Adecoagro Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 12, 2026

Key Takeaways

  • Positive Sentiment: Adjusted EBITDA reached record levels of $258 million year to date and $173 million in Q2, led by stronger fertilizer pricing, higher production, and operating efficiencies.
  • Positive Sentiment: Fertilizer EBITDA more than doubled year over year as urea production rose 22% and prices surged to nearly $800 per ton; management expects full-year fertilizer EBITDA to exceed its original projection.
  • Neutral Sentiment: Sugar, ethanol, and energy EBITDA declined to $53 million in Q2 as sugar prices and sales volumes fell, although cane crushing increased 3% and the company remains on track for low-double-digit full-year volume growth.
  • Positive Sentiment: The pending Carapó Mill acquisition is expected to be accretive, with management citing surplus cane, operating and commercial synergies, and potential to nearly double the mill’s crushing volume; closing is expected in the coming weeks.
  • Neutral Sentiment: Net leverage was 3.0x on a pro forma basis due partly to seasonal working capital and inventory buildup, while liquidity improved to 1.9x; management continues to expect deleveraging and plans to pay a total annual cash dividend of $35 million.
AI Generated. May Contain Errors.
Earnings Conference Call
Adecoagro Q2 2026
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's 2026 Second Quarter Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Emilio Gnecco, CFO; Mr. Renato Junqueira Pereira, sugar, ethanol, and energy VP; and Mrs. Victoria Cabello, Investor Relations Officer. We would like to inform you that this event is being recorded, and all participants will be in the listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section. At this time, further instructions will be given. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro's management and on information currently available to the company.

Operator

They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Adecoagro and could cause results to differ materially from those expressed in such forward-looking statements. Now, I would turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Good morning, and thank you for joining Adecoagro's first half 2026 results conference. Consolidated adjusted EBITDA marked new records, reaching $258 million year-to-date and $173 million during the second quarter, reflecting the earnings potential and scale that our well-diversified agro-industrial platform now has. In fertilizers, stronger operational performance during the quarter resulted in higher production volumes, while higher prices and cost efficiencies supported further margin expansion. Given higher than expected prices during the first half, we expect the annual performance from this segment to be above our initial projections. In Brazil, the sugarcane plantation is in excellent conditions. The investments and work done over the years to improve cane productivity are paying off as weather conditions have normalized. Sugarcane availability is now driving the crushing volume growth. This is also one of the reasons why we view the acquisition of Caarapó Mill as highly accretive.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

We believe this asset will enable us to organically expand our sugar and ethanol operations by milling the surplus cane that our cluster currently has, while further strengthening our presence in the region. As we capture the operational synergies, we see potential to unlock value by increasing the crushing and consequently reinforcing our position among the lowest-cost producers in the industry. Given its earnings potential, this expansion does not alter our deleveraging progress, nor our target net debt to EBITDA for the full year. In food and agriculture, stronger productivity enabled higher cost dilution. Raw milk production has improved, supporting higher processed volume in our industries. As the new crop is being commercialized, margins should improve, supported by a more efficient cost structure. To conclude, I would like to express my gratitude to all the teams in Adecoagro.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

It is because of their commitment that we continue to achieve new milestones despite the different commodity cycles which we navigate. Thanks to our shareholders for their continued support. Now I will let Emilio walk you through the numbers of the period.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

Thank you, Mariano. Good morning, everyone. Please now turn to page four with a summary of our consolidated financial results. As a reminder, we are presenting our numbers on a pro forma basis, assuming our fertilizer business had been part of Adecoagro since the beginning of 2025. We believe this provides a more meaningful year-over-year comparison. Gross sales totaled $535 million during the second quarter, while on an accumulated basis, they reached $928 million. Despite higher revenues in our fertilizers segment, overall revenues remain in line across both periods, reflecting mixed prices and volume dynamics across our product portfolio. Adjusted EBITDA set new high records. The main driver was the strong performance of our fertilizer business, which benefited from higher production, stronger pricing, and operational efficiencies.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

Such performance more than compensated for the softer results in sugar, ethanol, and energy and food and agriculture businesses, which I will discuss in a moment. Let's move to slide six and review the financial and operational performance of the sugar, ethanol, and energy segment. Despite experiencing above-average rainfall, particularly in May, we crushed 3.5 million tons of cane during the quarter, up 3% compared to the same period of last year. This continues the positive trend we have seen since the start of the year. Cane yields have recovered thanks to the better moisture conditions. Although TRS levels remain below last year's, they have been improving steadily throughout the year. In terms of product mix, we continue to maximize ethanol production given its attractive premium over sugar. As a result, we reached 78% ethanol mix year-to-date.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

By comparison, during the first half of 2025, we maximized sugar production. This shift highlights one of the key advantages of our industrial assets, the flexibility to quickly change production toward the product offering the highest marginal contribution. On the cost side, production costs were negatively impacted by the appreciation of the Brazilian Real. Excluding the FX effect, our year-to-date production cost in local currency remained in line with the previous year. Turning to sales, the decline we saw this quarter was mainly driven by lower sugar prices and lower sugar volumes sold, reflecting the change in our production mix. For ethanol, lower sales volumes were actually part of our commercial strategy. Following the sharp decline in domestic ethanol prices caused by higher market supply, we decided to start building inventories rather than selling at current market prices.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

As a result, we finished the quarter with about 41% of our year-to-date ethanol production stored in inventory, positioning us to capture stronger margins once prices recover. This follows the strategy we implemented during the first quarter when we sold inventories and current production while prices were at their peak ahead of the new harvest. Overall, adjusted EBITDA reached $53 million during the quarter and $94 million year-to-date. The decline compared to last year reflects lower sales as well as lower Consecana prices in the mark-to-market valuation of our biological assets, particularly harvested cane. Looking ahead, crushing is progressing as planned, and we are still on track to achieve our full-year target. We continue to expect low double-digit growth in crushing volumes this year, supported by greater cane availability. Now, let's turn to slide eight to discuss our fertilizer operations.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

Urea production increased 22% year-over-year, driven by higher plant utilization and importantly, zero downtime during the quarter. As a result, year-to-date, urea production reached 617,000 tons, remaining well above last year's level, which was impacted by 31 days of downtime due to adverse weather conditions that disrupted gas supply, as discussed on previous calls. On the commercial side, results benefited from a significant increase in international urea prices. Following the escalation of the conflict in the Middle East, a region responsible for roughly 30% of global urea trade, prices reached nearly $800 per ton during the quarter. As we executed sales throughout the period, we were able to progressively capture the surge in prices. Accordingly, adjusted EBITDA more than doubled both in the quarter and on a year-to-date basis. In addition, higher production volumes, together with operational efficiencies, drove a meaningful expansion in margins.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

Although urea prices have moderated from the peaks reached in April and May, we still expect full-year EBITDA from this segment to be above our original projections. This outlook is supported by higher prices captured in the first half of the year, while most of our cost structure remained fixed. Please move to page 10, where we describe the performance of our food and agriculture segment. As of the end of July, we harvested 92% of the planted area, achieving yields above the prior campaign and producing more than 1.1 million tons of crops. We expect to complete the harvest season during this month and have already begun planting activities of our winter crops for the next season. In dairy, processing volumes increased compared to last year, driven by higher raw milk production at our free stall facilities due to better cow productivity.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

Looking at financial performance, year-to-date, results still reflect lower commodity prices across much of our portfolio, along with higher costs in USD terms. That said, if we focus on the quarter itself, both revenues and adjusted EBITDA improved year-over-year, supported by higher production volumes and a gradual recovery in margins as we begin sales of the new harvest. We expect margins to continue improving over the next few quarters as the benefits of our cost reduction initiatives become more visible. In dairy, we also expect to continue growing processed milk volumes, supported by the launch of new products under our consumer brands. Let's move to slide 12 and review our capital allocation strategy, starting with expansion CapEx. Year-to-date, our largest capital deployment was the final payment of approximately $400 million related to the acquisition of Profertil, which was completed during the previous quarter.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

At the same time, we continued investing in a number of attractive organic growth opportunities across our businesses. These investments include the expansion of our sugarcane plantations and biomethane operations in Brazil, as well as additional agricultural machinery and new cheese packaging line at our Morteros dairy facility. Before moving on, I would like to highlight that these figures do not include the acquisition of Caarapó Mill, which remains subject to customary closing conditions. We expect the transaction to close in the coming weeks, with the purchase price paid in cash at closing. Given the estimated earnings contribution from the asset, we do not expect the acquisition to affect our deleveraging targets for year-end. Now let's move to page 13, where we present our debt profile.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

As we typically experience at this point of the year, net debt tends to peak due to the seasonal working capital requirements associated with our agricultural operations. If we exclude that seasonal effect, as well as the $58 million increase in readily marketable inventories during the quarter, net debt would already be below 2025 year-end levels. On a pro forma basis, net leverage stood at 3x, which remains consistent with our deleveraging path and reflects the stronger earnings generation we are seeing across the operations, despite the seasonality in cash needs and our commercial strategy to hold inventories for some of our products in anticipation of better pricing opportunities. Looking forward, we continue to expect leverage to decline as EBITDA generation increases. On the liquidity side, our ratio improved to 1.9x compared to 1.2x in the previous quarter, demonstrating our ability to comfortably meet short-term obligations.

Emilio Gnecco
Emilio Gnecco
CFO at Adecoagro

Please note that most of our debt remains long-term and that its currency composition is closely aligned with our revenue profile, helping reduce foreign exchange risk. Finally, regarding shareholder returns, the first installment of our annual cash dividend totaling $17.5 million was paid on May the 19th, equivalent to $0.12 per share. The second installment in the same amount will be paid in November, resulting in a total annual cash dividend of $35 million. Thank you very much for your time. We will now open the call to questions.

Operator

Thank you. The floor is now open for questions. If you have a question, please write it down in the Q&A section or click on Raise Hand for audio questions. Please remember that your company's name should be visible for your questions to be taken. We do ask that when you pose your question, you're picking up your headset to provide optimum sound quality. Please hold while we pull for questions. Our first question comes from Gustavo Troyano with Itaú BBA. Sir, your microphone is open.

Gustavo Troyano
Analyst at Itaú BBA

Hello, everybody. Thanks for taking my question. It is actually on Profertil, and more specifically on the mismatch between production figures in the quarter and sales volumes that you reported for this quarter as well. Basically, I just wanted to hear from you what could be attributed to the usual seasonality of sales volumes and what could relate to maybe one-offs in the quarter, potentially driven by urea price hike or something like that. Still on this point, maybe if after the first half, if we should expect Adecoagro's urea sales volumes for the full year to reach the 1.3 million tons for the full year, concentrating volumes in the second half, or if there could be some downwards adjustments to sales volumes after what happened throughout the first half of the year. Thank you very much.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Hi, Gustavo. Thank you very much for your question. I think this helps for a whole clarification of how we sell the urea. We produce 1.3 million tons per year, so we are going to sell 1.3 million tons in the whole year. Argentina consumes 2.5, so there is no way that we cannot sell the 1.3. So 1.3 is for sure something we will always be selling, and we could be selling all what we produce every month, and that is easy to do it.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

We have a strategy where usually and in general over the years, during September, October, and November, is the maximum consumption of the urea from producers. So in general, that would be where the higher prices in the domestic market of Argentina we can find. So we try to concentrate more sales in that specific part. That is for the general years. This year in particular has, as you mentioned, this peak because of the war during March and April. So in April we tried to maximize the peak. That is why we are selling more than what we originally projected in the first half. So what you can see there is the first half we sell more or less the average that has been sold in the previous years. But in this specific year, we were pushing to sell more.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

In June, you may not remember, but in June, the price of urea went down as far as lower than the previous year and lower than July and August. So during June we had the lowest price of urea. That is why in June in particular, we decided not to push on the sales as we were pushing in April and May on what we had produced. So, that is specifically why this particular month or this particular quarter, you are not selling all the production being sold. And we are happy with that decision because in June the price was lower than today's prices or July and August. So we have more inventory today to be sold at a higher price. Of course, we would have sold 100% in April. That is the maximum.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

But in April we pushed, and we tried to sell as much as possible, but we couldn't. This is a spot price that every week is being sold, and that's how urea commercializes in general. So that is important to make that specific clarification. And thank you for the question.

Gustavo Troyano
Analyst at Itaú BBA

That's clear. Thank you very much.

Operator

Our next question comes from Matheus Enfeldt with UBS.

Matheus Enfeldt
Matheus Enfeldt
Analyst at UBS

Hi. Morning, everyone. Thank you for the time. My first question on sugar and ethanol. You had in previous calls mentioned an expectation of a drop in cash cost of 10%-15%, if I'm not wrong. If you could provide any updates around that level of cost efficiency or cost improvements for this crop. If you still think that that number is reasonable when you're looking to the entire crop. That's my first question. Then the second one on the acquisition of the Caarapó Mill. I understand there's potential synergies to capture higher crushing. My question is, what's the excess capacity or excess sugarcane that you currently have? And how do you think, or how do you anticipate, that cost move, with a higher or a larger radius for sourcing once you end that plant? And if you could sort of help us get a sense around that.

Matheus Enfeldt
Matheus Enfeldt
Analyst at UBS

And then just to finalize on that, on what is a reasonable outlook for crushing for that mill for 2027 if it is already possible for you to reach 4.5 million tons above the 3.5 that the mill crushed last season? So those are my questions. Thank you.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Hi, Matheus. Thank you for the question. On the projection of the yield of the full milling for Caarapó Mill on 2027, we do not give that guidance, and we want to close first, and then we will explain more details on Caarapó Mill. On the rest of the questions, including some of the synergy from Caarapó Mill, Renato can take the cost and how the cost can be impacted with Caarapó Mill, and what are the synergies also with Caarapó Mill. Renato?

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

Hi, Matheus. Thank you for your question. As it was mentioned, we see Caarapó Mill as an extension of our cluster in Mato Grosso do Sul. So we are going to adopt the same operational model there. And we have the same competitive advantage. So our plan in the future is to do the continuous harvest. We are going to take advantage of the high production flexibility that Caarapó Mill also have, the high cogeneration potential, the ICMS tax rebate that is exactly the same as our mills in Mato Grosso do Sul. And we think that Caarapó Mill has a potential to increase the effective crushing a lot, almost double the crushing. This is because the capacity of Caarapó Mill is very similar to the capacity of Ivinhema.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

So if you consider the milling capacity, the sugar production capacity, ethanol capacity is very similar to Angélica and Ivinhema mills.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

We also think that we have a lot of opportunities to improve some KPIs and to reach the same level as you have in Mato Grosso do Sul. For example, industrial efficiency—we think we have 2% higher than Caarapó Mill. The use of time is also more than 2% higher. The cogen exports, kilowatts of energy per ton of cane crushed, we think we can improve. And also some improvements in agriculture, both in yields and TRS. To finalize the synergies, we think that we have a lot of synergies related to G&A, so we are going to keep the same structure that we currently have to also use this in Caarapó Mill. And we are going to also benefit from the logistic than commercial assets. So we are going to take advantage of the tanks that Caarapó Mill has, warehouse.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

I think there are a lot of synergies that we are going to get in the next years. Of course, part of the sugarcane, as Mariano mentioned, from the cluster, we are going to send to be crushed in Caarapó. Regarding the other part of your question, the cost, I think it is important to say that quarterly costs might have some temporary distortion caused by cost allocation and industrial seasonality. It is our better to analyze the costs based on the year cost. Even with this consideration, we think that it is still possible to reach the 10% reduction cost compared to last year. I think this is explained first by the cost dilution. We plan to crush approximately 10% more than we crushed last year. We still have plenty of time to do it.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

Of course, it depends on the weather, but at this point, it is still possible. This has an extra cost dilution. The leasing cost is much lower because of the Consecana price. The headcount has been reduced. This is because of some efficiencies that we have been obtaining, especially because of the use of new technologies such as two-row harvest machines, grunners. We have decreased the number of harvesting fronts, reducing the number of people working on those fronts. This is more than enough to offset some diesel and fertilizer increase in costs. We think it is still possible to have this 10% reduction.

Matheus Enfeldt
Matheus Enfeldt
Analyst at UBS

That is helpful. Thank you.

Operator

Once again, if you have a question, please write it down in the Q&A session or click on raise hand for audio questions. Our next question comes from Pedro Gama with Citi.

Pedro Gama
Pedro Gama
Analyst at Citi

Hi, Mariano and Adecoagro team. Good morning. Thank you for the opportunity to ask questions. On my side, I have two questions in the fertilizer segment. In the past, the management highlighted that the likely expansion of the Profertil plant as a key growth avenue. However, during the previous weeks and months, a major Argentinian competitor in the gas sector announced investment in a new greenfield urea plant in the same region as Profertil. Building on that, I would like to ask about two questions. First, how does the Profertil current cash cost structure compare to this peer that is vertically integrated in gas production compare itself? Is the unit cost difference significant? How does this affect Adecoagro long-term competitive position in the Argentine arena? Another question: given that the likely Profertil expansion is a brownfield project, should this theoretically be faster to implement?

Pedro Gama
Pedro Gama
Analyst at Citi

What would be the key triggers or market conditions required for you to make a final investment decision? Is that a strategic urgency to bring this new capacity online before your competitor, thereby capturing a first-mover advantage in the domestic market, which usually has higher margin than exports to Brazil, for example? Could this expansion be postponed in light of the company focus to deleverage? I believe that is the main points. Thank you.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you, Pedro, for your question. Very important. Number one is South America imports 10 million tons of urea, 10 million tons. We produce 1.3 million tons, and the announcement is to produce 2.1 million tons. So there are still a lot of need of urea in the whole region. This announcement is to produce urea in four or five years from now, so there is still a lot to go. When you ask to compare the cost of production from one system to the other, still a lot to understand on what is the other cost. We know exactly what are our costs, but there are a lot of costs on the other side that still need to be understood.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

In terms of gas and the cost of gas, the gas is very transparent market. We have to renew our contracts, as we said before, and we expect those contracts to be better in terms of prices than what they are today. We are having offers of gas way cheaper than today. There are still a lot of gas available in the region, so we do not see any disadvantage in buying gas in the region to the competitors or any other competitor there in the region. Argentina, as we have been explaining for many times, will be a huge exporter of gas. So we are always going to be a buyer of gas at the export parity, as we have been always saying; that is going to be very competitive. So, we still believe that we are going to continue to be the lowest-cost producer.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

When you think on the selling on the domestic market or on the export, depending on where, because with the logistics and the port that we have in Bahía Blanca, we are very competitive to go to Brazil, as competitive as to go to Puerto General San Martín, that are the northern ports in Argentina. The differences between the domestic and the export market, when we think on the Brazilian market, are not going to be really relevant. That is to understand what the impact of a new plant is in the whole 10 million tons that the region is importing. Then, going to our own project that you were asking about, we continue to understand, analyze, go deep, do the engineering, and work on the engineering on our brownfield project. Of course, we have a lot of benefits because of having a brownfield project there.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

We know exactly where the location, the plant, and where it is going to be. Behind the existing one, there are a lot of synergies with our existing assets. We are still very keen on that project. We are very interested on continue to understand and also continue to understand what is the real cost of producing it, of building the plant, and how is the best way to produce this plant or to build this plant in order to continue to be the lowest-cost producer. There is where we are focusing, and how efficient is that we can build this new plant that, of course, is a relevant investment.

Pedro Gama
Pedro Gama
Analyst at Citi

Very clear. Thank you.

Operator

Our next question comes from Lucas Ferreira with J.P. Morgan. Your microphone is open.

Lucas Ferreira
Lucas Ferreira
Analyst at JP Morgan

Hi, guys. Thanks for the time. I have two questions. The first one on the commercialization strategy for sugar and ethanol. Renato, if you can talk about, in your view, what are the reasons for ethanol prices to be extremely low, right at this point, and how the company is reacting to that. I guess, looking at your numbers, you are carrying a large amount of inventories to be sold later in the crop. So, how much of a capacity you have to carry, if that is still the strategy that you guys are rolling for the second half of the year? On the sugar prices, if this recent rally in prices drives you guys to accelerate selling and if this is already levels that you think are good enough to do a major acceleration of selling there in the market.

Lucas Ferreira
Lucas Ferreira
Analyst at JP Morgan

If I may, a second question: more on the Argentina farming side. A bit of your outlook, considering that we have this strong El Niño coming in. The business has been more and more challenging the last few years. How much of a recovery in, let us say, normal, what you think is sort of a baseline yields for the crops, and potential yields for the crops. So how much of that gap closure we should see, assuming that El Niño will mostly support rainfall right in the country? Thank you very much.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you, Lucas, for your question. I am going to ask Renato to answer the commercialization, the sugar and ethanol, and our strategy with sugar now.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

Hi, Lucas. Starting with ethanol. I think the supply of ethanol was high due to the progress of the sugarcane harvest and the corn ethanol. That is why prices decreased a lot, especially in June and July. With this price, the parity rate at the pump decreased as well. The parity rate is lower than 6%. Since early August, we have started to see some signs that demand is picking up, so more liquidity. We have already seen increase in price compared to July, about 5%. What we are doing, and I think most producers in Brazil are doing too, is switch the mix to sugar. This is going to decrease the supply of ethanol.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

We think that the combination of a lower supply and a higher demand, the situation for Q4 and Q1 is going to be better. That is why our strategy is to carry as much ethanol as possible to be sold at this point. We have capacity to carry our production, especially because we have also switched the mix to max sugar. Of course, in a few weeks, we are going to have all the tanks of Caarapó that we can also use to store our production. Regarding sugar, we think we are in a moment that the marketing is shifting from 3 million tons of surplus to a deficit of about 2 million tons for different reasons in the most important production countries: India, Thailand, European Union, and Brazil.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

If you take this with the fact that the lowest stocks worldwide, the stocks-to-use ratio is still very low. If you think the whole picture, we think the price of sugar has reacted because of this situation. Of course, we are taking the opportunity that the marketing is giving us in these rallies to increase our hedging, both in 2026 and in 2027. Today, currently, we are 7% hedged in 2026 at $0.1570 per pound, and in 2027, we are about 16% hedged at $0.1740 per pound. This is not counting Caarapó production.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you, Renato. Lucas, finally, on El Niño that you were asking on the impact on Argentina, we have an impact on the yields in general, where we expect normalization of yields or improvement of yields. That is, of course, welcome, and that is also including a benefit in terms of the whole cost structure that we have for the food and agriculture business. Even more important than that, because of El Niño, we are also seeing a recovery on the price of rice, that rice is an important product that we produce in Argentina and Uruguay, so that will have an even higher impact. In general, El Niño for us is a positive scenario. On top of that, the needs of urea are higher in the whole agriculture of Argentina because of more rains.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Usually, the consumption of urea in the whole country is higher because of El Niño projection.

Lucas Ferreira
Lucas Ferreira
Analyst at JP Morgan

Thank you very much, guys.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you, Lucas.

Operator

Our next question comes from Isabella Simonato with Bank of America.

Isabella Simonato
Isabella Simonato
Analyst at Bank of America

Hi, Mariano, Emilio. Good morning. Thank you for the call. I have two questions. First, since we are talking about the food and agriculture business, right? This year, you reduced planted area significantly, right? Given the economics, but now we are ahead of maybe a more favorable scenario. Prices picked up a little bit, yields as well. If you can give us a sense, how can we think about planted area for the 2027 campaign? I think this would be very helpful. Second, back to the sugar and ethanol discussion, right? I think we talk a lot about the surplus or deficit in the sugar market, but we have been seeing indeed in the inventories declining, right, over the past few seasons, but that not necessarily has been translated into prices that we have seen in the past with similar level of inventory.

Isabella Simonato
Isabella Simonato
Analyst at Bank of America

So part of that, I believe, is with China running lower inventories or the trade flow that is still balanced with Brazil producing above 40 million tons. Can you explain, in your views, what would actually need to happen globally for prices of sugar to go back to $0.18, $0.19, and $0.20 per pound? Thank you.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you, Isabella, for your question. Regarding food and ag and the planted area, you shouldn't expect differences to this year. We are maximizing returns. We are being very focused on only leasing and planting the areas where we continue to see the returns that we are looking for. So I don't see that changing in any significant way. At least I don't see that area growing significantly. Regarding the sugar and ethanol, and what's the scenario or what should need to happen to go back to the $0.19 per pound in sugar. Renato, if you want to add something to what you've already said.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

No, I think it will depend a lot of the El Niño impact on the key countries. Of course, the impact can be higher or lower. This switch from 3 million-2 million deficit, I think, can be higher depending what happen in those key countries. For example, India, we know that the stocks are very low. They are announcing some measures to avoid import sugar. But it, of course, is going to depend on the monsoons that is going to happen there. In Thailand, the same thing. Even in Brazil, despite the higher cane availability that we have in Brazil, I think there are a lot of interruption in the crushing. The TRS content, especially in June, was lower than everybody was expecting. The mix is less sugar-oriented than everybody was thinking at the beginning of the season.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

I think all those variables are going to impact the size of the deficit and the price of sugar in the coming months. I think that the world has learned to deal with lower stocks, maybe because of higher interest rates, improvement in logistics. But, of course, the fundamentals at some point has to prevail, and price has to increase.

Isabella Simonato
Isabella Simonato
Analyst at Bank of America

Very helpful. Thank you.

Operator

Once again, if you have a question, please write it down in the Q&A session, or click on raise hand for audio questions. Our next question comes from Thiago Duarte with BTG Pactual.

Thiago Duarte
Thiago Duarte
Analyst at BTG Pactual

Yeah. Hello, everybody. My question goes back to the Caarapó Mill transaction, and I think to Renato. Two things here, Renato. The first one, when we look at M&A deals in the industry, I guess one of the historically most challenging aspects is the quality of the sugarcane that comes along with the mill, right? My first question to you is whether you have a view on the quality of the cane that you're going to be harvesting, coming along with the Caarapó Mill in terms of cultural treatment, in terms of the quality, especially the longer cut cane, fifth cut or sixth cut cane. I don't know if you already have a view on that.

Thiago Duarte
Thiago Duarte
Analyst at BTG Pactual

The second one is related to when you talk about the optimism about raising the crushing volumes or almost doubling the crushing volumes, as you said, what you would say is the necessary CapEx you're going to have to do in terms of the expansion of the planted area, or similar investments that will need to be done? Or do you think you will have the additional 2.5, 3.5 million tons of cane available from your existing plantations? These would be my questions. Thank you.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you, Thiago, for your question. Renato?

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

Yeah. Okay. Thiago, we think that the region is very similar to our region, so the potential to produce sugarcane is exactly the same as Ivinhema. The potential to have the tons per hectare and the kilograms of TRS per ton of cane is exactly the same. Of course, we are going to adjust some treatments because we have different methodologies to treat the sugarcane that they are using today. But we think that is something very quickly to fix, and probably we'll have a better cane in the near future. Regarding the excess of cane that we have in the cluster, we think that we have already something close to between 500,000 tons and 1 million tons that could be diverted to be crushed in Caarapó for the next two, three years.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

But of course, in order to achieve 6 million to 7 million tons, which is very possible considering the industry that we are acquiring, of course we have to plant more sugarcane. The only additional important CapEx that we need to do to achieve these levels is to plant sugarcane. The industry is almost done, so few investments has to be made to achieve this level.

Thiago Duarte
Thiago Duarte
Analyst at BTG Pactual

Okay, that's great.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Just to complement Thiago, we visited the plantations, and the plantations are in a good mood today, which is not something that had to be changed. Just a clarification.

Thiago Duarte
Thiago Duarte
Analyst at BTG Pactual

No, that is perfect. Renato, you also mentioned that you see a possibility or opportunity to improve the yields of the cogen in the mill. The question there would be if there is also, you think, a CapEx associated with it in terms of improving the megawatt per ton generated.

Renato Junqueira Pereira
Renato Junqueira Pereira
VP of the Sugar, Ethanol and Energy Business at Adecoagro

Yes, there are some CapEx, but it is a small CapEx. We are thinking about things like isolate the main equipment, so we are going to improve the consumption of energy in the mill. If you consume less energy, we have more energy to be exported. But those investments are not big investments like acquiring a new boiler. We are not thinking about this type of investment, just some adjustments in things that we have already seen in our visits at the mill.

Thiago Duarte
Thiago Duarte
Analyst at BTG Pactual

That is perfect. Thank you.

Operator

This concludes the questions-and-answers section. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.

Mariano Bosch
Mariano Bosch
CEO at Adecoagro

Thank you all for participating today, and we hope to see you in our next calls.

Operator

Thank you. This concludes today's presentation. You may disconnect at this time and have a nice day.

Executives
    • Mariano Bosch
      Mariano Bosch
      CEO
    • Emilio Gnecco
      Emilio Gnecco
      CFO
    • Renato Junqueira Pereira
      Renato Junqueira Pereira
      VP of the Sugar, Ethanol and Energy Business
Analysts
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