Good morning, and welcome ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's 2nd Quarter 2021 Results conference call. Today with us, we have Mr. Mariano Bosch, CEO and Mr. Charlie Barreira Hughes, CFO.
We would like to inform you that this event is being recorded and all participants will be in listen only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section. At that time, further instructions will be given. Before proceeding, let me mention that forward looking statements are based on the beliefs and assumptions of Addecoagro's management and on information currently available to the company. 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'll turn the call over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.
Good morning and thank you for joining Adecoagro's 2021 second quarter results conference. As you can see in our release, we continue delivering strong operational and financial results across all of our businesses. Adjusted EBITDA marked a new record high for the 1st semester of the year and an increase of almost 50% compared to last year. The continuous growth in EBITDA and cash generation to prove the success of the investments we did during the past years. It is thanks to them that Adecoagro is now A larger company, more efficient and better positioned to face all different scenarios.
But our DNA remains the same. We are still a group of hard working people committed to the sustainable production of food and renewable energy at the lowest cost. Now in relation of the performance of each of our segments, In our Sugar, Ethanol and Energy business, during the 1st 6 months of the year, we increased our production in 40% compared to last year. Thanks to an increase in crushing volume of 1,300,000 tons and higher TRS content. This allowed us to significantly increase our sales of sugar, ethanol and energy and capture higher average selling prices of the 3 products.
In addition, Our commercial strategy is to carry over $70,000,000 in stocks to benefit from higher expected future prices. I also want to refer to the weather event occurred in Brazil during the last months. As you all may be aware, a frost hit the main productive regions of Brazil, including Sao Paulo and Parana, as well as Minas Gerais and Mato Grosso Azul where our sugarcane plantations are located. We took actions to minimize the negative effect. This includes accelerating our harvesting pace, anticipating the purchase of 5 two line harvesters to reinforce our equipment fleet and to contribute to speed up the harvest and also purchasing came from third parties.
Our assessment indicates that sugarcane availability will be reduced by year end and beginning of 2022, resulting in a drop of productivity. However,
Due to
the regional effect of the frost, we expect prices to continue to respond and improve the already constructive price scenario. We are confident that this is already offsetting significant part of the negative impact of the frost and will result in no material changes in EBITDA and free cash flow generation. In this regard, We are in a great position to continue capturing the upside in prices as we have been hedging at the low end of our commercial policy. More than 50% of our TRS for the current season remains unhedged, and 2022 is 100% open. Sugar and ethanol We have a healthy competition for the TRS and we own asset with high flexibility to switch from producing Sugar or ethanol and benefit from higher relative prices.
We recently doubled Moving on to our rice business, we achieved strong results during the semester, including a record high yield of 7.8 tons per hectare in average. This was possible, Thanks to the investment we made across the business, but especially to the consolidation and innovative approach of our teams. We have 3 main goals in mind. 1, increase productivity as a key to minimize cost per ton 2, Achieve higher quality rights to improve industrial efficiencies and serve as a commercial tool and 3, enhance efficiencies throughout the value chain. As we improve our product genetics and offer customized products that performed well at the farm and industry level, we continue to develop new markets and increase our mix of higher value added products.
Going to our Crops business, harvesting activities are practically finished, totaling 640,000 tons of grains so far. Although it was a La Nina year, We achieved good yields, thanks to the genetic selection, the use of technology, Our geographic diversification and product diversification, which allowed us to extend the planting and harvesting window, what is clearly one of our competitive advantages. We are currently undergoing planting activities for next season activities strategically located. In our daily operations, we continue to improve our productivity indicators even during the commencement of operations of our new 4th free stall and transform raw milk into the value added product demanded both in the domestic and export markets. As mentioned in our press release, We are generating positive free cash flow as well as targeting attractive opportunities, which synergize well with our operations and enhance our results.
We remain committed to distribute a portion of our cash generation with our shareholders. This is one of our priorities. And as you can see, during the 1st 7 months of the year, We have repurchased over 3,000,000 shares under our buyback program, totaling $28,000,000 This is equivalent to almost 3% of the equity of the company. Going forward, We expect to continue repurchasing shares in line with our strategy to generate long term value to our shareholders. To conclude, I would like to express my gratitude to all the operational and management teams.
2021 is proving to be a complex year from a climatic point of view in addition to an extended pandemic. I know we still have challenges ahead of us, but I feel confident that we have the right teams and that we are following the right strategy to overcome this situation and generate attractive and sustainable margins for all of our shareholders. Now, I will let Charlie walk you through the numbers of the quarter.
Thank you, Mariano. Good morning, everyone. Let's start on Page 4 with a brief analysis on the range in Matadoros do Sul. As seen on the top charts, range in our cluster during the Q2 of 2021 were 45% lower than during the same period of last year and 53.5 percent lower than the 10 year average. This was particularly notable during the month of April when virtually no precipitation was observed.
However, as can be seen on the graph, we experienced a humid first quarter. This means that our sugarcane was better prepared to go through the drier weather with no implication on productivity. Before turning to the following slide, I would like to briefly comment on the weather in Brazil. The Central South region of Brazil has been experiencing dry weather for a prolonged period of time, which negatively impacted its productivity. Due to the fact that the region accounts for approximately 85% of Brazil's sugarcane production, this has put pressure on the supply and demand and has led to an increase in the prices of both sugar and ethanol.
In addition to this, as Mariano mentioned in his introduction, During June July, Brazil's main productive areas were hit by a frost. We believe this will put further pressure on the supply side and thus continue to improve the outlook on prices going forward. Now let's continue with Slide 5, where I would like to discuss our and strategy. During the Q2 of 2021, the drier weather led to a 7.9 and increased our effective billing days compared to the same period of last year and enabled us to accelerate our crushing pace, resulting in a 10.9% increase in milling per day. In this line, total crushing during the quarter amounted to almost 3,500,000 tonnes, 0,600,000 tonnes or 19.6 percent higher during the same period of last year.
In addition to the favorable weather, which favored harvesting activities and to enhance efficiencies at the industry level, the increase in crushing volume was also explained by the dynamics of the Q2 of 2020, namely the fact during that time we temporarily slowed down our crushing pace in light of the COVID-nineteen pandemic as markets were fairly liquid, especially in the case of ethanol. As of June 30, crushing volume reached 5,600,000 tonnes, 1,300,000 tonnes or 31.7 percent higher year over year. This increase was explained both by the 2nd quarter dynamics as well as by the good cane availability and early start of crushing activities during the Q1 of the year as opposed to last year. Please jump to Page 6, where I would like to walk you through our agricultural productivity. During the quarter, TRS content marked a 6.7% increase reaching 135 kilograms per tonne and a 7.6% increase during the semester, reaching 126 kilograms per tonne.
This increase is explained by the fact that dry weather favors the concentration of sugar juice in the cane. I would like to point out that the increase in crushing volume coupled with higher TRS content resulted in an increase in TRS year over year. The company's net interest expense was $1,200,000,000 in the quarter and $42,200,000,000 during the semester. This in turn was translating to a greater production of both sugar and ethanol as we will see next. Continuing with productivity indicators, sugarcane yields reached 80 tonnes per hectare during the quarter, in line with last year and 78 tonnes per hectare during the semester, marking a 3.6% increase compared to the same period of last year.
Going forward, it is expected that yields will be negatively impacted by the effect of the regional frost in Brazil. The combined effect in TRS content and yields resulted in a TRS production per hectare of 10.8 tonnes during the quarter and 9.8 tonnes during the semester, 4.7% and 11.4% higher year over year. Let's move ahead to Slide 7, where I would like to discuss our production mix. As you can see on the top left chart, during the Q2 of 2021, anhydrous and hydrous ethanol, Imato Broz do Sul, traded at an average price of $0.186 and $0.172 per pound sugar equivalent, representing an 11.4 percent and 2.7 percent premium to sugar, respectively. However, it is worth pointing out that the evolution of sugar prices during the quarter was also very positive.
In line with our strategy to maximize production of the product with the highest marginal contribution, during the quarter. We diverted 59% of TRS to ethanol to profit from higher relative prices compared to 46% last year. Ethanol production increased by 66.4 result. Compared to the Q2 of 2020 due to the combined effect of ethanol maximization and the increase in TRS equivalent produced. In hand with the increase in TRS produced is that sugar production was in line with last year's volume despite having diverted a lower percentage of TRS.
On a year to date basis, production mix was in line with the 1st semester of 2020, standing at 59% ethanol and 41% sugar, although volumes produced deferred on account of the higher production of TRS equivalent. While we maximized sugar production during the Q1 of the year to benefit from higher relative prices and switched to ethanol during the Q2, the opposite was observed in 2020 as ethanol prices flunked during the Q2 due to the pandemic. This high degree and flexibility constitutes one of our most important competitive advantages since it allow us to make a more efficient use of our fixed assets and profit from higher relative prices. Year to date, ethanol accounted for 64.7% of total adjusted EBITDA generation in the Sugar Ethanol and Energy business, considering other operating income, while Sugar accounted for 28.6 percent. Let's please turn to Slide 8, where I would like to discuss quarterly sales.
As you can see on the top left chart, during the Q2 of 2021, ethanol sales volumes increased by 49.4 percent year over year. This increase is mainly explained by the lockdown measures adopted during the Q2 of 2020 in response to the COVID-nineteen, which negatively affected demand for fuels and resulted in fairly liquid markets. The increase is also explained by our decision to maximize ethanol production in the current quarter and capture higher relative prices. Despite the increase in cubic meters sold in absolute figures, carryover increased by 77.5% to take advantage of higher expected prices in the 2nd semester of 2021 beginning of 2022, driven by adverse weather conditions. Average selling prices for ethanol were higher measured both in reals as well as in U.
S. Dollars, standing at for $0.179 per pound issuer equivalent, representing a 67% year over year increase On account of the higher selling volumes and higher average prices, net ethanol sales during the quarter amounted to 64,900,000 almost 3 times higher year over year. In the case of energy, selling volumes reached 277,000 Megawatt hour, marking a 6.7% year over year increase. Average selling prices were higher both measured in reals as well as in U. S.
Dollars, standing at $40.8 per megawatt hour, implying a 16.5% increase compared to the same period of last year. This was driven by the low levels of water reservoirs, which reduced the supply of hydroelectric energy. All in all, net sales of energy in the Q2 of 2021 were 11,300,000 24.3 percent higher year over year. Net sales of sugar during the Q2 of 2021 reached of €71,600,000 over 2 times higher year over year. This increase was driven by A 47.6 percent increase in selling volumes, which reached 198,000 tons and a 52.1 and a 10% increase in average prices, which reached $0.164 per pound.
Sugar prices rallied during the quarter, mainly driven by the continuous dry weather observed in the Central South of Brazil. As mentioned before, this hike in prices is expected to be accentuated in the upcoming months as the market factors in the impact of the frost. In this regard, we are in a good position to capture the increasing prices as our estimated sugar production for the current campaign remains mostly unhedged, and we have yet to begin hedging 'twenty two, 'twenty three campaign. Finally, to conclude with the Sugar, Ethanol and Energy business, please turn to Slide 9, where I would like to discuss financial performance. Adjusted EBITDA during the Q2 of 2021 was CAD 73,600,000 62.1 percent higher compared to the same period of Q.
The main driver behind EBITDA growth was the $92,900,000 increase in net sales due to with higher selling volumes and prices of all three of our products. This was partially offset by and increase in selling expenses explained by the increase in sugar and ethanol selling volumes, which derive in higher freight costs and and increase in fiscal fin taxes, respectively, and a loss in the mark to market of our sugarcane. Even though our harvested cane experienced a gain in its mark to market due to the greater volume and higher consakenia prices, This was fully offset by a loss in the mark to market of our unharvested cane caused by negative impact of the frost on future expected yields. Year to date adjusted EBITDA stood at CAD 131.7 million, a 52.6% increase year over year. Higher results were explained by an increase in net sales driven by higher volumes and average selling prices measured in U.
S. Dollars for all three products, coupled with a gain derived from the mark to market of our sugarcane, mostly related to harvested gain. This was partially offset by a loss in our commodity hedge position and an increase in selling expenses in line with the increase in sales. End of the period stocks amounted to over $70,000,000 marking an increase of 2x year over year led by our commercial strategy to carry over stocks in order to benefit from higher expected prices. Regarding EBITDA margin, it is worth highlighting but the decrease is not indicative of our worst performance, but rather by the fact that the last year's figures were an outlier.
Especially during the Q2 of 2020, net sales experienced a sharp decrease driven by the pandemic and we embarked into a strict cost reduction plan, in addition to achieving higher results of our biological asset. I would now like to move on to the farming business. Please direct your attention to Slide 11. As of the end of July of 2021, over 240,000 hectares were successfully harvested, representing a 93% of our total planted area. This amounts to almost 1,000,000 tons of agricultural products harvested and recorded across 10 provinces in Argentina and in Uruguay.
The remaining hectares are expected to be harvested by early August. Let's move to Page 12, where I would like to walk you through the financial performance of our Farming and Land Transformation businesses. Adjusted EBITDA in the Farming and Land Transformation businesses reached $32,400,000 in the Q2 of 2021, $7,700,000 lower year over year. The decrease in financial performance was fully explained by the sale of farms we made in 2020 compared to no farm sales this year. Adjusted EBITDA slowly from the Farming business stood at CAD32.8 million, marking an increase of CAD4.2 million or 14.7 percent year over year.
Year to date, adjusted EBITDA in the Farming business marked a 64.7% increase compared to the 1st semester of 2020. Adjusted EBITDA in our Crops segment was $16,300,000 during the quarter, 4.8% higher compared to the same period of last year. This was explained by an increase in average selling prices, dollars 100 per ton increase in the case of soybean and $60 per ton in the case of corn, partially offset by a reduction in selling volumes as a consequence of our commercial strategy to carry stocks forward in order to benefit from higher expected prices. The increase in gross sales was partially offset by an increase in costs driven by inflation in dollar terms and a net loss in the mark to market of our inventories on account of a decrease in prices since the time of harvest, compared to an increase during the same period of last year. Year to date adjusted EBITDA amounted to $34,200,000 75.7 percent higher compared to the 1st semester of 2020.
In the case of RISE, most of the margin was already captured during the Q1 of the year. In this line, adjusted EBITDA reached of $9,600,000 during the Q2 and $37,900,000 during the semester, marking a year over year increase of 16.2% and 61.9%, respectively. The positive financial performance was mostly explained by and increase in yields, which reached a record high of 7.8 tonnes per hectare, and increase in area and an increase in prices, which led to a year over year gain in the value of our biological asset and agricultural produce. These results were possible due to our continuous focus on productivity, enhanced efficiencies and the consolidation of our team. The JRE business generated an adjusted EBITDA of $7,300,000 during the Q2 of 2021 and CAD12,100,000 during the 1st semester, an increase of 46.7% and 47.5 percent compared to the same period of last year, respectively.
In both cases, higher results were explained by and increase in sales volumes, which fully offset the increase in average prices and achieved efficiencies in our vertically integrated operations, including high productivity at the farm level and flexibility of our industrial assets. Let's now turn to Page 14, which shows the evolution of Adecoagro's consolidated operational and financial performance. On a year to date basis, gross sales reached €460,000,000 and adjusted EBITDA of €211,000,000 marking a year over year increase of 34.5% and 48%, respectively. During the quarter, gross sales reached €286,000,000 while adjusted EBITDA totaled CAD101 million, marking up 54.2 percent and a 24.9% increase compared to the same period of last year. From an operational point of view, we continue increasing our planted area, both in our Farming, Ensure, Ethanol and Energy business.
This, in line with our enhanced efficiencies at the farm and industry levels, has led to a 5.4% increase in our production of crops and rice and a 31.7% increase in crushing volume, as previously mentioned. To conclude, please turn to Slide 15 to take a look at our net and debt position. As you may see in the bottom left chart, our net debt as of June 30, 2021, reached $744,000,000 $12,000,000 or 1.7 percent higher than the previous quarter. This was fully explained by an 11.2% decrease in our for cash position. This reduction in our cash position was mostly explained by an increase in working capital on account of and increasing prices and our commercial strategy to carry stock in order to benefit from higher expected prices, especially ethanol.
On a year over year basis, net debt was in line with the Q2 of 2020, as the decrease in gross debt was offset by a decrease in our cash position, also explained by the increase in working capital. In fact, marketable inventories as of the Q2 of 2021 amounted to of £147,600,000, £73,000,000 higher than during the same period last year, driven by our carryover strategy and the impact on prices. The year over year increase in working capital was also driven by an increase in planted area in the crops, rice and sugar, for Ethanol and Energy Businesses as well as an increase in milk and cows in our dairy business. We believe that our balance sheet is in a healthy position not only based on the adequate overall debt levels, but also on the term of our indebtedness, most of which is long term debt. As of June 30, 2021, our net debt ratio reached 1.81 times and presented a downward trend comparable to the previous quarter as well as the Q2 of 2020, marking a reduction of 3.3% and 26.1 percent, respectively.
At the same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventories divided by shortened debt reached 1.84 times, in line with the previous quarter and 49.7 percent higher than the last 1.23 times ratio. This clearly shows the full capacity of the company to repay certain debt with cash balance without raising external capital. Thank you very much for your time. We are now open to questions.
Thank you. The floor is now open for questions. Call at any time. Questions will be taken in the order that they are received. We do ask that when you pose your question that you pick up your handset to provide optimum sound quality.
Please hold while we poll for questions. Our first question today will come from Guillermo Pajares with Bank of America. Please go ahead.
Good morning, everyone. Thank you for taking my questions. I have 2 actually. The first one is related to the next harvest region. So we are seeing food prices growing across the board and we would like to have your thoughts about it and how this could impact the company going forward?
And the second question is related through the fuel expenses and costs in the operation. So we are seeing that Avaya, ethanol is doing very well. We are seeing other fields Like we know that it's a cost of the company doing the same. So if I'm not mistaken, the company shared a pilot testing with a biogas plan that should allow the company to produce Biomechan and curb this cost increase. So if you could share an update on that project and what are you seeing in terms of economic availability and what would be the impact going forward for the company and the results of that operation?
Thank you.
Hi, Guilherme. Thank you for your question. On the first part of your question, you were asking about the next harvest season. What is the question?
Yes, chemicals and fertilizers and what would be the impact for the CapEx after next year.
Yes, clear. Thank you. So regarding your question of next harvest season and the increase of cost of fertilizers. As you know, our Production system is in the places where the combination of soil like climate is ideal. That's why we talk about our sustainable production systems and within this sustainability includes The lower rates of fertilizers, we use crop rotations and we combine those things in order to minimize the amount of fertilizer that we use.
So because of this and the intrinsic system that we have is that the cost of fertilizer is around 5% of our total cost. So the impact of the increase in prices in fertilizer is only on 5% of our total costs. That is thinking for next season and the specific question regarding the price of fertilizer. Then regarding your second part of the question that you were asking about the biogas and The total concept of this project, the biogas is taken from the concentrated vignettes that we have here. And I would like Renato to expand more on what The general numbers of this project of Biogas.
So Renato, can you update there?
Okay. So as Mariano mentioned, the source that we use to produce biogas is a concentrated VINAS. We concentrated VINAS in our cluster in Matagros Lusso to save fertilizer. So we concentrate the traditional VINAS in 8 times. So instead of producing 11, 12 liters of enas per liter of ethanol, we produce 1.5 2 liters of concentrated VINAS.
So this concentrated VINAS, we put that in a bio digester to produce the biogas. In the current phase of the project, we are producing 500 We're mines could be either of biogas and we are using the heat of the biogas to other source of heat to save We're still in the process and by doing that, we are exporting extra 1.1 megawatts per hour. So if you consider a season of 6000 hours, so it's approximately 6000 megawatts hour a year. So now we are getting ready to the 2nd phase of the project. So we are using the semi biodigester.
So but We are producing baumetan from this biogas. The production of baumetan, We need to clean and to take it out the sulfur of the biogas and also to compress The deal got to produce Biometan. And now we have been adopting some vehicles that we have in our mill. Actually, we have adopted with 7 vehicles, 3 cars, 3 trucks and 1 big truck. And now they are going to be fooled by Biogetan.
The 5 A cubic meters of the mass that produce 500 normalized cubic meters of biogas can replace the equivalent of 240 liters of diesel. So if you take the 2 40 liters per diesel and multiply by at 6000 hours. So you'll be saving approximately 1,400,000 liters of visio per year in the current phase. I think it's important to mention here that we have been using less than 4% of the concentrated VINAS that we produce in our cluster. So when we use the total in us that we produce in our cluster, we can multiply those numbers to 33 times.
So there's a huge potential to the project.
That's very clear. Just two follow-up questions on that. You said that you're moving toward the 2nd phase of the project. What is the timeline that you are looking at right now. And is there any opportunity to not only sell biomass and then use in your own operation, but Commercialize that should clarify these as well?
I think the time line now, we are just working this in the second phase. It's expected to start working on September. So then we are going to adjust the increase of the production according to the success of The project that we are going to have. So we have to be testing. And of course, we are very optimistic, but of course, depends on how good The fleet powered by the Biometan, we don't expect to Sell it because it's important to sell it to other sources.
What we expect to do is to You will see in our whole fleet, especially the vehicles that are that came to the mill to be fooled, not the ones that are in the food in the field, because then it's easier to fool them. And we are just starting to work in an idea to produce some hydrogen from our DUMETEN, but this is still in a very early conversation.
That's very clear, Renato. Thank you for the explanation and I look forward to the next steps in the project.
Call. Guilherme, one quick add on this biogas. This makes the whole system much more sustainable and this will also add additional cereals and including the whole project this can add like 85,000 So just a quick reminder on that. Are all your Questions answered, Guilherme or do you want to add something else?
That's very clear. Just if you could repeat the number, it's with the 1,000 reviews, right?
85,000 the total project additional
When you replace 100 percent of our diesel, which is the potential of the project.
Our next question today will come from Lucas Ferreira with JPMorgan. Please go ahead.
Hi, everybody.
First of all, just I'm not sure if I missed, I'm sorry. But what's as of now the expected impact of roast combined with drought in your crushing for this year. So what's expected the updated crushing guidance you guys may have for 20 2021, 2022. And do you already foresee some impact of this to 2022, 2023. Is it possible to anticipate something?
Ben, if you can comment obviously on the expected TRS production and decline as well. And the other question that I have is, even though I welcome you guys are open In terms of hedging hedges, especially for next season, right? Prices are getting combined with the currency are getting to a level that I believe will grant you guys super good margins. So on a risk perspective, wouldn't it make sense to start already to hedge something for the next season at these prices of if you look at the curve over $0.18 for the next 2 years pretty much. So would it make sense to already start position yourselves in locking in some good margins for the following seasons?
Thank you, Lucas, for your question. Renato, Can you answer both, please?
Okay. So thank you, Lucas, for your question. So different from the rest of the centers, we had a good summertime in terms of rains. That's why we crushed very well in the Q1. Actually, it was a record crushing.
And also, our yields, Accumulated yields for the 6 months is higher than last year because we didn't have such impact of the drought that is affecting the rest of the center itself. In July, as you know, there was a frost in Brazil, which affected the main sugarcane agas, including Sao Paulo, Panama and of course, Matipo dos Q and Minas Gerais. So we were also affected by the frost. This should impact Our sugarcane yields for the remaining part of this season and for the beginning of the next one, And we are doing all that we can do to try to minimize the impact, which include, as Mariano mentioned at the beginning, to speed up the crushing base, especially the sugarcane that will be harvested this year. We have acquired some third party sugarcane that has been delivered by the owner of the cane.
So it helps to supply sugarcane to our meals. We are taking part of the planting structure to help to crush the sugarcane affected by frost as quickly as possible. So we are trying to do to try to do our best to minimize the impact for this year and at the beginning of next year. It should be of Quite impact our crushing. I think that this year, we should be crushing similar or slightly lower than we have crushed last year.
And for next year, for 2020 through. Probably, we are going to crush for sure more than this year, but I would say a little bit more than 11,000,000 tons of sugarcane altogether. And I think the good point of the for us, if There is a good point is that the fact that the prices of both sugar and ethanol are very high, Both the SMB of sugar and ethanol are very constructive because specifically because of the drop in the supply of sugarcane in Brazil. I I think the market is starting to realize the impact that the drought and the frost is having in the Brazilian crop. So everyone is adjusting their projections to 500,000,000 tons or close to that, which will give you sugar production close to 30,000,000 tons of sugar, which is very is much lower than everyone was previously forecasting.
And we are very we are going to be able to capture those prices because as we were mentioning, we have 30% of our sugar or almost 55% of our TRS for this year plus hedged the app and 100% for next year. And I think it's important to also to mention that the price of Price of energy is very, very high at the moment. It's in the top range of the spot market. So we are selling energy now of almost BRL 600 per megawatt hour, and we have approximately 9,000 Megawatt hour to be sold in the spot market, which represents approximately 10% of our for Energy Production. Regarding the hedge question, of course, it's we are starting to talk about the hedging part of the sugar, but we still believe that the market is going to keep moving up because we don't I think that the scenario of the drought and the frost is fully priced.
There are a lot of important analysts that are still saying that Brazil has 550,000,000 tons of sugarcane to be close. So we are trying to monitor those variables to at some point to start hedging the production. And I think one last comment that I think is It's important to mention here is the fact that we think that the hydro situation is very tight because the auto cycle is growing in Brazil in a higher pace than everyone was expecting. And since the parrot of hydro is very high at the moment, so the gasoline is gaining market share in the auto cycle. So the demand Foreign hydro is growing a lot, and we are happy that we just finished our penermo molecular, which is the equipment to produce on hydro in the Viemma.
So we will be able to increase our hydro production in 50%. So I think we are very well positioned to get this upside of prices in all the products that we produce.
Excellent. So and sorry, just then a follow-up, if I may. What is with the sugar prices and now with you with more in hydro's capacity. What should be your mix going forward? Are you adjusting your production mix then for the second half?
We in Matos dos Sur, as I was mentioning, the anhydrous today is already equivalent to 0.22 St. Per pound, so it's paying more than sugar right now. And the hydro is about the same. So we think that we are going to be maximizing ethanol in the end part of the season. And also, we have to consider the sugarcane uses when the harvest progress, the sugarcane gets with lower TRS, so it's always easier to produce ethanol.
So we think that we'll be producing ethanol and benefiting of tie your brides and suspicion and congratulations to you.
Perfect. Thank you very much.
Start in March. There being no further questions at this time, this will conclude our question and answer session. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.
Okay. So before finishing the call, I wanted to thank you all for joining the conference. As you know, weather is and inherent risk of our business. However, we are uniquely positioned to continue taking advantage of the constructive price scenario. This is true for all the products we produce.
And as I have mentioned before, It is only possible because of the strategic investment we made across our operations and because of the hard work of our team. We believe we are in an excellent position to continue generating good financial results. We have already started to distribute these results with our shareholders through our buyback program and we plan to continue doing so in a more structural way in the coming years. Lastly, I would like to reiterate my gratitude to all our operating teams that are doing an outstanding job and to our shareholders for their continued support.
Thank you. This concludes today's presentation. You may disconnect your line at this time.