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Sugar price slide steals thunder from Adecoagro

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A further slide in sugar prices took some of the wind out of the sails of Adecoagro, which revealed that lower-than-expected revenues and earnings were down in part to a decision to delay sales of sugar and tap higher values.

The South American farm operator, in which investment legend George Soros is the top shareholder, reported an 82% slump to $4.61m in earnings for the October-to-December quarter, well below the $15.4m that Wall Street had factored in.

The fall - while in part down to higher interest payments for debt run up paying for a new Brazilian cane mill, and to lower agricultural commodity prices cutting the value of its crops – reflected also a relatively small rise in sales, of 17.3% to $144.7m.

Investors had expected sales of nearly $196m.

However, Adecoagro highlighted the role of delaying sales from its Brazilian Centre South sugar and ethanol business in the hope of exploiting higher prices, which indeed rallied in New York's ICE futures market to their highest levels since October earlier this month.

'Postponing sales'

Although the group's sugar production rose 23%, year on year, in the October-to-December quarter, an increase down to the ramp up of its Ivinhema mill, its sales of the sweetener rose 19.1% by volume.

After similar tactics in previous periods, sugar inventories ended last year at 47,096 tonnes, a jump of 59% year on year, with ethanol stocks up 46% at 74,264 cubic metres.

Adecoagro highlighted a "commercial strategy to carry sugar and ethanol inventories into the inter-harvest season to capture higher prices, postponing sales and margins to the first quarter of 2014".

The Brazilian Centre South cane harvest grinds to a halt around late November, as seasonal rains begin, typically picking up again in March-April.

However, the comments came as New York raw sugar futures tumbled further from their March 6 high of 18.47 cents a pound, standing at 16.73 cents a pound on Friday, down 1.9% on the day.

Dairy boost

Adecoagro revealed improved results at its dairy division, which achieved operating profits of $2.68m for the quarter, compared with a $1.64m loss a year before, helped by a 22% rise in Brazilian milk prices and higher cow productivity.

The group's more than 6,000 cows on average produced 32.8 litres per day last year, compared with 30.0 litres per day in 2012.

In crops, the group reported damage to its sunflower harvest from Argentina's late 2013 dryness, saying yields had come in at a below-average 1.4 tonnes per hectare.

However, the wheat crop harvested late in the calendar year produced a yield of 2.6 tonnes per hectare, a rise of 44% year on year, and rains last month had helped soybeans and most corn crops avoid permanent damage from the hot and dry weather.


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