BrasilAgro revealed that it had pulled back on hedging its
soybeans after being caught out by the rally in 2012-13, as the Brazilian farm
operator revealed a narrowing in losses.
The Sao Paulo-based group - whose land portfolio amounts to
285,300 hectares, including 117,300 held in a 50% joint venture – said that it
had sold forward 87% of its soybeans from the 2013-14 harvest, which is nearly
The group, which "began building hedge positions for the
2013-14 harvest in the first half of
[calendar] 2013", obtained an average price of $13.05 a bushel.
A year ago, BrasilAgro had sold ahead 99% of its soybeans
for 2012-13, after beginning to "build up hedge positions" in the first half of
'Negative hedge results'
However, that proved a losing strategy as even through BrasilAgro
last season achieved a higher price from hedging its soybeans, of $13.39 a bushel,
that proved small beer compared with the level that prices achieved.
Chicago futures hit their record high of $17.94 ¾ a bushel
over 2012-13, leaving BrasilAgro swallowing a hit of R$16.7m in the nine months
to the end of March 2013 on its hedges.
"Since the beginning of the building up of these positions,
soybean prices have increased significantly, generating negative unrealised
hedge results that impacted our income statement," the group said a year ago.
This time, the hit on unrealised derivative positions was
not eliminated, but reduced to $4.93m.
BrasilAgro remained further ahead in sales than peer SLC
Agricola - one of Brazil's biggest farming groups, cultivating an area of more
than 340,000 hectares, the size of the UK county of Somerset – which had sold
forward 78% of its soybeans as of the end of April, achieving $13.16 a bushel.
SLC had sold forward 86% of its cotton too, at 89.10 US
dollar cents a pound.
BrasilAgro unveiled its hedging retreat as the group announced
a loss of R$2.36m for the January-to-March period, down from a R$4.28m loss in
the same quarter last year.
Sales jumped 35% to R$28.1m, helped by a 21% rise in the
volume of soybean sales.
At the level of earnings before interest, tax, depreciation
and amortisation (ebitda), the group returned to an underlying profit of R$8.84m,
compared with a loss of R$725,000 a year before.