Almanaque Aprosoja Brazil’s Soybean Production

Outlook

September, 2010

Government Policies

Brazilian Environmental Legislation

Private Farms

Legal Reserve

APP

Indian Reservation

State Park

National Park

Parks and Indian Reservations

1- Parks and Indian Reservations 2.294.343 km2 27%

2- Legal Reserve 2.685.542 km2 32%

3- Permanent Preservation Areas (APPs): 1.442.544 km2 17%

TOTAL PRESERVED AREA: 6.059.526 km2 71%

TOTAL REMAINING AREA -BRAZIL 2.455.350 km2 29%

8.514.876 km2 100%

Impact of Preservation Policies in Brazil

Source: Embrapa

Area Proposal

New Forestry Code – Key Points

% of 80%, 35% and 20% remains unchanged

Small farms (up to aprox 300 hectares) exhempted

Areas of permanent preservation can count as legal forest

reserves

Legal Forest Reserves

(% of Tree cover in

Farms)

Riparian vegetation, steep slopes and hill tops remain preserved

Area of APP will now count to form % of legal forest reserves

Reduces from 30m to 15m requirements of riverbank cover in

small rivers

APPs (Areas of

Permanent

Preservation)

Farmers who cleared farms before Jul/08 will not need to replant in

the same area. They will be able to use collective areas/parks.

Farmers who cleared land when it was allowed will be legal now

Regularization of

current farms

5 year moratorium in forest clearing for agriculture Moratorium

Land registry reform and state zoning are also priorities that will contribute to a better

business environment and preservation.

State Official Credit Limit Average Area

(hectares)

Cost of

Production

% Area

Planted with

Rural Credit

Paraná - PR R$ 450.000,00 300,00 R$ 1.161 129%

Mato Grosso - MT R$ 450.000,00 1.200,00 R$ 1.483 25%

Source: Aprosoja/ Agroconsult 2009/10

Farm Credit – Opex Financing

Credit limits need to be different for regions with different scales of production (2009/10)

Soybean Operational Exp Funding - PR Soybean Operational Exp Funding - MT

Banks 11%

Banks 42%

- New Forestry Code

- Minimum price program (PEP, PEPRO)

for cotton and corn

- Biotechnology approvals (RR2BT)

- Capex Funding (BNDES)

- PAC (Infrastructure)

- Biodiesel program

- Kandir Law

- Credit access and cost of credit

- Farm Debts problem unsolved

- Rural Insurance still not effective

- Bureaucracy in infrastructure investments

- Exchange Rate –Overvalued BRL

- Restrictions to foreign investment of land

- Land registry and documentation

Positive Negative

Summary – Public Policies

Soybean Production

in Mato Grosso

Land Use in Brazil Land Use in Brazil

Source: iMEA

Cost of Production

COST OF PRODUCTION - SOYBEANS

SEP 2010

SEASON 09/10 10/11 % Total % Change

1. INPUTS (R$/ha) R$ 956,97 R$ 768,38 61% -19,7%

Seeds R$ 123,61 R$ 116,00 -6,2%

Fertilizers R$ 482,31 R$ 387,50 -19,7%

Chemicals R$ 351,05 R$ 264,88 -24,5%

2. FARM OPERATIONS (R$/ha) R$ 186,34 R$ 176,30 14% -5,4%

3 - OTHER COSTS (R$/ha) R$ 360,30 R$ 315,17 25% -12,5%

TOTAL COST R$ 1.503,61 R$ 1.259,85 -16,2%

(ex. Land and Depreciation) USD 729,91 USD 707,78 -3,0%Exchange Rate crop 09/10 @ R$ 2,06/US$ and crop 10/11 @ R$ 1,78/US$

Hedge Position as of September 15, 2010

PLANTING HARVEST

Source: IMEA – Elaboration - Aprosoja

Soybean Comercialization Status – Mato Grosso

Data from the PROJETO REFERÊNCIA of Aprosoja

47 Farms Monitored

80 k Hectares of Soybean

23 k Hectares of Corn 2nd Crop

This project is not aimed to be the average of the state, but a reference to farmers and researchers.

Farm Financial Summary – Projeto Referência (R$/ha)

Source: Projeto Referencia - Aprosoja

Source: Projeto Referencia - Aprosoja

EBITDA

Gross Margin Soybeans

Gross Margin Corn 2nd Crop

SG&A

38%

Farm Financial Summary – Projeto Referência (R$/ha)

For the season 2010/11 it is predicted an

increase of 61% of the EBITDA due to both

price increase and direct cost reductions

Points to Watch in the 10/11 Season

La Niña. Planting in Mato Grosso delayed for 3 weeks at least. This

could effect 2nd crop yields and also transportation costs. Concern for

drought later in the season in the south of the country (RS), where

weather yields have been good for last two years.

Weather Risk

Around 56% of Brazils corn will be GM this season only in the third

season after approval and 75% of RR soybeans. Corn has 9 GM events

with approved cultivars, while soybeans so far only have RR, even

though there are 5 events approved, including the recently BTRR2

GM Technology

New interpretation of an old law (Lei n° 5.709/71) is creating uncertainty in

the market. This interpretation states that brazilian companies with foreign

ownership should be treated as foreign co.

Restrictions on

Foreign Ownership of

Land

The 20 largest producers in Mato Grosso planted 3 million acres (up

from 1.3 mln acres five years ago) and were responsible for 20% of

soybean output. (Source: IMEA) Consolidation Trend

Soybeans - Area and Production Projections in Brazil

Mato Grosso Brazil

Source: Agroconsult (Brazil) and IMEA (Mato Grosso)

CAGR 2.44 % CAGR 4.92%

Biotechnology

Source: CTNBio, Soystats 2010, Agroconsult (Brazil data)

Adoption of Biotech-enhanced Soybean Seedstock GMOs Approved in Brazil

Soyb

eans

99%

91% 80%

72%

GMO soybeans planted before 2005 were brought

into Brazil illegally from Argentina.

Biotechnology

Source: CTNBio, GMO Compass, Agroconsult (Brazil data)

Adoption of Biotech-enhanced Corn Seedstock GMOs Approved in Brazil

Corn

99%

91% 80%

72%

Source: Aprosoja

170 Million hectares

Pasture Conversion Incentive Index – Mato Grosso There are 170 MM hectares of Pastures n Brazil

Pasture Conversion - Source of Area Growth

Ba

gs (

60

kg

) / h

ecta

re

Cattle Opportunity Cost

Convertion Costs (20%)

Operational Costs (ex Inputs)

Input Costs

Socio-Environmental Responsibility

Marcelo Duarte Monteiro CEO

marcelo@aprosoja.com.br