Financial and Investor Relations Manager. Joining me this morning, we have our CFO and IRO, Ivo Brum. It's a privilege to be with you this morning. Please note that this video conference is being recorded and will be available on the company's IR website, where you can also find the presentation. For those who need simultaneous translation, we have this tool available on Zoom on the globe icon under the description interpretation. It's located on the bottom center of the screen. When you select it, please choose your preferred language, Portuguese or English. For those listening to the video conference in English, there is an option to mute the original Portuguese audio by clicking Mute Original Audio. For the Q&A session, we recommend that you send your questions via the Q&A icon at the bottom of your screen.
As per our standard procedure, your names will be announced so that you can ask your questions live. At the time, a request to activate your microphone and camera will appear on the screen. If you prefer not to open your microphone and camera, please write "no microphone" at the end of your question and I will read your question aloud. We would like to emphasize that the information contained in the presentation and any statements made during the video conference regarding SLC Agrícola's business outlook projections and operating and financial goals represent the company management's beliefs and assumptions, as well as information currently available. Future considerations are not performance guarantees as they involve risks, uncertainties and assumptions because they refer to future events and therefore depend on circumstances that may or may not occur.
Investors should understand that general economic conditions, market conditions, and other operational factors may affect SLC Agrícola's future performance, leading to results that differ materially from those expressed in such future considerations. Now, I would like to turn the floor over to our CFO and IRO, Ivo Brum, to begin our presentation. Ivo, please proceed.
Thank you very much, Gelain. We appreciate everyone's participation in SLC Agrícola's third quarter 2023 earnings conference call. Let's move to slide four, where we discuss the cotton market scenario. The global cotton consumption outlook, estimated at 116 million bales according to U.S. data for 2023/2024 vs a production scenario of 113 million bales, results in a deficit of approximately 3 million bales in the global demand and supply balance. The current deficit scenario reflects significant production losses in the U.S., where the final production is expected to reach 12.8 million bales, approximately 17% lower than the initial production estimates for the country, according to USDA data. This phenomenon is expected to directly impact the global cotton market as the United States currently holds the position of the world's leading cotton exporter.
Consequently, Brazil is expected to continue increasing its market share and solidify its position as a significant global player, now in the second-largest cotton exporter position. Also, we have some news on the demand side. In Asia, the operation rate of the spinning industry has been higher than average, around 61.1%. China posted record cotton imports in August and September, totaling 180,000 tons and 240,000 tons respectively, and also imported cotton yarn during the same period, 190,000 tons and 180,000 tons, demonstrating that cotton fiber is in demand. Given the scenario, the company remains optimistic. Moving on to slide five, let's discuss soybean. Soybean prices in the CBOT spot contract and the prices paid for the commodity at the Paranaguá CFR base show the downward trajectory throughout the third quarter of 2023.
This trend was influenced by the supply and demand balance, which on a global scale for the 2023/2024 crop year is expected to show a surplus of approximately 17 million metric tons. In the U.S., in the current cycle, 2023/2024, while the cycle started with losses due to drought conditions and reduced planted acreage in comparison to the previous year. The initial production estimate of 122.7 million metric tons was revised down to 111.7 million metric tons, resulting in a net loss of approximately 11 million metric tons. Soybean demand in Brazil remains strong, with record exports over the first nine months of the year reaching 87 million metric tons compared to 70.4 million in 2022. Approximately 40% of soybeans have already been planted in Brazil, consistent with the average over the last five years. In Argentina, soybean planting began a few days ago.
At this moment, we are monitoring the development of the South American crop and accounting for its impact in the global supply and demand balance. Now let's turn to corn. Corn prices in the CBOT spot contract and in the domestic Brazilian market exhibited significant volatility throughout the third quarter of 2023. In a quarter marked by the irregular development of the U.S. crop, where adverse weather also impacted production. In the global scenario, there's still ongoing uncertainty around the Russia-Ukraine conflict, and the USDA predicts Ukrainian production to amount to 28 million metric tons. Production should outstrip demand in approximately 23 million metric tons. Regarding demand for the crop in Brazil, the national trade balance reported the highest year-to-date exports in the comparable period, reaching 34 million metric tons vs 24.2 million metric tons in 2022.
Brazil is expected to become the world's largest corn exporter in the world. In Argentina, corn planting has already begun, with approximately 22% of the area sown in normal crop conditions. After this brief overview of the three main crop scenarios, we now move on to the closing numbers of the 2022/2023 harvest. In slide seven, we show the yields achieved in the 2022/2023 harvest. We maintained record soybean yields and recovered our cotton and cotton yields. Also, we secured the reasonably priced input package and notwithstanding the increase in costs, with the fact that we had a residue of phosphorus and potassium, we bought only 80%. We completed the cotton harvest with 2,025 kg of lint per hectare, 7% higher than planned and 36% above the 2021/2022 season.
For soybeans, we concluded harvesting with a yield of 3,904 kg, only 1.8% lower than the previous year's record. We also finished the corn harvest with a yield of 7,666 kg per hectare, in line with the initial plan, but 22% higher than in the previous season. We achieved above average yield in all crops when compared to CONAB data. I will now turn it over to Rodrigo Gelain again.
Okay. Let's analyze now our financial performance. Can we please proceed to slide nine, where we highlight some of the key points in our income statement. In the quarter, net revenue increased by 22% compared to the same period last year, due to higher volume and higher billed prices of cotton lint and corn prices. In the first nine months, the slight decrease in net revenue was due to the lower amount of cotton lint and soybeans billings, reflecting lower yields in the 2021/2022 season. In the quarter and the first nine months, the variation of the fair value of biological assets showed that the appropriation of cotton lint and also cotton seed as a main factor. The margin expanded, thanks to the higher yield in the 2022/2023 crop year.
Net profit for the third quarter 2023 was BRL 167 million, with a net margin of 10% and also expanding in relation to the third quarter 2021. We had margin of 20.5% margin and net income of BRL 1.1 billion. Adjusted EBITDA for the quarter reached BRL 492 million with an EBITDA margin of nearly 30%. In year-to-date numbers, adjusted EBITDA amounted to just over BRL 2 billion, with a 38% margin. Cash generation for the quarter was positive at BRL 580 million, reflecting the financial cycle's phase at the end of the input payments and the start of the cotton and corn billings for the 2022 and 2023 crop. Now let's talk about the company's indebtness. Adjusted net debt closed the quarter at BRL 3.6 billion, up BRL 1.3 billion compared to the fourth quarter 2022, mainly due to the funding of the 2022/2023 crop.
In the fourth quarter, this is expected as part of the financial cycle, and the net debt over EBITDA ratio stood at 1.34x , a very comfortable leverage level. Now, moving on to slide 11, we discuss the new share buyback program and the cancellation of 5 million shares that were approved yesterday by the Board of Directors. Additionally, the split of all outstanding ordinary shares issued by the company was approved, with each existing ordinary share becoming two ordinary shares. As a result, the company's capital will consist of 443,329,716 ordinary shares with no par value. The split will be based on the shareholding position on the day of the general assembly meeting at which the split is approved.
This move aims to increase the liquidity of the company share and to make it easier for small and non-professional investors to trade the company's existing and outstanding shares. Now I'll turn the floor over to our CFO and IRO, Ivo Brum.
Now let's present the outlook for the 2023/2024 crop. Can we please advance to slide 13? Soybean planting is progressing well, with 71.3% of the area already planted. The current rainfall conditions in the Midwest and Northeast regions are now below average due to the El Niño event. However, the early planting window provides favorable conditions for crop yields. Advancing to slide 14, we take a look at our hedge position. We've made significant progress in hedging the 2023/2024 crop, reaching 45.8% for soybean, with 14.1% of commitments, 35.4% for corn, and 13.5% for cotton. Now in slide 15, we take a look at our ESG updates. During this quarter, we implemented circular economy waste treatment at the Fazenda Pioneira, following the successful implementation at Pamplona Farm, Paranaguá, and Fazenda Parceiro.
As a result, we project that within six months, the recyclability rate of waste will increase from 39.2%- 98.6% at the participating farms. Now we have the circular economy program in place in four farms, and by 2026, all farms will have implemented the program. Thank you very much. Now we are open for the Q&A.
We will now begin the Q&A. Kindly send your questions in writing in one go so that we can form the queue. Please hold for your name to be called. Please use the Q&A icon to send your questions at the bottom of the screen. As per our standard procedure, your names will be announced so that you can ask your questions live. At that moment, a request to activate your camera and microphone will appear on the screen. If you prefer not to open your microphone, please write "no microphone" at the end of the question and our operator will read it aloud. We have a first question from Gabriel Barra, Citibank. Good morning, Gabriel. Could you please open your microphone and camera? We are looking forward to your question.
Can you hear me now?
Yes, we can hear you.
Thank you very much for accepting my question. Let me open my camera now. Thank you very much for taking my question, Ivo and Gelain. I would like to address two points. First of all, in relation to climate conditions, we have seen extensive droughts, and you mentioned that there was a slight delay in the planting of soybean in terms of planted area, and there is a concern in relation to the winter crop for corn in relation to the window. You have updated the area for cotton, expanded this area. First of all, I would like to ask, is there any room for expansion in addition to the exchange in the corn and replacement by cotton?
Also if there is a possibility for that, if we have greater losses or greater delays in relation to the planting window of second crop corn or cotton. Also, if you could give us an update in Brazil, specifically, if you see any relevant impact on yields, perhaps a downward revision in corn for this season. Also in terms of capital allocation and in relation to this share buyback program, this is a new one. Of course, you closed the previous one recently. I would like to ask you, can you give us a little more flavor in relation to land expansion, the land bank, and also opportunities in Brazil? Could you give us a little more color in relation to land, the buyback program for us to think in relation to the future, what the future holds?
Good morning, Gabriel. In relation to the climate, in fact El Niño is in effect, affecting the Brazilian Midwest and Northeast in the comparison with the previous year, the same comparable period. You asked about the window for corn and cotton. What is important for us right now is to meet our plans for early soybean planting so that we could start planting cotton, and we met our goals in that regard. Now at the end of the Well, we will harvest in February, and then we will have the second crop, cotton, and there could be small delays in a couple of farms. This is a common situation in the Midwest. What could happen is that in February, we could make a decision whether we should plant second crop corn in March in the areas that are lagging behind.
I think this is very minor. If we do not plant second crop corn, we can use other alternatives, for example, Brachiaria or beans. There are some opportunities in which we can capture value by using other crops. In terms of an increase or expansion in cotton area, I think this is unlikely because we need harvesting ability besides planting capacity. Our cotton gins that separate the pit from the lint, we have already reached nearly our limit because next year, at the end of the year, probably in 2025, January and February, we will be still processing cotton. It is not good to go into this rainy period in cotton in the Midwest and Northeast. So we have reached our limit in terms of the planted area of cotton. Now, of course, we need to raise our production capacity.
Just to close the answer, I believe there could be a reduction in Brazil in relation to the second crops, because margins are too low and it is only natural that the farmer will try to either save with cheaper seeds or less fertilizer because of the shrinking margins. I think that this will probably be the case. We have to monitor the conditions, but I think that there is a risk that the second crop will not produce everything that is expected. It will depend on rainfall, especially March, April, and May, which are the last month, especially considering the second crop corn in the Midwest. Now, capital allocation. When we consider the price share, we see that there is a spread of almost 20%, so it makes all the sense. Instead of buying land, we should rebuy our own stock because it is much cheaper than land.
There will be adjustments and there will be open programs. Now, the share is being traded at BRL 40, which in the Board of Directors view is very low. That is why we started the share buyback program again.
Could you talk a little bit about leases and lease opportunities in the market? Do you have any prospects for improvement?
This is a great question. In fact, our leverage is very much in control at very low levels. We have actually some room to increase our leverage and obviously in this season here, this is possible, but more in 2024/ 2025. So there are opportunities that are showing up in terms of proposals that are being discussed in the market, and we are trying to find the best opportunity to allocate capital. It is not only up to us, there is always two parties in the negotiations with different interests, but we are making progress in the negotiations and probably up to April next year, we will have to close the deal so that we can buy fertilizer and get the machinery. So we have more than enough time to get organized in the negotiations. We are doing everything possible so that we can strike a deal between the parties.
Thank you very much, Ivo and Gelain.
Thank you, Gabriel, for your questions. Our next question is from Leonardo Alencar, XP. Leonardo, please open your microphone and camera.
[Non-English content] Good morning, Ivo. Good morning, Rodrigo. Can you hear me? That is great. Okay. First of all, congratulations on the results. I think it was a positive quarter. I think we should do a follow-up on the cotton dynamic. Last quarter, you talked about hedging levels, and I think that you have reached those levels. Cotton has been beyond expectations considering the worsening of the corn and soybean scenarios. If you could give us a little more information on the hedging strategy for cotton. Also because the USDA report will be published today, I would like to know how you are positioned in terms of inputs and considering the climate risk, what can we expect in terms of strategy for the next few years? Do you think that you'll change your strategy or do you think that the climate can sustain prices for now?
What I think is perhaps less relevant is the soybean seeds and cotton seeds activities have been surprisingly good because there was a whole discussion in relation to the drop in seed prices. In fact, what we see is that there is no need to sacrifice on the tech investments around seeds. Maybe the fact that you're using so much technology, this could actually bring some positive surprises. I would like for you to comment on that. Also, at what point in the season do the effects of the season disappear from the results? This is another question.
Okay, Leonardo, in relation to cotton hedges, we wish we had advanced much more historically. By this time of the year, we should be close to 45% of hedging in cotton. But when we go to the market to try to make the future operations, there's very little liquidity in the market. Our prices were adequate at $0.80 per pound. But there is very little liquidity, so our transactions have to be very small so that we don't cause a great impact in the cotton commodity market. This of course, makes us a little bit sluggish now because of the new war we see. There's an impact in the Middle East as well. This has weakened prices, but with the issuing of the new USDA report, we hope that the market will react.
This level of prices is not attractive to American producers, whose costs are much higher than $0.80. So for them, it doesn't make any sense to produce cotton at a loss. Prices have to go up because the U.S. is the top producer and the top exporter. Brazil could actually surpass the U.S. in cotton exports. If the acreage forecast in Brazil materializes, we could actually produce more than the U.S. Of course, we would like to advance our hedging. We are working towards that, but because of the economic conditions on the global scenario, the traders and the spinners, they are closing contracts more on the short term. So we have short-term contracts in December and March, and we hope that by February this will change because we'll have the new season in the U.S. and contracts for 2024 and 2025 will get bulkier.
I think it's going to be much easier to hedge. Well, seeds. Now, seeds are really important. Quality seeds really secure a winning start in terms of yield, and I think that Brazilian producers are very much aware of that. With quality soybean seeds, and with the adequate management, you can get results and yields that are far superior. So it's worth it to invest in seeds. That's why this market is prospering. Even though soybean is being traded at lower prices than last year, margins are still good. It is the best crop we have today. We increased the cotton acreage because we get more per hectare, but the margins in soybean are still better. In corn, margins declined significantly, so whoever can plant more cotton is planting cotton rather than corn.
As for the season, there will be a season in the 2022/2023 crop. Cotton will come next year and as of January, we will see soybean from the new season. Up to the second quarter, we will have soybean 2023/2024 and cotton 2022/2023. Of course, there will be an overlap, and then in the first half we will see cotton and second crop corn in the 2023 and 2024 season coming in. We will still be delivering soybean in the second half of the year because the premiums are higher and we use our storage capacity to be able to capitalize on this premium.
Just a question, a clarification, if I may. You already commented on your land. What is the temperature in the land market? Is it at a standstill? Are cattle ranchers selling degraded pastures?
Yes, there are some offers available in the market, but in this half of the year, there are not too many negotiations. Because if you have land, you are already planting, and you have acquired land, you do not have enough time to get organized to plant. So negotiations usually occur in February, April next year. This is the window for negotiations of land. But acquisitions and operation of new land is something that is almost unfeasible. So we will see more transactions occurring next year. Of course, there are some land offers circulating and being presented to us.
Thank you very much.
Thank you, Leonardo. The next question is from Lucas Ferreira, JP Morgan. Good morning. Good morning. Can you please open your microphone and camera?
[Non-English content] Hello, good morning. I have two questions. Firstly, about the expenditures line, both SG&A and selling expenses. I know that this is partly sharing of results, but also selling expenses and SG&A is growing above inflation. So I think this has probably a link with seeds. Should we expect the line to grow above inflation next year? In administrative expenses, what can we expect? Is inflation a good yardstick, or do you think that there is anything you can do to decrease expenses? Also in relation to the selling and margins, selling volume and the margins that you expect for cotton. The cotton margin has expanded in sequence. So considering your hedging and also the costs formation, can you wait for the margins to continue expanding in the next two quarters? Just to get a perspective on the end of this year and early next year.
Thank you, Lucas, for your questions. Let us start with administrative and selling expenses. In recent years, we switched our operational system. We were using Oracle, which was outdated, and we adopted SAP. This of course led us to a new level, with much tighter controls, better controls, but increased our expenses. We now have a shared service center in Porto Alegre. This is also increasing our administrative expenses, but we are preparing for a new leap. A new leap of growth in the future. We will be able to get the rewards of these expenses. We want to grow without increasing our SG&A expenses.
Well, we have implemented SAP and we are implementing improvements on a monthly basis. Then there are the selling expenses related to soybean seeds. If we want to reach two million bags of seed, then we need more sales representatives. So we are increasing our sales department. We need to hire people, give them training, and progress is gradual. But we are getting prepared for a new leap of quality, both in terms of acreage and in sales. So that's why you see this increase in SG&A. As for the cotton margin, I like to refer to that chart. The unit tight. So cotton in this season, it's now the third quarter, the unit gross result, considering hedging and costs, is BRL 4,005. This is excellent in comparison to last year, which was at BRL 3,677. So a very significant improvement in margins.
We also increased acreage for the next season, because we know we can maintain this level of return. Fertilizer prices are now decreasing, and we know that we can maintain the level. Now, soybean and corn are now suffering in terms of prices. Cotton had gone through this process in the past. Now cotton is now at $0.80, and it's stable, and soybean and corn continue to be on a declining curve. So soybean in the year, if we look at the year, because in the quarter it's a little more difficult to analyze because there's the impact of the different farms. So in 2023, the result per ton is BRL 1,200, and last year it was BRL 1,117. In corn, the result in the quarter is BRL 309 per ton. Last year it was BRL 183.
And we just harvested the 2022/2023 harvest, so the result per ton of corn is very low, and any small change will have an impact. That's why we are decreasing the corn acreage. This is the focus. Cotton now has a contribution of BRL 4,000 per hectare, so it's worth it.
The next question is from Matheus Enfeldt, UBS. Hello, Matheus. Could you please open your microphone and camera?
Good day. Thank you, Ivo and Gelain. Thank you for taking my questions. Two follow-ups on climate conditions. We talked about the climate risk, especially for corn, second crop corn, and I would like to ask about soybeans. From the moment the forecast of the season was announced, the climate conditions have worsened, some consulting firms have been talking about the risk of replanting in some areas. What is the yield estimate for soybean in the 2023/2024 season? Is there a risk of having to revise down estimates? Also considering climate, what is the impact of climate in company costs if there is a delay or a potential reduction in the technology used in corn or another transfer of acreage from corn to cotton? What about the inputs and how are you preparing for this scenario?
My second question, considering growth, you said that you are very optimistic about growth in 2024 and 2025. Are you thinking of converting pastures into agriculture considering that soybean margins is still very solid? These are my questions.
Thank you very much, Matheus. The most important thing right now was planting. The conditions were adequate. We actually had the rains coming earlier this year in the beginning of September. Our, of course, window starts in mid-September, so we planted in September. After September, we had enough rain for planting. There was enough humidity in the soil. There was a long draft before that, so we planted. Now the plants grew and now we have to keep on monitoring. Is there a risk of replanting in Brazil? Yes, because we know that rainfall is now irregular in Brazil. It is not uncommon that you have replanting in some farms. It is not something unprecedented. It has always been the case. Everybody plants 1,000 hectares- 2,000 hectares, sometimes 5,000 hectares. Of course, you have an impact in cost because you need to spend more fuel and spend more on seeds.
But plants have an amazing recovery potential. If they do not die and if it rains, they quickly recover. Of course, there is always the risk of losing potential because plants also have a cycle. We need to harvest soybean in January and February to plant the second crop. If in this cycle the plant is stressed, maybe the yield will be affected. But specifically in Mato Grosso, where rains total 2,000 mm, it is quite rainy. Soybean needs around 700 mm, that is enough. In the U.S. this year, there was not enough rain. We visited some areas there, and they observed clearly by talking to producers that it rained much less than expected. But if it rains, the plant can recover. If it is during the grain development phase, we are going to have robust rain, so in the end, we can have good yields.
Actually, the American yields were surprising, considering the low level of rainfall. In terms of fertilizers and the change of the tech package for the second crop, in terms of reduction of acreage, this is going to be very limited in Brazil. It is not going to be substantial. We already made the decision in relation to the tech package. We are still looking at the margins because corn prices are low, so we try to save on fertilizers and seeds. Seeds are very important as well, an important input in corn costs. This has already been decided, so we do not expect a lot of changes in production levels. What could happen is that if you do not plant second crop corn, you could migrate to mung beans.
There are several alternatives. Instead of planting second crop corn with low productivity, you can plant mung beans with better results. We have been talking to our consultants, and the impact will be minor in Brazil. It is not going to be significant. Of course, we are still at the beginning of the cycle. Soybean harvest starts in January, so we still have 45 days to that. As for pasture conversion, considering fertilizer prices, this is an option again. Fertilizer prices were too high last year, so it just made it impossible. Now, with the lowering of prices, we can study this now. Soybean prices continue to decline, so we need to understand very well, and you need the leverage for it, because return on investment will come only after four or five years.
So you need leverage for it and the ability to make investments. In our case, this is fully possible, so it is another capital allocation option for us, pasture conversion.
Thank you very much, Matheus. Our next question is from Isabella Simonato, Bank of America. Hello, Isabella. Please open your microphone, if you will.
Good morning to all. Thank you very much for this opportunity. I would like to go back to the discussion on cotton. When you talk about liquidity, could you explore your perspectives in relation to the opportunities to step up hedging? You mentioned that there was a decrease of $7- $8 in cotton prices. What was the reason for it? And what are the foundations? Are the foundations still positive? And what are the other strategies that you have available to protect the profitability of the new season?
Thank you very much, Isabella. Why are we optimistic about cotton? First of all, because American producers have higher costs than us. We can anticipate a reduction in acreage. Also, textile consumption in the U.S., we track imports in the U.S. and imports are growing, and by talking to economists, we understand that during the COVID pandemic, they were basically in lockdown. They did not spend much. Americans do not have this culture of savings. That is why the American government cannot curb inflation, because if they have money in their pockets, they will spend. And they had to spend less for 18 months during the pandemic. There is a strong trend in imports, prices reached almost $0.82 per pound.
This of course started around future contracts, but the market is more conservative. It is more focused on the short term, so there are few contracts for December 2024 being negotiated. We have to dance according to the music, dance according to demand. Now, there was a reduction in costs because of the new conflict on the planet, and people are more reticent. This could lead to inflation. What about consumer confidence in a scenario like this? What the market does initially is to take a step back. Commodity prices go down, oil prices go up, and we still have to wait and see what is going to happen. Cotton was going up today again, but we have to wait and see. We wish our cotton hedging was more advancing, but if we do not have the buyers, we have to just wait. We wish that we had more hedging.
We discussed this at length during the Board of Directors meeting, but unfortunately, it's part of the deal. It's part of the business. There are many events out of control cropping up, such as the conflict in the Ukraine and the new conflict, the changes, and cotton is traded based on the global GDP. Whenever something affects the GDP expectations, cotton is the first one to react. The other grains don't really move much because it's food and demand remains consistent. There could be a minor decrease, but it's different from cotton. Because cotton and textiles could see a more drastic reduction. So for the contracts of December 2024, we expected that volume in these contracts will be higher, and like this, we'll be able to advance in hedging. Any opportunity that we get, we'll use it.
But this is what we expect in terms of volume of transactions. This is also the moment in which Americans announce the first numbers of acreage, and we expect the U.S. to reduce acreage, and then we'll have basically Brazil. Brazil will be a major cotton producer in the world, and with the reduction of acreage, we won't have enough supply to meet the world's demand.
Thank you very much.
Thank you very much, Isabella. Our next question is from Thiago Duarte, BTG Pactual. Good morning, Thiago. Could you please open your microphone and camera, and please feel free to ask your question.
Hello, everyone. Good morning. Thanks for the opportunity. I think that some of the main points were discussed. Now, in relation to the basis and the freight discounts, this year was tough for the industry in terms of shipping and storage capacity. You did well because you had already contracts for the freight. What is the situation for next year? I believe that this discussion is already underway probably, and also considering in the case of second crop corn or also in relation to possible replanting perspectives. So I would like to hear about you considering the industry and not only the company. How do you view this point for next year? Now a question that summarizes much that has been discussed in relation to margins per crop. Could you please tell us a little bit about the consolidated numbers?
You made it very clear to us that it was a period of exceptional margins in the last three seasons, and that you expected that in 2023 and 2024, margins would bounce back to normal. Because we were at levels of 40%, and then they would go back to the average of 30% starting this year and also next year. Is this still your expectation considering the change in mix, the situation in hedges, and the decrease in costs? Could we expect margins similar to this year? This is the question. Thank you.
Thank you very much, Thiago. Well, the logistics costs had a strong impact this year. We had hedged for commodities early. Corn that had no storage capacity was already shipped by September. So that's why we're positive in soybean. We started shipping soybean, and we can see that what we delivered in soybeans was much below than last year because prices were too high in freights. Now things are stabilizing. It is a fact, freights are more expensive. This is also impacting our margins for next year. Now we have 99% of the 2022/2023 grain crop sold, but for next year, margins will be squeezed. Let me go now into your second question. Actually, in terms of logistics, Brazil is lagging behind in the hedging for the 2023/2024 season.
We are not at historical levels, also owing to the pressure in logistics. Everybody is aware that next year, there will be this crunch in terms of volumes that are shipped. Evidently, margins for next year, they are being penalized. Margins are shrinking, and we expect that we will go back to the historical levels EBITDA margin of 40% for two years, a net margin at 20%. Those are exceptional numbers, but they are one-off occurrences because it really does not make sense. It is only normal that your acreage will increase with margins like this. Obviously, there are several initiatives that we are implementing in the area of technology with cotton and corn seeds.
Of course, this also impacts our margins because we are adding more technology, we are reducing input costs, we are using several chemicals and crop protection. I think that it is to be expected that we will go back to more normal levels.
Thank you very much. Our next question is from Larissa Pérez, Itaú BBA. Hello, Larissa. Please feel free to open your microphone and camera.
Hello, Ivo and Gelain . Can you hear me fine? [Non-English content] Thank you for taking my questions. First I have a follow-up on cotton and then a question on CapEx. In this quarter, your cotton volumes grew very significantly, but almost half of the volume related to the previous season. What should we expect for the fourth quarter in terms of cotton volumes? Do we still have volume coming from the previous season? The reason I am asking is that if the volumes were not there, maybe we could see a reduction in cost in the fourth quarter. Also, in relation to CapEx, there was a very significant decrease coming from the machinery and equipment lines. What can we expect for this line in the medium and short term? Does it make sense to invest in machinery to harvest more cotton, considering the very expensive margins in this crop?
Yes, Larissa. In this last quarter, we had the 2021/2022 cotton crop being delivered because we still, just like the other crops, in cotton, we have logistic issues. So, the ports are in high demand. Cotton is exported in containers. It is a delicate product with fire risk, so the ports do not like to stock up a lot of cotton. This makes the process longer. Ideally, we should deliver our products in one season before we start the shipping the next season. I think that in the fourth quarter, we will not have any cotton from the 2021/2022 season. It is all going to have been delivered and probably will have lower costs because since we produced less cotton last year, there was a loss of productivity. Then unit costs for cotton are higher.
So margins are better because obviously our cost per ton is lower and we produce much more. In the fourth quarter, we should see the impact of that. Now, as for equipment purchases, with the end of the quarter, we usually buy more equipment in the first quarter. Sometimes you buy in the second half because you need it for harvesting, for planting, so you make your acquisitions. This year, we had nothing new to plant. The acreage is exactly the same. If we had a higher acreage, we would have bought more equipment, of course. Last year, we were also trying to provide Terra Santa with more equipment. Several acquisitions were made with no increase in acreage.
This year, everything is all right. Whenever we increase the cotton acreage and we have a limit, of course, we are going to need to invest more in this crop, building more cotton facilities, increasing the number of cotton harvesters. Today we have Pampeira, Parceira and other farms where we do not plant cotton yet. It is possible that we will continue to invest in these areas. It is a high investment, so that is why we invest a little year- by- year. Like in Terra Santa, we try to monetize the investment in machinery. Once everything is up to standard, we can start the cotton portfolio in those farms as well.
Thank you very much, and congratulations on your results.
Thank you very much, Larissa. We have one more question from [Mauro Santos], Investor. Could wheat be increased for the 2024 projections?
Yes. We have new varieties that are being used in the Brazilian Midwest, and they adapt easily. Wheat needs cold weather, and we have a small season with cold weather. The problem is the lack of rain at the time that we need cold weather. In the South of Bahia and other farms, we use wheat in crop rotation, and it is a good alternative because prices are going up and the new cultivars are adapted and can bring us excellent results. I think that we should increase the wheat area and it is going to enhance our crop portfolio. Since Brazil is a large importer of wheat, our wheat has import quality and of course, you have a gain there. There are some aspects that need to be adjusted, but we see wheat as a potential crop for Brazil, potential investment crop.
If we have no more questions, the video conference call on the third quarter 2023 is now closed. Our Investor relations department will be happy to take any of your questions and comments. Thank you very much for attending and have a great day. Thank you.