Management Report 2020
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■■■ Management Report 2020
d) Price risk
SLC Agrícola
Most of the protection against commodity price fluctuations is carried out through sales directly with our customers with physical future delivery (forward contracts). In
addition, futures contracts, negotiated in an exchange environment, and financial transactions of swap contracts, with financial institutions in the over-the-counter
market are also used. These operations are traded with reference to prices of commodities quoted in the futures market. All operations are related to the net exposure
of the production of the Company and its subsidiaries, so that every operation has its ballast in physical product. Transactions carried out in an exchange environment
require the availability of initial margins and adjustments are made daily, according to the variation in the reference price. On the other hand, operations with financial
institutions do not require initial margins, since these operations are supported by a credit limit pre-approved by financial institutions.
The table below shows the derivative financial instruments contracted for protection against variation in the price of commodities, the effects of which are recorded in
shareholders' equity as they are recorded in the form of hedge accounting.
Description
Currency
Reference value (notional)
12/31/2020
12/31/2019
Currency
Fair value
12/31/2020
12/31/2019
Year of Maturity at 2020
Financial operations
Commodities - Cotton
USD
Commodities - Cotton
USD
Subtotal
USD
135,483
R$
R$
135,483
R$
(19,444)
(19,444)
Year of Maturity at 2021
Financial operations
Commodities - Cotton
USD
180,673
17,656
R$
(209,486)
(4,245)
Commodities - Corn
Subtotal
Year of Maturity at 2022
Financial operations
USD
799
R$
25
USD
181,472
17,656
R$
(209,461)
(4,245)
USD
Commodities - Cotton
TOTAL
Commodity price risk
USD
USD
9,644
191,116
153,139
R$
(6,992)
R$
(216,453)
(23,689)
The Company has projected the potential impact of changes in soybean and cotton prices in 5 scenarios for the years 2021 and 2022, as follows:
Probable Scenario: Based on the closing price on 12/31/2020 of the reference future contract on the stock exchange where production is priced.
"
25% drop in the price of the reference futures contract on the exchange where production is priced.
"
50% drop in the price of the reference futures contract on the exchange where production is priced.
25% increase in the price of the reference future contract on the stock exchange where production is priced.
50% increase in the price of the reference future contract on the stock exchange where production is priced.
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