Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome you everyone to Adecoagro's Third Quarter 2020 Results Conference Call . Today with us, we have Mr. Mariano Bosch, Chief Executive Officer, Mr. Charlie Boero Hughes, Chief Financial Officer, and Mr. Juan Ignacio Galleano , Investor Relations Manager. We would like to inform you that this event is being recorded, and all participants will be in listen-only mode during the company presentation. After the company's remarks are completed, there will be a question and answer section. At that time, further instructions will be given. Should any participant need assistance during the call, please press star zero to reach the operator. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro'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. 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 Adecoagro's 2020 third quarter results conference. The company has been performing really well despite the pandemic. All our operations are working under very strict protocols to guarantee the safety of our people and contractors. We are seeing signs of partial economic recovery, but we cannot relax since the pandemic is far from over. Moving on to the results of our businesses. In our sugar, ethanol, and energy business, the strategy we adopted during the second quarter of 2020 to slow down our crushing pace in light of the pandemic allowed us to transfer sugarcane into the second semester of the year and benefit from better price outlook. As a consequence of the greater cane availability, during the third quarter, we were able to maximize our crushing pace, reaching 4.4 million tons, a record high for the quarter.
At the same time, capture higher prices of sugar and ethanol. In this quarter, we diverted 44% of the total reducible sugar content to sugar production, compared with 13% during the same period of last year. This 30% increase shows the high flexibility of our assets, a very important competitive advantage, especially under sudden changes in the market outlook of our products. Our flexibility was also seen in our ability to increase our mix of anhydrous ethanol to profit from its high prices and recover demand. During the third quarter, 41% of the ethanol produced was anhydrous, compared to the 31% produced in the same period of 2019. We are proud to announce that we were the first company to start commercializing carbon credits under the RenovaBio program. So far, we have sold 245,000 at an average price of BRL 41 per CBIO.
We are optimistic about the development and increasing liquidity of such market providing us additional sources of income. Our three mills have been certified to issue CBIOs and were awarded at a score which places us in the top 10%. As an example, in any given year where we would maximize ethanol productions, our mills could produce as much as 750,000 cu m of ethanol, which results in the right to issue approximately 1 million CBIOs. Moving to our farming and land transformation businesses, our adjusted EBITDA both during the quarter and year to date were more than 50% higher year-over-year. This is a clear proof of the consolidation of the five-year plan investments we made in our crops, rice, and dairy businesses, together with our focus on efficiencies. Our peanut processing facility is reaching full capacity.
Our dairy processing facility hit production records during the peak of the pandemic. Our rice mills, parboiled plant, and snack facilities allow us to offer higher margins. Our storage and conditioning facilities continue to improve our grain quality and reduce handling costs just as much as having our own seeders and harvesters in our different productions. These are just a few examples that make us proud of the work we are doing and excited about what is coming next. Let me also point out that our businesses have a strong focus on export market, which is very favorable in this current context. At the present time, all of our teams are fully focused on the planting activities for the 2020, 2021 harvest year. So far, crops are developing under good soil and weather conditions. We hope that the weather continues to be favorable over the coming months.
That is a period in which most of the yields are defined. As every September, Cushman & Wakefield conducted an independent appraisal of our land portfolio and valued it in line with last year. We continue with our strategy to sell part of our mature farmland at a premium to our valuations, as was the case with a plot of the Abolengo farm in Argentina. I would like to remind all that our five-year plan is in its final stages. As a result, and despite of the pandemic, this year we will be free cash flow positive and become a real turning point in the company. To conclude, I would like to express my gratitude to all the operational and management teams. It's impressive the commitment and hard effort of all of our people during these difficult times.
I am convinced that we were following the right strategy to generate good returns and values for our existing shareholders, while we reframe our discipline of being low-cost producers, enhancing our efficiencies, and taking care of our people. I will let Charlie Boero Hughes walk you through the numbers of the quarter.
Thank you, Mariano. Good morning, everyone. Let's start on page four with a brief analysis on the rains in Mato Grosso do Sul. As seen on the top charts, rains in our cluster during the third quarter of 2020 were only 4.7% below the 10-year average, but almost 2.5x higher compared to the third quarter of 2019. The increased rainfall was concentrated in a handful of days rather than being distributed throughout the quarter, which enabled us to rapidly resume crushing activities, as it can be seen in the following slide. I would like to briefly comment on the weather in the Center-South region of Brazil. The region, which accounts for approximately 85% of Brazilian sugarcane production, has been experiencing dry weather for a prolonged period of time.
We believe that this will result in a longer than anticipated inter-harvest period and will lead to a tight supply and demand scenario by year-end, which in turn will put pressure on prices. It's worth highlighting that we will continue to crush cane year-round and produce both sugar and ethanol during the inter-harvest period. This is because we are based in a region that has a different weather dynamic, and because we operate under a continuous harvest model. Let's continue with slide five, where I would like to discuss our sugarcane crushing. During the third quarter of 2020, a total of 4.4 million tons of sugarcane were crushed, 19.1% or 700,000 tons higher than the same period of last year. Indeed, during July, we reached a record of 1.7 million tons of sugarcane crushed.
The increase in crushing was favored by greater cane availability following our decision to temporarily slow down our crushing pace during the second quarter of 2020 in light of the COVID-19 pandemic, and advantageous weather to carry out harvesting activities. Enhanced efficiencies at the industry level resulted in a 20.4% year-over-year increase in milling per day, as they enabled us to crush a higher volume in 1.1% lower effective milling days. On a year-to-date basis, a total of 8.6 million tons of sugarcane were crushed. This represents a decrease of 5.1% or 500,000 tons compared to the same period of last year. However, milling per day increased by 5.6% year-over-year, which shows a significant recovery from the slow first semester. Please jump to page six, where I would like to walk you through our agricultural productivity.
During the quarter, sugarcane yields reached 81 tons per hectare, 20% higher compared to the third quarter of 2019. The year-over-year gap is fully explained by 2019's weather dynamic. Indeed, the adverse weather conditions that hit our cluster last year negatively impacted yields in the third quarter of 2019, as most of the harvested area was cane below optimal growth stage. However, TRS content in the third quarter of 2019 was in line with the 142 kilograms per ton registered in the current quarter. This is explained by the fact that the impact in the TRS content driven by 2019's dry weather was observed during the fourth quarter of 2019, not the third. The combination of these two effects resulted in TRS production per hectare of 11.6 tons, 19.3% higher year-over-year.
Year-to-date, yields reached 78 tons per hectare and TRS content 130 kg per ton, resulting in a TRS production per hectare of 10.2 tons, 0.7% higher year-over-year. Let's move ahead to slide seven, where I would like to discuss our production mix. As you can see in the top left chart, during the third quarter of 2020, anhydrous and hydrous ethanol in Mato Grosso do Sul traded at an average price of $0.118 and $0.108 per pound sugar equivalent, representing a 4.1% and 12.3% discount to sugar respectively. Current prices evidence a recovery compared to the previous quarter of 2020, when they traded at $0.103 and $0.095 per pound respectively. 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 maximum crushing.
Our efforts were focused on maximizing sugar, the product with the highest marginal contribution. Indeed, we operated our sugar kitchen at full capacity through a quarter. With a TRS content of 142 kg per ton, the maximum volume that could be processed into sugar was 44%. This represents an increase of almost four times compared to the third quarter of 2019, when we diverted only 13% of TRS to sugar production. I would like to insist that this high degree in 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 marginal contribution. In terms of ethanol, during the quarter, we diverted 56% of TRS to the ethanol distillery, compared to 87% during the same period of last year when our strategy was to maximize this product.
We also increased our mix of anhydrous ethanol to benefit from the higher prices and demand, from 30.7% in the third quarter of 2019 to 40.7% this quarter. Year to date, sugar accounted for 39.4% of total EBITDA generation in the sugar, ethanol, and energy business, considering other operating income, while ethanol accounted for 51.7%. Let's please turn to slide eight, where I would like to discuss quarterly sales. As you can see on the top left chart, during the third quarter of 2020, ethanol sales volumes decreased by 40% year-over-year.
This is explained by a decrease in the volume available for sale caused by a 26.4% reduction in ethanol production since the current mix has a lower incidence of ethanol compared to the third quarter of 2019, and 31% lower inventories carried from the previous quarter as production mix shift to sugar maximization with the peak of the pandemic. In addition, the decreases in ethanol sales volume is also explained by almost a 10% increase in carry in relative terms to benefit from higher expected prices. Average selling prices for ethanol were higher measured in BRL, but lower in USD, standing at $0.12 per pound in sugar equivalent, representing a 21% year-over-year reduction. On account of the lower selling volumes and lower average prices in USD, net ethanol sales during the quarter amounted to $37.6 million, 53.8% lower year-over-year.
In spite of the lower results, I would like to mention once again that the ethanol prices experienced a recovery throughout the third quarter compared to the second quarter of 2020, domestic ethanol sales, which increased 26%, according to UNICA. At an anhydrous ethanol are at pre-pandemic levels [audio distortion] caused by the lockdown was fully offset by an increased demand from the Northeast region of Brazil, as import parity favored domestic consumption. This increase in demand, coupled with a lower supply from the Central- South region, should lead to a tight supply and demand scenario by year-end. In the case of energy, selling volumes reached 311,000 MWh, marking a 8.4% year-over-year decrease.
Average selling prices were lower both measured in BRL as well as in US dollars, standing at $35.9 per megawatt hour, implying a 33.9% decrease compared to the same period of last year. Dry weather in the Center- South region of Brazil, coupled with the economic recovery, contributed to an improved outlook for energy prices, evidenced in an increase of more than three times between September and October. Net sales in the third quarter of 2020 were BRL 11.2 million, 39.4% lower compared to the previous quarter. Sales volume during the quarter more than doubled Third quarter 2019, sitting at 250,000 tons, driven by an increase in production mix and volume. Average selling prices in US dollars fell by 10.7% to $0.116 per pound due to the fact that the price also includes forward contracts fixed in previous periods.
All in all, the higher selling volume offset the decrease in prices, resulting in net sugar sales of BRL 64 million during the third quarter of 2020, 2.1x higher year-over-year. Finally, to conclude with the sugar ethanol and energy business, please turn to slide nine, where I would like to discuss financial performance. Adjusted EBITDA during the third quarter of 2020 was BRL 86.4 million, 1.5% higher compared to the same period of last year. This was explained by enhanced efficiencies, which allowed us to reduce costs, greater fixed cost dilution on account of the higher crushing volume, and the depreciation of the Brazilian real, which positively impacted costs, expenses, and the mark-to-market of our biological asset, especially harvested sugarcane. Year-to-date, Adjusted EBITDA stood at BRL 172.7 million, at 12.6%. I would like to move on to the farming business. Please direct your attention to slide 11.
At the end of the third quarter of 2020, we began our planting activities for the 2020 and 2021 harvest year under adequate weather conditions. We expect to plant 266,000 hectares, 11.4% higher than the previous harvest season. This increase is mainly driven by an increase in wheat area and an expansion of 12,000 hectares of peanut surface area, almost doubling last year's planted area. As of the end of October 2020, a total of 113,000 hectares, or 42.4% of the target area, has been seeded. We expect to continue planting rice until mid-November, and corn and soybean until early January. Let's move to page 12, where I would like to walk you through the financial performance of our farming and land transformation businesses. Year-to-date, adjusted EBITDA in the farming and land transformation businesses reached BRL 85.5 million, 53.3% or BRL 29.7 million higher year-over-year.
The increase was driven by an improved year-over-year performance in every segment, but it was mostly explained by the dynamics of the second quarter, during which we experienced an increase in the demand for basic food products, and we conducted a farm sale. In the third quarter of 2020, adjusted EBITDA in the farming and land transformation businesses reached BRL 20.7 million, BRL 7.3 million or 54.5% higher year-over-year. The increase was attributable to the farming business, since no farm sales were conducted, neither during the quarter nor in the third quarter of 2019. The crops business generating an adjusted EBITDA of BRL 8.2 million in the third quarter of 2020, 13.6% lower compared to the same period of last year.
This decrease is mainly explained by a decrease in selling volumes, which fully offset higher average prices and the increase in commodity prices, namely soybean and corn, which generated a negative impact in the mark-to-market of our derivatives and of our forward contracts. Conversely, the increase in commodity prices generated a positive impact in the mark-to-market of our biological assets, which partially offset the result, while the depreciation of the Argentine peso led to a dilution of costs in US dollars. Adjusted EBITDA in the rice business was $6.1 million during the third quarter, 13x higher year-over-year, driven by an increase in sales generated both by higher volumes and higher average prices in the domestic and export market, and lower costs in dollar terms as a result of the depreciation of the Argentine peso and enhanced efficiencies at the farm and industry level.
The dairy business generated an adjusted EBITDA of BRL 6.4 million, mainly driven by higher selling volumes due to increased demand in the export market and achieved efficiencies in our vertically integrated operations, including productivity at the farm and the 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, net sales reached BRL 580 million, an adjusted EBITDA of $2 44 million, 7.3% lower and 2.4% higher year-over-year. During the quarter, net sales reached $ 232 million, in line with last year, while adjusted EBITDA totaled $ 102 million, marking a 9.2% increase compared to the same period of last year. To conclude, please turn to slide 15 to take a look at our net debt position.
As you may see in the bottom left chart, our net debt as of September the 30th of 2020, reached $7 11.3 million or 4.1% lower than the previous quarter, driven by a $ 53 million reduction in gross debt, which amounted to $ 925 million, 5.4% lower than the previous quarter. The reduction was mainly explained by higher cash generation during the year as we continue to ramp up operations. On a year-over-year basis, net debt was 5.6% lower compared to the third quarter of 2019 on account of higher cash and equivalents, driven by a positive free cash flow during the last 12 months, which fully offset the higher gross debt. 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 tenor.
As of September 30th of 2020, both our net debt ratio as well as our liquidity ratio improved compared to the previous quarter. Our net debt ratio reached 2.29x , 6.7% lower than the second quarter of 2020 and 16.5% 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 1.49x compared to 1.23x during the second quarter. This ratio shows the full capacity of the company to repay short-term 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. If you have a question, please press star one on your touchtone phone at this time or anytime. If at any point your question has been answered, you may remove yourself from the queue by pressing star then two. Questions will be taken in the order that they are received. We do ask that when you pose your question, that you pick up the handset to provide optimum sound quality. Please hold while we poll for questions. The first question is from Guilherme Palhares of Bank of America. Please go ahead.
Good morning, everyone. Thank you for taking my question. I do want to touch base on your commodity hedging. We do see the company accelerating its volumes hedged, as well as prices, for the 2021 harvest season and for the next one as well. If you could provide some color on what is your rationale here, and do you expect to continue production to be leaning towards sugar rather than ethanol in the coming crops as well? Thank you.
Thank you, Guilherme, for your question. This is Mariano, and I'm going to take your question. First of all, I would like to mention that we have a hedging policy. This hedging policy contemplates how our crops evolve, and so how our production of the different commodities that we produce evolve, and according to that evolution, is that we start hedging the future production. That's what is contemplated in our hedging policy. This hedging policy has maximum or minimum levels in which we move according to our different views. Today, we have a clear view on all the different commodities that we are producing, that is a bullish view. According to this bullish view that we can discuss in each one of the commodities that is basically related to the supply and demand, is that we are hedging on the lower levels of this policy that we currently have.
That's the general strategy that we are taking in each one of these commodities. Particularly between sugar and ethanol, today, the sugar is paying more than ethanol, and that's why we are maximizing sugar. Also, within ethanol, the anhydrous ethanol is what's paying more, and that's why we are maximizing anhydrous in the ethanol side. I don't know, Guilherme, if your question is answered, or do you want more clarification?
No, that's very clear. Thank you.
The next question is from Santhosh Seshadri of HSBC. Please go ahead.
Hi. Good morning. Thanks for taking up my question. My question is basically on your capital allocation policy. You have been emphasizing on return of cash to shareholders, in the previous calls. Can you provide some color on how you are planning to execute that? Are you thinking of any minimum threshold levels? Since you are expecting positive cash flow by the end of this year, is there any possibility of distributing dividends from current year profits? Thank you.
Thank you for your question. Here I would like to mention that as we've been talking, most of the relevant CapEx of our 5-year plan has already been done. In 2020, our expansion CapEx is less than half done in 2019, and this trend will continue for 2021. As I mentioned in the introduction, despite of the pandemic, this 2020 will become a free cash flow positive for the first year since we started with this investment. This is a turning point, and it makes the beginning of a path where we start to generate free cash flow on a structural way, as you were saying. This is a combination of increasing results and decreasing CapEx as we start, or we continue to commit ourselves to return capital to shareholders.
In 2021, going directly to your expectations and assuming normal weather conditions and current commodity pricing, we will be in a position to start returning some cash to our shareholders on the second half of this coming year.
Thank you. That's clear.
This concludes our question and answer session. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.
Before ending the call, I just wanted to thank you all again for joining. This COVID-19 pandemic has introduced additional challenges to our businesses and even to our lives. The company, I mean the people who make Adecoagro, has proved to be up to the level of the circumstances, and we feel absolutely proud of the way we have handled the current situation, which, as I said before, is far from over. Our operations are in great shape to fulfill our strategy, even in such a complex environment. The market outlook is looking promising and expect obtaining attractive results in the short term. Hope you all stay safe and sound, and in the case we don't see or speak, we wish you all a very nice and healthy end of the year. Thank you.
Thank you. This concludes today's presentation. You may now disconnect your line at this time, and have a nice day.