Good morning, everyone, and welcome to the earnings conference call on the fourth quarter 2023 for SLC Agrícola. My name is Rodrigo Gelain. I am Financial and Investor Relations Manager. Joining us this morning is our CEO, Aurélio Pavinato, and our CFO and IRO, Ivo Brum. It's a privilege to be with you this morning. We'd like to inform you that the video conference is being recorded and will be available from the company's IR website together with today's presentation. We would like to emphasize that if you need simultaneous translation, this tool is available in Zoom with the globe icon and under the label Interpretation at the bottom of your screen. When selecting it, please choose your preferred language, Portuguese or English. If you're listening to the video conference in English, you can also mute the original audio by clicking on Mute Original Audio.
For the Q&A, our question and answer session, your questions should be submitted via the Q&A icon at the lower part of your screen. Your names will be announced so that you can ask your question live. At this time, a prompt to activate your microphone and camera will appear on the screen. If you prefer not to use your microphone and camera live, please write "no microphone" at the end of the question, and then I will read it aloud. We would like to highlight that the information contained in this presentation and any statements that may be made during the earnings video conference call relative to the business projections and operating and financial targets of SLC Agrícola are based on our beliefs and premises, together with currently available information.
Future considerations are not guarantees of performance as they involve risks, uncertainties, and premises, and refer to future events, and therefore depend on circumstances that may or may not occur. Investors should be aware that general economic conditions, market conditions, and other operating factors could affect SLC Agrícola's future performance and lead to results that differ materially from those expressed in future considerations. Now, I would like to turn the floor over to our CEO, Aurélio Pavinato, who will begin our presentation. Pavinato, you may proceed.
Good morning. Thank you very much. We would like to thank you for attending our earnings conference call for the fourth quarter 2023 for our company, SLC Agrícola. Please, let's go to slide four for some comments on the cotton market scenario. In the beginning of 2023, the market showed concerns with an outlook of slow economic growth in the European Union and United States and of the consequent reduction in demand for cotton. As a result, international prices dropped. More recently, demand picked up and the textile industry is now running back to historical levels, and as a consequence, there was good recovery of cotton quotes in the international market. In the current scenario, we also see the reflection of important losses in production in the North American crop, which final output should be around 12.4 million bales, the lowest level in the past 14 years in American territory.
In Brazil, the 2022/2023 crop was an all-time high in the global production context, and consumption should have a positive balance of just 0.7 million bales, and this will be a main lever for the recovery of prices in the international market. Let's please now move to slide five to discuss soybeans. The soybean quotes in spot contracts at CBOT was showing a declining trend along 2023, down 12.9% vs 2022. The previous crop year, 2022/2023, was marked by the recovery of global stocks with a positive balance of 13 million tons in the comparison between production and consumption. This has been a main driver of the deceleration of prices of commodities. In the current cycle, 2023/2024, we had the impact of losses due to the drought in the U.S. with a reduction of the acreage in the annual comparison in that American country.
Production was initially estimated at 122.7 million tons and is now only at 113.3 million that were harvested. This represents net losses of approximately 10 million, according data from the USDA. As for the Brazilian crop, we had to face a more challenging early cycle with lower rainfall and climate that was less than favorable in some very important regions, such as the state of Mato Grosso. In its latest report, CONAB has revised its production estimate to 149 million tons, down 6.8% in relation to the previous estimates. In the global scale for the crop 2023/2024, USDA estimates that the balance between supply and demand should show production outstripping consumption by approximately 15.2 million tons. The monitoring of the development of the South American crop is of utmost important and will help consolidate the global supply and demand balance according to the estimated levels.
Now on slide six, let's talk a little bit about corn. Corn prices in spot contracts at CBOT fell 29.7% in 2023. In the 2022/2023 crop year, there was a deficit in the relationship between production and consumption of 1.4 million only, which supported corn prices up to the first half of 2023. Now, the crop year 2023/2024 in America has shown an increase in acreage and yield in spite of some climate constraints. In Brazil, the second crop corn started to be planted in February 2024, and there is an expectation of lower production because of the reduction in acreage. In the global scenario, we expect that there will be 35 million tons according to the USDA. Now, let's move to slide eight in which we'll discuss the operating performance in the 2022/2023 crop year. We have seen in that crop year excellent levels of yield.
Even with a reduction of 20% in fertilizers, we maintained good yields of soybean, very close to our records, and production of lint cotton and second crop corn were records for the company and superior to the average in the country. In soybean, we reached the yields of 3,904 kg per hectare, 11.3% higher than the national average, according to CONAB. Lint cotton production was record-breaking, reaching 2,017 kg per hectare, and in the comparison with the national average, we were above in 5.8%. Corn productivity second season was also record with a productivity of 7,709 kg per hectare, 29.5% higher than the average. Productivities also had a positive impact in unit costs with lint cotton first season with a reduction of 2.4% in cotton, second season 6.5%, in soybean 4.3%, and in corn 2.3%. I'll now turn the floor over to Ivo Brum to talk about our financial performance.
Thank you very much. Let's please turn to slide 10, where we discuss some of the highlights of our performance. In financial highlights, I think it's important to see that our net revenue decreased 1.9%. Even though cotton had increase in prices, the sales volume was lower because of delays in ports. In the calendar year, 42% of the lint cotton that was built corresponds to the 2022/2023 crop year, with margins higher than 2021/2022. Net income amounted to BRL 938 million with a net margin of 13%, and adjusted EBITDA in the year amounted to BRL 2.7 billion with a margin of 37.5%. Now let's move to slide 11 where we can take a look at our cash generation. In 2023, cash generation represented BRL 428.8 million, with the impact of the delays in shipping of the cotton in the year 2022/2023.
We have now a balance of 226,000 tons to be shipped in 2024. Also there was the impact of the purchase of the Paysandu Farm with a disbursement of BRL 290 million. Now let's move to slide 12 to discuss the company's debt. Adjusted net debt closed the year of 2023 in BRL 2.9 billion. The net debt EBITDA ratio was 1.06x as a demonstration of the company's consistency. We are working with very low leverage in recent years. In slide 13, we discussed the distribution of net income by the parent company. In April 2023, our shareholders approved the distribution of dividends worth BRL 602 million, a total of 50% of the adjusted net income of 2022. The administration is proposing the distribution of 50% of the adjusted net income of 2023 of the parent company.
That is BRL 389 million, which corresponds to a dividend yield of 4.7%. Of this amount, we have distributed BRL 28 million as interest on equity paid off in January 2024. In slide 14, some words about our buyback program. In 2023, we repurchased 2.5% of the total shares issued by the company, and we canceled 5.2% of the shares, and we approved in November 2023 a new buyback program to acquire 2% of the shares in circulation. With this, I'll turn the floor over to Pavinato, who will discuss our seeds business and the outlook for the 2023/ 2024 season.
Okay. We can now move to slide 16, where we discuss the status of our crops and also the estimates for 2023/ 2024. We have faced adverse climate conditions in the early days of the cycle, owing to the El Niño phenomenon. The Brazilian Cerrado had lower than average rainfall and high temperatures. Those climate conditions were inadequate for the development of soybeans, especially in the western portion of Mato Grosso State, the hardest hit region. So we had to make adjustments in our planted area to optimize our margins. Up to yesterday, we have harvested 2/3 of our soybeans, and we expect to deliver a yield of 57.2 bags per hectare. Cotton has been 100% planted, and second crop corn is now concluding the planting phase. Our crops are developing very well, and the climate has been favorable since the end of last year.
We have seen very stable rains for the last three months, and we expect to deliver our yields as promised. The drought faced by Mato Grosso State was pernicious for the soybean crops. All the other regions have high production potential, showing how important it is to be geographically diversified. The cost per hectare budgeted for the 2023/ 2024 cycle show an average reduction of 10% in relation to what was budgeted for the 2022/ 2023 cycle. This reduction reflects the decline in prices of our main inputs. Now, let's please turn to slide 17, where we will discuss the results in 2023 in our seed business. We will also make comments about our sales estimates. In 2023, the seed business added EBITDA worth BRL 87 million , with an EBITDA margin of 14.3% and net income of BRL 42 million, with net margin of 7%.
The reduction of EBITDA and net income reflect the increase in general expenses and administrative expenses owing to the increase in personnel to give support to the growth of our operations, besides marketing expenses. In the next slide, number 18, we will disclose our sales estimates for 2024. For soybean seeds, both third-party sales and internal consumption, we estimate 1.2 million bags, and for cotton seeds, we estimate sales for third parties or internal consumption of 143,000 bags. In slide 19, we have a breakdown of sales per channel. In comparison to 2022, the main change was in the sales channel for soybeans for the market, with an increase of 14 percentage points and also better margins. We can now advance to slide 20 for a discussion of the current hedging position that have now been set by the company.
We have made advances in the 2023/ 2024 hedging. In soybean, we are now at 70%, adding all the commitments, and in corn, we are at 38%. Additionally, we have made increases in lint cotton, where the market reacted recently, and we have now 40% of hedging. We also have increased the peaks in the Forex rates to lock the number of cultures and crops. Now let's talk about the input purchase for 2024/ 2025. We will start planting the new crop in September 2024. We have set now the prices of fertilizers, 87% of phosphates, 82% of potassium, and 16% of nitrogenated chemicals. On slide 12, we have the forecasts of climate events for the 2024/ 2025 crop year.
According NOAA data, we see a reversal of the climate pattern with a 74% likelihood of La Niña as of August, September, and October, which is the planting period for soybean in Brazil. In the past three years ended in 2022, the La Niña was present as a climate pattern with an aggressive impact on the south of Brazil and in Argentina, creating a positive impact on grain prices. In short, the return of La Niña could be very positive for the international scenario, commodity prices, and for the production of the Brazilian Cerrado where we operate. Now we can move to slide 24, if you please. As we seek to adopt sustainable practices, we also strengthen our connection with future generations.
SLC Agrícola has made very significant inroads in its environmental, social, and governance performance, as shown by its climb in the ISE B3, which is the corporate environmental index of B3. Previously, we were ranking in the 55th position, and now we are in the 37th position in the preview of this portfolio, showing our continuous commitment to sustainability. We can now advance to slide 25 to share another highlight in ESG. We have certified two farms, Pamplona and Planalto, in the regenerative agriculture practice programs called Regenagri. This is the largest certified soybean and cotton area in Brazil and the Americas. Additionally, in slide 26, we see that SLC Agrícola has reached a rating of A in the climate change CDP Latin America program, and it is now part of the group of leaders in climate change.
Thank you very much. Now let us open our Q&A session. Gelain?
Now let us start our Q&A. Please submit your questions in writing all at once and wait for the company's response. To ask questions, we remind you that you should use the Q&A icon at the bottom of your screen. Your names will be announced so that you can ask your questions live, and at the time, an activation request will be shown on your screen. If you prefer not to open your microphone or camera live, please write "no microphone or camera" at the end of the question, and then I will read it aloud. Let us begin with the first question from Gabriel Barra, Citibank. Good morning, Gabriel. Please feel free to open your microphone and camera and ask your question.
Hello, can you hear me?
Yes, we can.
Thank you very much for taking my questions. Just a second, I am off camera. Well, I have two questions, in fact. Firstly, when we look at hedging, we see the scenario is a little bit delayed in comparison to the previous year. Of course, there was a significant improvement quarter-on-quarter. But in corn, I think that it is still delayed even below the levels of the company. Cotton showed a very strong performance in the past few weeks, in line with what you had been saying to the market. So if you can give us an overview of your hedging progress, especially in the last two weeks that were not incorporated in the fourth quarter results, it would be helpful for us to understand your hedging position. We know that it was a short period of time, just two weeks, but for cotton it was very significant.
Okay. The second point, one of the premises you have been mentioning is the expansion of your land bank in terms of opportunity. So how do you view your land expansion program? There is heated demand, or rather, a heated discussion about land, since this year is a little tougher for agriculture with more compression on the margins and farmers are now creating this opportunity for expansion of acreage and also better leasing agreements if you have the capital for it. So could you please discuss this strategy? What can we expect in terms of areas for next year? Thank you very much.
Gabriel, thank you very much for your question. Starting with hedging, as we said before, the market was really sluggish in setting future prices for cotton. In 2023, the contracts for December 2024 had no liquidity. So whenever the company tried to work on the volumes, it was seemed as if we were trying to sell and the market tended to reduce prices. This created an impact, with the conflict in Israel also created impact, a crisis that also affected Europe and U.S. holding up prices. But once the December 2023 were settled, which was the main contract, we saw that in January and February, there were more transactions and the market is more heated. This helped us advance in hedging. As for prices, it's what we had expected. We are convinced that prices will be above $0.18 and in comparison with the previous years, always above average.
We waited. Of course, we're a little behind in terms of hedging and we discussed this with the Board. They authorized this delay since the outlook was very positive. Now with the December contracts, we have liquidity and we will pursue the policies as expected. Corn is being traded at very low prices in our understanding. There was also a retraction in futures because of this drought scenario in Mato Grosso and we had to wait to see which would be the corn area, the yields we could reach because of the change in planting window. Now that we are back to normal and we're ending the planting for corn, we'll try to pick up our hedging.
In July and August, corn will be harvested, so definitely we'll make advances in spite of the lower prices and we also expect that there could be an improvement in that because we have now a period that we can call the so-called American climate period, which is a critical period could lead to issues and problems in production and this could make corn prices pick up. In the next month, we'll accelerate the hedging for corn even though, the price is still on a par with the risk level and the investments that we need to make.
Thank you very much for this question, Gabriel. About the land expansion, as you said, margins are tighter, especially because of corn and soybean prices. But at the same time, it's a scenario of opportunities for. Therefore, at the right time, we'll be communicating to the market. But certainly in 2024, there will be many more opportunities for expansion than we had in 2023. This is the positive side of the commodity price adjustment cycle. It creates opportunities for expansion every day and always following our strategy of having low leverage so that we can make the most of the opportunities that will emerge in the coming cycle.
Just a quick follow-up about the land expansion. Aurélio, we have seen some discussions about adjustment in leases with reduction in the number of bags that you pay per hectare. Do you think that this is a possible discussion with your lease partners?
Yes, we have agreements negotiated in the long term and of course, when you're updating the market, you're going to analyze the situation and define the new price for this agreement. This is how we do it. Using our long-term vision, we avoid to renegotiate agreements before the maturity. But if the contract is about to expire, we negotiate and bring the agreement also back to present levels because adjustments happen when somebody is doing poorly, so they give back the land to the farmer and you pay less than you used to pay. This is how the adjustments are made and they are now back to present value as the negotiations evolve.
Thank you very much. Thank you very much, Gelain and Pavinato.
Thank you, Gabriel. Our next question is from Lucas Ferreira, JP Morgan. Good morning. Lucas, could you please open your microphone?
Hello?
Hello, Lucas, we can hear you.
Great. It's great to talk to you again. I have two questions. The first one is about what are the risks for the soybean harvest this year? It started raining again, but in a very regular pattern, concentrated in a few regions. What about the pests and other conditions and the speed of the harvest, do you think that there is a risk of other productivity reductions? If you can also talk about Mato Grosso in this context, is the state worse than the rest? If so, how much worse than the average? About yield expectations for cotton at the current price levels that you're locking, what do you expect? How does this compare year-on-year with by ton? What about the new fertilizer purchases? What decrease are you finding in comparison with the previous cycle?
Thank you, Lucas. About the climate. Well, after Christmas, climate went back to normal. It started raining again as normal in Mato Grosso, Bahia, Maranhão, the entire center north region of the country. That's why the crops in Bahia, Maranhão, and Mato Grosso do Sul, well, there the drought was not very strong. In Mato Grosso, we have already finished the soybeans. We know that there was this rupture in the soybean crop. It was below. Now we are harvesting in the Northeast Maranhão, Bahia, and we have now harvested almost 2/3 of corn. Unless there's a climate catastrophe, everything has been adjusted. It's not a shortage of water that we're experiencing. The soil is very moist, both in Bahia and in Maranhão. We are doing a little bit of soybean replanting in Bahia, and these areas still depend on rainfall so that we can confirm the yield.
There's still a little bit to be confirmed, and we are using an estimate. Could there be an oscillation? Yes. If the climate worsens and it stops raining or if it rains too much, and this affects the harvest. But according to the climate predictions for March, we're back to normal with rains, and everything indicates that we'll confirm the expectations for soybean. The climate in Mato Grosso for cotton is very favorable. We planted cotton in part of Mato Grosso, so it became from second crop to crop and all the rest of the second crop corn. Since soybean actually moved ahead of the cycle in Mato Grosso because of the hotter climate and the drought, we ended up planting cotton earlier than usual this year.
That's why the cotton crops so far are doing very well because we planted a little before what is expected and the climate has been favorable. It has rained, but not too much. That's why we're feeling so optimistic with the cotton crop now on the field because the conditions are favorable and we could actually have some positive surprises in cotton yield if the climate continues to behave as it is behaving now. As for the productivity and profitability of cotton, prices have been going up and down between $ 0.80 and $ 0.85 and $ 0.90 in spot prices. But the futures price for the current cycle is now at $ 0.83. So we are talking about futures prices in this level between $ 0.80 and $ 0.83 and a positive basis of $0.03–$0.04 .
So cotton will be sold at $ 0.86, $ 0.87, $ 0.88 . And at this level, with the necessary cost adjustments that we made and additional cost adjustments that are being planned, and based on the simulations of margins for cotton at this price level, the margins will remain normal, not exceptional, but not compressed margins as we see in the case of corn and soybean. So this is the scenario for the three crops. It is looking brighter for cotton in terms of yield this year and also for prices, international prices. The curve is now reversed and prices have been at a higher level. So our expectation is that as time progresses, we will be able to sell even higher than the current prices, which is we are getting $ 0.83 in New York for December 2024.
This is the expectations for cotton. Well, thanks for the crop diversification. Of course, this is a strong support that we have in reducing volatility, and this is the expectation that we have for prices and margins.
Thank you. Very clear, Pavinato.
Thank you, Lucas. Our next question is from Pedro Fonseca, XP. Please open your microphone and ask your question, Pedro.
Good morning, Pavinato, Ivo, and Gelain. Thank you for taking my question. I would like a follow-up on the seed business, if it is okay. I think that Pavinato mentioned during the speech that part of the decline is explained by the increase in SG&A expenses and marketing. But we also saw a decline in gross margin with an increase in costs, especially relating to internal transactions. There was a drop in the cost of products such as soybean. But can you give us a little more flavor? What explains the financials in the seed business with this decrease in gross margin? And my second point, could you tell us a little bit more about the strategies for inputs purchases? You are still at a low level of nitrogenated chemicals. What is your vision? When can we expect for you to advance in purchasing nitrogen?
And what about crop protection products, especially in 2024/ 2025? It is difficult to track this number, but based on our investigations, it seems that the industry is now understocked. So if you could give us a perspective on crop protection, cost per hectare for the 2024/ 2025 crop year, it would be very helpful.
Okay, seeds. Well, initially, we reduced the number of sales to verticals because this was a product sold at request. So we focused on products for the exports markets or in domestic markets where the margins are very similar. So in this specific case, when we talk about an increase in expenses and production costs, well, the origin of the cost in seeds is the grains produced in the previous crop year, 2021/ 2022. And in the case of soybean, the prices were traded at that time much higher. So this is the costing base for the seeds. So there was an increase in costs. So when we started selling seeds, prices were declining.
Farmers, of course, put pressure on us to reduce the prices of seeds together with the prices of crop protection, et c. This creates, of course, a disadvantageous scenario for the seeds, because in the previous cycle, costs were higher. When you start selling, the prices were lower. Basically, this is what explains this increase in costs.
About input purchases, when we look at the crop protection market internationally and the so-called generic or brandless products, prices are an all-time low. There was an additional reduction in relation to prices from last year. In relation to your question, is there still room for a decline in crop protection prices? Yes, there is, because there was a decrease in prices in the international market. Obviously, patented products is another story because it depends on the marketing strategies of each company, but the sector is putting pressure and demanding cost adjustments, and this is the year for that. There will be pressure on the suppliers so that they adjust the price of inputs.
This is what we expect. There should be an additional adjustment in prices for the next crop year. As for fertilizers, we have purchased fertilizers at opportunity prices using the down curve moment and in nitrogen, for example, it has recovered recently, but logic points out to the fact that higher prices cannot be sustained owing to the decrease in commodity prices in international markets, not only in Brazil. Margins are under pressure in all countries, in the U.S., et c., and this creates pressure on fertilizer prices. That is why we have used opportunities to enjoy lower prices.
We look at the entire basket of fertilizers in Brazil at current prices, we are still 11% higher than historical prices. At CFR prices. In some cheaper products, such as super simple nitrogen, they bounce back. But potassium has been declining. It reached $280 CFR, and it is now at $290. Some adjustments are still happening, especially in nitrogen. We believe that new opportunities will crop up in the next month, especially after the planting in North America ends in April and May. This creates a downward pressure on prices as well.
Thank you very much for your answer. Very clear. You have talked about the decrease in prices. But since there is internal sales and sales to third parties, could you give us an order of magnitude? How much was the drop in seed prices year-on-year for third parties? I know that you do not disclose this type of information, but if you can give us any light on that.
It is difficult to give you this number because there are many different varieties, and so to give you a number is very complex. It actually is very vague because we had recently a discussion internally about the seed business. It is very difficult to make year-on-year comparisons because prices change, so we have to compare variety by variety. Because the reduction was in proportion to commodities, in fact. There is an exchange between the two. Yes, in relation to the raw materials price.
Thank you very much. Great answer. Thank you. Very clear.
Thank you, Pedro. Our next question is from Thiago Duarte, BTG Pactual. You may open your microphone, Thiago.
Good morning, everyone. Hello, Pavinato, Ivo, and Gelain. Well, I just wanted to go back to two points, going back to the review in soybean yield in comparison to the review that you did in December. First of all, I want to understand. Well, it has become clear, Pavinato, that as you have explained that the reduction of expectations is coming from Mato Grosso, right? The reason for my question, it still seems, I don't know, an exaggeration based on IMEA numbers. You're talking about a year-on-year decrease in productivity of 15%. In relation to the project, we're talking about 12%-13%. Could you please tell us, what are you expecting in relation to the rupture in the Mato Grosso farms in relation to the previous year? This is my first question.
Now the second question is about the carrying over of cotton stocks, the cotton that was produced last year. I don't remember if in the past you carried over so much cotton from one year to the other, and we know that this year, because of the land expansion and also the positive outlook, you should have a large volume of cotton being produced. From this carried over volume from 2023 to 2024, how much do you expect to sell in 2024, and how much will be carried over to future years? I'm thinking now more of the capacity or to ship all of this volume that was produced this year.
Thiago, about productivity. Okay. What was the situation in Mato Grosso? In Mato Grosso, cotton farmers, we plant soybean first in September, and in the first fortnight of October, we harvest the soybean in January to plant cotton. The cotton that is planted in the first and second fortnight of October is harvested in February to plant corn. What happened in Mato Grosso this year? When did the drought hit? It started in mid-October, and it went all the way through Christmas, the second fortnight of December. It was hot and dry. You might remember the heat wave that we saw in the center north of the country. Which crops, which varieties were hardest hit? Early soybeans. The soybean that had a shorter cycle and that was going to be harvested in January. It completed the cycle with no water.
By Christmas, it was now maturing without receiving adequate rain. The rupture in productivity for cotton producers was two times higher than the loss of productivity for corn producers. This explains why in Mato Grosso, we produce 1/3 of the soybeans, and the average in Mato Grosso was 20%. This year, cotton producers in Mato Grosso, and you can talk to any of our neighbors, and you can confirm this. There was a rupture that was more pronounced, especially if you plant very early soybean with the expectation to plant cotton next. In relation to the average of the state, there's regions in Mato Grosso that don't plant cotton, and we also held on a little bit and planted a little bit later. In some farms, we are close to expectations. In others, we had losses of 40%.
This is the rationale that explains it. We had losses of 12%-13% that were concentrated in Mato Grosso, but in fact, it was much more than that. That's why the balance to be harvested will enable us to confirm the productivity that we are estimating. About the carrying over of cotton, the second half last year. Well, in fact, last year, we were looking at the numbers, and Brazil last year had an export in agriculture increased from 180 million tons- 220 million tons. There is a product that competes with cotton, which is sugar that is shipped in containers. So there was a dispute for ships. It was not the difficulty in shipping out cotton from the farms. No, it was at the ports that we had delays, and that was the main reason for the delay in deliveries of cotton in 2023.
So we ended up delivering 40,000 tons less than estimated. Now Brazil has become a cotton exporter in the 12 months of the year. We export throughout those 12 months. So we're going to divide our output in those 12 months. In this case, in 2023, we were below the exports in the second half. So the balance that remained from last year is now being shipped out, and we expect that in the new cycle, in the new season that will be available in August and will start being processed in July, then it's going to be processed, classified, and will be available for export in August. So up to July, we hope to ship all of this volume that remained from last year.
We are implementing an action plan to find a way of exporting even more volume in the second half. Like this, we'll maintain our exports in this proportion of one twelfth per month. This is what we expect for cotton.
Thank you very much. Very clear, Pavinato. Do you expect that you can go back to normal this year, or do you believe?
The Brazilian production volume of commodities that will be exported this year, unfortunately, will be much lower than last year. Why? Because there is a reduction in soybean production and also in corn that's very expressive, a reduction that's very expressive, and all other products that depend on climate, while we're still waiting to see the numbers on sugar. But those are the two major volumes, soybean and corn. Both domestic freights are now being negotiated at lower prices than one year ago. So there's less demand for transport. In the specific case of cotton, all shipping companies are taking several actions to increase shipping capacity at the port, and then we need to wait and see the flow of ships.
This is going to be the major factor, considering that the textile industry in China is now resuming its occupation levels as in the past, and textile demand in Europe and the U.S. continues to go on strong. So there was an expectation that would be a decrease, but it actually didn't turn out to be the truth. So this created a pickup in prices. We had also the war along the way, Israel and the West Bank. This, of course, was a problem. The Gaza Strip war, in fact. The flow of ships, of course, could be a variable to watch, but considering that there will be a normal availability of ships, we believe that we will go back to normal and we will ship one twelfth of our production every month.
Thank you.
Thank you, Thiago. Our next question is from Matheus Enfeldt, UBS. Please, you can open your microphone.
Hello, Pavinato, Ivo, and Gelain. Thank you for entertaining our questions. First of all, I would like to discuss the capital allocation with a potential resumption of growth in 2024/ 2025. You also engaged in a buyback program, but maybe for 2024 and 2025, there will be a stronger focus on investments so that we can go back to a growth cycle. With maybe a smaller direct return to shareholders. So what are your expectations in relation to growth? I believe that new opportunities will appear in the near future, but are you still focusing on leases and, what about the geography? In the last few years, there was a concentration in Mato Grosso where more opportunities will appear since this was the hardest hit program.
Are you going to try to increase geographical diversification or will there be more concentration in Mato Grosso for 2025? You mentioned that cotton margins will be more attractive. Do you think that perhaps you will increase the share of cotton in your portfolio in 2024/ 2025?
Matheus, we operate in the Brazilian Cerrado. Historically, this is one of the most stable regions in the world in terms of climate. We have this proven by data. However, world climate is becoming more volatile, so expansion in regions, diversification makes all the sense as a way of mitigating climate change. So our motivation in expanding into other regions is now greater than it was five years ago. In the Brazilian Cerrado, all regions are good for us, and historical data shows this. So whether we expand in Mato Grosso or Bahia or Maranhão, this will depend on opportunities that emerge.
We haven't made any decisions, in fact. Well, we had a historical drought in Mato Grosso, but this is the most stable state in terms of climate, so we don't really have any restrictions in relation to Mato Grosso. We lost in soybean, but our cotton is looking great and part of the losses we had in soybeans will be offset by the increase in cotton productivity. That's one of the advantages of having two crops in Mato Grosso. It's a great advantage, in fact. So this is the scenario. As I said, it really makes sense to expand into other regions as climate volatility rises.
The buyback program, those were programs that added value to shareholders and now with more opportunities for growth, it's only natural that you will direct your investment to what gives you greater return in the medium term for the shareholders, that is. We are going to plant as much cotton as possible with the existing infrastructure that we have. When you lease a farm, depending on the farm, it's not always prepared for cotton. So we'll have to take this into account and analyze if expansion of cotton should be done in new farms or if we should use our existing farms. We're investing in irrigation, for example, in a farm in Bahia. We have now added pivots in 3,113 hectares. Today we only plant soybeans there, but we're going to be able to plant soybeans and cotton in the same land.
We have this crop portfolio now. We are finishing our agriculture crop planning, and then we will decide the size for each crop in our farms.
Thank you very much.
Thank you very much, Matheus. The next question is from Laura Hirata, Santander Brasil. You may open your camera for questions. I think we have some technical glitch here with Laura. We will just skip Laura, and if she can get connected, we will have her again. Now, Julia Rizzo from Morgan Stanley, please open your microphone. We are looking forward to your question.
Good morning. Can you hear me?
Yeah.
I want to follow up one of the questions that my colleagues asked that it is not so clear for me in relation to the outlook 2024/ 2025. In September, the cost. Well, you are now closed in crop protection, basically, and I would like to know about this relationship. You said that fertilizer prices are being traded 11% higher than historical levels, but that does not really tell me much about the prices you have closed. Can we expect a better relationship, or is there an outlook perspective or an improvement perspective? What about hedging? Have you locked prices for the 2024/ 2025 cycle since most of your fertilizer has already been purchased?
Thank you, Julia, for the question. Yes, we have not locked hedging for next year. We are just getting started, and we are defining the mandate, but we have not closed anything yet. As for the costing, as we mentioned, we have made some acquisitions because prices were below current levels and the relationship with the historical costs were really very appealing. But we have to see what the mix will be. If we are increasing cotton, clearly cotton has a superior margin in relation to the other crops. This will be an impact in our hedging. If the prices are low, it is natural that we should expect a reduction in tech and fertilizer prices to make corn viable as a crop because today it only gives us a contribution margin.
This is what we are going to work on the next five months so that we can deliver results for 2025 in line with our historical results. This is our objective today. We are going to make an analysis of the technology packages, and this is what we are going to be dedicated in doing in the next month. But it is difficult to.
But what about the ratio, the purchase fertilizer package price and the average commodity prices ratio?
I think the soybeans are in an adequate level of cotton as well, but corn is really lagging behind. We have to, I do not know, either use seeds with lower potential. There are several things that need to be analyzed by our agricultural planning team. But with this exchange ratio between fertilizer and commodity prices, I think that in cotton and soybean, there is good alignment, so we can resume our historical margins.
It would not come as a surprise. A little above 2023/ 2024, because we are a little below historical prices.
Yes, 2023 was close to historical levels with 13% in net margin, an EBITDA of 37%. It is very much in line with our expectations. Next year, we can do this feat again with the same levels, and this would be very positive.
Okay, now I have a question about the carrying over of cotton because it is a large volume, 226,000 tons. Can I use the gross margin of the quarter?
To ensure a result of BRL 1 billion coming from cotton, yes, it makes sense, your calculation, because the cotton has been carried over from 2023 to 2024. But I cannot say that the cost will be the same, because it depends on the farm that is delivering, and prices depend on the quality of cotton. I think it is going to be a little below BRL 4,500 per ton, because there is the issue of cotton quality in the last quarter. We harvested cotton with great quality. There could be a small reduction, but it should be around that four and four and a half, I think, thousand per ton. This is very adequate. But we know that December, this is the period for harvesting the best cotton and then also for direct sales.
Oh, thank you. Thank you very much. I did not know there. What about your perspective for the U.S. in relation to the new planting season? What do you think will happen in terms of acreage, corn and soybean? What about the price conditions? I would love to hear your views.
The soybean-corn ratio in the U.S., American farmers have insurance, which works very well. What is the first milestone that they have? They have the soybean prices and cotton for the futures crop year in October that were practiced in the month of February. In February, the ratio between soybean and cotton was 2.6. When this ratio is above 2.4, farmers have an incentive to plant more soybean. When it is lower, they have an incentive to plant more corn. That is why the first version of USDA data shows an outlook for growth of soybean areas around 3 million acres and a reduction in corn. At the same time, in this scenario with lower prices, maybe the total acreage will decrease. It has happened in the past.
Today, the U.S. are using its full potential of planting it, and it is no surprise for us that in a condition of tighter margins, as we see for American farmers, maybe they will reduce their acreage or replace some of the crops. But the scenario today is that they are going to plant more soybean and less corn because the price of corn dropped before. Soybean prices have just decreased. When we look at the futures for next year, in this month, there has been an adjustment already of 2.4 with future prices of corn of $4.78 per bushel and soybeans of $11.5, which means 2.4 in the end. But we believe there will be more soybean on the fields, and this is already being reflected on prices.
Thank you very much.
Thank you, Julia. Let us go back to Laura Hirata, Santander. Could you please open your microphone and ask your question, please?
Can you hear me?
Yes, we can.
Good morning. Thank you. Thank you for the Q&A. My apologies. I would like to talk a little bit about the crop planning for 2024/ 2025, especially in terms of crop diversification. Could you give us a follow-up in relation to costs, freight costs, and what is your outlook in relation of a possible container shortage? Is this in your radar? Did you map this out? What is your opinion about this risk? This is what I have for today. Thank you.
Well, starting with the containers and cotton exports, Laura, as I said, we cannot have greater control and depending on the flow of ships, of course, this depends on the imports that Brazil makes and also competition with other products. This is what increases availability of containers. What happened this year was not actually a problem with containers, but rather with the ships. There were many delays. Instead of one week, it took them two weeks to arrive. This is what happened. This is also a problem related to the wars and the different deviations that ships need to make. This, of course, takes time.
A trip that should take 30 days lasts 40 days. This, of course, reduces availability of ships. So I have nothing really more to add about this topic. Anything else?
No. Our crop planning program, well, it's around 118,000 hectares. This is what we are using. So we increased the cotton area last year because of the better margins that we anticipated. This year, we are going to make the same type of analysis. Always doing crop rotation, but there could be some adjustments so that we can provide maximum returns to our investors. But the agriculture planning team is on the field. There are several aspects to be discussed. Sometimes there are investments needed, and we need to discuss this in great detail. By the middle of the year, we'll have everything aligned.
Thank you very much, everyone.
We have one more question from Clarice Couto. She's from Bloomberg. So I'll read it to you. "Hello. Here's Clarice Couto from Bloomberg. So I would like to ask a follow-up on La Niña. Why is it good for the Brazilian Cerrado and therefore for the company?"
Good morning, Clarice. The La Niña years, well, they have a certain historical pattern. There is a shortage of rain in the south of Brazil and Argentina. With this, there are losses in the crops of those two regions. With this, prices go up. This is the upside that we have seen in 2021/2 022. On the other hand, the center and north of Brazil, and specifically the northeast of Brazil experiences heavy rains. In Mato Grosso, the effect of El Niño and La Niña were not as intense. But this year, we saw El Niño leading to a drought in Mato Grosso. But with La Niña, we would expect normal rainfall in Mato Grosso. In Bahia and Maranhão, La Niña is good for agriculture, which means we're going to have a full harvest with a full crop.
This gives us some potential for price recovery. This is actually a summary of the effects of climate over our agricultural production and over the market.
Thank you very much, Pavinato. If we have no further questions, we are now closing this video conference call on the fourth quarter 2023. Our Investor Relations department will be happy to answer any of your questions. Thank you very much for participating and have a great day.