BrasilAgro Companhia Brasileira de Propriedades Agrícolas - Earnings Call - Q2 2025

Transcript

Ana Paula Zerbinati (Head of Investor Relations)

Good morning, everyone.

[Foreign language]

We are here for another earnings call for BrazilAgro.

Nosso segundo e terceiro.

To disclose our second quarter of our harvest year 2025-26, which represents the first half of the year. If you're new around here, it's important to highlight that the BrazilAgro year goes from July to June, and that's why we're reporting the second quarter now. Have a great call, everyone, and I will pass the floor to André.

André Guillaumon (CEO)

[Foreign language]

Thank you so much, Ana. Good morning, everyone, and good to be with you all once again. I want to bring in some important news here. We're going to talk about the harvest, the climate, commodities, and also major dollar variations in this quarter, which is super important to demonstrate here. You all know that due to accounting reasons and considering the value of our stocks and assets, these variations were very important within the quarter.

But overall, we would like to once again thank you for your participation and share a bit of what the company has been doing very well in the first six months of the year. So we would end the first six months with a net revenue of R$644 million, and then adjusted EBITDA of R$78 million.

These are the main numbers, and we'll see that most of the net income was affected by this main variation I mentioned. Gustavo would just mention that this is occasional within our balance sheet. On the next slide, on the next page, we can see major stability for some products, and I want to highlight some products that have been really standing out from January all the way here.

We saw a reduction in soy, and once again, it's very important to highlight that the company is really focusing on closing the contribution margin, not only the price itself, but the exchange ratio and our contribution margin. We saw the soy reality in the first year from January 2024 to January 2025, dropping about 9%. We can also see some important reasons for this.

Plantation this year was really good overall in all of the central Brazilian region, but the beginning was a little later, and this year we can see that this off-season harvest would move along a bit. That has really been leveraging the prices a bit. What's also influencing prices a lot is the loss in value, and that makes our meat basket become cheaper, and that no doubt increases the demand for the native corn internally to be able to handle this possible increase in exports. In cotton, we've seen a year with major reductions, and

This is really connected to economic factors, and so we've also seen an inversion in this cycle. This cycle has been inverted in the second semester, and we've never seen such a high peak in 60 days. This cycle has reversed a lot, and this is important to mention that we have a cattle stock that also affects the company's results, and there was an important increment in the stock value.

For ethanol, we had the first semester last year pretty weak. The second semester was an important recovery trend, and basically here, I think this is levered by two important effects. One is the modification in the shift in the ethanol percentage in gasoline. This volume went from 27% to 30%, which generates additional demand of 1.5, 1.6 billion liters of ethanol. That really made the market react positively.

In parallel, the main competitor for sugarcane has been corn ethanol. As I mentioned, this peak in the corn costs also creates this effect. In sugarcane, we had some higher prices. We reached historical levels last year, and we saw a major reduction, but still really attractive prices in sugarcane.

More recently, in the last few days, we've seen a significant reduction in our production in the production in India, which will impact us with the market having a bit more volatility in the next few months because it's almost like 1.4 million tons of sugarcane. That would have been produced in India. They're dropping to about 28 million tons of sugarcane produced there. Brazil is still strong with its numbers at about 42 million tons.

Now, on the next page, it's important to highlight, and I believe the company has been very disciplined in this. There's a learning curve, of course, but whoever was looking at the pizza graph before on the left side for a few years, we can see it was a graph that was really focused on two crops, sugarcane and soy. We've seen a diversification in the planted area in the company.

There's less learning curve process, but also all of the agriculture projects which bring in more diversity to the product basket. Once again, I always say diversifying is fundamental. We're in this production, which is an open-air industry, and you can reduce the climate change risks. That also affects the real estate risks, right? We see demand or markets that, from a real estate perspective, are really connected to diversified crops, right?

On the right side MAP, you can see a bit of how we see the rain volume this year. When we started the year, we had all of the discussion in the intensity of the La Niña. It was a La Niña that was not too strong, pretty moderate or neutral, but we've seen this move with this La Niña phenomenon throughout the year, and that brought in important stability.

As I mentioned, it took a little longer to start with the rain period, but ever since they began, it was a really good year from a productive perspective. It's important to mention also, and I love using this example, which is last year in the company, we had replanting that was about 8,000 hectares, and this year less than 600.

It just demonstrates that we were able to plant with the ideal humidity periods and not too many disturbances. Everyone knows that for a good harvest, we need to have stability. Everything we do after the plantation is just to keep the productive potential. That's where we consider the choice of the seeds and the soil management as well, as well as the quality of the plantation. All of the other processes are factors that help avoid the productive potential dropping.

That's a summary in the beginning of this, and then rains were kind of accompanying this. December was really rainy, and like Maranhão, Piauí, and Bahia, which is always an important caution point, especially Bahia with more climate volatility, with January going above average, and that's where January even gets in the way a bit.

Soon after, we'll highlight this a bit. Then we can already start the plantation of the cotton. The rain in January kind of gets in the way, but no one can complain about the lack of rain. We have to try to be more efficient, right? That's just an overall panorama. From then on, we've had pretty good rain, and we're still having rain conditions and soil conditions that are pretty good.

We start off with February with soil humidity that's really interesting and pretty stable. That allows us to also start having some conclusions about how soy in the first cycle has already pretty moved along accordingly. Soon after, here we have more of an educational approach of where we're at at this moment. Our plantation is a little more extensive.

We also consider Paraguay as well, and that's a little different. Paraguay starts this in the beginning of December, goes to mid-January. Then, as we mentioned, you have the plantations of cotton with the off-season harvest as well. We were able to plant all of the cotton and off-season harvest before the 30th of January, which really gives this cotton a very good level of productivity.

From the productive perspective, the summary is pretty good, with crops performing very well, very low rates of replantations, which means we have good levels of productivity and good crop installation rates. Paraguay also, we've finished this, and we had rains following this until January. The critical period for us is the month of March, just as in Bahia, Maranhão, Piauí, is February and March. For Paraguay, it's more about March, but we have good expectations.

The expectations for February in Brazil, there was a possibility of some impacts in the Matopitoba region, but we'll have February a little drier, which is actually pretty good because the crops also need some sun and light, but that won't in any way impact at this moment the state of these crops and harvests. Here you can see the amount of what was estimated versus what was actual, and that's due to the births that start happening in December, normally around January and February.

This number is going to be recovering considering the amounts of animals and the amounts of cattle and estimating about 510 grams of GMD, and we already have 310. Here you can see that there's a bit of influence from the delay of this beginning of the rain period, and that also delayed a bit of the scenario with the pastures.

We think we'll be able to really achieve our 510 kilos of beef that's budgeted. Just about sugarcane, which is so important, the company ended the harvest with approximately 2.6 million of sugarcane, an increment of 4.3%. What's important to highlight here is a growth of 3% in sugarcane and the productivity.

There was also, due to everything you guys have seen, we had a pretty dry winter, and that makes sugarcane accumulate a bit more sugar, which also helps us with important gains, right? When you increase the TCH and the TR rates, that means that that's just pure EBITDA because the sugarcane was already going to be transported, and you're transporting sugarcane that's a lot richer in saccharosis. It's not only about the 3% of ATR gains, but you also reduce some costs in the CCT phase.

This is a photograph of sugarcane and how it looks. Then we'll show you a bit of volatility and how we've been positioning ourselves. Anna provided us with this briefing. It starts off in the 1st of July, and we worked on this budget in the end of the month of May, beginning of June. The expectation we had was that when you look at the FACO estimates, we're considering a dollar at $5.30.

We considered this, of course, for our budget, and it was a little higher as well. That's the photograph of soy at the company now. Soy has already been lower now. We're talking about soy at about $10.70, $10.80, and the company has practically 50%, and we have a currency at about $5.33. What's a currency at about $5.30?

We also had an important recovery, which is maybe a little different than what we expected, and we're going to show you this later on. This is a photograph of the soy we're going to be harvesting. Remember in the last earnings call, we were saying we were going to ensure part of the harvest in the past campaign to sell in the second semester because we believed in the recovery of these, and this was assertive, generated important impact.

Now we can also see a trend with the recovery of this due to this turbulent scenario, right? We have that at $51.80. Ethanol here on these two columns, you can see the column with the closing in the last harvest and this harvest. Today, the levels of pricing are about $2,750, $220. We're also increasing this position of what's sold.

This is the hedge position at February 7th, and we've already advanced a little more with our ethanol sales. Prices are a little higher, $27.50 to $27.20. In cotton, we just bring in the two harvests still because that's where we really consider CTZ December and the harvest in 23-24. We ended at $5.27. Now we have 41% of our cotton closed, and we were able to really block this pretty well.

It was positive, but as you all know, we have a mismatch policy. We also had to block the dollar there, and that was at $5.27. But this combination of cents, pounds, and dollars are still providing cotton at 136 reais per bundle, and that's a bit higher than what was budgeted.

We have the receivables, which is also in our P&L and the farms, where we can see soy closed at $10.53. We've also started off with this volatility in the dollar rates, and we started selling soy at $26 also for receivables. We sold dollar for the receivable at $26 and the blocked rate at $5.26. That's an overview of how our commodities are, and we'll be able to have major insights as well in the next slide.

On the next page, we also bring in a bit of the vision in regards to costs. You'll see a reduction in our costs. That's maybe not that significant, but a reduction that we also consider impacted the results of the company very well.

We saw the map stability in prices, and we also had an opportunity to have prices that are even a little better in certain inputs. We were also able to confirm some chloride for the harvest of 25 and 26 with chloride. We've seen petroleum kind of moving sideways, but what we can see in the area is that it's pretty stable.

The exchange ratios are a little better, but they were better in the past, actually, but they're pretty stable. We're talking about chloride at about 13, 13.5. The position upon the cost was already pretty much blocked out of the fertilizers in this current harvest, and also for the defenses. Now I'll pass the floor to Gustavo after providing this overview, and we'll look at the numbers in this quarter and semester.

Gustavo Lopez (CFO)

Thank you, André.

Good morning, everyone, and thank you for keeping up with our earnings call for the first half of the year. We're going to start talking about the 31st of December 2024, where the company has been disclosing this total net income: R$77.8 million. In the same period last year, in the previous year, the net income was R$24 million. These main variations are represented here on the graph above, on the right upper side.

You can see that all of the expressions of soy, corn, and sugarcane, as well as the volume in soy and sugarcane. You can see how this reflected in the net revenue of R$478 million in 2025. We've also seen revenue, the accounting of the sale. We had the real estate sale of a total amount in the farm in Taquarí.

We also had some hectares, like 200 hectares, I think, that would add up in by year. We had also registered a revenue from these sales of R$129 million, but when we discounted the taxes and other acquisition costs, etc., we had an EBITDA of R$107 million. In the previous year, in the same period, we also had a small sale performed, which was about approximately R$5 million, and that was in this segment.

As you can see in the upper graph, you have the R$103 million that are varying due to the real estate and property sales we had in this period. In 2025, the EBITDA margin, adjusted EBITDA margin, was 31%. You can see about 31% and for an EBITDA of R$200 million, which is very different than what we saw in the previous year.

In this graph, as you can see at the center, we see the main variations in soy, corn, sugarcane. We also have the sale of real estate. The margins got a lot better because of pricing issues and also volumes. In some crops, we've also had a savings in our costs. We're going to also show you some crops like beans and cotton, where we intend to incorporate this in the basket.

There's still small volumes, but we're not being compensated as we had estimated because the productivity is still not that positive. When we see the profit in the period, which are these R$77 million, as André mentioned, and that's why we're bringing in this last chart here with the financial results, you can see a very relevant impact when comparing periods.

In the previous years, in the first six months of 2024, we saw that the revenue from financial investments that were leading to R$19 million in interest. Now we see there's R$11 million because we reduced the amount of cash that we're carrying. We consider that the interest is also starting to be recovered now in the last two months. But we have a variation because of this, right?

You also have the passive interest, which are the R$26 million and R$38 million this year, which are the interest that we pay due to our debts, right? The R$26 million represented an impact of lower interest with a debt stock that's also a little smaller. In exchange, what's happening in these six months in 2025? However, some updates in fair value here.

You can see we always talk about how we have a major stock in amounts receivable. Every quarter, we have to mark this as it's indexed, and we have to consider the dollars and the premiums and rates, etc. All of this leads to what would be the current value of these receivables. Also, last year, we had a variation that was higher than what we saw this semester because of this reduction.

Last year, we were valuing about this at $12.80. Now we're talking about on the 31st of December, this level was about $10.20 per share. The main important point here that André mentioned is the derivative. This year, we are demonstrating this.

Of course, this will only take place at the moment where we sell the actual product and establish the final price for the company. The company has been working towards this, considering the position for the purchase of these inputs, considering the margins per hectare. With that, what André mentioned, we're maybe a little above this value that we had considered with this margin.

When you consider soy, about R$2,000 per hectare. What happened on December 31st, we had to consider about $75 million that we had sold. We also had the receivables for the sale of the farm and soy. We generated an average price of about R$5.40, R$5.45. That led to an impact of about R$65 million. So this photography, if we consider this price from yesterday, we consider the result of R$30 million positive.

This value, if we were to consider that with the market value yesterday, we're talking about R$32 million. Just to show you the volatility, we're going to mark this once we sell this. We'll be considering the market value and the revenue value. Once you perform these until you have the amount or value, which is about R$112 per sac, so the market's at about 124, 125.

If you consider this difference with the 300,000 tons, with the values and tons to be sold for production, we'll be able to reach this value that we're presenting here. In the next, just to show you what André was mentioning, we always say that soy and sugarcane, you can see combined represents more than 85%.

When you add that, it's about over 75% of the revenue and the gross results in the company. What's positive about all of this that we were discussing in the last two calls is that when we had seen this last year, we'd always considered that we had the crocodile effect of the costs and revenue, where we had some margins that were contribution margins that were way below the historical average.

We can see that during this last quarter, they were able to reach these levels, right? You have these R$48.8 million, as I mentioned, margins at about 29%. That's the historical average. With the price per ton at when we started the period in July, these values were at about R$400 below. That was the impact of these premiums, right, that generated this improvement in pricing.

The main factor responsible for the cost reduction with the reais per ton was because of the better costs we had already discussed. We could say we understood that it was really important with this bigger amount. When we consider the sugarcane, we can see that the margins are even higher than 30%.

Historically, the increment in the margin led to a very positive impact, considering the increase of this price in the TR and the reference term. We also see this increase. That's the photo we worked on. The high levels of sugarcane, of sugar also levered this price even more. We can see that these are excellent prices, very different than what was being practiced in the last two years.

The increase in the costs as well this year was also at about 3%. Very controlled, but that's something that increased a lot. It would increase the contribution margin a lot. You can see a reduction in the amounts that are commercialized at about 70,000 tons. 42,000 were 2025 and 113,000 tons last year.

This was a bit of a consequence from a decision the company had made of not, well, because the previous margins, due to agronomic issues, really, we had considered diversifying the portfolio. We had made the decision to continue. But prices being recovered, I think the 14% approximately between R$650-745 per hectare are getting back to levels of prices that are really profitable.

Our costs had suffered an increase because we had lost this in the Mato Grosso region, where we had a very—we had some impacts with pork and swine, and that led to lower productivity with a higher cost per ton. For beans, volumes are pretty low still. For sugarcane, we would also like to increase and expand this portfolio and have a higher contribution of this crop.

We're still having some variations. We understand that the deployment of irrigation in the Bahía region and also with some diversification that we are trying to implement in certain regions in Mato Grosso should lead us to this positive result. On the next page, we also have the level of debt in the company and the cash position on the 31st of December, where we have the biggest volume, where you have all the incurred costs.

We're still lacking all of the revenue and production and continuing the commercialization of products as well. Then the debt of R$798 million with a cost that's an excellent cost for this funding, 93.4% CDI, and a net debt on the right side. You can see the schedule for the amortization of this debt and the working capital as well and R$516 million reaching 2 to 5 years.

It's also important an amount that we had considered also due to the sale of this farm. As I mentioned, we had about 8.4 million sacs we had received. This variation was kind of like what I mentioned about the impact we bring with the financial results as well. Next page, please.

Here, what we would like is that we would like to invite you all to review our sustainability reports that we had just disclosed and also a bit of how we communicate about this commitment towards value creation in a sustainable way. Here, we're going to show you also what types of investments and actions and social environmental impacts that we've been working on during this harvest of June 31st, 2023.

It's important to mention that we had also created all of this considering the principles in IR and SASB that guarantee the transparency and that demonstrate that we follow international standards for communication. Here, you'll see about four groups.

Also the social environmental and governance issues as well to strengthen the company at the moment where we should consider this stock exchange here in the U.S., where we need to be very careful with this as well and adhere and stall the policies. We also have some premium and some awards we've been conquering as well. We'd ask you to please review this report with everything the company has been performing in a very maybe silent but consistent way, let's say. Anyways, here we can go into Q&A now. Thank you so much.

Operator (participant)

Thank you all, Gustavo and André. We'll pass the word on to Pedro Fonseca in XP for his first question. Please.

Pedro Fonseca (Equity Analyst)

Good morning, André, Gustavo, and Ana. Thank you so much for taking my question.

I had two here, and I wanted to get more information from you guys to understand your understanding because, of course, we had viewed a better scenario for margins and not considering the loss in the ideal window for the off-season harvest of cotton considering the ideal window. I just wanted to confirm this understanding.

I remember the last time we spoke, we were talking about a margin of about R$110 to R$1,200 per hectare for the off-season harvest. I wanted to confirm if that still makes sense when it comes to price. I also wanted to know what you guys are understanding as sugarcane productivity as well in the rain in the southeast, the southern region of the Midwest area as well. I want to understand what you guys are imagining when it comes to results and productivity. These are the points I had to share. Thank you so much.

André Guillaumon (CEO)

Great. Thank you, Pedro, very good questions as always and provocative questions, of course. I'm going to start off with the first one, which is you were very assertive. It's not like there was a reduction in the off-season harvest. We were able to plant it all in the ideal window. But of course, there was an improvement in the prices of corn that started happening from October, November, and December.

Then, of course, trying to increment this a bit more because there was, of course, a recovery of the margins. But I just want to give you a classic example. The harvest, maybe we grew even more because when we were preparing our budget in May and June, we were talking about this margin of about R$400, R$500, R$600, right?

We consider our first projection in the results now, and we decided to improve this as corn started getting better in the second half. We had significant recovery in the margins of the corn, and that helped us increase our corn harvests and also contributed to search for ways to have a bit more of this off-season harvest.

Of course, you'll see the company grew in this area in Mato Grosso in the next few years because we'll have major operations in Mato Grosso starting, right? The first year as well, I was very careful, especially with the off-season harvest of corn, where we work with soy and then wheat, soy and wheat, soy and wheat, and then after we add corn to the system. We'd expect that this also happened, of course, this year.

Some farms that had the second year of soy and then wheat, then this year the farms had soy and corn. This combination and the pricing combination also improved performance. That's where we can see this recovery, right? We see the company here where you have the earnings call, and you can see we're not here to promise. We're here to really just fulfill whatever we've promised.

The company has been growing in sugarcane, as you've seen. You saw us talking about this in the past. We need to increase sugarcane, and we need to have more. We have to increase the productivity of sugarcane as well. We're working on many investments. This year, we're also working on plantation. We're also planting more sugarcane. We're also investing a lot more in irrigation.

We had been working on more water storage tanks, and we've been really implementing major efforts to increase productivity. You'll have very positive surprises with São José in the next exercise. When we look at the Brazil vision, you can see the company's going to increase productivity year over year and also the volume of sugarcane in the next harvest.

When we look at year over year, we can see this amount. It's worth mentioning that the beginning of the rains were a little delayed. We know it's fundamental because you have the cut. In September, October, November, if you already have rain, you have great results. It's wonderful. You can see we don't go back to this kind of perspective with the 640 in the next harvest due to this delay in the rains in September and October.

This delay in the rains is a reflex of the price coffee, how the prices of coffee here go up so much. The lack of rain in September, October is impacting the prices of coffee in Brazil now. You can see how this impacts the price of coffee as we're all seeing.

Anyways, I think in the southern part of the Midwest, there was a bit of difficulty with this delay in the beginning of the rain period, and that impacts the overall results, right? But in sugarcane, Pedro, even when you extend up until where would you extend the volume? If the rain is coming in earlier, we'll have this impact. If it comes in later, we have more TCH and less rain. Initially, Pedro, we have three meteorologists that work with us, three main companies in meteorology.

We've actually seen a bit of a positive perspective with an extension of the rain system in the summer period. We'd expect that there would be March, still quite rainy March, and April would also be very rainy, and that we would be able to have the beginning of May as well with rain. That really makes a huge difference in TCH, and that can help recover so that we can not close the $614 million at this harvest and try to have a bit more in the next harvest.

That's the overall vision for Brazil. The beginning of the rain period really impacted us initially. Now we're understanding how long this period will extend for. If it's May, then we'd imagine it would recover a bit, right? But also in exchange in the Midwest region, as we're considering in São Paulo, it's really important.

It's just like following the temperature, right? If you have rain, but you have a low temperature, then you stop vegetating the sugarcane, and you start accumulating actual saccharosis. But initially, we're not seeing this in the beginning of May, in the end of April. We're seeing this extension in the rain period, but we're still not seeing the possibility for anticipated cold weather.

Pedro Fonseca (Equity Analyst)

Very clear, André. Thank you so much.

Operator (participant)

Now I'm going to open up the audio here for Bruno Tomaseto from Itaú BBA.

Thank you so much, André, Gustavo, and Ana. Excellent panorama, as always. I just wanted to try to bring in this discussion of everything we had discussed so far with opportunities for M&As in '25, right?

We see it's a year with higher interest rates, the cost of capital is higher, and we should have more decision-making in a careful way, right? But in exchange, higher interest rate maybe have some impact for that kind of public that's a little less capitalized, let's say. So let's consider all of the factors we're seeing along with the case of higher interest rates and understand what we would expect from the market this year. If you could also compare the scenario considering the counterparties in the market now with other points in the past or even at this moment.

André Guillaumon (CEO)

Thank you so much, Bruno. As always, it's a pleasure. Great questions you have here. No doubt at all, the high interest rates. Of course, the overall market suffers, but it's not the overall agribusiness photography, right?

That's not the total photograph, right? But I think no doubt at all, the abundance in the last few years really made the leverage in the sector go up a lot. Overall, the leverage levels were really high, and we don't think we'll have a market of low interest rates in such a short period of time. No doubt at all that company and group that had this leverage level at cost of capital that were like CDI plus something, we're considering CDI that could reach maybe even 14%, 14.5%.

But we're talking about 17%, 18% interest rate, and this activity would not tolerate this cost of capital. That's quite clear. Just to answer in a very clear manner, we still have some very occasional points brought, but we also see liquidity.

When I'm talking about diversification here, it's really interesting because we diversify considering the predictive risk and also logistics. We're seeing some regions in Brazil that are more stuck and other regions in Brazil that are pretty heated, which is the case of Bahia due to irrigation projects and new agribusiness factories in the state.

In Bahia, I see a lot of current liquidity. What I'm saying here is, well, you can buy in other regions, but you can also sell in Bahia, and it's great. We need a buy in other regions as well. For us, this duality in the liquidity could not be better than it is already. It's quite reasonable to understand why. Gustavo just talked about the soy of 110, 112. We see Bahia pretty heated.

What I always say is that here we provide some guidance, and then no doubt at all, the company is seeing major opportunities, and that's the year where we need to search for some opportunities, some occasional acquisitions. It's not something general, but we can still have some leaps in all of this.

But we definitely see a scenario that's more of a buyer and also more of a sale opportunities due to irrigation projects, agribusiness, and other projects in the state where we see some recurrent liquidity in Bahia. I think we think that here in this market, for us, it's going to generate this kind of opportunity. That also eliminates a bit of the appetite, let's say, and with agricultural funds, buying properties, etc.

Shareholders in Faria de Lima are going to be moving towards high interest rates, and the prices still weren't accommodated for this, right? But as we are looking at these projects in perpetuity and operational perpetuity, this is maybe a little different in our case.

Great. Thank you so much, guys.

Operator (participant)

I think we also have Tiago here with another question. Please, you can open up his audio.

[Foreign language]. André, Gustavo, Ana. Good morning, guys. André, Gustavo, Ana. In this discussion[Foreign language], we wanted to discuss the long-term projects and all of the history with transforming land and all the real estate value as well.

In the last few years, this discussion migrated to a discussion where we consider the purchase and transformation of raw land or the brown soil to a discussion that I believe is going to be really focused on the new generation here, which is converting pastures into farming regions, right? That's something that has been intensified in Brazil over time.

So you guys have already started some recent movements and trends towards this, right? I just wanted to hear y'all and understand if you guys consider that this thesis is sustained based on the experience. It's pretty small for your size, but based on the experiences you've already had with converting pasture into harvest areas and farming areas.

I'm saying all of this considering the. [Foreign language]. No one has seen the arroba prices go up as much. Of course, this would impact the equation a bit, right? I want to understand if this generational conversion in the overall real estate gains are really supported or not or sustained.

André Guillaumon (CEO)

Hi, Tiago. Pleasure to speak with you. Your question was almost the thesis we believe in, right? That's where we're going to generate opportunities. Occasionally, you could consider the price of the arroba, of course, no doubt. It could be more valued. But when we look at if we consider the price of this land that has the cattle and when we perform the IRR in the perpetuity of this operation, it's about 2.5% to 3%, right? When you look at the conversion of this land and you consider this agricultural project, it's about an IRR of 7%, 8%, or 9%. There's a difference. It's very important.

If you consider this at R$330, R$340 per bundle, we're talking about profitability of about R$1,100, R$1,200 per hectare. That's what gives you this kind of result with the R$330. When you consider the system, we're not going to consider. We're going to look at our history and what the market believes in, right?

If you consider R$1,200, R$2,000, and you consider an off-season harvest, then you shouldn't consider this of R$1,500. You should consider it of R$1,000. We're considering R$3,000. It's still really a better advantage at the end of the day. The biggest discussion here is really that people always provoke me, and they say, "Is Brazil going to continue to grow with its production of soy?" If income around the world grows, yes. The challenge we have.

[Foreign language]. And considering the international demand as well. If income continues to be incremented.[Foreign language]. This fundamental point in this thesis, of course, we've already discussed this many times, is that this land matures a lot quicker, right? If we have some, you can have really good levels of productivity.

We have this new operation in the Guaporé Valley, and it's really impressive to see the results we're having there, right? It's not about productivity in the farm, but last year, it produced about 54 sacs. It's pretty significant if you consider the first year, right, for pasture. This year, the farm's moving towards its second year. I'm not saying this because of the farm, but we have many areas that have above 65 sacs, right?

When you consider this and you see that there's a bit of limitation, it's not an area where you're going to have 80% or 70%, but you're going to have 35% or 40% of this. If you consider the profitability of this soy and 30% or 40%, it's going to be a lot higher than harvest itself. More and more, Brazil is not stopping this production. It's just intensifying this model. That's going to make major, major sense.

Well, that's great. Thank you, André. Obrigada, Tiago.

Operator (participant)

Thank you, Tiago. The next question here I'm going to be reading is from Reinaldo Veríssimo.

And he says, "The drop in the dollar, could that be an opportunity for the acquisition of fertilizers?" If you consider the rain period, is there any farm that's been calling your attention due to a drought or an excess in rains?

André Guillaumon (CEO)

Thank you so much for that question. Anyways, the dollar and this accommodation of the dollar at R$620 to maybe R$570 or R$580 still makes us have a fertilizer cost. When you think about reais, it's higher than the previous harvest, right? So we have our eyes open. I think that in this decision, when we decide about acquiring fertilizers, we need to consider the exchange ratio between the inputs and products. So we have our eyes open. [Foreign language]

[Foreign language]. We considered about MAP [Foreign language]. For MAP, we still haven't made a decision about this. We're looking at the ratio, the exchange ratio. Unfortunately, with this increase, we went from a level of like 530, 520 with the dollar that was 570, 580. Now we're talking about a product that's a lot more expensive. [Foreign language]. The Northern Hemisphere [Foreign language]. The US and part of Asia are starting to plant now in April and May. [Foreign language]

We've already started to plant this. The Northern Hemisphere is going to have to make more precise decisions now as well to start planting from April and May when we start this plantation in the hemisphere. We are going to be really monitoring this, the 40 or 50 days where the market historically always finds the bottom of the well, let's say.

When it comes to rain, as I mentioned in the beginning, this has been doing pretty well. Some things concern us. Not the lack of rain, but the excessive amount of rain. The soy in the beginning of this harvest in Mato Grosso, we had some reductions in productivity due to the fact that we started to have the situation with the grains.

In these cases, it's where you see that it's really started breathing, and that's where you lose volume. The soy has 2% or 3% of this problem in the grains, but it's not only a discount of 2% or 3%, but when you start this process, this grain starts breathing and consuming its own mass. It's more than just the discount of the grains that have visible damage, right?

That was just the beginning of our harvest. We were able to have a bit more humidity in certain units, but we see we're in a better situation. What's important here is the concentration of the harvest in Mato Grosso that starts off now in the first 15 days of February. The expectations are that there would be a little less volume of grains now.

We're looking into a bunch of different measures to be able to harvest as much soy within this window. That's where you can see a major surface to be harvested. Nos outros estados. In the other states, as we can see, rain's coming along pretty well. We had a possibility for this off-season summer, and we start February with our box full, let's say.

Now if you have 10 or 15 days of drought from now on, you're still going to have a lot of humidity in the soil. I don't think this is a warning point. I think we have good distribution for this region in the MAPITOBA area. [Foreign language]. In Paraguay, the critical period is normally not February.

It's like the last part of February till the first part of March. When we look at the numbers in Brazil, just to show you, Brazil, I just saw this number yesterday. There was about, in the last harvest, 14% of this area harvested. We had a delay of 6%. Yesterday, on the 6th of February, we had 14% soy harvested in this area of 8% on the 14th of February. This, no doubt, Reinaldo, is a reflex of this intensity in the rain in the month of January. [Foreign language]

Operator (participant)

Now the next question is from Carlos Henrique Antônio, investor. The hedge policy in the company was not allowing us to confirm more sales when the dollar reached 630, or was it a strategic vision that the dollar would go up more?

André Guillaumon (CEO)

[Foreign language]. So they'd say that the economist cemetery is the type of currency, right? When the dollar started going up, and I think it's really important, I always talk about this, right? We need to look back and reflect and understand what was done, etc. You can see the hedge policy that really has this crucial objective.

There's actually an objective of reducing risks, right? The company's policies are that up until plantation, you have 50% sale potential. After plantation, you can start taking on this position, right? What we reached here was, in the beginning of the plantation process, we had already advanced at about 41%, 42%. Then we started selling a bit more. We were able to sell a bit more.

But in exchange, we operated a bit more in the higher rate. And now we have 50% of the soy sold, right? So when we had 41, we had almost 60%. We had a mismatch that was a bit higher, authorized by the company's board. That made sense because there was a lot of volatility. So we weren't going to sell dollar, take advantage of this moment without selling Chicago.

At that moment, Chicago dropped. So what happened is when the dollar reached $649 at that day, basically. So when you did that. Chicago was about close to 10, right? So when you combine that, it wasn't that interesting, right? You didn't have the basis we have today. So we considered a base of minus 35 or minus 40.

I'd say that even if the dollar goes back, Chicago went from 1,020 to 1,080, and the basis went from minus 35 to plus 35. I think it was very precise and assertive. At that moment, we already had sales that were pretty well positioned. What we did at this moment was that soy has three components: Chicago, dollar, and premium, right? We started blocking our physical position.

When the premium started to react, we started to block this physical position. Then we also started blocking the logistics, right? Because the peak in the dollar impacted this. When the dollar started going up a lot, what happened with the Brazilian logistics is that they got cheaper. Then we made the decision to sell physical to be able to block in the logistics, right?

So when we consider the rush for the dollar, we already had maybe 40% sold, right? And that's algo em torno de 15, 18% de vendimento. We had about 15% or 18%. And what happened is e levar o físico. We would be able to have physical really close to the derivative where we kind of block in the FOBs and cheaper logistics. That's kind of what we took advantage of this rush for the dollar, right? We consider this combination 580, 570 with this positive premium. Chicago also from 1020 to 1080, right? We're really equivalent to that dollar of 620 back there. [Foreign language]

Operator (participant)

We have one last question here from Saulo. He's also an investor. Considering the low value of the stock in the company, do you guys plan to start a buyback program?

André Guillaumon (CEO)

[Foreign language] It's always a very tempting provocation. We consider this at all moments. We don't want to, in any way, lose this liquidity. We have no buyback program that's authorized yet at this moment. But if we start seeing this frequent delivery in the results, as we expect this year again, and if this price, a big part of this is you have the effects of the Brazilian stock exchange, right?

So although your company is doing well and you have consistent results, if the equity market is low, it's going to be difficult for you to overcome this. That's why we have kept our eyes open, and we don't have anything planned for the next few days, but it's something that we revisit at all moments. I think it's fundamental.

This question is added on in the following manner. If we are able to buy assets at this moment of stress and with the levels of discounts that are similar with what we have on paper, we shouldn't be really buying this. But if we don't understand that she has, we have these levels of assets with the levels that allow this, then who knows, maybe we can discuss this with the board and the company. I think we've gone over time.

Ana Paula Zerbinati (Head of Investor Relations)

I just want to end by thanking everyone for their presence, André, Gustavo. I think we're really excited for what's coming ahead. If anyone has any outstanding questions, me and all of my team in the IR department are available. Thank you all so much. See you all in the next quarter.