Brasilagro Companhia Brasileira de Propriedades Agricolas
BOVESPA:AGRO3
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Brasilagro Companhia Brasileira de Propriedades Agricolas
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Good afternoon. Welcome, everyone, to BrasilAgro's Second Quarter 2021 Results Conference Call. I am Ana Paula Ribeiro, Manager for Investor Relations and I have Mr. André Guillaumon, CEO; and Mr. Gustavo Lopez, Administrative Officer and Investor Relations Officer.
This live webcast is being recorded. [Operator Instructions]
Next, we will have the Q&A session exclusively for investors and analysts when further instructions will be given. The audio is being presented simultaneously on the Internet www.brasil-agro.com, where you will find the slides of the presentation that we will have today.
Before proceeding I would like to clarify concerning the declarations that may be made here during the conference, concerning the business perspectives of BrasilAgro, projections and our operational goals. They are based on assumptions and beliefs of the Board of the company. They involve risks and uncertainties. They refer to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions from industry and other factors may affect the future performance of BrasilAgro and lead to results that may differ from the assumptions.
Well, now, I would like to pass the floor to André, our Chairman, who will begin the presentation. You have the floor André.
Thank you, Ana Paula. I would like to thank all the participants. It's a great pleasure to be here to talk about our quarter, Q2 2021. We bring here many new things, many events that happened with us and in the market in the last few days. So let's begin the presentation, and we would like to talk about the company and Q2. We will be presenting Q2 2021 and we have a lot of information to share with you to clarify many points for those who follow us, those who are analysts. And I say it is a company that has consistently delivered solid results. And it is a company that has real estate results together with operational results. And now we are at a very good time for commodities, we will have a lot of good operational results.
Well, I'd like to call your attention to the highlights of the quarter. We closed with a net revenue of BRL 348 million; net income of BRL 52.2 million; adjusted EBITDA BRL 116.7 million; and the new fact that we would like to inform, most of you are already aware, the capitalization that the company did recently now last Wednesday. And with this, we can see a very promising future concerning the liquidity of the company. We have no doubts that the consistent delivery will take price of shares to where they should be, and we had a challenge liquidity.
Well, with this capitalization, this increases our float and this for you who are investors, you have been asking us for this, it makes sense now. We are a company with a consistent delivery of results that conjoins real estate with operations and now with liquidity. This was missing in our basket of products.
Production of sugarcane, we closed in December. We needed the harvest from Maranhão, more than 2.2 million tons. We have been growing consistently in sugarcane with very solid results in sugarcane. Well, I'd like to talk about the follow-on. I always like to say to comment. We are now -- we have structural issues and market issues, now we have a combination of both. We believe that it is a very positive time for commodities. We had a round talking to investors. For example, market situation, for example, in Asia, 40% of the animals were lost. They have the largest herd of pigs. So there was a lack of animal protein on a global level with the loss of these animals.
And this brought euphoria to commodities in order to recover the inventory of animal protein around the world. Now what are the structural changes? We have an important structural change. The migration of the model in China for a new model with more technology and the market is showing these signs. China is the large producer of corn. We saw China importing more than 18 million tons this year of corn and surely they will import 100 million tons of corn in the next few years. And they are the second largest producer of corn behind the U.S. China produces 260 million. These are structural changes and no doubt this will have an impact on the price of land in the medium and long term.
To give you more transparency, to be more transparent, the great opportunity we have in the market that we mapped in terms of land, we have a robust pipeline to make acquisitions of land in the near future. We have a very low interest rate in Brazil. No one -- no one wants to invest in the CDI, so we have to allocate our resources very fast after the follow-on.
So we have a very robust pipeline to guarantee that the allocation of these funds be made in a very concise way. While the consistent delivery of results that the company has done in the last 5 years is due to the management, work, leadership from all those involved in production and also in the decision-making of the company. This enables us here -- now it's different. We had an IPO in the past. We have a solid history. And now certainly, with this increase in capital, we begin to grow again, a new wave of growth, not organically. Now in a more robust way, in a more robust growth. So I would like to end saying this transaction is a win-win situation because we closed an important gap, which was liquidity.
On the right, we had a transaction, where we received proceeds, BRL 440 million. Part of these resources were allocated to our operation that we are purchasing in Bolivia. I will give you more details. I'm available to answer questions. And most of these resources will be used to buy property in some -- in Brazil -- land in Brazil. This is the focus. At the bottom right, we see the situation with the increase in capital. Cresud accompanies the growth. We had 1 shareholder for a long time, and their float comes to the market. This increase in liquidity and the consistent delivery of results that we will continue generating. We have strong commitment on the part of the people here, and I have no doubt that soon, soon, we will be a great and large company with robust payments in dividends and high liquidity. This makes us very happy after this transaction.
Now giving you more details about the acquisition in Bolivia. We gave many details during the road show. I would like to thank very much all those who trusted, trust and continue trusting in the company's management efforts. Those who -- those who subscribe and the new shareholders too. So here, there is a strong trust. We will continue to delivering our good results. The Bolivia operation involves the purchase of 9,900 hectares, 7,900 arable hectares. These pictures are from Bolivia, from the properties. We are buying 100% developed properties without any need for CapEx, 2,200 millimeters of rainfall per year. So it is similar to Mato Grosso in Bolivia.
So why Bolivia? In Mato Grosso, for example, the land for which we paid $3,000 would be worth 10 -- $12,000. So the country risk is priced. What I would like to tell you is that an operation that doesn't need CapEx with cash flow -- with important cash flow and with this value, $3,000 per hectare, we are generating $300, $400 of results per hectare. A return on investments of profitability around 12% to 13%. So a very profitable operation in Bolivia. The guarantee of liquidity is guarantee of a profitable operation.
The second point, it is located in the core region of Bolivia, as if it were Mato Grosso or Ribeirão Preto in Brazil regions. Very good regions where we can have first crop and a second crop, a winter crop to a very good plot of land. And the idea of the company is to intensify the production of sugarcane to take all our know-how to Bolivia, our know-how for sugarcane, expand sugarcane plantations we have in Bolivia. And as we show on number three, we bought this land at a discount NAV of more than 34%. So the idea, those areas where we can plant sugarcane, we intensify and where we have gained since we have the discount, the idea is to really sell. So this is -- these are details of the transactions. A transaction we did this with total transparency, the counselors, independent counselors of the company approved unanimously, unanimous approval in the shareholders' meeting.
We're -- so we have proved this in the shareholders' assembly, record forum, 73% of the shareholders of the company voted unanimously for this project and with the trust that you have in us and the consistent delivery of results, we did not have a single vote against -- against 73% were there and approved unanimously. This is very important, more than saying what we will do in Bolivia. We have to show the transparency. There was transparency and the discount, 34%. This was done by Deloitte. Deloitte has been appraising our lands for many years. We trust in this number that we bring to you.
Well, from now on, we will talk about the numbers, the harvest. And here Bolivia is not included in these numbers from now on, we will see. Certainly, in the next quarter, we will have Bolivia included because the transaction was made in February, and these are the results of December 31. So on the first graph, we have a growth of the planted area, around 7% a year, year after year. We see a small growth, but it's important to mention one fact. The company even selling a lot of land were growing year after year even with the sales.
So we combine very well these strategies. The graph, what we bring shows with soybean. We have a small reduction in the second crop for corn. And this is not -- this is focused in some leased areas that left the portfolio, small areas, but they left our portfolio. And important growth in beans. We've done a beautiful job, very good job in terms of profitability, going after new markets, being a company to produce food with responsibility.
It's a new crop, new for analysts, but it has been a profitable crop. Sugarcane, you know this is our -- this is where we have the greatest expertise or greatest profitability. Therefore, we are planting sugarcane in very good lands. We have an evolution in area, but we'd like to remind you that we've had an increase in productivity. So we're decreasing the area as when you follow us when we bought São José farm, we said this was for grains with a winter crop plus sugarcane. So we're obtaining very high productivity in sugarcane, and we have -- thus, we have included -- we have liberated more land for soybean. So the more efficient it becomes, the more areas we use to have other crops and automatically to have liquidity. This is fundamental. This has been -- we have delivered this consistently. Pasture land, a reduction, we converted some lands in Jatobá farm, cotton almost the same in others. You know that we have some areas that are in production that are leased with the following objective. To have liquidity and so most of our lessees will be the natural purchasers of these assets in the future. We believe this strategy is very good.
Well, here, a small increase when we talk about harvest year tons, an increase of [ 1.9 ]. Part of this increase is due basically to the increase in corn and an increase also in the winter crop for beans. These have called the attention, the second crop of beans. So here, in this graph, it's important to see how we see things, the status of our production. So we ended the planting season in January. We have operations in Paraguay. So Paraguay, we know that it has a different window. We ended in January. Every -- all the planted area is well stabilized and it was in the beginning, there was some uncertainty in the beginning. I was in a call talking to you about Mato Grosso, but in the region where we have important operations in Xingu and in the south, close to Rondonopolis and Taquari, we had good success. A small -- a very small part had to be replanted, and we have seen a good stabilization of rainfall from mid-December onwards. So the difficulty that all farmers had in October, beginning of November, then stabilized in December. We had a good distribution of rainfall then came January.
You know that it's a very important month because of the operations in the Northeast, January and February. In January, we had a few days of droughts, which is normal and by year, around 10 to 15 days in a period with no impact on production. And since then, rainfall has normalized and has been very good with good estimates with good perspectives for February. So we're almost in the middle of the month of February, and we have rainfall in all the units on the -- during the last weekend. So I believe that February is okay. So the way we see things, yes, we will have a consistent delivery.
We have begun. I would like to highlight that we began harvesting in some units, especially in Mato Grosso. Until now, we know that the soybean that was planted first was the one that suffered the most, but it has positive estimates for productivity and also very close to our assumptions and forecasts. We had some difficulties in installation during the 21st -- 25 days of October, but we're having a positive result. We know that soybean, soybean in these regions still have a production status that is good. So we're very optimistic with the productivity of this year in terms of soybean. Since we began harvesting soybean, we're planting the winter crop for corn. It's developing. We're doing a follow-up closely. So with this, we have a guarantee of production for the winter crop of corn.
In some regions, we began to plant the winter crop for beans. So in terms of operations, okay, let's talk about sugarcane too. These -- in October, November, these problems slowed down growth, but then things became more normal. This happened more in the Midwest and South. The Midwest actually suffered less. And in the Northeast, we had a lot of rainfall, where we have a lot of sugarcane. We have more than 15,000 hectares of sugarcane in the state of Maranhão, and we have good rainfall in October and November. So without doubt, we will have good surprises in sugarcane in the Maranhão and in the Midwest, it's stabilizing. The volume stabilized as of December and I'm sure that we have productivity that is very close to this year. Cotton too is planted. Cotton is going well and pasture. Pasture all our production, we will give you more details about pasture in the next slides.
Well, here, some numbers when we show this, the main focus is to show the evolution of the herd, and we're capturing good gains. So with price of commodities, especially animal protein. Yes, we should take advantage of the good situation just because of the price. Everyone retaining the females. We've seen the price of beef going up. So we reduced the inventory to capture the high prices. Pasture is roughly the same. And since we had October and November with irregular rain, we had a delay in the installation of pasture.
Now it's normal. As of mid-December, it became stabilized and GMT of 0.56, which is -- which was expected due to the drought, then rain, and now we're seeing an important recovery. Here, one point I would like to mention in Paraguay, we've reached in January. It's not included in this result. We're talking about December. We have the highest GMT year of history, 1 more than 1.1-kilogram per hectare. So we believe that all the numbers we promised will be delivered. So this is an idea of the crops. If we had to alert you, we would have done this. But the way we're seeing things in the last few months, the distribution of rainfall, planting, everything else we see we will have a good harvest.
Well, here a little about sugarcane. What we see here once again, this is -- we see 25,000 hectares. No change. Production, important increase. When we talk about harvesting in the same area and an increase of 20,000 tons. And what is good here. We added TCH which is very solid the TCH in 2020. Very close to our estimates. We had estimated this. So in all our units, we closed at 89 TCH. Here, I'd like to clarify and highlight since we are large producers, there's always a premium-based on the volume delivered and this premium fluctuates in other places, it's fixed, but I would like to say that it's around 20% in São Paulo. So this together with this productivity and also a premium of 20% makes the sugarcane operation, a very profitable operation for the company. And you will see the robust results in the second -- in the second quarter of our fiscal year.
Next, I believe here, we showed how the company is doing, growth, new opportunities, work. Let's talk a little about sales, the commercial point of view. You know that since the soybean that is being harvested, we have been selling it since the beginning of last year, always looking at contribution margin, always looking at profitability. So what is sold already? When soy bean -- when we felt the rise in price, which was a great surprise for all the market. When everyone prepared the budgets, we had a soybean of $9 a bushel, and now at $13 a bushel. This was a surprise for the market. We have sold a lot of soybean. We reduced some of these operations, we have 63% hedged. 40% is open, and we will capture these interesting prices. So the dollar position in the case of soybean, every dollar sold, 75%.
And here, I'd like to stay on the budget, you have an upside with the increase in production. We have sold at $5.44. In the case of corn, we were more optimistic because of animal protein. So we were -- we have 39% of corn -- of the volume of corn closed. And with a currency of $5.36. And in the case of cotton, the last one, it's small. But we have 79% of cotton already sold at the price of $64.41 per bushel. So giving you an overview. So we have these prices that we show to you. And what is open is, will be sold at market price. We have an important increase in the receivables from soybean. We sell grains. So most of the receivables we're having these -- we're having gains in production of commodities and now we have the receivables.
While this is production. Now I'd like to pass the floor to Gustavo, and he will concentrate on the numbers, financial numbers of the company. Thank you.
Thank you, André. Good afternoon. Let's continue here. Now with focus on EBITDA and adjusted EBITDA. And we have been following the results and we have here the EBITDA, Q2 2021, including and excluding also results from derivatives. Here, we can see that in the quarter, we have an EBITDA, BRL 48.156 million, and we have also -- this reflects the increase in the price of commodities.
We began with -- we can see the inventory of corn. And until -- by December, we had sold this inventory. Then we see a positive result here. And also consistent response with sugarcane too. In November, 2 million tons and also an increase in price. Here, we see in $0.60 to $0.65. So this brought a good impact. We see here a BRL 70 million. You can see here last year and in the previous year, we had BRL 52,000. This year, we see the difference of BRL 100 million here. So this gives us good expectations, positive expectations for June 30. We understand the market is seeing a good harvest and I will repeat this is very positive for the results of the company.
On the next page, during the previous year, we had operational results, BRL 70 million and BRL 100 million. And here, we see that -- we see the harvest 6 months of 2020 and 6 months of 2021, we see EBITDA much higher. And this is due to corn and soybean. But here -- the impact is here. We have good expectations this year.
Here, I'd like to mention too sugarcane. We were not that optimistic when the pandemic began. We thought that demand could be affected due to the pandemic, and we're closing this semester with good productivity, prices to firm prices. And in terms of margin to good expectations. We can see this in the graph. Normally, our -- we can see the impact of sugarcane. And now normally, we had 50-50% in terms of revenue and results between grains and sugarcane. And now we see over 76%.
On the next page, income statement, Page 12. Here we have the results of the quarter. In terms of operations, the result was very positive. The final result is negative. And here the main impact, you can see your financial results, André mentioned, we sold part of soybean and corn and the higher prices, the rise in prices had a negative impact on the operations and but as André mentioned, we have the part of the harvest sold and we had a rise in prices.
When we look at the results we see revenue -- revenues here. We see the revenues from sugarcane, revenues from cattle raising, revenues from farm leasing here. We sold during the harvest of 2020, 6 months of 2019, 6 months of 2020, we sold this at BRL 92 million and now we had a hedged position, selling at BRL 120 million. So this is -- this had this impact. Gross profit, we can look at gross profit here. This -- here, we'd like to mention also other revenues here. We purchased the company, Agrifirma. This here -- we -- if we have no contingencies in accounting, there is a variance here. The price had gone up in December 31.
We have an expectation of positive results for June 30. If we are able to harvest soybean and corn, I believe that here we have a picture before the follow-on. So we -- we have BRL 380 million, in the farms with soybean. We understand that we should continue calculating this position for soybean.
Now in terms of investments, we are -- this we can see here the numbers. These numbers are from June 30. And here we're showing in liabilities. We have the derivatives and receivables. This is the effect of volatility mentioned in the year-end report. Here we don't have included the next harvest.
On the next page, we can see here. We understand that our debt is low. Our challenge, as we mentioned, is to lengthen the duration of this debt. Here, we have one part maturing till next 12 months. And then in the next 18 months, and we have -- we will -- we have now this new debt and we will decrease this with receivables. We had a drop in debt. Also, we can see derivatives here, total indebtedness, BRL 400 million. We see the change here. We -- net debt is a little higher, and we have BRL 390 million. So we -- the company is not leveraged.
On the next page, net asset value, NAV. So you can see here the market cap, upside potential. The company continues developing. This will have an effect on the portfolio. And those who don't follow us here, you can see the numbers, the value of the shares and you can see here, the possible increase, upside potential. The company becoming more visible to the market, more liquidity, and this will help us as a large company. Here, we see the potential.
And next page, here we see the evolution of the price of our shares, AGRO3, in the stock market and this is -- we have a commitment to increase liquidity. We are paying dividends and having more investors. Thank you.
And now we can begin the Q&A session.
[Operator Instructions] We have a question from Pedro Soares, BTG.
With the conclusion of the follow-on and your commenting that you will now grow rapidly. Can you give us a forecast of the use of these proceeds for land. Apart from this, with the current market situation, how much do you believe you will pay for each hectare?
Well, Pedro, thank you for the question. As I said in the beginning, the great challenge of the company is to allocate these funds quickly. We are negotiating. We have some negotiations that are pretty much advanced. But we have -- we are doing this with a lot of response for being transparent, any due diligence process as we see, we look at all the documentation. These are -- these takes 60 to 90 days. So a purchase, let's say, that on the day of the pricing, if we have an agreement that's already signed, the due diligence, solvency of the seller and also the ownership of the land and also environmental licenses. All of this takes around 90 days. We've done a lot of acquisitions, and this is the time it takes to complete an acquisition 90 days. The speed of allocation going into formalizing contracts and due diligence, we hope that in 6 to 8 months, we will be capable of allocating these resources, considering acquisition time, documents, transfer. So this is the horizon that we estimate for the allocation of the funds.
The second question is very valid too where you heard a lot and we're focusing, looking for new areas to be converted. We -- so I will try to talk about prices when we talk about land to be converted. Pasture land, for example, we calculate, we estimate acquisitions around BRL 15,000, BRL 18,000 per hectare. And then you will have a need of CapEx around BRL 3,000 to BRL 4,000. Why BRL 3,000 to BRL 4,000. It depends on the situation of the pasture land, if it's good, if it's clean, if it needs land development. So we're estimating a hectare, we talk about net areas. So when you look at a farm-in Mato Grosso, 35% of legal reserves, we're talking about the net arable land. In general terms answering you. The acquisition is around BRL 15,000 and CapEx of BRL 3,000 to BRL 4,000. BRL 15,000 per hectare with BRL 3,000 to BRL 4,000 of CapEx. So we hope to increase our production more in another 25,000 hectares. And then you can estimate the increase in cash flow.
Thank you, Pedro. One more question concerning the follow-on from Mr. [ Flavio Becca ].
Why the increase in capital? Do you have other investments after Bolivia. I believe you already answered most of this, but if you wish to supplement your comments André.
Thank you for the question. Yes, answering you in a transparent way. Yes, we have things that are in our pipeline, negotiations that are pretty much advanced. We -- so yes, we have also things well advanced in the pipeline for quick allocation of these resources. We will have also the resources coming from the harvest in Bolivia. It's an ongoing operation. They are beginning to harvest. And now as of March, April, we begin to harvest sugarcane too in Bolivia. So part was already allocated in the Bolivia. We will have results in the next 60 to 90 days due to the harvest, reminding you that in Bolivia, you have the crop and the winter crop and also the harvest of sugarcane. We have 1,900 hectares of sugarcane.
Last year, they produced 80 tons, so an important revenue coming from the sugarcane in Bolivia. Answering your question, yes, we have negotiations that are advancing very rapidly for the allocation of these resources, buying new plots of land.
The next question from Eduardo Varela.
The results of the derivatives. What are the forecasts for the next some quarters.
Yes, a comment, we have 3 million of bags of soybean to be produced. And here, what happened BRL 120, we have hedging. And on December 31, it was BRL 150. We had this impact, as you saw. We understand that on March 31, we will have most of the harvest. And from then on, we will correct this distortion that you see. We had estimated the results. And this, we had estimated soybean at BRL 90. And now at BRL 120, BRL 130 per bag, we have -- we will have BRL 80 million more. We believe that this value is very good. It will -- the results in derivatives will remain negative. The only concern is the amount of soybean that we already sold, but we have a policy of selling only 50% before the harvest. So we have these values. We have these amounts sold, as I said. The risk of the company would be if we had a problem in the harvest. So the results, we believe the results from March 30 and June 30 will be very positive.
The next question comes from Anthony Gordon, Genagro.
The reduction of the NAV per share due to the increase in capital.
Tony, thank you for the question. Let's try to clarify more. The increase in capital around 20 million shares, 20 million in a horizon of 62 million. So we're talking about an increase of the shareholder base equivalent to 30%. So this is the reduction of the NAV per share. If I were to do this without inclusion, but it's important to say that we receive BRL 440 million that will be included in the value of -- in the assets of the company. Bolivia was bought with a 34% discount in relation to market price, this helps. So when you do the calculation, you had a dilution of 30%, but you have an increase in NAV of BRL 440 million or if we don't look at it that way, we can increase it by BRL 260 million, BRL 270 million in cash and BRL 160 million in new areas with a discount of 34%. If you consider that, if you add to these BRL 160 million of Bolivia, 34% discount, I'm calculating this quickly. I would be adding BRL 48 million. So it's like adding BRL 200 million to the portfolio of the company, adding BRL 200 million in the portfolio and BRL 270 million in cash. So now it's important to say that the great engine is we have an increase in liquidity, and this was always a pushback that we had, less liquidity, and we confirm this by increasing the capital, bringing liquidity is fundamental to close this gap of NAV.
Gustavo mentioned all our properties have been evaluated for -- at the price of June 30 last year, 2020, we will evaluate them again on June 30, 2021. This should correct a lot the NAV of the company due to the new prices of commodity. We believe that we're not going to use the spot price, but they will show a curve, reflecting the trends of commodities. It should be positive. If you ask me, I believe yes, did after the transaction and after the inclusion of Bolivia, even with 20 million more shares, we should have an NAV around BRL 35 and BRL 40. Even after the transaction, after the dilution, I believe that the inclusion of Bolivia, the cash and property at a higher value, we should have a company around BRL 35, BRL 40 per share.
The next question, investor [ Gustavo Gushiken ].
Good afternoon. How is BrasilAgro using the new technologies, 5G, Internet, biotechnology to increase productivity.
Okay. I will try, excellent question. I will try to answer. We have many things being used, a lot of technology. Let's begin with our biofertilizers, bio inputs. We have biofactories. We began to use this 4 harvests ago, 4 years ago, on an experimental basis, and we increased our biofactories. In this harvest, we have 5 biofactories in different units that supply 100% of our needs. So this is a technology we are using. We believe a lot in this. Biofactories, biofertilizers a better balance. I always say that. We -- agriculture went to chemicals and now again organic and now it will stabilize. It will stabilize with a combination of chemical and bio. So we're using this on different scales and different crops. For example, insect control, pest control increase in resistance to fungus. So many bioproducts we have used in the company this year. Initially, I would say that André, what is the company's vision? Initially, it hasn't brought a reduction in cost, but it increased efficiency. So the increase in efficiency will allow us in the next few years to have a cost reduction with less expenses with chemicals due to a greater efficiency with bio and chemicals. That's the first point.
Now in terms of new technologies, We're very close to these new technologies. A 100% of the operations has GPS, geo positioning. We have all the planting and most of the harvest with geo positioning, which allows us to generate productivity maps and also maps for planting. We have increased the adoption of new technologies concerning climate monitoring in partnership with many companies, some start-ups, others now. But we have a lot embedded. 100% of our units have real-time monitoring of the climate, which gives us a good efficiency. You can have a rainfall map, the rainfall map, when you decide on the we -- we can create climate maps every single day. The company is always innovative. We were the first in agro business in Brazil to implement SAP for management at the farm. So every part, every stretch is considered a cost center. We have a lot of technology embedded monitoring programs. So technical, we have Taurus and the next wave of Agriculture 4.0. We have a lot of things being adopted, many things in the pipeline, especially sensor. This has been very useful in the company. Drones, we have used a lot of drones.
And what is missing, and this is a problem not only of BrasilAgro, the work that is being done to large projects, connectivity. We're making efforts in this area, connectivity. For example, the office is connected. The challenge, we're very optimistic. This coverage is increasing. We've seen pilot projects. We will see 5G. Let's hope that 5G will bring us more productivity, more scale and more efficiency for our operations. So all these technologies, we have a quality team, and we're using sensing. We prepared a couple of years ago, a book of dreams. We sat down with all the areas we mapped, the new technologies, cattle raising controls, internal controls, also accounting. New things we mapped 23 new technologies in most of them 4.0, and we understood those that brought most of the results in the short term. So we established priorities, we're implementing.
So we implemented 5 in the first year, and this is constant. It's a book of dreams. I'll give you an example. People from cattle raising would like to count the cattle in different ways. We have infrared cameras, sensing, things we're including as this will increase the efficiency. Today, our scales are all integrated with SAP, automatic capture animal by animal. The weight and the animals with the chip, all animals have chips. So a lot of embedded technology and the good news of all of this, the speed of this technology has been tremendous. You have to -- you have -- you need a NASA department to do a follow-up on everything that comes. So we have looked at those that generate value. In the short term, we're implementing this.
New things that generate value in the medium and long term, all of this is mapped. And we have a schedule for execution to put into practice those that generate in the short term, then later on in the medium and in the long term. So everything is mapped. We have 5 new technologies implemented and we have a pipeline and the market is always bringing us new things. So what I'm saying that this will be the great green revolution in the next decades, 4.0. Agriculture 4.0 bringing more efficiency.
The next question, Gabriela Carvalho. Congratulations for the results. Thank you, Gabriela. Do you intend to maintain the sales of farms?
Well, Gabriela, thank you. Okay. Yes, today, our team right now is working on this in some regions, especially in Bahia. Yes, we are doing this, the sale of farms. It's important to say that farmers, they -- we begin to see -- we're seeing the commodity market is booming.
And another point, Gabriela. There's always a delay between commodity prices going up and being transformed to profitability. Soybean may be worth 150, but people are planting. They haven't sold yet. And also this year, in 2020, Brazilian producers sold a lot of the crops in advance. This shows that they have a lot of risk management. This brings stability in the medium and long term, but a year when we had an important rise in commodities becomes favorable.
So yes, there should be land purchasing. We have to be anticyclic. When everyone is trying to buy, we should sell. And now we have to do both things with the increase in capital. But yes, it's possible to sell because we're always buying in the lower shelves and selling what is ready.
So we buy what doesn't generate results. These land prices haven't gone up in price. And those -- the land that is generating results we sell. So we buy land to develop and then sell. Okay. We can't buy land that is developed. It would be too expensive. But in general, we are -- we will be a seller in the next few months and capable to allocate this cash of the follow-on in the next few months, too. Thank you.
[ Daniel Lerner ]. Congratulations for the results. Do you have any expectation of changing the hedge policy?
Well, Gabriel (sic) [ Daniel ], it's important to see. We have a hedge policy. It's important to see, we have to guarantee margin profitability. So we define a budget in April, May. We approve in the management council end of May, beginning of June. And then as of June 1, that's the budget. We have a price design and begin to work. We begin to design it.
Now for example, we cannot buy and not sell. We're always monitoring margin. Our policy is clear, [ Daniel ]. We can have a hedge position until 80% before planting, not more than 80%. And then as soon as we -- when we begin the harvest, we can get to a coverage of 100% because we have most of the estimates of what we are harvesting. So that's the policy, hedging for commodities.
Now in terms of exchange rate, we have a policy to have a mismatch of commodities in Chicago or corn Chicago or beef Chicago. So we have a 5% difference. Since we saw that this year, there was a lot of volatility in commodities and in the exchange rate, we worked with 20% difference. So today, we can capture soybean that went up in Chicago. But if the U.S. currency goes down, the next day, it goes up the exchange rates.
So our policy up to 80% until planting until 100% during harvest and the exchange rate in commodities in U.S. dollars, a mismatch of 5%. I don't see the need to change this. It's a good policy. It's a clear policy. We want to guarantee profitability. We want to guarantee a consistent result. I don't see the need to change this policy for a new one.
What we saw this year was a year of a lot of uncertainty, volatility, as Gustavo mentioned. We had an important issue in derivatives when you sell physical now. And also, we're also very optimistic with premiums in the second semester. So we have the sale of the physical neutralizing derivatives, and then we have an interesting expectation of premiums.
So this -- Gustavo corrected me. Until planting, it's 50%, sorry. So correcting, until planting, 50%. After we plant, 80%. Well, I believe I answered your question. No, we don't expect any changes in hedging or derivatives. We are a small company but very sophisticated. So we hedge soybean, corn. Corn, we operate. Chicago and BMF, Chicago because all the corn of Xingu goes for exports, a lot of correlation with Chicago. Sugarcane, we are the largest operator of ethanol, although we don't have very much liquidity. We're always monitoring this. We believe that with the pandemic, we had ethanol, 1,300 already. Now 2,200, it's going up. Cotton, same thing, also an important rise in price.
And also cattle, too. In cattle, we do something even different. We do hedging of the operation. Everything we will produce in terms of animal protein, we monitor the P&L. And since our inventory goes to results, we always also do a hedge covering part of this inventory. Let's have an inventory at BRL 300 per pound. Then if it goes to BRL 370, you will have less value. So yes, cattle, too, we are always looking at animal protein because it interferes in our financial results.
The next question, [ João Pedro Sanochi, Via Finance ]. The future acquisitions should generate synergies with the current properties?
Well, [ João ], yes, they may. Some units of these that I mentioned, one of them, I can tell you, will generate synergy. Yes, one of the acquisitions, and the others are units, acquisitions in Mato Grosso and some in Tocantins. These are units where we have synergies, yes, in terms of management. We have a base -- our general management is in Palmas. So we have -- there are a lot of energies of ESG, overhead reduction, too. BrasilAgro, since it is in the stock market in New York, has an overhead. You need auditors, compliance, governance. And this brings security to your investors. But it's a cost.
And in a certain way, we're still a small company in terms of production. We're talking about 155,000 hectares. I would say that the new acquisitions, when we think of SG&A and overhead, the company has the capacity to increase its capacity by 60,000 hectares without hiring any new employees. You will have people at the farm, technicians at the farm, cafeteria and so forth. This is the direct cost or actually indirect cost of the farm.
Now in terms of synergies, yes, yes. And here, I would like to say our logic of buying in Bolivia is to have a synergy with the structure that we have in Asunción. So Gustavo has the enormous challenge of use -- of making this synergy real. I can't say, probably reducing drastically the cost in Bolivia, the management cost in Bolivia. Yes. Synergies, yes, it's a fundamental point that we want in this growth of the company. Apart from liquidity, you must have the capacity to produce in another 40,000, 50,000 hectares without changing the management structure of the company.
The next question, Eduardo Varela. How do you believe -- for example, we see many new funds in agriculture. Can this impact your business, new funds in agriculture?
Excellent question. I believe that everything that brings liquidity to the market is positive. So if you ask me, André, in the short term, what do you see? Liquidity. Tomorrow, we can sell property to management. They have no management, we continue operating. It would be a dream. It's something we're going after actually. It's not even a dream.
So it's a great opportunity for us. There are assets where it makes sense. Other assets, the price is very high. And the profitability of a fund would not allow me to work with leasing. Yesterday, I was discussing things with one of these funds. And it makes sense, yes. I don't see pressure in acquisition. I always say, Eduardo, that our -- this is simple to explain what we do, but it's complex in the execution. And I've said this consistently, there's a great problem between the difference of a real -- of an urban real estate fund and a rural real estate fund. The management is very different.
So if you put together a fund and you don't have scale, you will have difficulties. And I don't imagine any investor would put money in a fund without governance, without security. So this control will be necessary, a lot of governance. And they will have to have size. If they don't have size, if they don't have volume, although they have tax exemption, they'll lose control without governance.
So I believe it's possible. I see this with good eyes. I see this as liquidity. We're a transformer of land. I believe funds will buy ready farms. They don't buy what we like to buy. They don't develop; they buy ready land. And if we have another client, it's an extra -- these are extra clients. The funds will not develop land because they don't have liquidity for this.
So my answer is, yes, I see this in a positive light, the presence of rural funds, real estate funds, an extra buyer. But we're talking about 3, 4 funds in Brazil with 66 million hectares. It can bring liquidity. Any large fund would like to be with us in such a project. They buy the assets. They buy from us. They know that we are there. And they can guarantee profitability, one more option for us to channel resources and efforts and bring more profitability to you, shareholders.
Yes, Anderson Alves de Lima. He says, thank you for the excellent life. Congratulations, and let's work.
Yes, we're already working. You can be sure that we never stop here.
The last question comes from Werner from Trígono Capital. The new railways can have an impact on the property -- on your properties and reduce costs, the effect of railways, new railways.
Excellent question. You've heard me say this many times, gains in logistics are for operators in the short term. Then they can always go to competitiveness, but that's later on. In -- your question was about technology. Yes, I believe that it brings a lot of efficiency. We can have good cost reductions.
I'll give you an example. Today, we have sprayers that detect the amount of green. They are weed seekers. They map the leaves, and they apply jets only there. So you have higher efficiency. You can work with a higher dosage because it's directed to the weeds and less aggressiveness to the environment. An example of a technology that is bringing more synergy, more profitability.
So in general, I believe that this always helps in Brazil, and it's a sector that is different from other sectors in Brazil. It's the sector that has used -- adopted more technology. So the -- comparing with other sectors, when we compare -- so technology has been very adopted heavily in agro.
So answering your question, it can bring to us gains in scale and also cost reductions in the medium and long term. So there are technologies like biofertilizers, biocontrols that are bringing results to us. We -- in Xingu, we have a lot of problems with insects. They make a pinhole in soybean, and when you sell, there's a discount. And in our operations in Xingu, we had 5 chemicals. With the adoption of biotechnology, we reduced the use of insecticides, herbicides to 3. We had to apply 5 times, now 3 with greater efficiency. We're testing a lot this in fungus. We're testing this in other areas, also a lot of technology and also Agriculture 4.0 information. We know that information is time, and time is money. So Agriculture 4.0 will bring us a lot more efficiency, although we're always using state-of-the-art technology. This technology will become less costly and will give us more profitability and gains in scale.
Well, with this, we'd like to conclude the Q&A session. In our conference call, I would like to pass the floor to André to conclude our call.
Thank you, Ana, thank you, Gustavo, who are with us during this conference call. Thank you to the participants. What we do here is due to the trust you have in us. With this consistent delivery, thank you to the team. Yes, we're here, Gustavo and Ana. But behind us, we have more than 2,000 people working in our operations. So thank you to the team, which is very committed.
Before coming here, Gustavo and I spent all morning working on human resources, people management, performance evaluations of managers. It was very good. Not only the strategy is clear, not only the processes are robust, but people. The company values people and the development of people. Tomorrow, there will be -- we will have other people, other minds, and we have to instruct them. The company was certified as a great place to work a few years ago. And I always say that this is the guarantee of sustainability and guarantee to you, investor. We want every leader to invest 35% of their time with people management. Now it's doing follow-up, giving feedback. This enables us to say this company has a lot of success and will continue successful because we work well with people. We have the trust. We deliver results. And delivering results means to have your trust as investors.
So we're very happy. Now we're going into a new cycle, and you can be sure that this team will be working in a very solid way for recurring delivery of results, which is what you expect from us. Thank you, and a good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]