SLC Agrícola, Brazilian largest farming group, expects margins to improve in the 2026/27 amid rising grains and cotton prices and well-timed fertilizer purchases for plantings starting in September.
Chief Executive Aurélio Pavinato said soybean, corn and cotton futures for delivery in 2027 are trading above comparable year-earlier levels as tightening global inventories and rising input costs lift the prices farmers need to cover production expenses. El Niño is the main threat to the Brazilian crop producer’s outlook.
“It looks like we have moved past the bottom in prices,” Pavinato told reporters Wednesday after SLC released second-quarter results. He reiterated the view on Thursday’s call with analysts.
The war in the Middle East has also drawn more speculative interest into commodity markets and driven up the cost of some inputs, including phosphate fertilizers, Pavinato said. Higher production costs are squeezing margins globally and increasing the need for stronger crop prices.
Citing U.S. Department of Agriculture data, Pavinato said the global soybean market will post its smallest surplus in five years in 2026/27. Corn consumption is projected to exceed output by 24 million metric tons, while the cotton market is expected to run a deficit of 5.3 million bales.
“Even after a 10% to 15% recovery, current prices do not encourage acreage expansion,” he said. “Costs have risen sharply worldwide.”
Pavinato pointed to expectations for flat soybean acreage in Brazil next season as evidence that prices still need to rise enough to restore proper returns for growers.
Cost Advantage
SLC bought all the phosphate fertilizer it needs for the 2026/27 season before prices surged because of the war in Iran. It also waited for nitrogen fertilizer prices to fall and secured 70% of its requirements near the year’s low.
“With this cost structure, we expect margins to improve in 2027,” Pavinato said. Operational efficiency and productivity will remain the main support for profitability, he added.
El Niño Risk
SLC is improving soil cover, fine-tuning planting dates based on rainfall forecasts and expanding irrigated acreage to nearly 25,000 hectares (61,750 acres) in Bahia state to reduce the impact of a potential drought.
The company would cut input applications only in areas where rainfall is expected to be insufficient to support strong yield potential, Pavinato said.
In the 2025/26 season, SLC posted a record soybean yield of 69 bags per hectare, with each bag weighing 60 kilograms, equivalent to 4.14 metric tons per hectare. The result came even as planted area increased 13%.
Cotton yields are also expected to set a company record, while corn yields fell short after some areas received insufficient rain.
Deleveraging
Second-quarter net revenue rose 16.8% to $426 million (2.2 billion reais). Adjusted EBITDA increased 4.3% to $112 million (580.6 million reais), with a 26.7% margin, while net income jumped 75% to $47 million (245 million reais).
SLC’s net-debt-to-EBITDA ratio rose to 3 times from 2.3 times a year earlier, reflecting recent acquisitions including farmland bought from Radar. Pavinato said the ratio should now decline, with a target of about 2 times in 2027.
The company is evaluating sale-and-leaseback transactions to monetize part of its land portfolio and accelerate deleveraging while continuing to farm properties it already knows.
Such deals would also preserve SLC’s preferred operating mix of one-third owned land and two-thirds under land leases, XP Investimentos analyst Leonardo Alencar said in a note to clients.
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
