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Agriculture in Brazil

Agriculture in Brazil. Overview | April 2010. Los Grobo Overview. Section 1. Los Grobo & Sollus: Unique Integrated Business Platform. Complementary businesses with specific focus allows for higher value creation in both vehicles. Agribusiness Value Chain. Farmland. Production.

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Agriculture in Brazil

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  1. Agriculture in Brazil Overview | April 2010

  2. Los Grobo Overview Section 1

  3. Los Grobo & Sollus: Unique Integrated Business Platform Complementary businesses with specific focus allows for higher value creation in both vehicles Agribusiness Value Chain Farmland Production Services Partnership Key Value Drivers • Execution capacity • Strong local presence • Quickly identify business opportunities • Production efficiency • Crop rotation • Risk/reward analysis • High technology • Infrastructure • Agreements with infrastructure players • Better working capital management • Capacity to manage sales according to price fluctuation • Lower logistic costs • Scale • Dilution of costs and investments • Stronger bargaining power • Complementary revenues • Recurring cash flow generation • Reduced cash flow volatility • Risk diversification • Opportunity identification • Execution capacity • Land conversion • Divestiture of developed land FARMLAND SCARCITY INFRA & SERVICES - Land appreciation + PRODUCTION LAND LAND Ecosystem development Land Appreciation Play Agriculture Operation Play

  4. Los Grobo & Sollus: Solid Sponsorship Successful agricultural operator, a top financial player and an expert in commodities Grobocopatel Family Vinci Partners Touradji Capital Management • More than 90 years of agribusiness market, since the arrival of the family in Argentina, from Ukraine • In 1984 Adolfo founded Los Grobo Agropecuária composed by 4 employees and 3k ha and became a Professional company at the first half of the 90’s decade • Gustavo, son of Adolfo, joined Los Grobo in 1984 and was responsible for the development of its actual business model • Under Gustavo´s management, Los Grobo was the first agro company in the world to obtain the ISO 9001, becoming also a Harvard Case • Gustavo Grobocopatel has received several awards, including the recent most influent company Leader in Latin America by “América Economía” • One of the most successful private equity funds in Brazil • Highly recognized financial player/business developer • Investment vehicle of Banco Pactual´s former partners • Pactual was the largest investment bank in Brazil and one of the largest Asset Managers. It was sold to UBS for US$ 3.1Bn in 2006 • Vinci is the controlling shareholder of PDG Realty, second largest real estate company in Brazil by market cap, and of Equatorial Energia, a leading Brazilian energy company • Vinci has also investments on the ethanol business in Brazil through CMAA and on the retail /fashion business through InBrands • Touradji Capital Management is a New York based commodities hedge fund manager • The firm currently manages over US$ 3.5 billion in assets • Through its investment activities, the firm has developed extensive firsthand knowledge of the Brazilian agricultural economy and its producing regions • Touradji Capital Management funds posted positive returns in 2008 despite the market volatility and abrupt downturn, which indicates its expertise in risk management • The sponsor Paul Touradji has over 14 years experience investing in commodities and related equities

  5. 2,255 1,868 1,763 1,389 1,030 833 594 486 02 / 03 03 / 04 04 / 05 05 / 06 06 / 07 07 / 08 08 / 09 09 / 10E Clients Own Los Grobo: Sizeable and Diversified LatAm Player Los Grobo is the 2nd largest LatAm grain producer, with more than 250k ha of productive land throughout Brazil, Argentina, Uruguay and Paraguay… Planted Area (k ha)¹ Geographically Diversified Production – 2009/2010 251 Brazil: Production Area: 55k haInput Sales: US$ 50 mmGrain Origination: 800 tonCrushing: 90 ton 247 9% CAGR 02 / 03 – 09 / 10 E: 21% 21% Venezuela 173 24% 154 Colombia 18% 13% 23% 118 Argentina: Production Area: 90k haInput Sales: US$ 25 mmGrain Origination: 1,000k tonCrushing: 266 ton 105 14% 12% 81 26% MA 27% 10% 64 62% 24% 51% PI 13% 29% TO 27% 47% 53% 31% 54% Brazil 49% Peru BA MT 53% 43% GO 02 / 03 03 / 04 04 / 05 05 / 06 06 / 07 07 / 08 08 / 09 09 / 10E Bolivia Uruguay: Production Area: 90k haInput Sales: US$ 15 mmGrain Origination: 440k ton MG MS Soybean Wheat Corn Others Paraguay Grain Origination (k tons)¹ PR Chile Argentina Paraguay: Production Area: 16k haGrain Origination: 35k ton Uruguay CAGR 02 / 03 – 09 / 10 E: 20% Total: Production Area: 251k haInput Sales: US$ 99 mmGrain Origination: 2,255k tonCrushing: 170k ton … also servicing over 500k Ha of production through its services business

  6. Global Agribusiness Outlook Section 2

  7. Global Agribusiness Outlook: Increasing and Sustainable Demand Increasing demand for food and biofuels are the main pillars for bullish commodities outlook… Urbanization (Million of people)1 Population Growth • Global population will rise by 1.5 billion people over the next 20 years • Migration to urban areas, specially in the developing countries Per Capita Meat Consumption (2009=100)2 Economic and Income Growth • Consistent personal income growth in developing countries • Income growth increases meat consumption and food demand Development of Global Biofuels • Development of viable and environmental friendly fuels globally • Increase in blending of biofuels with gasoline • Fuel crops are crowding out food crops, constraining food supply World Biofuels Production (Liters – billions)3 • Source: • OECD • FAPRI • MB Agro

  8. 1st 6th 3rd 5th 2nd 3rd 3rd 1st 2nd 1st South America: The Natural Supplier … and South America is likely to consolidate its position as the global preeminent farming region… Leading Producer of Major Products (% of Global Production)1 Long Term Competitive Advantages • Highly favorable geographic and climate conditions Orange Juice • All-year-round crops • Favorable regulatory environment Coffee • Competitive production costs Soybean Land Availability (k ha)2 Sugar Poultry Beef 20% Corn ... due to its competitive advantages and abundant resources • Source: • USDA 2008/2009 Estimates • FAO

  9. South America: Upside Potential Despite the bullish scenario for agribusiness, land prices are still lower when compared to other main productive areas… Average Agricultural Farmland Price (US$ / ha) Farmland Price Dynamics and Appreciation Estimates APPRECIATION ESTIMATES¹ STAGE CONDITIONS Scarce Land • Successful prior crops • Well developed region • Lack of available properties nearby • Ribeirão Preto – SP • US$ 7.5k / ha 1,400 1 2,300 3,500 2 3 5,300 3,000 Infra &Services • Developed crops • Availability of services / infrastructure • Rio Verde – GO • US$ 4.0k / ha USA 11,000 5,900 4 6,000 4,000 5 6 3,500 ( - ) Development Stages (+) Production • Crop is implemented • Lack of services / infrastructure • Luis Eduardo – BA • US$ 3.0k / ha 1 4 • Several infrastructure developments expected • Further development of exports and logistics facilities • Highly developed infrastructure for exports and logistics • Concentration of high yield products Raw Land • Agriculture potential • No agricultural utilization • Lack of services / infrastructure • Balsas – MA • US$ 1.1k / ha 2 5 • Significant soybeans and sugarcane crops expansion • Limited infrastructural integration • Long cattle tradition • Northern provinces: best promises in acreage increase 3 6 • Traditional producing area • Arbitrage opportunities rising • Paraguay is growing its agricultural acreage steadily … and are likely to appreciate as farmland becomes more scarce Source: FNP, Iowa State University and Sollus

  10. The Soybean in the World SoybeanProduction Exports Soybeans Imports SoybeansCrushing SoyOil Soymeal Soybeans

  11. Historical Soybeans Yield Linear trend grow in Soybeans Yield Historical Soybeans Yield (tons/ha) vs. Modeled (LS) Argentina Uruguay Paraguay Brazil

  12. Production Costs - SOYBEAN Production Cost Breakdown

  13. Grain Production in Brazil Section 3

  14. Grain Production Value Chain

  15. Grain Production Area in Brazil

  16. Soybeans in Brazil BrazilianMarket Overview Brazil – ConsumingMarket- 1990 x 2007 Exports Exports Soybean SoyMeal Internal Mkt Exports Crushing SoyOil Internal Mkt Seeds and Losses ProducingRegions Brazil – ExportMarkets – 1990 x 2007

  17. Brazilian States Risk Reward Analisys Different Risk and Risk x Reward relationships Historical Data 10Y Yield Volatility Good Risk x Reward Lowest Risk and Margin Gross Margin Best Risk x Reward Good Risk x Reward 10Y Worst Gross Margin Hard to Scale Up Too Risky

  18. Los Grobo: LatAm Agribusiness Preeminent Agriculture Company … leading to a highly synergistic business to maximize value creation throughout the Agribusiness Value Chain Contacts Sizeable and Diversified LatAm Player Antonio Oliva Neto CFO antonio.neto@losgrobo.com.br +55 62 3018-2700 Gustavo Barbeito CIO gustavo.barbeito@losgrobo.com.br +55 21 2554-1300 + One-Stop-Shop + Network Model + Superior Productivity and Efficiency + Proven Track Record with Strength Financials + Sponsors & Fully Aligned Management Team With Strong Execution Capacity Structured and scalable growth platform with secured access to relevant grain production/origination

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