SLC Agrícola’s recent acquisition spree may finally start paying off as firmer soybean, corn and cotton prices boost the outlook for one of Brazil’s largest listed farming companies.
BTG Pactual more than doubled its forecast for SLC’s 2027 net income to about $147 million (763 million reais), as analysts see the commodity cycle shifting toward higher prices after years of oversupply. Sell-side analysts expects the company’s Ebitda margin to expand in 2027 for the first time in three years.
“The supply inertia that drove years of oversupply and lower prices now finally seems to be reversing and driving a new cycle of higher prices”, analysts Thiago Duarte and Guilherme Guttilla wrote in a report to clients on Friday. “Price curves are still in contango”.
SLC has expanded aggressively over the past three years, adding farmland equivalent to the entire portfolio of rival BrasilAgro (148 thousand hectares, about 365 thousand acres). Falling commodity prices, however, prevented that expansion from translating fully into earnings growth.
BTG now expects a tighter global supply-demand balance for soybeans, corn and cotton to support margins. SLC Chief Executive Officer Aurélio Pavinato has also said he expects margins to improve next year as commodity prices recover.
Cotton prices have risen 17% over the past two months, while soybeans have gained about 10%. Although part of the rally is correlated with higher oil prices, BTG analysts said improving agricultural fundamentals are also driving the move.
Global inventories have tightened significantly compared with recent years. According to US Department of Agriculture data cited in the report, the global soybean market is expected to post its smallest surplus in five years in the next season. Corn consumption is projected to exceed production by 24 million metric tons, while the cotton balance is expected to show a deficit of 5.3 million bales.
Room to Run
Recent price gains alone prompted BTG to more than double its 2027 profit estimate for SLC. The bank now forecasts revenue of about $1.93 billion (10 billion reais), up 6.2% from its previous estimate, and Ebitda of about $559 million (2.9 billion reais), an increase of almost 18%.
“If we’re right about where prices and margins are headed from here, the carryover
play we’ve historically advocated may make even more sense going forward”, the analysts wrote.
El Niño remains the main risk to the more bullish outlook. Historically, the weather phenomenon has had a predominantly negative impact on SLC, according to BTG, though the analysts said improvements in the company’s operations should make its current exposure different from previous cycles.
“SLC has continuously invested in technology and irrigation to mitigate those impacts,” the analysts said. “More importantly, nearly 100% of its acreage is now fully developed or mature.”
BTG has a price target of about $4.44 (23 reais) for SLC shares, implying 52% upside from the market price.
SLC shares rose about 1% on Friday on B3, the Brazilian stock exchange, to about $2.96 (15.35 reais). The stock has gained 7.7% over the past year, and the company has a market capitalization of about $1.45 billion (7.5 billion reais).
This story was translated from the original Portuguese with the assistance of artificial intelligence and reviewed by The AgriBiz editorial staff.
