Morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Addison Agro's 4th Quarter 2020 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO Mr. Charlie Belaraju, CFO and Mr.
Juan Ignacio Gagliano, Investor Relations Manager. We would like to inform you that this event is being recorded and all participants will be in which will be noted during the company's presentation. After the company's remarks are completed, there will be a question and answer session. 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 Addacal Aggro It could cause results to differ materially from those expressed in such forward looking statements. Now, I'll turn the conference over to Mr. Mariano Bosch, CEO. Mr.
Bosch, you may begin your conference.
Good morning, and thank you for joining Addecoagro's 4th quarter results conference. 2020 was an a difficult year due to the global impact of the COVID-nineteen. Since the pandemic was declared, we immediately prepared safety measures to mitigate the eventual risk of being affected by the disease And prevent an uncontrolled spread of the virus throughout our operations. We provided a Safe environment for our employees and contractors, implementing safety measures and developing protocols that allowed us to maintain our facilities 100% operational. It is because of this That we achieved very good operational and financial results even in past challenging times.
And once again, we proved that being low cost producers and focusing on efficiencies Definitively pays off. In our sugar, ethanol and energy business, the impact of the pandemic Cost a decrease in the prices and demand for ethanol starting in the Q2 of 2020. In light of these factors, we rapidly shifted our strategy to maximize sugar production. We slowed down our crushing pace, implemented a cost reduction plan and revised our CapEx plan. As times of the pressure recovery started to emerge, we accelerated our crushing pace and finally concluded the year with 11,100,000 tons crushed, 0.3000000 tons higher than during 2019, A very relevant aspect of our production system is the high flexibility we have to switch From producing sugar to ethanol and vice versa.
This allowed us to triple the amount of sugar we produce Compared to 2019 and to increase our relative production of anhydrous ethanol to capture the premium prices. These were decisions we took on a weekly basis given such a changing and unstable environment. Having the ability to take directions in such a short period of time constitutes A very important competitive advantage. As you know, having a sustainable production model is part of our DNA. Thanks to this, we obtained 1 of the highest scores under the Renault Avio program and benefited We are optimistic about the program's consolidation, and we will continue to increase the sustainability of our operations to keep on benefiting from this Additional thoughts of interest.
To conclude on our short and long business and because of all these things I'm mentioning, We ended up 2020 with a cash cost of $0.079 per farm. That is 13% lower than the previous year. Apart from the land transformation business, Our adjusted EBITDA during the year was 50% higher year over year. It is a clear proof of the consolidation of the 5 year plan investments we made across our crops, rice and dairy businesses, together with our focus on efficiencies. In 2020, we completed the harvest of Almost 1,000,000,000 tons of rice and grains, transporting our production across 10 provinces and reaching customers across the world.
We're ready to achieve this and overcome the loss of challenges caused by the mandatory lockdown of our people and the work we did alongside with public agencies. We have once again started harvesting activities for rice and some of our crops. While soybean, corn and peanuts are in the period of yield definition. In our dairy operations, we continue ramping up Our industrial facilities are achieving high positive indicators even as our cloud curve increases. In terms of land sale, the active demand for farmland in Argentina allowed us to conduct an additional farm sale in December 2020 marks a turning point for us.
We became free cash flow positive for the first time Since we started our 5 year plan in 2017, generating over $50,000,000 The expansion of our Clustered in Sugar and ethanol business, especially in terms of cane availability the acquisition of our peanuts and South Tower processing facilities. The investment in our rice business, both at the farm and industry level And the acquisition of the 2 making processing facilities are part of the investments we did during the past year. They are all generating returns on invested capital in line or above our expectations, ranging from 20% to 100%. The investment in our peanut processing facility to make one example Now that the results of our bigger, more efficient And vertical integrated operations are in front of us and that our 5 year plan is in its final stages. We have considered that cash flow generation will continue to increase in the upcoming years.
Moreover, Commodity prices have been increasing. Our gain availability for 2021 is good and our debt level It's adequate and well structured in the long term. All of this places us in a good position to distribute results with our shareholders. And as you can see, we have already started doing it through our Vygel product. Lastly, I would like to express my gratitude to all of our operational and management teams.
We are very proud of the commitment shown during these difficult times Of the hard work and continued support, I am convinced that we have the right people and that we are following the right strategy We'll generate good returns and value for our existing shareholders. As always, we need to remain focused on being low cost producers, enhancing our efficiency and taking care of our people. Now I will let Charlie walk you through the numbers of the year. Thank you, Mariano. Good morning, everyone.
Let's start on Page 4 with a brief analysis on the range in Mato Grosso do Sul. As seen on the top charts, range in our cluster during the Q4 of 2020, we are 10.7% below the 10 year average, but 12.8% higher compared to the Q4 of 2019. Rainfalls were distributed throughout the quarter and was especially concentrated towards the end of the December, resulting in interruptions in our crushing activities As can be seen in the following slide, I would like to briefly comment on the weather in the Central South region of Brazil. The region, which accounts for approximately 85% of Brazil's sugarcane production, experienced its dry weather For a longer period of time last year, this forced mills to shut down operations earlier than usual as they didn't have enough cane to crush. For the same reason, the beginning of this year's harvest season will probably be delayed, Resulting in a longer than anticipated in the harvest period, it is worth highlighting that we will continue to crush cane year round And produced both sugar and ethanol during the inter harvest period.
This is so because we are based in a region I have a different weather dynamic and because we operate under a continued harvesting model. Let's continue with Slide 5, where I would like to discuss our sugarcane crushing. During the Q4 of 2020, a total of 2,500,000 tons of sugarcane were crushed, 40.1 percent or 700,000 tons higher than the same period of last year despite the reduction in effective billing days. Indeed, in an attempt to make up for the slowdown in crushing activities during the Q2 and in order to profit from high prices, We decided to accelerate meeting operations. This was evidenced by the astonishing 57.6% increase in meeting per day.
Needless to say, it was a greater gain availability coupled with enhanced efficiencies at the industry level that made it possible. On a year to date basis, a total of 11,100,000 tons of sugarcane were crushed. This represents an increase of 2.4% compared to the same period of last year. Again, this speaks for the highly efficient and coordinated work during the second half of the year. Please turn to Page 6, where I would like to walk you through our agricultural productivity.
During the quarter, sugarcane yields reached 82 tons per hectare, 20.3% higher compared to the Q4 of 2019. The year over year gap is fully explained by the negative impact of the adverse weather conditions on the 2019 periods As most of the harvested area was came below optimal growth stage, TRS content It was 137 kilowatt per tonne in the Q4 of 2020 and 132 kilowatt per tonne in 2020, 5.5% and 1.1% lower compared to the same period last year. Again, The reason for the decrease is explained by the dry weather conditions in 2019, which led to higher TRS content. The combination of these two effects resulted in TRS production per hectare of 11.3 tonnes in the Q4 of 2020, 13.6% higher year over year. Year to date, yields reached 79 tons per hectare and TRS content, 132 kilograms per tonne, resulting in a TRS production per hectare of 10.4 tons, 3.5 percent higher year over year.
Let's move ahead to Slide 7, where I would like to discuss Our production mix, as already said, in light of the improved outlook on prices and in order to take advantage of the favorable weather and cane availability, Our strategy during the quarter was to maximize crushing. As you can see in the top left chart, during the Q4 of 2020, Sugar traded at a premium of 14.3% and 3.9% to hydrous and iHIBrous Ethanol, which traded at $0.125 per pound and $0.14 per pound, respectively. As a result, our efforts were focused on maximizing sugar, the product with the highest marginal contribution. Indeed, we operated our sugar kitchen at full capacity throughout the quarter, diverting as much as 50% of TRS to sugar reduction compared to 6% during the same period of last year. On a full year basis, we maximized the Shula production in 44% compared to 15% during 2019 despite a first quarter of Full ethanol maximization prior to the pandemic.
I would like to insist that this high degree of flexibility Constitutes one of our most important competitive advantages since it allow us to make a more efficient use of our fixed assets and sell the product with the highest margin and contribution. In terms of ethanol, during the quarter, we diverted 50% of TRS To the ethanol distillery, compared to 94% during the same period of last year, when our strategy was to maximize this product, Year to date, sugar accounted for 36.9% of total EBITDA generation in the sugar, ethanol and energy business Considering other operating income for items higher compared to 2019. Again, this is a clear evidence of our capacity to shift production from one product to the other. Let's please turn to Slide 8, where I would like to discuss quarterly results. As you can see on the top left chart, ethanol sales volumes decreased by 36.1% year over year.
This is fully explained by our strategy to maximize tura production Due to the lagging impact of the pandemic on ethanol prices and demand, in particular, during the 1st semester of the year. During 2020, hydro and anhydrous ethanol traded on average at sugar equivalent prices of $0.12 per pound And $0.13 per pound, 6.7 percent discount and 1.3% premium to sugar, respectively. Average selling prices for ethanol were higher measured in reales, but lower in U. S. Dollars Standing at €0.132 per pound in sugar equivalent, representing a 36.1% year over year reduction.
On account of the lower selling volumes and lower average prices in U. S. Dollars, net ethanol sales during the year amounted to $180,600,000 46.4 percent lower year over year. In spite of the lower results, I would like to mention once again that ethanol prices experienced a recovery throughout the second half of the year Due to higher gasoline prices, increasing fuel demand and lower supply, thus building a positive scenario for the upcoming months. In the case of energy, E activated net sales amounted to EUR 36,900,000 marking a 31.3% decrease compared to 2019, driven by a 5.3% decrease in volume and a 27.5% decrease In average selling prices measured in U.
S. Dollars, net sales of sugar increased by 72.7% in 2020 Compared to the previous year, reaching EUR 167,800,000, sales volumes increased by 89.9 year over year led by an increase in production mix and volume, which fully offset the 9.1% decrease in average Selling prices measured in U. S. Dollars, 6.5 percent and increasing prices measured in reales. Although sugar is trading in U.
S. Dollars, The depreciation of the Brazilian real does have an impact on prices due to the fact that our function currency reales and our reporting currency in U. S. Dollars. In addition, I would like to comment that during 2020, We started exporting certified organic sugar produced at our Uma Mill.
Certification is required by the European market And it's only granted after having produced organic sugar for a period of 3 years. We successfully exported approximately 5 1,000 tons of organic sugar at an average price of $0.25 per pound, capturing a significant premium over BHP sugar and plan on doubling this forward figure in 2021. In this way, we not only have a highly efficient cluster model in place, But we also continue to add value to Ooma. Let's move to Slide 9, where I would like to explain our total cost of production. Total cost of production depicts on a cash basis how much it costs us to produce 1 pound of sugar and ethanol in sugar equivalent.
Maintenance CapEx is included in the calculation since it's a recurring investment necessary to maintain the productivity of the sugarcane and plantation. As we are calculating sugar and ethanol cost, energy is paid via byproduct and thus deducting from total costs. As for the tax recovery line, it includes the ICMS tax incentive that the state of Mato Grosso do Sul granted us until 2,032. As shown in the table, total cash costs in 2020 marked a 12.7% reduction On a per unit basis, reaching $0.079 per pound of sugar equivalent. This decrease was explained by a 29% reduction in total production costs, driven by Higher crushing volume, which allowed us to dilute fixed costs, coupled with the year over year depreciation of the Brazilian real, which further contributed to reduced unit costs measured in U.
S. Dollars. Additionally, enhanced agricultural efficiencies, Lower industrial costs due to reduced third party services and temporary suspension of wood chips purchases Also had a positive impact on production costs. These positive effects were partially offset by the higher cost of third party cane, both as a result of higher purchased volumes and higher constant prices. At the same time, The maximization of sugar production led to an increase in SG and A expenses as well as a reduction in pitcofinestry investments.
Finally, to conclude with the Sugar, Ethanol and Energy business, please turn to Slide 10, where I would like to discuss financial performance. Adjusted EBITDA during the Q4 of 2020 was $80,300,000 $25,200,000 or 45.6% higher compared to the Q4 of 2019. This increase was mostly explained By the $19,900,000 higher result derived from the mark to market of our biologics and assets, Partially offset by a loss that is derived from the mark to market of our commodity hedge position and an increase In SG and A, on account of higher freight and falling costs due to higher sugar sales. On a full year basis, Results were impacted by the effects of the pandemic. However, adjusted EBITDA amounted to $253,100,000 in line with last year.
I would now like to move on To the farming business, please direct your attention to Slide 12. As of today, Adecoagro finished It's planting activities for the 2020, 2021 harvest year. We planted 262,000 hedges, 10% higher than the previous holiday season. This increase is expected to come primarily from a greater lease area. So far, rents have been at equating average.
However, we continue to closely monitor water requirements as we are going through the critical phase Let's move to Page 13, where I would like to walk you through the financial performance of our Farming and Land Transformation Businesses. In 2020, adjusted EBITDA in the Farming and Land Transformation Businesses reached $107,700,000 $35,900,000
or 50
1% higher year over year. The decrease in financial performance is mostly explained By the $28,300,000 higher result generated by the farming business, although the land transformation business contributed With a $7,600,000 increase following the completion of 2 land sales during 2020. The Crocs business generated an adjusted EBITDA Of $35,700,000 during the 2020, 39.1 percent or $10,000,000 higher compared to 2019. This is mainly explained by a $17,000,000 gain in the mark to market of our biological asset and our grain inventory As a consequence of the increase in commodity prices, the higher planted area and the increase in yields for most of our crops And by a cost reduction in U. S.
Dollars on account of enhanced efficiencies and the depreciation of the Argentine peso. These results were partially offset by a EUR 10,500,000 loss in the mark to market of our commodity hedge position. The RAS business accounted for an increase in adjusted EBITDA of 67.8 percent or $13,700,000 compared to the previous year, Reaching $34,100,000 in 2020. This was mostly driven by a $6,300,000 gain in the mark to market of our biologics Assets explained by the increase in commodity prices, coupled with an increase in area and yields as a result of recent investments, which enhance productivity And a $6,900,000 reduction in selling expenses due to our 4% reduction in export taxes And the cost reduction effect as a result of the depreciation on the Argentine peso during 2020. The dairy business was Responsible for an increase in adjusted EBITDA of 21.3 percent or $3,800,000 compared to last year, Totaling $18,200,000 during 2020.
This increase was driven by our enhanced Efficiencies at the farm and industry level led by our continuous focus on increasing productivity in every stage of our value chain. Our production flexibility, which enabled us to capture the increasing demand in the domestic market, driven by COVID-nineteen pandemic And an increase in gross sales, thanks to a 58.7% increase in sales volumes, partially due to the 3 month gap In 20 nineteen's industrial operations, this increase was partially offset by higher costs and expenses on account of the larger volume. Let's now turn to Page 16, which shows the evolution of Arequaro's consolidated figures for the year. I would like to highlight the fact that Despite all the challenges, we managed to outperform both from an operational and financial perspective. Consolidated adjusted EBITDA totaled $342,000,000 12.1 percent or $37,000,000 year over year.
As previously explained, the good results in farming and natural formation explained the increase. At the same time, 2020 marks A milestone for the company as it was the 1st year that we generated positive free cash flow following the initiation of our 5 year plan back in 2017. Turn now to Slide 16 to take a look at our net debt position. As you may see in the bottom left chart, our net debt as of December 31, 2020 reached BRL 635,000,000, BRL 33,000,000 or 4.6% lower than the previous quarter, driven by $122,700,000 increase in cash and equivalents, which fully offset the higher gross debt. The higher cash and equivalents was mainly explained by our strategy to raise long term debt during the second half of the year With the idea to cancel short term debt during the 1st semester of 2021, this will result in a significant improvement in our debt profile, While substantially reducing capital payments for the year.
On a year over year basis, net debt in the Q4 of 2020 was 6.4% or $43,200,000 lower compared to the Q4 of 2019 In spite of gross debt being flat year over year, this is explained by the 15.8% higher as part of our risk management program. The Q4 of 2019 in turn reflects the inflow from the issuance The credit bond in Brazil that took place by 2019 year end, 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 With approximately 78% having a long term tail. As of December 31, 2020, Both our net debt ratio as well as our liquidity ratio improved compared to the previous quarter. Indeed, our net debt ratio reached 1.86x, 18.9% lower than the Q3 of 2020 and 16.4% lower year over year. At the same time, our liquidity ratio, which is calculated as Cash and equivalents plus marketable inventories divided by short term debt reached 2.6 times compared to 1.49 in the 2nd quarter.
This ratio shows the full capacity of the company to repay certain debt with cash balance without reaching external capital. Thank you very much for your time. We are now open to questions.
Thank you. The floor is now open for questions. At this or any time. Questions will be taken in the order they are received. We do ask that when you pose your question, when you pick up your handset to provide optimum sound quality.
Please hold while we poll for questioners. Today's first question comes from Pedro Salares with BTG Pactual. Please go ahead.
Yes. Good morning. Good morning, Madel, Carlos, Juan. I have a couple of questions here on the shoe and ethylene business And another one is very strong. First, now with the end of the investment cycle that you guys delivered in the past few years.
What should we expect for the crushing levels For the view, right, for the stand 20 1 or in the words that stand 20 2 crop, it would be helpful to have
A color
on that, if you could expect it to increase in the next half of it. And also regarding the organic sugar market, What's the size of this market for you guys? And what should we expect as well in terms of How much you could capture in terms of value for in the organic segment would be nice also to hear. And the last one, very far Now with this recent spike, especially in North Salt Commodities, could we see or expect To sell more land and to accelerate, I mean, increases in years that this happened also when inflation picked up In Argentina, this was the case. So if you could ask a touch base
a little bit on this, it would be
helpful to us. Thank you.
Hi, Pedro. Thank you very much for your question. On all the sugar methanol Stace, I will ask Renato to answer your question and then I can complement and then I will go through the your farmland question. Renato, do you want to answer Pedro's question?
Okay. Thank you, Pedro. So it's time for the organic question. We have been producing organic sugar in Lima for 4 years. This year is the 1st year that we have export organic sugar because we need 3 years Our production team starts heading to Europe even in U.
S. Market. We think that Uma is the right location to do this project because of the location of Uma, which is very close The market and also the trend of exports and also the weather in NIMA is very well defined. So we think the conditions to produce gum sugar there is very good. The scale of our projects It's about 3,000 hectares, which will be able to produce 14,000 Tons of sugar, of organic sugar, we don't think that we can grow more than that because in this particular area, We have been able to use all the byproducts that we produce, peanuts, filter, fly ash.
So we should go further. We have to acquire organ fertilizer from other areas, which would make the sugarcane the cost of the sugarcane very high. So we should definitely decide that We think it's appropriate for our model. The size of the market, the global market It's about 400,000 tons of sugar. So it's a small market.
It's a niche. And the goal of this market is about 10% per year. And regarding the other question about sugar ethanol, Sure. It's actually regarding the crushing levels expected for this next harvest year. Should we expect you guys to crush more Kin?
Okay. So for the coming year For the current year, sorry, we expect to crush around 10% more than we did last year. As Charlie mentioned before, the leverage in MAPFRE YENZO was very good in the second semester. We had very good range Key points of last year and this year. So for example, in general, we have more than 400,000,000 units of RAN, which was very good.
That's why we are crushing a lot in the first quarter, taking advantage of the prices of both sugar and ethanol That's very high. We expect to reach the 12,500,000 tons of sugarcane, which is our goal in our 5 year plan And 2023, I think the good news is that we have already leased all the land that we need. So it's just a matter of planning those events and to be ready to push that.
Thank you, Renato. Then Pedro, to answer your question about the farmland, I would say that since September of last year or since the end of last year, there was an increase in the demand of land In Brazil, Uruguay and Argentina, so there was more demand also for our own farmland. And as You know and as we've been explaining many times, selling and buying land is a liquid market where We find the right buyer and it takes time to find the right buyer for our already transformed farms. So that's what we did back in December. We do expect to continue to do it within the same level, But that would be the general answer to your question.
Our next question today comes from Lucas Ferreira with JPMorgan. Please go ahead.
Hi, guys. Good morning. Two questions regarding capital allocation. The first one is a quite simple one. If you can remind us The CapEx budget for this year, is it has also sized up or not because of the outlook on prices?
Second question is, since you now finished the growth your growth cycle, Probably, we'll be paying more dividends and doing buybacks. But wanted to think about Strategically thinking, let's say, a couple of years from now, what are the growth opportunities you foresee for the company? Would you still be investing in Argentina? Do you see opportunities in acquisitions or expansion CapEx in Argentina? If yes, Where exactly, in which segment, which market?
The same question for Brazil. What are the growth perspectives For the operations in Brazil, would you consider M and A or organic growth? Can you discuss this with us a little bit more? Thank you. Hi, Lucas.
Thank you for your question. I will try to answer first on a broad way and then we can get into More details, I would like to include all the different parts of your questions. I would like to point out the as you mentioned, the cash flow positive that sees 2017, that is wasn't there anymore. So The important point here is that all the investments that we did are currently generating very attractive returns. And because of this consolidation is that we are generating this Free cash flow positive.
This marks the beginning of the path where we start to generate cash in a structural way That should result on a significant increase in our cash generation in the upcoming years. In addition, Our debt level is structured in the long term and reaching the adequate levels. This means That we will have enough cash for both to distribute results with our shareholders and continue to create value by enhancing our operations. Our first priority We need to distribute a relevant portion of this cash with our shareholders. In fact, we have already started to do this Via our buyback program, only during the 1st month of 2021, we have already purchased Close to 1,000,000 shares.
And we are also analyzing attractive opportunities, both in the farming Adding the sugar business, as you were asking specifically. All these opportunities are Our synergies well with our current operations and have the potential to make them more efficient As a whole operation, and all of these things that we are analyzing offers IRRs above 30%. So that's basically how we are thinking about this capital allocation question that you were asking. And specifically in terms of the CapEx of 2021 that you were asking, I would consider that this is in the same lines that what happened in 2020. Because in 2020, when we'll revise some of the CapEx, as were mentioning we delayed some of these by their plan CapEx that we had already planned.
If I may, just a quick follow-up.
These potential high return projects you're talking about, what's the size of those? I mean, Could we expect something like a major, like a significant increase in your CapEx going forward? Or you see those as more like a marginal? My point is, do you see any large CapEx or big CapEx equity impair Your dividend payments in the next few years, that would be my passion. No.
The important thing is What I was just mentioning and I also mentioned in the introduction is that our priority is To distribute with the shareholders. So including that is that we are open for different projects with attractive IRRs. All these projects can include M and A or can include Organic growth can include a change in one machine that makes us much more profitable so that the small investment It has a specific IRR because of its marginal contribution of 50% or 70%. So those are all the different projects that we can do. But always with this idea that we have a priority that is distributing with shareholders Also, so that's how we are approaching on all this thinking of the capital allocation.
So to be more specific, I don't see a huge CapEx coming online. Got it. That's very clear. Thank you very much. And on the different topics also take time because They imply improving on the operations on the day to day.
So are all things that cannot be run from one day to another.
Thank you, sir. And today's next question comes from Rodrigo Alveda with Santander. Please go ahead.
Hi, good morning, Mario, Ricardo, and team and congratulations on the impressive results and the fast implementation of the CapEx plan as well. My first question here is related to the Frugal Natural Business and more specifically to the expansion in harvest scenario. I think Yanav already mentioned that you've already lived there that you need. But I wanted to understand a little bit more on the pace Planting and harvesting on this area 2023, just so we can understand a little bit better the sugarcane availability year by year. And also just out of curiosity here, with the higher sugar, soy, corn prices, is there any way that the leaf expenses Increase or do you have everything very well, say, wrapped up so that these changes in prices do not affect your contracts?
And just also out of curiosity, if you were to lease more land right now, do you think you would have a higher cost than you did before just because of the high prices This is all for you. And then the second topic here that I want to touch a little bit is on the buyback program. As far as I remember, the program was extended September of last year, but then maybe I missed something, but the program is now just wanted to understand until when the program is going to be valid And what's the size of the program that is active right now? Those are my questions. Thank you.
I'm going to start from the end of your Question Rodrigo, thank you for them. On the buyback program, the buyback program is 5% has been approved in by the Board and is renewed every year. And if we reach that level, it can also be Open by the world. So this is more decision that is always can be taken. Today, what is On place, this is 5% product.
Then going to your question about the costs And the different costs and increasing the land and increasing in commodity prices, yes, it's clear. There is an increase in costs, But the increase in the revenues because of this increase in prices is higher than the increase of cost. So the margins improved Even with this increasing cost, of course, we are working with that. We have several parts of the cane that We've been leased for 2 years or 2 cycles that means 14 years. So that is not an unchanged, but there is a portion of the leases That the view this year that when we renew those leases, there are some Small increases and that's part of the negotiation that we continue to do every day and that's part of what we do.
But I'd say if we take your question, we see what you're seeing and it's part of our reality. But at the end, the margins, of course, are better with this higher prices. And finally, on the expansion of the harvesting area, I couldn't understand exactly well. Specifically on the farming and land transformation, there is an increase of 10%, where we're increasing the more profitable crops that in this case are It's some flour, peanuts and rice. But on the sugarcane question, I couldn't understand What was your question?
We have already leased all the land to continue to finalize The 13,200,000 tons of total crushing that we will reach in 2022 that Renato was talking about, but I couldn't understand exactly what was that part of your question.
Yes. I just wanted to let you know through the pace of the planting and harvesting, how much We can expect more sugarcane availability in 2021, 2022 and then we reach the full Capatin, just I just want to understand
the year by year pace. Renato, you want to answer more specifically? Of course, always it depends on the climate of every year. And as you've seen, that is changing, but we have our own projection That is between 5% to 10% growth every year.
Yes. We still need to plant 12,000 vehicles of the expansion planting, and we think that we will Increased this year 10% compared to last year and another 10% compared to this year. And then finally, in 2020, we reached the 12,500,000 tons in the cluster, and we have to add the 1.2 We have in terms of order to get with the total crushing capacity.
Okay. That's perfect. That's very good color. Thank you.
Thank you, Rodrigo.
And our next question today comes from Santosh Seshadri with HSBC. Please go ahead.
Hi, good morning. Thanks for taking up my question. And remember in one of your presentation a couple of You mentioned that your EBITDA could reach well above USD 400,000,000
by the end of your 5 year CapEx plan.
I know that that's a bit dated presentation, but I'm just wondering if we got to refresh those estimates to reflect the current commodity price increases, which are obviously much higher than it was at the time of presentation.
Do you think we'll still
be able to generate EBITDA of about $400,000,000 in 2021. Or is there any other factor that is necessary to achieving that number? I'm basically trying to understand the possible scenarios for 2021 earnings and the underlying drivers.
Thank you, Santos, for your question And thank you for participating in the call. And of course, we don't need guidance I say EBITDA guidance, but you can clearly, as you were making your calculations with Our crushing volumes and what we are going to be producing and subject to all these Climatic events that our business has, we can reach those levels that you are talking about the The ILS, but it's something that you can do your own calculations and work with the models. And it's clear that it's something that we cannot take clinically behind us, but it's that we could
Thank you. I have another question. So if you look at ethanol prices in Brazil, it has Seeing a strong rally in February 2021. So assuming this momentum would continue, Do you think you will be producing more ethanol instead of sugar for 2021? So if you can give some numbers on the production mix
Yes, that's an excellent question. Today, In this exact and that in this exact moment, we are again maximizing ethanol, but that's something that we are changing Every week. So that's the great competitive advantage that we have as a company and that's the great flexibility that we have. So every week, we know what is it that we are going to be maximizing. So we've been maximizing sugar for many months.
Now that has just changed and that would change next week or that's one of the great advantages Of our whole production system, not only the assets, but the whole production system. And the other important thing I would like to point out with your question is That we are currently producing ethanol. That in general, nobody is producing ethanol today. But because of our continuous harvest and our model of the harvest in all the year round, in this moment, We are taking advantage of all the second crisis of the account.
Thank you. And my last question is on your yield expectation in your crop business. Since you're nearing harvest for most of the crops. Can you give some sense on the potential yield impact due to the dry weather in Argentina?
Okay. Good question. For the whole sugarcane operation, we are in an excellent situation in terms of The climate, there has been a relatively dry period for the center south region. We are in the Mato Rosso Sul region and we are within excellent sugarcane plantation that is for the whole sugarcane business. And then for the total farming in Argentina and Uruguay, There is being a dry period in the last 15 days.
Soybean, corn And peanuts are in the middle of its yield definition. I would say that We have already done a portion, but we are still subject to climatic events and this slide period can continue or not. So There is still variability on those 3 crops, but then we have the other crops like Rice and sunflower that are important for us today that are having very good yields In this scenario or in this situation of in this climatic situation, And we are in the middle of the harvest of those 2 crops that are yielding pretty well and some way above our projections. So that talks about the amount of different crops that How we minimize our risk because of having all these different crops and
And ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Mr. Bosch for closing remarks.
Okay. I would like to use this opportunity to reiterate my gratitude to all our employees, contractors and Stakeholders for their hard work and commitment during such active times. 2020 was a very difficult year, full of challenges that tested the limits of organization and our stability against And unexpected event, however, our investments, our devotion to efficiency in each Processed across the different lines of businesses and our low cost production model has proven us Right one more time. We closed the year with attractive returns in every segment, Resulting in strong consolidated figure. But the challenges are not over yet.
2021 is already showing us signs of difficulties that we shall have to overcome. We are confident that we have the right people and strategy to continue generating value for our shareholders and obtaining attractive returns. Thank you very much and see you in our upcoming events.
Thank you. This concludes today's conference call. You may now disconnect your lines and have a wonderful day.