at our historical relationship and the process of soy and corn, which is 2.3, but it's a lot more favorable compared with the corn and the positive ratio is a lot better for corn.

So when we see cotton, it's moving sideways around 66, 67, even 68. And then cattle is a recovery that took place in the beginning of last year with a perspective that's been very positive. This week, we've had news all over of Trump advisors saying they're going to pressure to lower cost of beef in the U.S. But the biggest issue is we had scarce supply of beef.

And so we're really optimistic of the prices in this sector. And for ethanol, in the end of last harvest was very positive, went up significantly, and that helped offset the bottom graph, which was sugarcane. And we left those prices that were -- those high prices, $0.22, $0.23. We started the harvest with $0.17, and we wrapped up with almost $0.15 a pound.

And a lot of the plants have the capacity to modify the mix at a certain proportion. No one can modify the mix entirely, right? But this is a photograph or panorama of the commodities. It's very important to always look at this and see that the company besides being an agricultural production company, it's a company that's involved in the development and commercialization of properties.

So there are some things that are really bad of production, but it could generate opportunities for the company. So we always keep our eyes open to all of these movements in pricing, and we're going to provide more details about how the strategy has been commercially in the company. Next, well, now when things are tough, prices are tough, and you can't do much, you have to work in-house, right?

So my friend Gustavo has been around for 20 years, and said Costs are just like nails. We have to cut them every week, right? And trying to find the best way to allocate our resources, right? And so on this graph here, we show you basically the moment where we had -- we're talking about the current harvest that's currently underway, and the moment we took on the position of the purchases of these inputs.

So the first graph shows MAP, where you can see, where we were at this moment, and how we were buying MAP at $640 a ton. There was a peak, and then it went back, and now, once again, starting to go up a bit more. Then, chloride, we also had a very effective purchase at about $308, and there's a lot of volatility as well, right?

So we've always been monitoring this currency situation. And when we had the budget, we had a projection and a budgeted amount of $6 and for inputs of $5.90, and we've been monitoring this. With the reduction, we were able to lock this in a bit more and get the right higher prices. And now at this low bottom level, we've been able to lock it in the opposite, right?

Prepay a lot of what we had in dollars as inputs to get lower prices. And this has been leading to significant savings in defensives and some inputs, about 7% or 8%, which is a lot if you talk about commodities. On the right side, we can basically see the position taken with everything.

And what's missing is basically just something related to sugarcane, let's say. And then we show the exchange ratio that's already been worse. It got better then, and now it gets back to showing some signs of a peak, but not such a significant peak. And as you have -- I always tell the team when we have a lot of turbulence between the price of sale, dollar and other variations, we're always looking at the exchange ratio to try to find the best moment to lock in agrochemicals, fertilizers and this is where we can see this graph.

And I think it's worth mentioning the decision-making process of the company at the right moment. Sorry, one more. In cattle raising, we've had significant reduction in the volume of production, which is normally due to the sale of the Preferencia farm.

And I'm really humble in saying that when at the company, we think we should have a basket of products, we're really focusing on reducing volatility operationally, productive volatility and the volatility, especially of prices in this basket of products. But we were keeping our eyes open that much to having different crops that could maybe generate better liquidity to the sale of land.

Of course, we knew land with cotton is worth more. We always try to add value. But here is a classic example of this when we saw -- we were selling always the grain farm, but when we saw that there was a recovery in the prices of cattle and beef, that started heating up the market and was in Preferencia. It was in our portfolio for 15 years, but we were able to complete a sale that was very significant for the company in the middle of last year.

This brought in important results in a unit, where we had very limited expectations to implement grains and other crops. So it was really a cattle-raising area. So we can show you here the harvest and a bit of the reflex here. As I mentioned, we talked about the harvest that started in a bit of a turbulent scenario when it comes to rain distribution, right?

And that brought in two factors. Pastures were delayed in growth and sprouting, and that also -- this delay in the pastures growing, which generally led to volumes of rain that were also very low in these areas, where we have cattle-raising activities. So -- but then after -- from 15th of January, it kind of got stabilized, but this reflects the overall scenario of the quarter.

So that's why the photograph in cattle raising is limited. Of course, we were still quite optimistic. We're talking about 470 grams of daily weight gains. And we're looking at a photograph of the drought period, right?

But we're looking at the scenario of July, which is already the drought season, limited offering of pastures. And then in December, you have this delay in the beginning of the rains in October. So in the quarter, already kind of compromises this a bit, but nothing is too concerning.

We're going to reach the numbers because of the -- what happens and helps a lot is the production of small calves that are getting weight. And so that's advancing really well. Now we're going to move on to a photograph here that we say we have to show good news and bad news.

This is a photograph of the sugarcane year-over-year. And I think this is a huge challenge. Last year, we had two significant events take place, especially the ice period in the southeast of the state of Sao Paulo, which affected some of our sugarcane plantations with this frost and ice.

And also, we had a situation of fire in Sao Jose, where we had a big plantation of sugarcane that burnt. When it burns, you have to harvest it beforehand. So some sugarcane has a later average cycle, you have to cut that down.

You don't lose all of your sugarcane, but it won't complete its full cycle. And this leads to two impacts. First, the maturity, right, the level of ATR, and there's a lower impact in TCH, but the biggest impact is in the maturity level.

You have to harvest sugarcane that hasn't reached 70% of dry material. And so it's almost like the fruit is not riped enough, right? It hasn't concentrated all of its sugar yet to simplify things here. But this led to an effect in productivity.

But as I mentioned, we've been keeping up a good productivity in the sugarcane plantations this year. It's a lot better than last. Next, here, we can see a photograph that we like sharing a lot, which is the company's capacity to work in the real estate pillar and operational pillar in a very effective way, right?

So on the left side pizza, you can see that we've been keeping up our productive area in the company despite the fact that in the last few years, we had to take advantage of commodity prices that were very positive, but the company that sold lot of area and land, and had a significant amount of sales in the last four or five years, taking advantage of the cycle.

And I'd say we must be a cyclical company that captures moments of opportunity of the commodity prices, and that's been affecting the land prices as well. So one thing it's very different as well for the company. When you look at this graph for quite a while in our presentations, you can see that there's a real high concentration of sugarcane and soy.

And the company in this important strategy for diversification and mitigation of the risks searching for better results. The pizza graph has been improving more and more, and it's just becoming more significant with other crops. On the right side, you have the two other graphs that also indicate and was showing a bit of the breakdown of our properties, which are our own land and also lease land.

And here, there's no magic number. We've always mentioned that the leasing needs to bring operational results and stabilize the results, and our own land should be efficient to allocate capital. So our own land allows us to have a cost of capital that's cheaper.

And so this combination between leased and properties -- and our own properties is something we closely watch so that we can always be around 50% or 55% or 52% because that's where we understand is our main formula to have cheap cost of capital and really consider the results of the operational stability and especially where you have a lot of volatility in these open areas in the company.

So when you consider leasing in more premium areas, especially in Mato Grosso, where we had a lot of leases there. And there's still some work to be done as well, nothing is ready yet, but we understand that this company will be stabilized in a very productive manner. So next, here, I've already gone over this a bit.

But here, you can show a summary of what we've been talking about. Harvest plantations complete and in good conditions. And considers good conditions. We started the year with a trend that was a weak La Nina, and we also see climate scientists mentioning this heading to more of a neutrality.

And we always say it's fundamental, right? Our experience in these boarding zones, right? And so when you have this, of course, La Nina a is strong, you're going to have an important significant when it's not, you also have -- when you have El Nina or the neutrality, or El Nina that's closer to a lower intensity, have better rain distribution, and that's the condition that's setting this harvest in Brazil.

Next, well, here, we bring in a bit of detail on what the company is searching for ways to do in a more efficient way through the treasury team led by Ana and Gustavo. And we've been searching for ways to find efficiency, right?

So setting up an increase of 2% or 3% productivity is difficult year-over-year, but losing 2% or 3% in the commercial formula is really easy, right? So we're going to show you some of the derivatives, and that's been led by Ana and Gustavo and commodity.

And so soy is about 65%, closed at $10.80. Everyone saw this soy reached $10.20, $10.50, but -- and so we've been considering this. And we have a currency that's sold at about 55%. And it's very different than spot, right?

So as I was mentioning in other calls, it's a very volatile year, a lot of geopolitical insecurity, and it's a year where we have to bring volatility to our favor. And so we've already sold this soy, this currency. And part of this is already kind of closed off.

And part of this soy will most likely be left to be commercialized in the second semester as we've done. Cotton is 6% locked in already, and it's a crop where we're a little more stuck because we had a perspective for daily plantations, we reduced this and at that moment where we already had sold about a piece that had represented 30%, 40%, there was a peak of the dollar.

And when you look at cotton, it's different than looking at soy. When we look at soy, we're considering -- and here, we're considering this for December, right? So we already have a lower percentage because you have a longer period, right?

But two things happened here, right? The longer period was about December '26, and the reduction of this area is quite beneficial because you had a better sold dollar, right? And so that's been sold at $6.65, right?

And then below you have ethanol for the '25 harvest and that's at BRL2,670. And then after this, we decided to -- we saw the prices were recovering. And so this is really important to reach the prices we needed at that moment where ethanol was reaching BRL200 to BRL300.

And with corn, we have a little bit less sold due to the off season harvest kind of what we mentioned now, which was the issue of better premium captures in the different locations. So this also has made things a lot easier. We can capture better prices, and this is what kind of justifies a little bit less corn locked in, right?

And just a minute. And receivables from farm sales is an important line in our balance sheet. As you all know, there is a significant volume of over 5.5 million sacks, and we have over approximately $120 million in this line receivables.

And all of the receivables of the current harvest come into the P&L. And then it's kind of like a photograph of what we have of receivables from farms this year. So soy sold at $1,078, 67% at this level and currency at $6.16.

And so when you look at the position of the dollar, we look at the global position, but we also consider the allocation because the receivables in farms are in certain units that maybe we don't even operate anymore. So we have a segregation, it's very significant, and we like demonstrating this separately.

Next, please. Gustavo, it's all yours, and we'll get back to your -- to the questions with the rest of the team here.

Thank you, Andre. Good morning, everyone, and I want to thank you all for your presence. The first six months, 2025, 2026. As Andre mentioned, normally, it's just when you have a weaker quarter, you generally have the sale of all of the stocks that we had harvested in the harvest for '24, '25.

And we'll then see that this decision of being -- of carrying this product is really positive, right? But also on the other hand, you have this impact that what Andre mentioned of sugarcane. And for the first time in a long period, we had achieved productivity that was very low. And so we had almost 200,000 tons and another 200,000 we lost due to burning and some other operational issues we had as well in Maranhao.

So we started off with losses of BRL61.7 million. And in the same period of the previous year, we had already reached BRL77 million. And on the right side, we can see the results of this period. The first graph on the top, BRL77 million at BRL71 million negative.

And then you have the main variation that we'll see volumes of prices, which is mainly in sugarcane. And in some products, especially with soy and corn, we had the savings and fertilizers are a little cheaper, but that was not enough to offset or compensate the impact in sugarcane. And then we also had the sale of Taquari, BRL207 million, and commercial expenses. And the impact of the financial results this year were better performance in previous year, and this is something we can see in the financial results as well.

And in derivatives, we did not have such volatility, was kind of at normal levels with the sale of soy and corn. But at that moment, the currency had reached BRL6.10, BRL6.20, and that had impacted the results that we had mentioned. And so it was kind of mark-to-market, but that had been very relevant, right, in that period. And so I think these periods, they behaved -- the derivatives behaved pretty well, especially with currency bringing in more positive results.

But of course, results that are not going to have an actual cash effect. We see the cash effect, the revenue from financial investments always above CDI. And then also the impact of the interest 15% that we can see interest -- passive interest rate. And so we have a net impact.

Last year, in this period, we had lower interest and also maybe not that different, but the impact was about BRL11 million positive and BRL38 million negative because of the interest we were considering about BRL20 million. And this was something we already discussed. These lines are the ones that have the actual cash effect. All the rest is the mark-to-market or updates of fair values, the values which are receivables as well from farms.

As mentioned, we have 5.9 million, almost 6 million sacks of soy. And the mark-to-market for all the months and quarters is generating a variation. And last year had been positive. This year, it's a negative, especially because of the drop of the dollar prices.

So from a financial earnings perspective, it was not that relevant in the results, and it didn't impact that much. But if we consider the last year, we had BRL107 million, and now we're talking about BRL71 million. And we can say that there was about BRL90 million. And actually, the adjusted operational results, right?

And you can see on the graph, at the center, you can see the main variations, right? So as mentioned, like soy was BRL3.7 million, corn was BRL20 million and cotton was BRL9.9 million. And so other crops, we diversified our basket and the impact of all of the sales of stocks were very positive. And what really hindered us during the semester was sugarcane with BRL54 million, BRL58 million.

And then a bit more of the details of what happened to these products, right? And so we're talking about -- this is a stock decision trying to capture the best premiums in the semester. And then we had margins of 28%, 29%, very similar, of course. Although, prices were a little bit lower during the semester, we're talking about BRL2,037 million.

Last year it was BRL148 million, and the costs have been a little bit smaller, especially for fertilizers. And that generated BRL52 million. And so that was against BRL48.8 million, right? So then you can see that explanation.

Then for corn, this was last year, we had mentioned the company really reduced the off-season harvest because at that time, we had a very low expectation for prices and a lot of stock. And so for fertilizer prices, we normally all of the technical pack as well. And we understood that it was a great moment to reduce this and reach a better decision, right?

So with this, we would be able to also reduce the losses we had. And so we always mentioned that the farm needed this rotation. You plant this, and sometimes we understand this is better to provide the sustainability, right?

So last year, this product generated a loss of BRL5.3 million. And this year was a period with the arrival of a lot of industries in regions, where you have different locations of the farm, this generated the possibility to have better prices because this also -- they also pay like some premiums and to ensure the stocks for the production in the plant.

But even so, what we understand is that the logistical impact upon the price and is what really generates this differential that's very significant. And it generated BRL15 million of results that were -- gross results that were a lot better, and the expectation that this should be kept for this next harvest as well.

Beans, we always say that they're more for the sales in the external market. The margins are not always so positive, but we understand it's very important to keep this market with a bit more diversification and sugarcane. We also once again are talking about 1.3 million in tons, and that was the previous year, and it also showed above 80 tons per hectare, and that was kind of the average in the company, even a little more, right, 83 million tons, 84 million tons.

And this year, of course, we had these issues. We mentioned we had 970,000 tons during the semester. And the price, although Consecana was always very positive, besides the losses in productivity. We also had problems with ATR. We lost sugar, right?

Last year, we had an average of 140 kilograms per ton. This year, we reached 131, 132 kilograms per ton. It also impacts the price and the cost when we consider this increment because we see the absolute values for the same amount of hectares, we have BRL131 million. And last year, we had BRL147 million.

But the main point here, the main issue here is that the costs are pretty fixed, right? After we harvest, we need to add fertilizers and then treat the land and soil and use all the fungicides and all of the inputs required for our process to keep the sugarcane plantation that generated a reduction in the tons, which makes the cost per ton a lot higher.

And then the results from last year, BRL78 million, this year BRL20 million. And this is where we really feel the impact operationally in the company's results. And all the other products like cotton and especially pluma cotton, which is a crop we still have, but we can see that the margins are still very low like 8% or 6%.

But it's a crop that we were betting on in areas that have irrigation, and we're going to search for the right moment also to work with these feather cottons and then reach the levels of hectares we had, right?

But what we understand is today, the capital costs don't make it unfeasible, but make the returns very low and especially when you have a lack of security, right, in these areas that were planted and that makes the company still be a little more careful about this.

And then for cattle raising, as we mentioned, the main effect of the purchase in Seoyon here, I want to remind you that we have a fair value part that's not included. But when you consider this normally the cattle heads in the market, this generates results also. And we can exclude this also to analyze our EBITDA.

On the next part here, we can show you the debt and the position financially of the company. So we have a debt of BRL886 million, which is similar. It was similar to what we had on the 30th of June in 2025, with an equivalent cash position of BRL73 million, net cash of BRL802 million.

And normally, this is a moment where we have the lowest level of cash and the highest level of debt because it's the moment where, as Andre mentioned, we have all of the fertilizers, inputs. And most of what we use operationally was already acquired and kind of already have paid off expenses, right?

And that generates these differences. So -- but anyways, what I always say and I think it's important to remember is that from the BRL686 million at present value of receivables sales in the farm, which is pretty big stock that we have to be received.

The cost of debt is pretty low, and it allows us to keep a bit more comfort about 94%. And here, we can see on the right graph, it's lower than one year, which is the working capital to plant this harvest of BRL360 million.

And two to five years, BRL500 million, which is basically the issuances we performed to implement some investments and irrigation and transformation of the areas and investments that mostly were already complete, and we are expecting the return of this cash flow to be able to also advance, right?

But at the bottom, we can also see the indicators that we always monitor closely with our financial committee. And we believe that the company's position is not concerning.

But of course, what we expect is a reduction of this interest rate, right, because we believe it's very significant, the impact that this would have with the levels of interest rates within the company as well as in the whole market, right?

So it's difficult to work with such high level rates of interest as we still face and operate in. Then I think we reached the end here, and we'll get into our Q&A session. Thank you so much, everyone.

Thank you, Andre. Thank you, Gustavo. Well, we have three people here waiting in the queue to ask questions. And first, we'll have Guilherme Guttilla from BTG.

Hi, guys. How's it going? Good morning. And we have two questions on our side here, please. The first one is if you could give us a bit more info on what's behind this shift in productivity for the cotton guidance, right? Just so we can understand more about what changed in this process, right? And then the second question is about sugarcane. In our last conference call, we actually talked about this, and you guys mentioned this a bit more than the market, right, in regards to this last harvest of sugarcane. And now you guys are expecting some strong recovery, right, for this next one. And so what we wanted to understand is how you're looking at the scenario in the market overall, and how you're considering if there's going to be a recovery, and what this next harvest for sugarcane should be like?

Just about cotton, I just wanted to -- if you could just give us a bit more context on the question. You want to know why the company reduced the cotton plantation, or what our vision is for cotton, if you could just review this?

A bit of both, but more related to productivity.

All right. In regards to the change in the guidance. Okay. Guilherme, thanks for the question.

As always, very great questions coming from you guys. But first about cotton, right? What we noticed is we were really relying on cotton in Bahia, and that's the first BrasilAgro photograph, right? And then we know Bahia is a place with a lot of volatility with a production cost that's very high.

So what we started to design and structure, and the company has been working on this stability more and more, right, with the cotton production. So we're in the final deployment phase of the irrigation project in the Arrojadhinho farm, and we also have some other pivots as well. And we've been focusing a lot on all of our efforts for cotton production, right, on irrigated agriculture. And so a view the company had -- and so we look at the profitability.

And so when you look at soy with a contribution margin at about 29% to 30%, we see cotton with the cost of production, and there's results in reals per hectare. We see a lot of capital under risk, a lot of cash working at a moment where you have such high capital cost, so the company readjusted. We see the cotton of Sequeira. We took all of the cotton from the off-season harvest, right, in the Xingu region, where you have challenges to altitude, et cetera.

And you can see days that are maybe not that cold, right? So it's really important to dosage the consumption of energy through this. And when at night, it's colder, the plant can breathe ease -- with greater ease, right? So in that region, we reduced 100% of the cotton there, and we're focusing on cotton in this irrigated area in Bahia.

And this is going to be cotton that's high productivity. We closed levels of productivity of our Projeto Genio, that's about 370, 380 per hectare. And everything is kind of moving towards having a year that is very -- at this moment, we're reducing this a lot, is the cotton of Sequeira, right? There's another region for this, is that part of the Chapparral Farm, we have a lot of this cotton.

We sold those 8,000 hectares, which is a very interesting deal for the company, right? But the profile of areas that are mature kind of changes a bit. And you have mature areas, but you also have the weight of the new areas that's greater. We have to operate and have a turnaround of this other crop transition, right?

So there is a big challenge also with sanitary conditions also between 33 and 34 applications to control an insect that's really a big problem. And so it's a crop where you can't make any mistakes. And you also can't put shareholders' capital at risk. And so we're directing cotton to irrigated areas here in Bahia.

And together with this, we're also increasing irrigation projects. So the company will continue to produce cotton in a more efficient way. And so for sugarcane, what we did was the following. First, this year, we'll have -- we had significant work done to kind of change the nutrition a bit and place more fertilizers.

We had significant work to also reduce issues in the sugarcane plantation. Ever since the pandemic, there was discussions on this. So that's kind of like a sector market perspective, right? There are moments where the production plants didn't even know when they were going to stop processing that because they didn't have space to stock up alcohol, right?

So at that moment, everyone kind of moved away from the renewal areas, and you carry this for two or three years for the cycle of the crop, which is five years. So overall, us and the sector had aging of the sugarcane plantations. The sector still has a big challenge, which is the cost of capital, and that's pretty high. And with this, you pressure the renewal of the plantations.

So in our case, I would say that we ended up kind of accelerating what we needed to do because we had to produce more in the unit there in Maranhao. We have potential. We have a water and a good partner there, and we're accelerating this. So this is also a factor that makes us ready to have a bit more sugarcane in the next harvest.

So we accelerated the plantation of sugarcane in this harvest compared to others, which is the sugarcane is going to be harvested now. And this is also -- we're going to get back to planting this around 2,000, 2,600 hectares in this unit. So the company, overall, what we're understanding in the improvement of the sugarcane is the issues of management and a bit more fertilizer.

We had another challenge also, I think, which was every year, you have a different challenge, right, that you have plagues, diseases and other issues. But in sugarcane, we had more efficiency to find and control what they call the camalote grass, which is a big challenge, but now this is really well controlled, and the areas are very clean. So all of the detracting factors for productivity, we've been able to work on and interacting in a very precise manner with telemetrics. And we've been working on improving this productivity.

So when you look at the sector, what are you seeing in the sector?

Well, the overall sector is really concerned with the price of sugarcane. And so we've seen this in the last few years. There's been an acceleration in the plants that only had ethanol, and they had the mix of sugar and then everyone was more geared to sugarcane. And the overall scenario now is going to be a harvest that's more alcohol-based, right? But in these two or three years of changes, we went from ethanol -- sugarcane ethanol that was 3 million or 4 million tons to almost 10 -- sorry, 3 million or 4 million liters of sugarcane to corn ethanol. That was very different, also pressure ethanol. But there's still an interesting parity.

And the big question mark is going to be, well, I can't see a sector that, and you guys have seen this better than I can, where you've seen this movement that's very significant in the sector.

And so yes, there's going to be some recovery and some production plants that are sold, whoever buys wants to place their face in the business, right, and search for what's best. And so yes, I think there's going to be some kind of a recovery in the sector. We're not optimistic about the price of ethanol and sugarcane in the next year, but we're optimistic for sugarcane and ethanol prices in the next cycle.

And why is that?

Well, because we know the stability of productivity in India always, and we -- the cost of capital in the last few years held the renewal of sugarcane plantations a lot, right? And so we really believe that this will leads to some limitation of productivity. We want to be really well positioned to have productive sugarcane and working in the opposite direction, working towards a reduction of the average age range of the plantations, right? So this is our strategic view as a company, and our view of what the year will be like. I don't think it's going to be favorable pricing, but it does not seem that we're going to have years of super good pricing. And so we're actually starting to visualize a possible recovery in the next two or three campaigns.

Yes, that's a great, Andre. Thank you very much.

Bruno Tomazetto, Itau BBA.

Hi, guys. Good morning, everyone. Good morning, Andrea Gustavoana. Two questions on my side.

If we could just start getting a follow-up on the discussion on sugarcane. That was an important detractor as well and considering all the dynamics you mentioned, the icing and frosting and all of the plaques, et cetera. But when you look at the future with this, you have harvest in 2026, is this already -- are you already considering some impacts that we saw in 2025 that can be carried over to '26? And how are you going to measure this marginal move in the last few months, right?

So we're just trying to understand what's left as a space once you have this initial comment, right? And so then, Andrea, more of a long-term question here. In Brazil, we have -- we're not used to seeing this reduction of planted areas, right? And so we also are used to seeing three or four harvests of high interest rates and all these other instability -- geopolitical instability.

And there's a lot of things happening at the same time that weighs in profitability of farmers, and there's probably going to be a limit to this, right? So our question is what we want to provoke you all about is, do you believe that there's going to be, at some moment, an adjustment for the reduction of this planted area in Brazil? And if so, what would we have to see to see this scenario take place, right? So this is a farmer where we're going to have a big volume of grains, right?

This should be a positive variable, right, especially at this moment with worse profitability, right? So what's the limit of this disruption? And what's missing for this to happen?

That's a million-dollar question, right? And then we'll talk about where this -- where we believe this is headed, right? We've been using a series of different factors to be more precise ever since raising data with drones to identify and generate the overall productivity maps and aspects in the sugarcane and then also show the telemetrics for this location.

At this moment, what we're seeing, and why we're a lot more optimistic is because we see that this year, what we call how sugarcane is going to grow, and that's where we measure this spacing, right? And so we can see this distribution, that's a lot better. And we're in February. We still have like four months basically for the growth of sugarcane, but we already see this distribution of internodes that's better.

Last year, we -- despite having rain in the formation of the greens, we had a summer that was really hot and plants above this certain temperature, they stop and they say, Look, that's too much. I'm going to start losing a lot of water here, right? And so that also showed that we had a shortening of the width of the sugarcane that we're not seeing this year. And we did have peaks in temperature, but there weren't that many sequential days as it was last year in December, January.

So these two factors for us are extremely decisive for productivity. And now that what's starting to happen from March on is that we start have biometrics and then people start coming into those points that were raised and start performing the biometrical analysis to understand how things are doing. But visually, considering the extension of the internodes and also the width, the sugarcane is very different, right? And these are the main tools.

But the second question is the reduction of the margin. And you always need to -- and I've been talking about this a while, right? You have to have many years so you can actually understand the effect of this reduction, right? But what I think changes in this scenario, and what changed in the last few years, and you were very precise in your comment, you said like the area was being expanded, but we included a factor which is very important.

The decision to open up areas for farmers in the Cerrado region was always based on a contribution margin criteria and profitability. Civil society, as a whole, understood other criterias of sustainability and started adding restrictions to the conversion of new areas, even if they had been authorized adequately by the authorities, and that generated this external factor into this sector, right? So the farmers opened up a huge amount of land and the profitability and contribution margin factor was not decisive anymore, right?

So the farmers said, Look, if I don't open up my farm until 2025, the trading thing, they're not going to buy grains. The other trading saying, they're going to do that only in 2030. So what happened again, which is kind of what eliminates a bit of this factor, right? I'm not saying you have to deforest an area, but adding an exogenous or external factor that was pressuring something and the rational started to be a little box next to it and maybe not as important as the rational factor, which is the external factor and the opening of the areas due to the limitation of the trades in not buying grains from areas that are deforested or areas that were open after '25 and '26.

So in our understanding and with everything you've seen in the last few months, we're starting to deactivate this huge bomb of external factors, right? And then we're going to have something similar more rational, then we'll see the cycle of the soy. And if you guys like looking at numbers, you're going to really like this data. If you look at the historical series in about 100 years of soy prices, you'll see -- and I had the opportunity actually to watch this study closely.

But you'll see that at every -- we have like a cycle, right, of soy every six or seven years. And that's what we see in the data when you look at this historical series of many years. And you can see if this is deflated or not.

But why is that?

Well, prices that are attractive. Farmers have a contribution margin, there is a carryover, they have to harvest, perform this and then they start expanding, right? And then when they expand the area, the prices have a retraction. And then we have the expansion of the area in this historical series. And when you see this, on the other hand, you have to consider the demand, right? So what's going to happen is you're going to have restrained prices and then the demand of soy is a little watch, right, like 1.5%, 2%. So you spend like three or four years and that generates like a hole of 6%, 7%, 8% of the demand. And then once you go back to increased prices, incorporating new areas in the system, et cetera. So -- but we're talking about something that's infinite, right?

And so you would incorporate a lot of areas that are easier and more productive and incorporate more areas with greater difficulty and less productivity, right? So this curve of recovery and responses becomes --

And so now we're going into more areas but less productive areas, right? So the other factor that I think was fundamental to incorporate the areas in Brazil in the last few years, which is mostly like 60%, 65% is most of them did not come from areas are opening up in Cerrado. They came from incorporating pasture areas. And that would make real sense if we have these investment and incentive programs from the government.

And so this area when it's incorporated with high productivity kidnaps more carbon, right? And so the second factor that kind of tightened this a bit was the price of cattle, right? So you had high soy, and then you would say, well, it's better to lease -- to plant the soy than to have a stress of my cows here, right? But when you see the recovery today, this is also a factor that eliminates a bit of this pressure.

So anyways, the opening of areas and incorporating new areas and systems is always connected to the contribution margin and profitability. And so in the last few years, we had external factors. And we also had this big valley, right, which was also a significant movement, right? So look, I'm going to make 160 kilos of beef per year, or I'm going to lease this farm in this average period.

In our understanding, we are estimating this, and we eliminate this pressure conversion. So that area, that's not the area that's completely degraded, right? But this is going to be recovered in the contribution margin. And so my understanding and when you look at this in the last year, you see soy was already bad and Brazil incorporated about 800,000-some hectares of soy.

So this year, everyone is saying, look, we're not going to incorporate 800,000, we're going to incorporate maybe in our understanding like 400,000, 500,000 hectares of soy. So in the next year, then we're going to get back to incorporating what's a basal, right? So maybe 200,000, 250,000 hectares of soy per year. And then that becomes a number that's going to be adjusting that supply and demand ratio.

So you're always going to have farms that are going to be open, people that are expanding. But in the last years, these two factors were accelerators for this process.

Excellent. Great. Thanks, guys.

Leonardo Alencar, XP.

Great, so the connection is excellent. And so Ana Paula owns my agenda here. Anyways, okay. Actually, I had a bit of a follow-up about this point here.

You had a lot of relevant information transmitted here. And also you have like a land donor, right? But of course, you still have a big potential conversion, but maybe it reduces a bit of the short-term pressure, right? But if we get into more details, just to see if I understood your reading, we had the trading factor with the soy.

But when you consider this end of the moratorium, do you think this would be feasible in the short or midterm? And then if you think about this dynamic of price of land, and so do you think this is an opportunity? Well, maybe a risk and groups that kind of move in this direction. These are some of the aspects, right, trying to get more clarity on this point here.

Just to make it easier to understand. The second point would be even more of a short-term vision, which is why we've been discussing this dynamic for a few years. And I remember one of your phrases on how soy has to drop three or five years to really start being priced in the market, right? And we've already seen this in '23, '24, '25 and '26.

So it's kind of in this window and this entire scenario, profitability of the farmers and the financial health of the farmers has been very concerning. It would be kind of favoring the scenario, right? So that's really what we consider from the soy farmer perspective, right, where we can add financial health and also with this, you also have even a bigger supply, right? And you have a new dynamic also where a lot of land going to the hands of funds and banks are being auctioned and searching for operators, right?

So you have this factor on the moratorium, but then do you also consider more liquidity maybe in the market for land and real estate and maybe even more attractive pricing, et cetera, that are focused on this as this appears to be an opportunity.

And Leo, that's a great question. Just trying to split this into some phases here. First of all, the incorporation of new areas and the big groups that are the ones that have the biggest concern with ESG and all of this. They certainly create a basis, but that's not where you move your supply-demand ratio, right?

For agriculture, I always mentioned the beauty of agriculture is how it's fragmented, right? So if you add up all the groups in the states, et cetera, the areas incorporated in the last few years will probably represent 3% or 4%. So 97%, 96% come from farmers to farmers, right? So I would say that the pressure of the trade for industry and the industry will -- well, the qualified company will pressure this development.

And I don't think so, but if they do, I don't think it's going to change the equation of productivity. What changes this equation of the farmer when they have this limitation, and that's where you kind of shift the equation, right? But I don't think there's going to be pressure, huge pressure. I think it's going to -- I don't know if you got the opportunity, but once they called me to have an integrated global and I said, Look, as a society, we're pressuring the environmental system wrongly. We need to consider how we pressure this.

The way we did it, it distorted everything, right? So the equation and profitability was left sideways. So I don't think the exit or the solution of the moratorium will generate this impact of like, Oh, now it's a huge crazy race or a lot of openings now. No. But now we're going to get back to a rationalist perspective.

The rationale is opening up areas now are really difficult. You're going to open up an area that's (inaudible), then first you're going to lose money. So now we go back to more of a rational equation, right? Now what could happen is in a new cycle of soy.

If we have a scenario like this, then yes, you could have an increase in the expansion, but that would be due to a recovery in the contribution margins, right? So I can't view that we've reduced all the pressure, and now things are going to move, right? But when it comes to prices of land, this is dropping already. And we always receive information about this.

But fortunately or unfortunately, some people think it's good, but we think it's bad. The process of the judicial recovery is not as it was in the past. In the past, like a farmer would tighten up and had five or six farms, he would sell one, and life would move on, and things will keep on. But now people don't want to sell land. They want to start a judicial recovery process and keep up in their activity.

And that made a lower cycle of land. And so this is happening a lot at a lower level, right? So when you look at the bank's recovering land, the average property of 600, 700, 800 is always coming into the market and that comes due to this tightening of the contribution margin. So yes, I think that the prices did drop. We've seen a bit of this reduction.

It's very like one-off, but the big land extension, what you still see is you have groups that generate liquidity. And on the other hand, you have persons offering that extension with this instrument of judicial recovery, right? And so it's complex, but I do see a reduction in prices. And as I mentioned, two or three years. We're in the third year, we already start seeing this.

So like farms that would arrive at 600 sacks of soy, now you can buy 450. But when you consider the 450 and the cost of capital that Gabriel -- Gustavo mentioned, you still have a non-attractive return rate. And so even with this reduction, we're being penalized a lot, right, with the cost of carrying. So to accelerate this a lot, it's a bit of the logic of the actual assets, right, with low interest rates.

So if we have a reduction in the moratorium and lower interest rate and a scenario of -- you have three factors that are important for this. So you have high interest rates, a positive scenario and then we have this issue which kind of affect buyers. We're definitely going to be more buyer than sellers.

All right. Thank you very much.

Well, I think we've reached the end of our call. Thank you all for your questions. Thank you, Andre, Gustavo. If anyone has any questions or unanswered points, our IR team is available to clarify. And have a great weekend, and we'll see you in our next quarter.