March 4, 2008

 

Brazil's soy and corn prices to stay high

 

 

Brazilian agricultural company SLC Agricola SA said that commodity prices for soy, corn and cotton should continue to remain above average historic levels for coming years, SLC Chief Financial Officer Laurence Gomes said Monday (March 4, 2008).

 

"Prices of soy, corn and cotton will remain above the average price level that occurred between 1999 and 2007," Gomes told Dow Jones Newswires.

 

"Although the price of soy, corn and cotton may slip below today's current prices, a long-term structural change (in prices) has taken place," he said.

 

Gomes was reiterating what many have said about the price of commodities recently: These commodities have strong fundamentals.

 

Prices are being driven by factors such as the demand for crops used for biofuels, as well as a strong global demand for food and textiles in Asia, Gomes said. 

 

SLC Monday reported a net profit for 2007 of 31.6 million Brazilian reals (US$18.8 million), compared with a net loss of BRL20 million (US12.00 million ) in 2006.

 

"Net profit rose due to high crop prices and good crop conditions, with higher yields for soy and cotton," Gomes said.

 

Net revenue jumped 27 percent to BRL268 million in 2007.

 

The company also lowered costs by purchasing most of its fertilizers and pesticides in June 2006, avoiding a rise in prices of around 30 percent.

 

SLC did not provide guidance for 2008, but the company expects net profit, revenue and margins to improve.

 

"The company also intends to hike its planted land to 168,000 hectares for the 2007-08 crop for mainly soy, corn and cotton," Gomes said.

 

Moreover, SLC will introduce transgenic seeds for 20 percent of its soy and 40 percent of its cotton 2007-08 crop.

 

SLC's reported capital expenditures of BRL160 million (US$95.8 million  in 2007 and is currently studying its investments for this year.

 

"We are currently talking to five farms and expect to acquire at least two in 2008," Gomes said, as part of SLC's plan to reach 193,000 hectares.

 

SLC in April 2007 raised a total of BRL490 million (US$293.4 million )in an initial public offering.