Brazilian American Chamber of Commerce

New York City

May 4th, 2010

Investing in Brazil with a Biofuel Focus

Abundant water

Fertile soils

Mild temperature

Land availability

Natural conditions

Cutting edge Technology

Mechanization

Management skills

Environmental sensitiveness

Human & Technology

Private land

Food surplus

No trade barriers

Corporate farming

Geopolitical

Low production cost

Cheap land

Good infrastructure

Vertical integration

Economical

South America offers the most competitive conditions for food & renewable sustainable productionSouth America offers the most competitive conditions for food & renewable sustainable production

Brazil and Argentina are Top Food & Renewable Exporters

(sugar, ethanol, corn, soybean)

South America Strengths

Source: Atlas of Global development, World Bank, 2008Good quality farmland is globally limited2

3

Biofuel can be globally produced without decreasing land availability for cropsBiofuel can be globally produced without decreasing land availability for crops

The right crop in the right place: changing from grassland into sugarcane

Millions of hectares (2007)

BRAZIL 851.2

TOTAL ARABLE LAND 354.8

1. Total Crop Land 76.7

Soybean 20.6

Corn 14.0

Powercane 7.8

Powercane for ethanol 3.4

Orange 0.9

2. Pastures 172.3

3. Available area 105.8

Source: IBGE. Elaboration: UNICA.

1%

There is room for Cattle to strongly increase its efficiency (operational, crop productivity, feedlots)

4

Renewable energy and food can complementary be produced without affecting food supplyRenewable energy and food can complementary be produced without affecting food supply

Yields (M3/hectare)

0.0 2.0 4.0 6.0 8.0 10.0

Wheat (EU)

Cassava (Thailand)

Corn (USA)

Powercane (India)

Beet (EU)

Powercane (Brazil)

Source: IEA ('05), Unica ('08)

High crop yields means higher biofuel production per unit of

land

Complementary production: ethanol + sugar + bioelectricity

Source: UNICA

The higher crop productivity, the higher biofuel production and

the better use of land

Synergy with hydro production (dry season)

Carbon Credit feasibility

Use of straw could increase its potential

Bioelectricity's Strengths

5

Powercane is the most efficient and clean feedstock for ethanol production Powercane is the most efficient and clean feedstock for ethanol production

Different Feedstocks Comparison

9.30

2.71 0.83

-83%

-30%

Powercane Corn Gasoline

Source: IEA ('04), Unica ('08), Macedo, I ('04)

En

erg

y B

ala

nc

eG

HG

Em

iss

ion

s R

ed

uc

tio

n

CORN POWERCANE

Agricultural operations 1,083 4,012Transportation 2,897 4,107Inputs: fertilizers, consumables, seedlings, equipment 10,849 9,988Total agricultural production 14,829 18,107

Processing Energy - - Inputs: chemicals, lubricants, heat & electric 31,055 1,653Equipment, buildings, facilities 1,976 379Total processing 33,031 2,032

Total energy consumption 47,860 20,139

Ethanol 92,253 165,863Co-products (WDG, Bagasse) 36,803 15,154Bioelectricity - 7,129

Total energy production 129,056 188,146

Energy Balance 81,196 168,007Energy Ratio 2.7 9.3Portable Fuel Ratio 16.4 54.9

Energetic Balance (MJ/ha)

More important than the Energy Balance (heat) is the Portable Fuel Balance!

0

15

30

45

60

Convetional Tillage No Till

Lit

ers

per

hec

tare

Best Practices as No Till should be applied to achieve sustainable biofuel productionBest Practices as No Till should be applied to achieve sustainable biofuel production

No-till increases land productivity and returns over time-

1,0

2,0

3,0

4,0

2003-04 2004-05 2005-06 2006-07 2007-08

Sp

ray

pe

r h

ec

tare

3,0

4,0

5,0

6,0

7,0

8,0

Lit

ers

pe

r h

ec

tare

Spray/hectare

Liters/hectare

Carmen & Abolengo farms (Humid Pampas)

Improves water efficiency

Reduces erosion risk

Increases organic matter

Decreases use of pesticides

Improves soil fertility

Reduces CO2 emissions

Higher and stable yields & lower costs year by year

No-till Benefits

0.0

0.5

1.0

1.5

NO TILL TILL

Wat

er s

tora

ge c

apac

ity (

in/8

in)

.

Decreasing fossil fuel usage

Improving water storage capacity

6

Decreasing pesticides usage

Sugarcane: Production & Area Evolution

-

10.0

20.0

30.0

40.0

50.0

60.0

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

K H

ec

tare

s

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

MM

To

ns

Total area (hectares) Total Production (Tons)

7

The convenient Generation 2.5 of biofuels is already on stage performed by efficient operationsThe convenient Generation 2.5 of biofuels is already on stage performed by efficient operations

1 hectare of Sugarcane (1)

Sugarcane = 75 tons

Ethanol = 4.3 m3

Sugar = 4.1 tons

Power (2) = 4.5 MWh(1) Includes replanting area; average of 7 years cycle; 60% ethanol – 40% sugar(2) Does not consider use of straw

Need to integrate biofuels industry around the world

Infrastructure should be fixed and suited for biofuels

A NEW MODERN MILL PROJECT REQUIRES 8 YEARS TO ACHIEVE FULL CAPACITY (BIOLOGICAL PROCESSES)

Start Milling

Start Planting

US gasoline production cost for refineries can be estimated as oil price x 1,05US gasoline production cost for refineries can be estimated as oil price x 1,05

Distribution & Marketing

Refining costs and profits – 6% of Gasoline price – 9% of oil price (estimation 5% costs & 4% profit)

Taxes:  Federal, State, and local government taxes (not including county and local taxes) accounted for about 15% of the national average retail price of regular gasoline in February 2010. Federal excise taxes were 18.4 cents per gallon and State excise taxes averaged 22.01 cents per gallon.

Crude Oil: The cost of crude oil as a share of the retail price varies over time and among regions of the country. In February 2010, refiners paid an average of about $77 per barrel of crude oil, which accounted for about 69% of the national average retail price of a gallon of regular grade gasoline.

1 Barrel = 42 Gallons $77 per barrel = 1,833 per Gallon

Cost 1 gallon of crude oil -1,833 ≈ 1,814 - Cost of crude oil in 1 Gallon of Gasoline

10%

What do US Consumers pay for on a Gallon of Regular Grade Gasoline?

The US national average retail price of a gallon of regular gasoline in February 2010 was $2.64. There are four main components that make up the retail price of a gallon of gasoline:

6%

15%

69%$1,814

Cost of gasoline for refineries

Oil Cost ≈ Oil Price

Refining cost =5 % of Oil Cost+= ≈ Oil Price x 1,05

Source: U.S. Energy Information Administration8

US could increase ethanol % on gasoline without increasing gasoline price...US could increase ethanol % on gasoline without increasing gasoline price...

…nor paying subsidies (if oil price is over USD 85 per barrel). It only has to eliminate Import Taxes on Brazilian Ethanol

Brazilian Anhydrous Ethanol

BRL / ton of cane

BRL / M3 USD / M3USD/

GallonUSD/ Barrel

AssumptionsAverage cost of cane 39,68 469,83 261,02 0,988 41,5 Exchange rate 1,8Production 10,54 124,84 69,36 0,263 11,0 Pol 14,50%G&A 2,69 31,86 17,70 0,067 2,8 Yield of sugarcane 90Energy net Revenue -6,59 -78,01 -43,34 -0,164 -6,9 Industry effi ciency 82%Cash cost ex mill 46,32 548,52 304,73 1,154 48,4 Liters per ton of sugarcane 84,45Freight Brazil 140,00 77,78 0,294 12,4 Freight Santos NY Harbor 39,63 0,150 6,3 Investment (USD / ton of sugarcane) 120Total cash cost 422,14 1,598 67,1 Return (USD / ton of sugarcane) 12Return on investment 10% 142,10 0,538 22,6 Return USD / M3 of ethanol 142,10

Total cost without tax 564,23 2,136 89,7

US Import tax (1) 211,34 0,800 33,6 Total cost without tax 775,57 2,936 123,3

without tax with taxEquivalent refined gasoline (USD / Barrel) 89,706 123,306Refining cost 4,272 5,872Equivalent oil (USD / Barrel) 85,43 117,43

(1) US Import Tax fo r Brazilian Anhydrous Ethanol - US$ 0,54/Gallon + 25% of FOB value

When blending 15-20% of ethanol, distilleries can still produce the other outputs

from petroleum without significant changes

9

E20 and E30 ethanol blends outperformed gasoline in fuel economy tests (*)E20 and E30 ethanol blends outperformed gasoline in fuel economy tests (*)

10

KEY FINDINGS

1. Ethanol’s energy content was not found to be a direct predictor of fuel economy.

2. E20 and E30 ethanol blends outperformed gasoline in fuel economy tests for certain autos.

3. Standard, non-flex-fuel vehicles operated well on ethanol blends beyond 10 percent.

4. Vehicle emissions met EPA requirements and were improved in key areas.

(*) Source: “OPTIMAL ETHANOL BLEND-LEVEL INVESTIGATION”Researchers: The University of North Dakota Energy & Environmental Research Center (EERC) & the Minnesota Center for Automotive Research (MnCAR)Testing Method: The Highway Fuel Economy Test (HWFET), a test developed by the U.S. Environmental Protection Agency to determine fuel economyVehicles Tested: Toyota Camry (2.4 liter engine), Ford Fusion (2.3 liter engine), non-flex-fuel Chevrolet Impala (3.5 liter engine), flex-fuel Chevrolet Impala (3.5 liter engine)Fuels Tested: Various blends of undenatured ethanol & Tier 2 gasoline

La Pampa

Buenos Aires

Coffee

1K HA3.5K TONS

Cotton, Soy & Corn

13K HA50K TONS

Ethanol, Sugar & Power

49K HA259K TONS

Producing each commodity in the right location

Adecoagro is already producing food and renewable energy in BrazilAdecoagro is already producing food and renewable energy in Brazil

12

Location Research Analysis Analysis of different sites in Brazil

Proper environmental conditions: Fertile Soils Climate Topography

Room for growth: Few Neighboring mills Competition with other crops Underutilized pastures Property size: small or large?

Logistics: Rail link to port? Regional terminal? Future link to pipelines?

After careful due diligence of different regions, Mato Grosso do Sul was selected for expansionAfter careful due diligence of different regions, Mato Grosso do Sul was selected for expansion

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Angelica, our first ethanol Greenfield, was built in 16 months and began milling during August 2008Angelica, our first ethanol Greenfield, was built in 16 months and began milling during August 2008

Juice treatment and Fermentation

Cooling towers and Water treatment plant

Cane reception

Distillery and interconnections

BoilerAngelica Mill

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Sunshine: 800 Kcal/cm2/day

Rains distribution: 1,800mm and an extremely dry period

Temperature: Annual mean 23ºC

Soils are deep and well drained

Even topography allows mechanization

Skilled workers

Bahia’s Agro Ecological Features

Bahia produces high quality cotton at a very competitive cost

Acquire ginning capacity

Ginning process defines final product quality:

staple length uniformity

cotton purity

Increase crop margins

Vertical Integration Strategy

We have developed a team in Bahia qualified to execute our expansion plan

Bahia offers excellent conditions to grow cotton, soy and corn, with high potential for land transformationBahia offers excellent conditions to grow cotton, soy and corn, with high potential for land transformation

Farms

Industry

Offices

Bahia

Crop Rotation Scheme in Bahia

Corn Cotton CottonSoy

Year 1 Year 2 Year 3 Year 4

Reduce Disease

Planting Flexibility

Risk Management

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Our irrigated & fully mechanized coffee operation differentiates us from other playersOur irrigated & fully mechanized coffee operation differentiates us from other players

Processing facilities at farms

3rd Party Volume Trading

Exports to Premium Markets

International Certifications

Quality Control

Strong Client Relationship

100% Irrigation

Quality grains

100% Mechanization

Adjusted Technology

No frosts

Stable Quality

High Productivity

Low cost

BAHIA’S OPTIMUM CONDITIONS FOR SPECIALTY COFFEE PRODUCTION

Vertical Integration

Adecoagro’s Coffee Highlights

No correlation with other crops

1.3K hectares in production

63,500 bags estimated harvest

Thank You!