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SLC Agricola Reaping Booming Commodity Markets And Advancing Its Value-Creation Strategy

Apr. 04, 2021 7:30 AM ETSLC Agrícola S.A. (SLCJY)3 Comments
Stephen Simpson profile picture
Stephen Simpson


  • SLC Agricola continues to advance a high-return asset-light model predicated on generating above-average yields from Brazilian farmland.
  • The Terra Santa deal expands planted acreage by 30% at very attractive prices, with little expected erosion in average yields.
  • Although SLC Agricola has shown it can generate good returns across cycles, the shares will often trade more on near-term commodity prices.
  • SLC Agricola should be able to generate double-digit annualized returns from here, but the current high price environment is a risk to consider as the shares are vulnerable to short-term commodity moves.

I’ve written many times of my admiration for SLC Agricola (OTCPK:SLCJY), as management has shown great aptitude in generating above-average returns from Brazilian farmland, while simultaneously looking to maximize the value of its land bank and shift toward a more asset-light strategy by monetizing owned acres at attractive prices and expanding its leased acreage for planting.

When I last wrote about SLC Agricola, I thought the valuation was “more interesting”. At the time, corn was trading at around $3.65/bu, soy at $10.03/bu, and cotton at $0.66/lb. Now those commodities are trading at around $5.60/bu, $14/bu, and cotton at $0.78/lb, so you can probably imagine what has happened to SLC Agricola’s share price since then (up ADRs are up close to 65%).

Not only does SLC Agricola continue to see strong yields from its farmland that are typically above the averages for Brazil, management is locking in attractive prices for the ’21 and ’22 crops through hedging. Management also executed on a very attractive transaction that will significantly expand the company’s leased acreage at good prices.

I don’t believe today’s crop prices are new normals, but I do believe that SLC Agricola’s hedging program will secure at least two more strong years of EBITDA (weather permitting), and I believe the asset-light model and above-average yields will continue to drive good long-term results … albeit not at 2020-2022 levels. I do still see worthwhile potential in the shares on a long-term basis, but investors need to appreciate that in the short term the share price is often heavily influenced by commodity prices (cotton and soy in particular).

Adding Terra Santa Advances The Asset-Light Strategy

Management has made no secret of its intentions to increase planted acreage on leased farmland over time. While farming is typically not a particularly high-return business (low-to-mid single-digit returns are

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (3)

CaptainFrank profile picture
I would love to read your updated take on brazilian agriculture investments for 2023-24’ 🙏🏼
Thx. Superior biz to LND US?
@A2015 I haven't explored SLS thoroughly but LND is a great company.
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