20-F 1 y91810e20vf.htm FORM 20-F e20vf
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
     
o   REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
     
þ   ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED ON DECEMBER 31, 2010
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                     TO                     
OR
     
o   SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
COMMISSION FILE NUMBER: 001-35052
Adecoagro S.A.
(Exact name of Registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Grand Duchy of Luxembourg
(Jurisdiction of incorporation or organization)
13-15 Avenue de la Liberté
L-1931 Luxembourg
R.C.S. Luxembourg B 153 681
+352 2689-8213

(Address of principal executive offices)
Abdelhakim Chagaar
13-15, avenue de la Liberté
L — 1931 Luxembourg
Email: abdelhakim.chagaar@atcgroup.com
Tel: +352.2689.0112
(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
     
Title of Each Class   Name of Each Exchange on Which Registered
 
Common Shares   New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
The number of outstanding shares of each of the issuer’s classes of capital stock
as of December 31, 2010:
120,069,222 Common Shares, par value $1.50 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act
Yes o     No þ
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
Yes o     No þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
         
Large accelerated filer o   Accelerated filer o   Non-accelerated filer þ
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP o International Financial Reporting Standards as issued by the International Accounting Standards Board þ Other o
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Registrant has
elected to follow:
Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
 
 

 


 

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FORWARD-LOOKING STATEMENTS
     This annual report contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements can be identified by words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “is/are likely to,” “may,” “plan,” “should,” “would,” or other similar expressions. The forward-looking statements included in this annual report relate to, among others:
    our business prospects and future results of operations;
    weather and other natural phenomena;
    developments in, or changes to, the laws, regulations and governmental policies governing our business, including limitations on ownership of farmland by foreign entities in certain jurisdiction in which we operate, environmental laws and regulations;
    the implementation of our business strategy, including our development of the Ivinhema mill and other current projects;
    our plans relating to acquisitions, joint ventures, strategic alliances or divestitures;
    the implementation of our financing strategy and capital expenditure plan;
    the maintenance of our relationships with customers;
    the competitive nature of the industries in which we operate;
    the cost and availability of financing;
    future demand for the commodities we produce;
    international prices for commodities;
    the condition of our land holdings;
    the development of the logistics and infrastructure for transportation of our products in the countries where we operate;
    the performance of the South American and world economies;
    the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; and
    the factors discussed under the section entitled “Risk Factors” in this annual report.
     These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may turn out to be incorrect. Our actual results could be materially different from our expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this annual report might not occur, and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.
     The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made. We undertake no obligation to update any forward-looking

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statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Certain Defined Terms
     In this annual report, unless otherwise specified or if the context so requires:
    References to the terms “Adecoagro S.A.,” “Adecoagro,” “we,” “us,” “our,” “Company” and “our company” refer to, Adecoagro S.A., a corporation organized under the form of a société anonyme under the laws of the Grand Duchy of Luxembourg, and its subsidiaries, except in the case of historical financial and operating information and results where we are referring to IFH LLC and unless otherwise indicated.
    References to “IFH” and “IFH LP” mean International Farmland Holdings, LP, a limited partnership (previously International Farmland Holdings, LLC, or IFH LLC) organized under the laws of Delaware, and its subsidiaries.
    References to “Adecoagro LP” mean Adecoagro, LP, a limited partnership (previously Adecoagro, LLC) organized under the laws of Delaware, and its subsidiaries.
    References to “$,” “US$,” “U.S. dollars” and “dollars” are to U.S. dollars.
    References to “Argentine Pesos,” “Pesos” or “Ps.” are to Argentine Pesos, the official currency of Argentina.
    References to “Brazilian Real,” “Real,” “Reais” or “R$” are to the Brazilian Real, the official currency of Brazil.
    Unless stated otherwise, references to “sales” are to the combined sales of manufactured products and services rendered plus sales of agricultural produce and biological assets.
Financial Statements
   Background
     As part of a corporate reorganization (the “Reorganization”), Adecoagro, a Luxembourg corporation under the form of a société anonyme, was formed as a holding company for IFH for the purpose, among others, of facilitating the initial public offering (the “IPO”) of our common shares. As of December 31, 2010, Adecoagro had not engaged in any business or other activities except in connection with its formation and the Reorganization. For an additional discussion of the Reorganization, see “Item 4. Information of the Company—A. History and Development of the Company—History.”
     The Reorganization was limited to entities which were all under the control of the same shareholder group and was implemented in part to facilitate the IPO. In accordance with IFRS, the Reorganization did not qualify as a business combination under common control; rather, it was a simple reorganization of the capital of IFH. The Reorganization was completed on October 30, 2010. In accordance with IFRS, the Reorganization was retroactively reflected in the consolidated financial statements as of and for the year ended December 31, 2010. Therefore, all financial and other information herein relating to December 2010, 2009, 2008, 2007 and 2006 are presented using the historical values from the consolidated financial statements of IFH. However, the issued share capital reflects that of Adecoagro as of the Reorganization date.

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     On January 10, 2011, our board of directors voted in favor of a proposal to change the nominal value of the equity shares of the Company from the nominal value of $1 each to the nominal value of US$1.50 each. This proposal was approved at a duly convened extraordinary general meeting of shareholders held on January 24, 2011, pursuant to Luxembourg law, which reduced our total shares outstanding from 119,999,997 shares to 79,999,985 shares. On February 2, 2011, the Company completed its IPO when it increased its total shares outstanding from 79,999,985 shares to 120,069,222, after giving effect to the exercise of the underwriters over-allotment option on February 11, 2011.
     The consolidated financial statements as of December 31, 2010, 2009 and 2008 and for the years then ended included in this annual report have been prepared in accordance with International Financial Reporting Standards (“IFRS”) of the International Accounting Standards Board (“IASB”) and the interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). All IFRS issued by the IASB, effective at the time of preparing the consolidated financial statements have been applied. The consolidated financial statements as of December 31, 2010, 2009 and 2008 and for the years then ended are hereinafter referred to as the “consolidated financial statements”.
Non-IFRS Financial Measures
     We present Adjusted Consolidated EBITDA, Adjusted Segment EBITDA, Adjusted Consolidated EBIT and Adjusted Segment EBIT in this annual report as supplemental measures of performance of our company and of each operating segment, respectively, that are not required by, or presented in accordance with IFRS. Our Adjusted Consolidated EBITDA equals the sum of our Adjusted Segment EBITDAs for each of our operating segments. We define “Adjusted Consolidated EBITDA” as consolidated net profit or loss for the year, as applicable, before interest expense, income taxes, depreciation and amortization, foreign exchange gains or losses, other net financial expenses and unrealized changes in fair value of our long-term biological assets, primarily our sugarcane and coffee plantations, and cattle stocks. We define “Adjusted Segment EBITDA” for each of our operating segments as the segment’s share of consolidated profit from operations before financing and taxation for the year, as applicable, before depreciation and amortization and unrealized changes in fair value of our long-term biological assets. We believe that Adjusted Consolidated EBITDA and Adjusted Segment EBITDA are important measures of operating performance for our company and each operating segment, respectively, because they allow investors and others to evaluate and compare our consolidated operating results and to evaluate and compare the operating performance of our segments, respectively, including our return on capital and operating efficiencies, from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), tax consequences (income taxes), unrealized changes in fair value of biological assets (a significant non-cash gain or loss to our consolidated statements of income following IAS 41 accounting), foreign exchange gains or losses and other financial expenses. Other companies may calculate Adjusted Consolidated EBITDA and Adjusted Segment EBITDA differently, and therefore our Adjusted Consolidated EBITDA and Adjusted Segment EBITDA may not be comparable to similarly titled measures used by other companies. Adjusted Consolidated EBITDA and Adjusted Segment EBITDA are not measures of financial performance under IFRS, and should not be considered in isolation or as an alternative to consolidated net profit (loss), cash flows from operating activities, segment’s profit from operations before financing and taxation and other measures determined in accordance with IFRS. Items excluded from Adjusted Consolidated EBITDA and Adjusted Segment EBITDA are significant and necessary components to the operations of our business, and, therefore, Adjusted Consolidated EBITDA and Adjusted Segment EBITDA should only be used as a supplemental measure of our company’s operating performance, and of each of our operating segments, respectively. We also believe Adjusted Consolidated EBITDA and Adjusted Segment EBITDA are useful for securities analysts, investors and others to evaluate the financial performance of our company and other companies in the agricultural industry. These non-IFRS measures should be considered in addition to, but not as a substitute for or superior to, the information contained in either our statements of income or segment information.
     Our Adjusted Consolidated EBIT equals the sum of our Adjusted Segment EBITs for each of our operating segments. We define “Adjusted Consolidated EBIT” as consolidated net profit or loss for the year, as applicable, before interest expense, income taxes, foreign exchange gains or losses, other net

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financial expenses and unrealized changes in fair value of our long-term biological assets, primarily our sugarcane and coffee plantations, and cattle stocks. We define “Adjusted Segment EBIT” for each of our operating segments as the segment’s share of consolidated profit from operations before financing and taxation for the year, as applicable, before unrealized changes in fair value of our long-term biological assets. We believe that Adjusted Consolidated EBIT and Adjusted Segment EBIT are important measures of operating performance, for our company and each operating segment, respectively, because they allow investors and others to evaluate and compare our consolidated operating results and to evaluate and compare the operating performance of our segments, from period to period by including the impact of depreciable fixed assets and removing the impact of our capital structure (interest expense from our outstanding debt), tax consequences (income taxes), unrealized changes in fair value of biological assets (a significant non-cash gain or loss to our consolidated statements of income following IAS 41 accounting), foreign exchange gains or losses and other financial expenses. Other companies may calculate Adjusted Consolidated EBIT and Adjusted Segment EBIT differently, and therefore our Adjusted Consolidated EBIT and Adjusted Segment EBIT may not be comparable to similarly titled measures used by other companies. Adjusted Consolidated EBIT and Adjusted Segment EBIT are not measures of financial performance under IFRS, and should not be considered in isolation or as an alternative to consolidated net profit (loss), cash flows from operating activities, segment’s profit from operations before financing and taxation and other measures determined in accordance with IFRS. Items excluded from Adjusted Consolidated EBIT and Adjusted Segment EBIT are significant and necessary components to the operations of our business, and, therefore, Adjusted Consolidated EBIT and Adjusted Segment EBIT should only be used as a supplemental measure of the operating performance of our company, and of each of our operating segments, respectively. We also believe Adjusted Consolidated EBIT and Adjusted Segment EBIT are useful for securities analysts, investors and others to evaluate the financial performance of our company and other companies in the agricultural industry.
Fiscal Year and Harvest Year
     Our fiscal year begins on January 1 and ends on December 31 of each year. However, our production is based on the harvest year for each of our crops, rice and coffee. A harvest year varies according to the crop, rice or coffee plant and to the climate in which it is grown. Due to the geographic diversity of our farms, the planting period for a given crop, rice or coffee may start earlier on one farm than on another, causing differences in their respective harvesting periods. The presentation of production volume (tons) and product area (hectares) in this annual report, in respect of the harvest years for each of our crops, rice and coffee, starts with the first day of the planting period at the first farm to start planting that harvest year and continues to the last day of the harvesting period of the respective crop, rice or coffee on the last farm to finish harvesting that harvest year, as shown in the table below.
(GRAPHIC)

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     Product area for cattle is presented on a harvest year basis given that land utilized for cattle operations is linked to our farming operations and use of farmland during a harvest year. Production volumes for dairy and cattle operations are presented on a fiscal year basis. On the other hand, production volumes and product area in our sugar, ethanol and energy business are presented on a fiscal year basis.
     The financial results for all of our products are presented on a fiscal year basis.
Certain Weight Units and Measures in the Agricultural Business
     Weight units and measures used in agriculture vary according to the crop and producing country. In order to permit comparability of our operating data with operating data from the international markets, the following table sets forth key weight units and measures used in the agriculture industry:
         
Agricultural weight units and measures    
1 metric ton
  1,000 kg   1.102 U.S. (short) tons
1 cubic meter
  1,000 liters    
1 kilogram (kg)
  2.20462 pounds    
1 pound
  0.45359 kg    
1 acre
  0.40469 hectares    
1 hectare (ha)
  2.47105 acres    
Soybean and Wheat
       
1 bushel of soybean
  60 pounds   27.2155 kg
1 bag of soybean
  60 kg   2.20462 bushels
1 bushel/acre
  67.25 kg/ha    
1.00 U.S. dollar/bushel
  2.2046 U.S. dollar/bag    
Corn
       
1 bushel of corn
  56 pounds   25.4012 kg
1 bag of corn
  60 kg   2.36210 bushels
1 bushel/acre
  62.77 kg/ha    
1.00 U.S. dollar/bushel
  2.3621 U.S. dollar/bag    
Cotton
       
1 bale
  480 pounds   217.72 kg
1 arroba
  14.68 kg    
Coffee
       
1 bag of coffee
  60 kg   132.28 pounds
1.00 US$ cents/pound
  1.3228 U.S. dollar/bag    
Dairy
       
1 liter
  0.264 gallons   2.273 pounds
1 gallon
  3.785 liters   8.604 pounds
1 lbs
  0.440 liters   0.116 gallons
1.00 U.S. dollar/liter
  43.995 U.S. dollar/cwt   3.785 U.S. dollar/gallon
1.00 U.S. dollar/cwt
  0.023 U.S. dollar/liter   0.086 U.S. dollar/gallon
1.00 U.S. dollar/gallon
  0.264 U.S. dollar/liter   11.622 U.S. dollar/cwt
Sugar & Ethanol
1 kg of TRS equivalent
  0.95 kg of VHP Sugar   0.59 liters of Hydrated Ethanol
1.00 US$ cents/pound
  22.04 U.S. dollar/ton  
Presentation of Information — Market Data and Forecasts
     This annual report is based on information provided by us and by third-party sources that we believe are reliable, including data related to the economic conditions in the markets in which we operate. Unless otherwise indicated, information in this annual report concerning economic conditions is based on publicly available information from third-party sources which we believe to be reasonable. The economic conditions in the markets in which we operate may deteriorate, and those economies may not grow at the rates projected by market data, or at all. The deterioration of the economic conditions in the markets in which we

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operate may have a material adverse effect on our business, results of operations and financial condition and the market price of our common shares.
Rounding
     We have made rounding adjustments to reach some of the figures included in this annual report. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
     A. SELECTED FINANCIAL DATA
     The following tables present selected historical consolidated financial data of Adecoagro for the periods indicated below. We have derived the selected historical statement of income, cash flow and balance sheet data as of and for the years ended December 31, 2010, 2009 and 2008 from the consolidated financial statements included elsewhere in this annual report. The historical results for any prior period presented are not necessarily indicative of our results to be expected for any future period.
     We have derived the summary historical statement of income, cash flow and balance sheet data as of and for the year ended December 31, 2007 and 2006 from the consolidated financial statements as of and for the year ended December 31, 2007 and 2006, which are not included in this annual report. Certain reclassifications have been made to the consolidated financial statements as of December 31, 2007 and 2006, and for the year then ended, to conform to the current presentation.
     The consolidated financial statements are prepared in accordance with IFRS as issued by the IASB and the interpretations of the IFRIC. All IFRS issued by the IASB effective at the time of preparing the consolidated financial statements have been applied.
     You should read the information contained in these tables in conjunction with “Item 5. Operating and Financial Review and Prospects,” “Item 8. Financial Information”, “Item 18. Financial Statements” and the consolidated financial statements and the accompanying notes included elsewhere in this annual report.
                                         
    For the Year Ended December 31,  
    2010     2009     2008     2007     2006  
    (In thousands of $)  
Statement of Income Data:
                                       
Sales of manufactured products and services rendered
    294,529       183,386       117,173       69,807       47,145  
Cost of manufactured products sold and services rendered
    (219,201 )     (180,083 )     (105,583 )     (63,519 )     (29,016 )
Gross profit from manufacturing activities
    75,328       3,303       11,590       6,288       18,129  
Sale of agricultural produce and biological assets
    131,738       130,217       127,036       72,696       37,370  
Cost of agricultural produce sold and direct agricultural selling expenses(l)
    (131,738 )     (130,217 )     (127,036 )     (72,696 )     (37,370 )
Initial recognition and changes in fair value of biological assets and agricultural produce
    (30,528 )     71,668       61,000       26,935       (66 )
Changes in net realizable value of agricultural produce after harvest
    7,999       12,787       1,261       12,746       3,160  
Gross (loss)/profit from agricultural activities
    (22,529 )     84,455       62,261       39,681       3,094  
Margin on manufacturing and agricultural activities before operating expenses
    52,799       87,758       73,851       45,969       21,223  
General and administrative expenses
    (56,562 )     (52,393 )     (45,633 )     (33,765 )     (13,147 )
Selling expenses
    (52,528 )     (31,169 )     (24,496 )     (14,762 )     (8,578 )
Other operating income, net
    18,224       13,071       17,323       2,238       9,287  
Excess of fair value of net assets acquired over cost
                1,227       28,979        
Share of loss of joint ventures
    (50 )     (294 )     (838 )     (553 )      
(Loss)/profit from operations before financing and taxation
    (38,117 )     16,973       21,434       28,106       8,785  
Finance income
    16,559       11,553       2,552       12,925       2,595  

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    For the Year Ended December 31,  
    2010     2009     2008     2007     2006  
    (In thousands of $)  
Finance costs
    (39,496 )     (34,216 )     (50,860 )     (12,458 )     (4,490 )
Financial results, net
    (22,937 )     (22,663 )     (48,308 )     467       (1,895 )
(Loss)/profit before income tax
    (61,054 )     (5,690 )     (26,874 )     28,573       6,890  
Income tax benefit/(expense)
    16,263       5,415       10,449       59       (1,379 )
(Loss)/profit for the year
    (44,791 )     (275 )     (16,425 )     28,632       5,511  
Attributable to:
                                       
Equity holders of the parent
    (43,904 )     (260 )     (18,947 )     28,587       5,400  
Non-controlling interest
    (887 )     (15 )     2,522       45       111  
(Losses)/Earnings per share for (loss)/profit attributable to the equity holders of the parent during the year:
                                       
Basic
    (0.361 )     (0.002 )     (0.168 )     0.299       0.077  
Diluted
    N/A       N/A       N/A       0.292       0.074  
                                         
    For the Year Ended December 31,  
    2010     2009     2008     2007     2006  
Cash Flow Data:
                                       
Net cash generated from/ (used in) operating activities (2)
    26,938       (45,807 )     (21,427 )     (49,757 )     (20,018 )
Net cash used in investing activities (2)
    (111,725 )     (114,386 )     (188,515 )     (265,189 )     (35,327 )
Net cash generated from financing activities
    79,828       156,047       213,200       292,353       150,626  
Other Financial Data:
                                       
Adjusted Segment EBITDA (unaudited)(3)
                                       
Crops
    33,613       21,120       34,040       27,216       7,333  
Rice
    7,121       13,244       13,966       2,014       2,782  
Dairy
    2,649       484       (2,159 )     1,051       (1,646 )
Coffee
    (2,854 )     (3,550 )     (1,693 )     (3,440 )     1,883  
Cattle
    4,369       1,525       (761 )     (1,188 )     (514 )
Farming subtotal
    44,898       32,823       43,393       25,653       9,837  
Ethanol, sugar and energy
    51,735       (26,903 )     (6,979 )     (10,146 )     (880 )
Land transformation
    20,837       18,839       15,201       33,114       7,623  
Corporate
    (22,353 )     (22,262 )     (23,077 )     (11,435 )     (5,629 )
Adjusted Consolidated EBITDA
    95,117       2,497       28,539       37,186       10,951  
 
(1)   Consists of two components: (i) the cost of our agricultural produce and/or biological assets sold as appropriate plus (ii) in the case of agricultural produce, the direct costs of selling, including but not limited to, transportation costs, export taxes and other levies. The cost of our agricultural produce sold represents the recognition as an expense of our agricultural produce held in inventory valued at net realizable value. The cost of our biological assets and/or agricultural produce sold at the point of harvest represents the recognition as an expense of our biological assets and/or agricultural produce measured at fair value less costs to sell, generally representing the applicable quoted market price at the time of sale. Accordingly, the line item “Sales of agricultural produce and biological assets” is equal to the line item “Cost of agricultural produce plus direct agricultural selling expenses.” See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies and Estimates—Biological Assets and Agricultural Produce.”
 
(2)   For the years ended December 31, 2007 and 2006, the retroactive reclassification of long term biological asset planting costs and purchase of cattle outflows from Net cash generated from/(used in) operating activities to Net cash used in investing activities totaled $18,284 and $6,142, respectively. For further information, please see Note 2.3 to the consolidated financial statements.
 
(3)   See “Presentation of Financial and Other Information” for the definitions of Adjusted Segment EBITDA and Adjusted Consolidated EBITDA and reconciliation table below.
                                         
    As of December 31,  
    2010     2009     2008     2007     2006  
    (In thousands of $)  
Statement of Financial Position Data:
                                       
Biological assets
    186,757       230,454       125,948       102,562       40,900  
Inventories
    57,170       57,902       61,221       58,036       23,146  
Property, plant and equipment, net
    751,992       682,878       571,419       538,017       226,404  

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    As of December 31,  
    2010     2009     2008     2007     2006  
    (In thousands of $)  
Total assets
    1,340,851       1,269,174       1,028,234       945,047       438,083  
Non-current borrowings
    250,672       203,134       4,099       62,090       9,276  
Total borrowings
    389,472       306,781       228,313       159,925       37,875  
Equity attributable to equity holders of the parent
    708,532       741,934       581,159       556,321       313,213  
Non-controlling interest
    14,570       15,222       57,269       60,544       6,392  

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     The following tables show a reconciliation of our segments’ profit from operations before financing and taxation, the most directly comparable IFRS financial measure, to Adjusted Segment EBITDA, and a reconciliation of our net profit (loss) for the year, the most directly comparable IFRS financial measure, to Adjusted Consolidated EBITDA:
                                                                                 
    As of December 31, 2010  
                                                    Sugar,                    
                                                    Ethanol     Land              
                                            Farming     and     Trans-              
    Crops     Rice     Dairy     Coffee     Cattle     Subtotal     Energy     formation     Corporate     Total  
    (In thousands of $)  
Adjusted Segment EBITDA (unaudited)
                                                                               
Profit/(Loss) from Operations Before Financing and Taxation
    31,902       5,041       5,836       (5,753 )     4,000       41,026       (77,627 )     20,837       (22,353 )     (38,117 )
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                (3,610 )     2,450       36       (1,124 )     96,795                   95,671  
Adjusted Segment EBIT (unaudited)(2)
    31,902       5,041       2,226       (3,303 )     4,036       39,902       19,168       20,837       (22,353 )     57,554  
Depreciation and amortization
    1,711       2,080       423       449       333       4,996       32,567                   37,563  
Adjusted Segment EBITDA (unaudited)(2)
    33,613       7,121       2,649       (2,854 )     4,369       44,898       51,735       20,837       (22,353 )     95,117  
Reconciliation to Profit/(Loss)
                                                                               
(Loss) for the year
                                                                            (44,791 )
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                                                                            95,671  
Income tax benefit
                                                                            (16,263 )
Interest expense, net
                                                                            33,028  
Foreign exchange, net
                                                                            (7,324 )
Other financial expenses, net
                                                                            (2,767 )
Adjusted Consolidated EBIT (unaudited)(2)
                                                                            57,554  
Depreciation and amortization
                                                                            37,563  
Adjusted Consolidated EBITDA (unaudited)(2)
                                                                            95,117  

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    As of December 31, 2009  
                                                    Sugar,                    
                                                    Ethanol     Land              
                                            Farming     and     Trans-              
    Crops     Rice     Dairy     Coffee     Cattle     Subtotal     Energy     formation     Corporate     Total  
    (In thousands of $)  
Adjusted Segment EBITDA (unaudited)
                                                                               
Profit/(Loss) from Operations Before Financing and Taxation
    19,054       11,792       113       (16,782 )     1,299       15,476       4,920       18,839       (22,262 )     16,973  
Initial recognition and changes in fair value of “long term” biological assets(l)(unrealized)
                (32 )     12,662       (127 )     12,503       (57,335 )                 (44,832 )
Adjusted Segment EBIT (unaudited)(2)
    19,054       11,792       81       (4,120 )     1,172       27,979       (52,415 )     18,839       (22,262 )     (27,859 )
Depreciation and amortization
    2,066       1,452       403       570       353       4,844       25,512                   30,356  
Adjusted Segment EBITDA (unaudited)(2)
    21,120       13,244       484       (3,550 )     1,525       32,823       (26,903 )     18,839       (22,262 )     2,497  
Reconciliation to Profit/(Loss)
                                                                               
(Loss) for the year
                                                                            (275 )
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                                                                            (44,832 )
Income tax benefit
                                                                            (5,415 )
Interest expense, net
                                                                            27,750  
Foreign exchange, net
                                                                            (10,903 )
Other financial expenses, net
                                                                            5,816  
Adjusted Consolidated EBIT (unaudited)(2)
                                                                            (27,859 )
Depreciation and amortization
                                                                            30,356  
Adjusted Consolidated EBITDA (unaudited)(2)
                                                                            2,497  

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    As of December 31, 2009  
                                                    Sugar,                    
                                                    Ethanol     Land              
                                            Farming     and     Trans-              
    Crops     Rice     Dairy     Coffee     Cattle     Subtotal     Energy     formation     Corporate     Total  
    (In thousands $)  
Adjusted Segment EBITDA (unaudited)
                                                                               
Profit/(Loss) from Operations Before Financing and Taxation
    27,523       13,256       (667 )     864       1,289       42,265       (12,955 )     15,201       (23,077 )     21,434  
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                (1,840 )     (3,355 )     (2,567 )     (7,762 )     (13,448 )                 (21,210 )
Adjusted Segment EBIT (unaudited)(2)
    27,523       13,256       (2,507 )     (2,491 )     (1,278 )     34,503       (26,403 )     15,201       (23,077 )     224  
Depreciation and amortization
    6,517       710       348       798       517       8,890       19,424                   28,314  
Adjusted Segment EBITDA (unaudited)(2)
    34,040       13,966       (2,159 )     (1,693 )     (761 )     43,393       (6,979 )     15,201       (23,077 )     28,538  
Reconciliation to Profit/(Loss)
                                                                               
(Loss) for the year
                                                                            (16,425 )
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                                                                            (21,210 )
Income tax benefit
                                                                            (10,449 )
Interest expense, net
                                                                            21,830  
Foreign exchange, net
                                                                            24,932  
Other financial expenses, net
                                                                            1,546  
Adjusted Consolidated EBIT (unaudited)(2)
                                                                            224  
Depreciation and amortization
                                                                            28,314  
Adjusted Consolidated EBITDA (unaudited)(2)
                                                                            28,538  

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    As of December 31, 2009  
                                                    Sugar,                    
                                                    Ethanol     Land              
                                            Farming     and     Trans-              
    Crops     Rice     Dairy     Coffee     Cattle     Subtotal     Energy     formation     Corporate     Total  
    (In thousands $)  
     
Adjusted Segment EBITDA (unaudited)
                                                                               
Profit/(Loss) from Operations Before Financing and Taxation
    25,729       1,363       1,720       2,809       2,184       33,805       (27,378 )     33,114       (11,435 )     28,106  
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                (1,009 )     (6,571 )     (3,814 )     (11,394 )     11,117                   (277 )
Adjusted Segment EBIT (unaudited)(2)
    25,729       1,363       711       (3,762 )     (1,630 )     22,411       (16,261 )     33,114       (11,435 )     27,829  
Depreciation and amortization
    1,487       651       340       322       442       3,242       6,115                   9,357  
Adjusted Segment EBITDA (unaudited)(2)
    27,216       2,014       1,051       (3,440 )     (1,188 )     25,653       (10,146 )     33,114       (11,435 )     37,186  
Reconciliation to Profit/(Loss)
                                                                               
Profit for the year
                                                                            28,632  
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                                                                            (277 )
Income tax benefit
                                                                            (59 )
Interest expense, net
                                                                            4,094  
Foreign exchange, net
                                                                            (5,971 )
Other financial expenses, net
                                                                            1,410  
Adjusted Consolidated EBIT (unaudited)(2)
                                                                            27,829  
Depreciation and amortization
                                                                            9,357  
Adjusted Consolidated EBITDA (unaudited)(2)
                                                                            37,186  

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    As of December 31, 2009  
                                                    Sugar,                    
                                                    Ethanol     Land              
                                            Farming     and     Trans-              
    Crops     Rice     Dairy     Coffee     Cattle     Subtotal     Energy     formation     Corporate     Total  
    (In thousands $)  
Adjusted Segment EBITDA (unaudited)
                                                                               
Profit/(Loss) from Operations Before Financing and Taxation
    6,436       2,632       325       (625 )     264       9,032       (2,241 )     7,623       (5,629 )     8,785  
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                (2,289 )     2,431       (871 )     (730 )     (2,852 )                 (3,582 )
Adjusted Segment EBIT (unaudited)(2)
    6,436       2,632       (1,964 )     1,806       (607 )     8,302       (5,093 )     7,623       (5,629 )     5,203  
Depreciation and amortization
    897       150       318       77       93       1,535       4,213                   5,748  
Adjusted Segment EBITDA (unaudited)(2)
    7,333       2,782       (1,646 )     1,883       (514 )     9,837       (880 )     7,623       (5,629 )     10,951  
Reconciliation to Profit/(Loss)
                                                                               
Profit for the year
                                                                            5,511  
Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)
                                                                            (3,582 )
Income tax expense
                                                                            1,379  
Interest expense, net
                                                                            1,754  
Foreign exchange, net
                                                                            (565 )
Other financial expenses, net
                                                                            706  
Adjusted Consolidated EBIT (unaudited)(2)
                                                                            5,203  
Depreciation and amortization
                                                                            5,748  
Adjusted Consolidated EBITDA (unaudited)(2)
                                                                            10,951  
 
(1)   Long-term biological assets are sugarcane, coffee, dairy and cattle.
 
(2)   See “Presentation of Financial and Other Information” for the definitions of Adjusted Segment EBIT, Adjusted Consolidated EBIT, Adjusted Segment EBITDA and Adjusted Consolidated EBITDA.

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     B. CAPITALIZATION AND INDEBTEDNESS
Not Applicable.
     C. REASONS FOR THE OFFER AND USE OF PROCEEDS
Not Applicable.
     D. RISK FACTORS
     Investing in our common shares involves a high degree of risk. Before making an investment decision, you should carefully consider the information contained in this annual report, particularly the risks described below, as well as in our consolidated financial statements and accompanying notes. Our business activities, cash flow, financial condition and results of operations could be materially and adversely affected by any of these risks. The market price of our common shares may decrease due to any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us.
Risks Related to Our Business and Industries
Unpredictable weather conditions, pest infestations and diseases may have an adverse impact on agricultural production and may reduce the volume and sucrose content of sugarcane that we can cultivate and purchase in a given harvest.
     The occurrence of severe adverse weather conditions, especially droughts, hail, floods or frost are unpredictable and may have a potentially devastating impact on agricultural production and may otherwise adversely affect the supply and price of the agricultural commodities that we sell and use in our business. Adverse weather conditions may be exacerbated by the effects of climate change. The effects of severe adverse weather conditions may reduce yields of our agricultural products. Additionally, higher than average temperatures and rainfall can contribute to an increased presence of insects. Commencing during the middle of 2008 and lasting until the middle of 2009, the areas in which we operate suffered one of the worst droughts of the last 50 to 70 years, which resulted in a reduction of approximately 15% to 40% of our agricultural production per hectare, depending on the affected commodity, compared with our historical averages.
     The occurrence and effects of disease and plagues can be unpredictable and devastating to agricultural products, potentially rendering all or a substantial portion of the affected harvests unsuitable for sale. Our agricultural products are also susceptible to fungus and bacteria that are associated with excessively moist conditions. Even when only a portion of the production is damaged, our results of operations could be adversely affected because all or a substantial portion of the production costs have been incurred. Although some diseases are treatable, the cost of treatment is high, and we cannot assure you that such events in the future will not adversely affect our operating results and financial condition. Furthermore, if we fail to control a given plague or disease and our production is threatened, we may be unable to supply our main customers, which could affect our results of operations and financial condition.
     Our sugar production depends on the volume and sucrose content of the sugarcane that we cultivate or that is supplied to us by growers located in the vicinity of our mills. Both sugarcane yields and sucrose content depend primarily on weather conditions such as rainfall and temperature, which vary. Weather conditions have historically caused volatility in the ethanol and sugar industries. Future weather patterns may reduce the amount of sugarcane that we can harvest or purchase, or the sucrose content in such sugarcane, and, consequently, the amount of sugar we can recover in any given harvest. Any reduction in the volume of sugar recovered could have a material adverse effect on our operating results and financial condition.
     As a result, we cannot assure you that future severe adverse weather conditions or pest infestations will not adversely affect our operating results and financial condition.

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Fluctuation in market prices for our products could adversely affect our financial condition and results of operations.
     Prices for agricultural products and by-products, including, among others, sugar, ethanol, grains and coffee, like those of other commodities, have historically been cyclical and sensitive to domestic and international changes in supply and demand and can be expected to fluctuate significantly. In addition, the agricultural products and by-products we produce are traded on commodities and futures exchanges and thus are subject to speculative trading, which may adversely affect us. The prices that we are able to obtain for our agricultural products and by-products depend on many factors beyond our control including:
    prevailing world commodity prices, which historically have been subject to significant fluctuations over relatively short periods of time, depending on worldwide demand and supply;
 
    changes in the agricultural subsidy levels of certain important producers (mainly the U.S. and the European Union (“E.U.”) and the adoption of other government policies affecting industry market conditions and prices;
 
    changes to trade barriers of certain important consumer markets (including China, India, the U.S. and the E.U.) and the adoption of other governmental policies affecting industry market conditions and prices;
 
    changes in government policies for biofuels;
 
    world inventory levels, i.e., the supply of commodities carried over from year to year;
 
    climatic conditions and natural disasters in areas where agricultural products are cultivated;
 
    the production capacity of our competitors; and
 
    demand for and supply of competing commodities and substitutes.
     For example, we reported a loss of $96.8 million for the year ended December 31, 2010 compared to a gain of $57.3 million in the same period in 2009 for our sugarcane business segment in the line item “Initial recognition and Changes in Fair Value of Biological Assets and Agricultural produce.” This loss was generated mainly by a decrease in price estimates used in the discounted cash flow (“DCF”) model to determine the fair value of our sugarcane plantations. In the DCF model, the price of future harvested sugarcane is calculated based on estimates of sugar price derived from the No. 11 futures contract (“NY11”) quoted on the ICE-NY. Sugar price estimates decreased due to lower sugar market prices. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Year ended December 31, 2010 as compared to year ended December 31, 2009.”
     Further, there is a strong relationship between the value of our land holdings and market prices of the commodities we produce, which are affected by global economic conditions. A decline in the prices of grains, coffee, sugar, ethanol, or related by-products below their current levels for a sustained period of time could significantly reduce the value of our land holdings and materially and adversely affect our financial condition and results of operations.
Ethanol prices are correlated to the price of sugar and are becoming closely correlated to the price of oil, so that a decline in the price of sugar will adversely affect both our ethanol and sugar businesses, and a decline in the price of oil may adversely affect our ethanol business.
     A vast majority of ethanol in Brazil is produced at sugarcane mills that produce both ethanol and sugar. Because sugarcane millers are able to alter their product mix in response to the relative prices of ethanol and sugar, this results in the prices of both products being directly correlated, and the correlation between ethanol and sugar may increase over time. In addition, sugar prices in Brazil are determined by prices in the world market, so that there is a strong correlation between Brazilian ethanol prices and world sugar prices.

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     Because flex-fuel vehicles, which have become popular in Brazil, allow consumers to choose between gasoline and ethanol at the pump rather than in the showroom, ethanol prices are now becoming increasingly correlated to gasoline prices and, consequently, oil prices. We believe that the correlation among the three products will increase over time. Accordingly, a decline in sugar prices will have an adverse effect on the financial performance of our ethanol and sugar businesses, and a decline in oil prices may have an adverse effect on that of our ethanol business.
The expansion of our business through acquisitions poses risks that may reduce the benefits we anticipate from these transactions.
     As part of our business strategy, we have grown primarily through acquisitions. We plan to continue growing by acquiring other farms and production facilities throughout South America. We believe that the agricultural industry and agricultural activity in Argentina and Brazil are highly fragmented and that our future consolidation opportunities will continue to be significant to our growth. However, our management is unable to predict whether or when any prospective acquisitions or strategic alliances will occur, or the likelihood of a certain transaction being completed on favorable terms and conditions. In addition, we are unable to predict the effect that changes in Argentine or Brazilian legislation regarding foreign ownership of rural properties could have in our business. See “—Risks Related to Argentina—Proposed changes in Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina” and “—Risks Related to Brazil— Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.” Our ability to continue to expand our business successfully through acquisitions depends on many factors, including our ability to identify acquisitions or access capital markets at an acceptable cost and negotiate favorable transaction terms. Even if we are able to identify acquisition targets and obtain the necessary financing to make these acquisitions, we could financially overextend ourselves, especially if an acquisition is followed by a period of lower than projected prices for our products.
     Acquisitions also expose us to the risk of successor liability relating to actions involving an acquired company, its management or contingent liabilities incurred before the acquisition. The due diligence we conduct in connection with an acquisition, and any contractual guarantees or indemnities that we receive from the sellers of acquired companies, may not be sufficient to protect us from, or compensate us for, actual liabilities. Any material liability associated with an acquisition could adversely affect our reputation and results of operations and reduce the benefits of the acquisition.
     To support the acquisitions we hope to make, we may need to implement new or upgraded strategies, systems, procedures and controls for our operations and will face risks, including diversion of management time and focus and challenges associated with integrating new managers and employees. Our failure to integrate new businesses successfully could adversely affect our business and financial performance.
Adverse conditions may create delays in or the suspension of the construction of our Ivinhema mill and/or significantly increase the amount of our expected investments.
     As part of our strategy to increase our production and increase our competitiveness through economies of scale, we are in the process of commencing the construction of the Ivinhema mill, which is expected to commence operations in 2013. See “Item 4. Information on the Company—B. Business Overview.” Through March 31, 2011, we have invested $64.1 million in this project through the purchase of industrial equipment and 8,363 hectares of land, and we estimate that we will need to invest an additional $725 million to complete the construction of the Ivinhema mill (of which $230 million were raised through the IPO). See “Item 4. Information on the Company—B. Business Overview.” We cannot assure you that we will be able to borrow the additional funds we will need to complete the project on acceptable terms, or at all.
     The Ivinhema mill project involves various risks, including engineering, construction and regulatory risks, such as obtaining necessary permits and licenses as well as other significant challenges that can suspend the construction of the Ivinhema mill, hinder or delay the project’s scheduled completion date and successful operation or that can result in significant cost increases as well as foreign exchange risks

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associated with incurring costs in Brazilian Reais. In addition, the Ivinhema mill may not operate at projected capacity or may incur higher operating costs than estimated, and we may not be able to sell the ethanol and sugar produced by the Ivinhema mill at competitive prices. If (1) construction is delayed or suspended, (2) we are required to invest more than the budgeted amount to complete the project, (3) we are unable to borrow the funds needed to complete the project on acceptable terms, or at all, (4) we fail to operate the mill or operate it at a lower capacity than we anticipate or (5) we are unable to sell all of the ethanol and sugar produced by the mill, our results of operations and financial condition will be materially adversely affected.
A significant increase in the price of raw materials we use in our operations, or the shortage of such raw materials, could adversely affect our results of operations.
     Our production process requires various raw materials, including fertilizer, pesticides and seeds, which we acquire from local and international suppliers. We do not have long-term supply contracts for most of these raw materials. A significant increase in the cost of these raw materials, especially fertilizer and agrochemicals, a shortage of raw materials or the unavailability of these raw materials entirely could reduce our profit margin, reduce our production and/or interrupt the production of some of our products, in all cases adversely affecting the results of our operations and our financial condition.
     For example, we rely on fertilizers and agrochemicals, many of which are petro-chemical based. As of March 31, 2011, fertilizers and agrochemicals constituted approximately 25% of our cost of production for the 2009/2010 harvest. Worldwide production of agricultural products has increased significantly in recent years, increasing the demand for agrochemicals and fertilizers. This has resulted, among other things, in increased prices for agrochemicals and fertilizers.
Increased energy prices and frequent interruptions of energy supply could adversely affect our business.
     We require substantial amounts of fuel oil and other resources for our harvest activities and transport of our agricultural products. Purchases of fuel constituted approximately 11.3% of our cost of production as of March 31, 2011. We rely upon third parties for our supply of energy resources used in our operations. The prices for and availability of energy resources may be subject to change or curtailment, respectively, due to, among other things, new laws or regulations, imposition of new taxes or tariffs, interruptions in production by suppliers, imposition of restrictions on energy supply by government, worldwide price levels and market conditions. Over the last few years, the Argentine government has taken certain measures in order to reduce the use of energy during peak months of the year by frequently cutting energy supply to industrial facilities and large consumers to ensure adequate supply for residential buildings. For example, certain of our industrial facilities have been subject to a quota system whereby electricity cuts occur on a work shift basis, resulting in our facilities being shut down during certain work shifts. While some of our facilities utilize different sources of energy, such as firewood and liquefied natural gas, and have attempted to stock their required supplies ahead of higher demand periods, we cannot assure you that we will be able to procure the required energy inputs at acceptable prices. If energy supply is cut for an extended period of time and we are unable to find replacement sources at comparable prices, or at all, our business and results of operations could be adversely affected.
We depend on international trade and economic and other conditions in key export markets for our products.
     Our operating results depend largely on economic conditions and regulatory policies for our products in major export markets. The ability of our products to compete effectively in these export markets may be adversely affected by a number of factors that are beyond our control, including the deterioration of macroeconomic conditions, volatility of exchange rates, the imposition of greater tariffs or other trade barriers or other factors in those markets, such as regulations relating to chemical content of products and safety requirements. Due to the growing participation in the worldwide agricultural commodities markets by commodities produced in South America, South American growers, including us, are increasingly affected by the measures taken by importing countries in order to protect their local producers. Measures

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such as the limitation on imports adopted in a particular country or region may affect the sector’s export volume significantly and, consequently, our operating results.
     Between April 1 and October 12, 2010, China implemented a ban on the import of soybean oil with exceeding amounts of hexane residue, a chemical used in the extraction of soybean oil from oilseeds. This ban has effectively forced us and other Argentine soybean oil producers who utilize hexane out of the market for Chinese imports, impacting the price we can obtain for our soybean oil production. Similarly, the European Union has a zero tolerance policy with respect to the import of genetically modified organisms, or “GMOs”. See “Some of the agricultural commodities and food products that we produce contain genetically modified organisms.” While the recent drought in Europe has led to the relaxation of these restrictions for certain products, we cannot assure you that we will continue to be able to export any of our products with GMOs to the European Union. If the sale of our products into a particular importing country is adversely affected by trade barriers or by any of the factors mentioned above, the relocation of our products to other consumers on terms equally favorable could be impaired, and our business, financial condition and operating results may be adversely affected.
Our business is seasonal, and our revenues may fluctuate significantly depending on the growing cycle of our crops.
     As with any agricultural business enterprise, our business operations are predominantly seasonal in nature. The harvest of corn, soybean and rice generally occurs from January to May. Wheat is harvested from December to January. Coffee and cotton are harvested from June to August, but require processing which takes approximately two to three months. Our operations and sales are affected by the growing cycle of the crops we process and the timing of our harvest sales. In addition, our sugar and ethanol business is subject to seasonal trends based on the sugarcane growing cycle in the center-south region of Brazil. The annual sugarcane harvesting period in the center-south region of Brazil begins in April and ends in December. This creates fluctuations in our inventory, usually peaking in December to cover sales between crop harvests (i.e., January through April), and a degree of seasonality in our gross profit. Seasonality could have a material adverse effect on our business and financial performance. In addition, our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs. Therefore, our results of operations have varied significantly from period to period and are likely to continue to vary, due to seasonal factors.
Our dairy and beef cattle are vulnerable to diseases.
     Diseases among our cattle herds, such as mastitis, tuberculosis, brucellosis and foot-and-mouth disease, can have an adverse effect on the productivity of our dairy cows. Outbreaks of cattle diseases may also result in the closure of certain important markets to our cattle-derived products. Although we abide by national veterinary health guidelines, including laboratory analyses and vaccination, to control diseases among our herds, especially foot-and-mouth disease, we cannot assure you that future outbreaks of cattle diseases will not occur. A future outbreak of diseases among our cattle herds could adversely affect our milk sales and operating results and financial condition.
Our current insurance coverage may not be sufficient to cover our potential losses.
     Our production is, in general, subject to different risks and hazards, including adverse weather conditions, fires, diseases and pest infestations, other natural phenomena, industrial accidents, labor disputes, changes in the legal and regulatory framework applicable to us, environmental contingencies and other natural phenomena. Our insurance currently covers only part of the losses we may incur and does not cover losses on crops due to hail storms, fires or similar risks. Furthermore, although we maintain insurance at levels that are customary in our industry, certain types of risks may not be covered by the policies we have for our industrial facilities. Additionally, we cannot guarantee that the indemnification paid by the insurer due to the occurrence of a casualty covered by our policies will be sufficient to entirely compensate us for the damages suffered. Moreover, we may not be able to maintain or obtain insurance of the type and amount desired at reasonable costs. If

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we were to incur significant liability for which we were not fully insured, it could have a materially adverse effect on our business, financial condition and results of operations.
We may be exposed to material losses due to volatile prices of agricultural products since we do not fully hedge our agricultural products price risk. We also may not be able to realize gains related to price appreciation for hedged positions.
     Because we do not hedge 100% of the price risk on our agricultural products, we are unable to have minimum price guarantees for all of our production and are, therefore, exposed to significant risks associated with the prices of agricultural products and their volatility. We are subject to fluctuations in prices of agricultural products that could result in our receiving lower prices for our agricultural products than our production costs. Further, as a commodities producer, we naturally have a long position in agricultural products, which increases our risk of loss if prices of agricultural products decrease. If the prices of agricultural products in respect of which we have entered into hedges increase beyond the prices specified in our various hedging agreements, we would lose some or all of the value of any such increase in prices.
     We are also subject to exchange rate risks with respect to hedges we have entered into for our agricultural products because our futures and options positions are valued in U.S. dollars while a portion of our production costs are in the currencies of the countries in which we operate. In addition, if severe weather conditions or any other disaster causes lower production than that which we have already sold in the market, we may suffer material losses in the repurchase of sold contracts.
A reduction in market demand for ethanol or a change in governmental policies reducing the amount of ethanol required to be added to gasoline may adversely affect our business.
     Government authorities of several countries, including Brazil and certain states of the United States, currently require the use of ethanol as an additive to gasoline. Since 1997, the Sugar and Alcohol Interministerial Council of Brazil (Conselho Interministerial do Açúcar e Álcool) has set the required blend of anhydrous ethanol to gasoline (currently 25% ethanol to 75% gasoline by volume).
     Approximately 32% of all fuel ethanol in Brazil is used to fuel automobiles that run on a blend of anhydrous ethanol and gasoline; the remaining 68% of fuel ethanol is used in flex-fuel vehicles powered by hydrous ethanol alone. Five districts in China require the addition of 10% ethanol to gasoline. Japan is discussing requiring the addition of 3% of ethanol to gasoline and increasing the requirement to 20% by 2030, and nine states and four union territories in India require the addition of 5% of ethanol to gasoline. Other countries have similar governmental policies requiring various blends of anhydrous ethanol and gasoline. In addition, flex-fuel vehicles in Brazil are currently taxed at lower levels than gasoline-only vehicles, which has contributed to the increase in production and sale of flex-fuel vehicles. Many of these policies and incentives stem from, and are mostly driven by, climate change concerns and the positive perceptions regarding the use of ethanol as a solution to the climate change problem. If such concerns or perception were to change, the legal framework and incentive structure promoting the use of ethanol may be revised, leading to a reduction in the demand for ethanol. In addition, any reduction in the percentage of ethanol required in fuel blended with gasoline or increase in the levels at which flex-fuel vehicles are taxed in Brazil, or any growth in the demand for natural gas and other fuels as an alternative to ethanol, lower gasoline prices or an increase in gasoline consumption (versus ethanol), may cause demand for ethanol to decline and affect our business.
Growth in the sale and distribution of ethanol depends in part on infrastructure improvements, which may not occur on a timely basis, if at all.
     In contrast to the well-established logistical operations and infrastructure supporting sugar exports, ethanol exports inherently demand much more complex preparation and means of distribution, including outlets from our facilities to ports and shipping to other countries. Substantial infrastructure development by persons and entities outside our control is required for our operations, and the ethanol industry generally, to grow. Areas requiring expansion include, but are not limited to, additional rail capacity, additional storage facilities for ethanol, increases in

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truck fleets capable of transporting ethanol within localized markets, expansion of refining and blending facilities to handle ethanol, growth in service stations equipped to handle ethanol fuels, and growth in the fleet of flex-fuel vehicles. Specifically, with respect to ethanol exports, improvements in consumer markets abroad are needed in the number and capacity of ethanol blending industrial plants, the distribution channels of gasoline-ethanol blends and the chains of distribution stations capable of handling fuel ethanol as an additive to gasoline. Substantial investments required for these infrastructure changes and expansions may not be made or they may not be made on a timely basis. Any delay or failure in making the changes in or expansion of infrastructure may hurt the demand for or prices of our products, prevent our products’ delivery, impose additional costs on us or otherwise have a serious adverse effect on our business, operating results or financial status. Our business relies on the continuing availability of infrastructure, and any infrastructure disruptions may have a material adverse effect on our business, financial condition and operating results.
We may be harmed by competition from alternative fuels, products and production methods.
     Ethanol competes in the biofuel market with other, established fuels such as biodiesel, as well as fuels that are still in the development phase, including methanol and butanol from biomass. Alternative fuels could become more successful than ethanol in the biofuels market over the medium or long term due, for example, to lower production costs, greater environmental benefits or other more favorable product characteristics. In addition, alternative fuels may also benefit from tax incentives or other favorable governmental treatment, from which they may benefit at the expense of ethanol. Furthermore, our success depends on early identification of new developments relating to products and production methods and continuous expansion and preservation of our existing expertise in order to ensure that our product range keeps pace with technological change. Competitors may gain an advantage over us by, for example, developing or using new products and production methods, introducing new products to the market sooner than we do, or securing exclusive rights to new technologies, thereby significantly harming our competitive position.
A substantial portion of our assets is farmland that is highly illiquid.
     We have been successful in partially rotating and monetizing a portion of our investments in farmland. During the last eight years, we have executed transactions for the purchase and disposition of land for over $460 million. Owning of a significant portion of the land we operate is a key part of our business model. However, agricultural real estate is generally an illiquid asset. Moreover, the adoption of laws and regulations that impose limitations on ownership of rural land by foreigners in the jurisdictions in which we operate may also limit the liquidity of our farmland holdings. See “—Risks Related to Argentina—Proposed changes in Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina” and “—Risks Related to Brazil— Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.” As a result, it is unlikely that we will be able to adjust our owned agricultural real estate portfolio promptly in response to changes in economic, business or regulatory conditions. Illiquidity in local market conditions may adversely affect our ability to complete dispositions, to receive proceeds generated from any such sales or to repatriate any such proceeds.
We lease or have agriculture partnerships relating to a significant portion of our sugarcane plantations.
     As for March 31, 2011, approximately 82% of our area of sugarcane plantations were leased or were subject to agriculture partnership agreements, for periods of an average of six to twelve years. We cannot guarantee that these leases or agriculture partnerships will be renewed after their respective terms. Even if we are able to renew these agreements, we cannot guarantee that such renewals will be on terms and conditions satisfactory to us. Any failure to renew the leases or agriculture partnerships or obtain land suitable for sugarcane planting in sufficient quantity and at reasonable prices to develop our activities could adversely affect our results of operations, increase our costs or force us to seek alternative properties, which may not be available or be available only at higher prices.

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We may be subject to labor disputes from time to time that may adversely affect us.
     Our employees are represented by unions or equivalent bodies and are covered by collective bargaining or similar agreements which are subject to periodic renegotiation. We may not successfully conclude our labor negotiations on satisfactory terms, which may result in a significant increase in the cost of labor or may result in work stoppages or labor disturbances that disrupt our operations. For example, a short-lived strike at UMA in 2009 resulted in a plant stoppage which, when coupled with the adverse weather conditions during the harvest season, resulted in a reduction of 16,000 tons of sugarcane that otherwise would have been milled during the 2009 fiscal year, with an estimated impact of approximately $100,000 to our operating results. Cost increases, work stoppages or disturbances that result in substantial amounts of raw product not being processed could have a material and adverse effect on our business, results of operations and financial condition.
We are subject to extensive environmental regulation, and concerns regarding climate change may subject us to even stricter environmental regulations.
     Our activities are subject to a broad set of laws and regulations relating to the protection of the environment. Such laws include compulsory maintenance of certain preserved areas within our properties, management of pesticides and associated hazardous waste and the acquisition of permits for water use and effluents disposal. In addition, the storage and processing of our products may create hazardous conditions. We could be exposed to criminal and administrative penalties in addition to the obligation to remedy the adverse affects of our operations on the environment and to indemnify third parties for damages. Environmental laws and their enforcement are becoming more stringent in Argentina and Brazil increasing the risk of and penalties associated with violations, which could impair or suspend our operations or projects (e.g., the Ivinhema mill licensing), and our operations expose us to potentially adverse environmental legislation and regulation. Failure to comply with past, present or future laws could result in the imposition of fines, third party claims, and investigation by the environmental authorities and competent public attorney office. For example, the perceived effects of climate change may result in additional legal and regulatory requirements to reduce or mitigate the effects of our industrial facilities’ emissions. Such requirements, if enacted, could increase our capital expenditures and expenses for environmental compliance in the future, which may have a material and adverse effect on our business, results of operations and financial condition. Moreover, the denial of any permit that we have requested, or the revocation of any of the permits that we have already obtained, may have an adverse effect on our results of operations.
Some of the agricultural commodities and food products that we produce contain genetically modified organisms.
     Our soybean, corn and cotton products contain GMOs in varying proportions depending on the year and the country of production. The use of GMOs in food has been met with varying degrees of acceptance in the markets in which we operate. The United States, Argentina and Brazil, for example, have approved the use of GMOs in food products, and GMO and non-GMO grain in those countries is produced and frequently commingled during the grain origination process. Elsewhere, adverse publicity about genetically modified food has led to governmental regulation limiting sales of GMO products in some of the markets in which our customers sell our products, including the European Union. It is possible that new restrictions on GMO products will be imposed in major markets for some of our products or that our customers will decide to purchase fewer GMO products or not buy GMO products at all, which could have a material adverse effect on our business, results of operations, financial condition or prospects.
If our products become contaminated, we may be subject to product liability claims, product recalls and restrictions on exports that would adversely affect our business.
     The sale of food products for human consumption involves the risk of injury to consumers. These injuries may result from tampering by third parties, bioterrorism, product contamination or spoilage, including the presence of bacteria, pathogens, foreign objects, substances, chemicals, other agents, or residues introduced during the growing, storage, handling or transportation phases.

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     We cannot be sure that consumption of our products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential customers and our corporate and brand image, and we could also incur significant legal expenses. Moreover, claims or liabilities of this nature might not be covered by any rights of indemnity or contribution that we may have against others, which could have a material adverse effect on our business, results of operations or financial condition.
Our principal shareholders have the ability to direct our business and affairs, and their interests could conflict with yours.
     As of March 31, 2011, our principal shareholders are the beneficial owners of approximately 71.89% of our common shares. As a result of this significant influence over us, our principal shareholders may be able to elect a majority of the members of our board of directors, direct our management and determine the result of substantially all resolutions that require shareholders’ approval, including fundamental corporate transactions and the payment of dividends by us. The interests of our principal shareholders may differ from, and could conflict with, those of our other shareholders.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
     We intend to evaluate our internal controls over financial reporting in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, and rules and regulations of the United States Securities and Exchange Commission (the “SEC”) thereunder, which we refer to as “Section 404.” The process of documenting and testing our internal control procedures in order to satisfy the requirements of Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. During the course of our testing, we may identify deficiencies of which we are not currently aware.
     In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. We are not currently required to furnish a report on our internal control over financial reporting or include an attestation report of our auditors on our assessment of internal controls over financial reporting pursuant to the SEC’s rules under Section 404. We expect that these rules will apply to us when we file our annual report on Form 20-F for our fiscal year ending in December 31, 2012, which we will be required to file by April 30, 2013. We cannot be certain as to the timing of completion of our evaluation, testing and any remediation actions or the impact of the same on our operations. If we are not able to implement the requirements of Section 404 in a timely manner or with adequate compliance, our independent registered public accounting firm may not be able to certify as to the effectiveness of our internal controls over financial reporting and we may be subject to sanctions, stock exchange delisting or investigation by regulatory authorities, such as the SEC. As a result, there could be a negative reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. This could harm our reputation and cause us to lose existing customers or fail to gain new customers and otherwise negatively affect our financial condition, results of operations and cash flows. In addition, we may be required to incur costs in improving our internal control system and the hiring of additional personnel.

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The historical financial information in this annual report may not accurately predict our costs of operations in the future.
     The historical financial information in this annual report does not reflect the added costs we incurred as a public company. For more information regarding historical financial information prior to the Reorganization, see “—A. Selected Financial Data,” “Item 5. Operating and Financial Review and Prospects” and the consolidated financial statements in this annual report.
IFRS accounting standards require us to make numerous estimates in the compilation and preparation of our financial results and limit the comparability of our financial statements to similar issuers using U.S. GAAP.
     IFRS accounting standards for agricultural companies require that we make assumptions and estimates relating to, among other things, future agricultural commodity yields, prices, and production costs extrapolated through a discounted cash flow method. For example, the value of our biological assets with a production cycle lasting more than one year (i.e., sugarcane, coffee and cattle) generated initial recognition and changes in fair value of biological assets amounting to 78.8 million loss for the year ended December 31, 2010 (2009: $52.9 million gain; 2008: $25.1 million gain). For 2010, an amount of $60.1 million loss (2009: $29.8 million gain; 2008: $29.6 million) was solely attributable to price changes (see Note 9 to our consolidated financial statements). In addition, the impact of price estimates on our results is evidenced most recently in our sugarcane business due to changes in the market price of sugar. For example, we reported a loss of $96.8 million in the twelve-month period ended December 31, 2010 compared to a gain of $57.3 million in the same period in 2009 for our sugarcane business segment in the line item “Initial recognition and Changes in Long Term Biological Assets – unrealized” due principally to the decrease in the market price of sugar. These assumptions and estimates, and any changes to such prior estimates, directly affect our reported results of operations. If actual market conditions differ from our estimates and assumptions, there could be material adjustments to our results of operations. In addition, the use of such discounted cash flow method utilizing these future estimated metrics differs from generally accepted accounting principles in the United States (“U.S. GAAP”). As a result, our financial statements and reported earnings are not directly comparable to those of similar companies in the United States.
Certain of our subsidiaries have substantial indebtedness which could impair their financial condition and decrease the amount of dividends we receive.
     Certain of our subsidiaries in Argentina and Brazil have a substantial amount of debt, which requires significant principal and interest payments. As of March 31, 2011, we had $403.9 million of debt outstanding on a consolidated basis, all of which was incurred by our subsidiaries and not guaranteed by Adecoagro. Such indebtedness could affect our subsidiaries’ future operations, for example, by requiring a substantial portion of their cash flow from operations to be dedicated to the payment of principal and interest on indebtedness instead of funding working capital and other business purposes, making it more difficult for them to satisfy all of their debt obligations, increasing their cost of borrowing to satisfy business needs and limiting their ability to obtain additional financing.
     The substantial level of indebtedness borne by certain of our subsidiaries also affects the amount of cash available to them to pay as dividends, increasing our vulnerability to economic downturns or other adverse developments relative to competitors with less leverage; and limiting our ability to obtain additional financing on their behalf for working capital, capital expenditures, acquisitions or other corporate purposes in the future.
The terms of the indebtedness of, and past breaches of financial ratio covenants by, certain of our subsidiaries impose significant restrictions on their operating and financial flexibility.
     The debt instruments of certain of our subsidiaries contain customary covenants including limitations on their ability to, among other things, incur or guarantee additional indebtedness; make restricted payments, including dividends and prepaying indebtedness; create or permit certain liens; enter into business combinations and asset sale transactions; make investments, including capital expenditures; and enter into new

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businesses. Certain of these debt instruments are also secured by various collateral including mortgages on certain farms, pledges of subsidiary stock and liens on certain facilities, equipment and accounts. Certain of these debt instruments also contain cross-default provisions, where a default on one loan by one subsidiary could result in lenders of otherwise performing loans declaring a default on the otherwise performing loans. For more information regarding the covenants, collateral, and cross-default provisions of our subsidiaries’ indebtedness, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Indebtedness and Financial Instruments.” These restrictions could limit our subsidiaries’ ability to obtain future financing, withstand a future downturn in business or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise. Moreover, by reducing the level of dividends we may receive, such indebtedness places limits on our ability to make acquisitions or needed capital expenditures or to pay dividends to our shareholders.
     The terms of certain of our subsidiaries’ debt instruments contain financial ratio covenants, limitations on their levels of debt and capital expenditures and requirements on maintaining various levels of EBITDA. During 2008, 2009 and 2010, certain of our operating subsidiaries in Argentina and Brazil breached certain financial ratio covenants under their debt instruments, and subsequently entered with the lenders into amendments to redefine the terms of such financial ratio covenants. The financial ratio covenants we are currently required to meet, some of which are measured on a combined basis aggregating results of the borrowing subsidiaries and others which are measured on an individual debtor basis, include, among others, debt service coverage, minimum liquidity and leverage ratios. For detailed information regarding the financial ratio covenants, limitations on levels of debt and capital expenditures and requirements on EBITDA, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Indebtedness and Financial Instruments.”
     The failure by our subsidiaries to maintain applicable financial ratios, in certain circumstances, would prevent them from borrowing additional amounts and could result in a default under such indebtedness. If we or our subsidiaries are unable to repay those amounts, the affected lenders could initiate bankruptcy-related proceedings or enforce their rights to the collateral securing such indebtedness, which would have a material and adverse effect on our business, results of operations and financial condition. For detailed information regarding the terms of our subsidiaries’ indebtedness, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Indebtedness and Financial Instruments.”
Fluctuations in interest rates could have a significant impact on our results of operations, indebtedness and cash flow.
          As of March 31, 2011, approximately 58% of our total debt was subject to variable interest rates and 42% was subject to fixed interest rates. As of March 31, 2011, the variable-rate interest bearing indebtedness of our Argentine subsidiaries had a rate of LIBOR plus 5%, and the variable-rate interest bearing indebtedness of our Brazilian subsidiaries had a rate of LIBOR or other country-specific rates such as the Taxa de Juros de Longo Prazo (TJLP) or Certificado de Depósito Interbancario (CDI) plus spreads ranging between 2.65% and 8.65% per annum. Significant interest rate increases can have an adverse effect on our profitability, liquidity and financial position. Currently, our variable interest rate exposure is mainly linked to the LIBOR rate plus specified spreads. If interest rates increase, whether because of an increase in market interest rates or an increase in our own cost of borrowing, our debt service obligations for our variable rate indebtedness would increase even though the amount of borrowings remained the same, and our net income could be adversely affected. See also “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”
     We occasionally use interest rate swaps and forward interest rate contracts to reduce interest rate volatility and funding costs associated with certain debt issues and to achieve a desired proportion of variable-versus fixed-rate debt, based on current and projected market conditions. We have not applied hedge accounting to these transactions and may not do so in the future. Therefore, changes in the fair value of these derivative instruments can result in a non-cash charge or gain being recognized in our financial results for a period preceding the period or periods in which settlement occurs under the derivative instruments and interest payments are made. Changes or shifts in interest rates can significantly impact the valuation of our derivatives and therefore could expose us to substantial mark-to-market losses or gains if interest rates fluctuate

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materially from the time when the derivatives were entered into. Accordingly, fluctuations in interest rates may impact our financial position, results of operations, and cash flows. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”
We may not be able to renew our credit lines when they mature, depriving us of needed liquidity.
     Certain of our subsidiaries rely substantially on existing credit lines to support their operations and business needs through the agricultural harvest cycle. If we are unable to renew these credit lines when they expire, or if we cannot replace such credit lines with other borrowing facilities, our financial condition and results of operations may be adversely affected.
There is a risk that we could be treated as a U.S. domestic corporation for U.S. federal income tax purposes, which could materially increase our U.S. federal income tax liability and subject any dividends we pay to U.S. federal withholding tax.
     We acquired approximately 98% of IFH, a holding company which is a partnership for U.S. federal income tax purposes organized under the laws of Delaware, immediately prior to our IPO, in exchange for our stock. Under U.S. Internal Revenue Code section 7874(b), we would be treated as a U.S. domestic corporation if we were deemed to have acquired substantially all of the assets constituting the trade or business of a U.S. domestic partnership and former members of IFH were deemed to own at least 80% of our stock by reason of the transfer of those trade or business assets (ignoring stock issued in our IPO for purposes of the 80% threshold). Although we and our subsidiaries conduct no direct business activity in the United States and we believe that, and we obtained an opinion from our U.S. tax counsel in connection with the IPO to the effect that, our acquisition of IFH should not be subject to the rules above, those rules are unclear in certain respects and there is limited guidance on the application of the rules to partnership acquisitions. Accordingly, we cannot assure you that the U.S. Internal Revenue Service (“IRS”) will not seek to assert that we are a U.S. domestic corporation, which assertion if successful could materially increase our U.S. federal income tax liability and require us to withhold tax from any dividends we pay. See “Item 10. Additional Information—E. Taxation.”
Risks Associated with the Countries in which We Operate
We operate our business in emerging markets. Our results of operations and financial condition are dependent upon economic conditions in those countries in which we operate, and any decline in economic conditions could harm our results of operations or financial condition.
     All of our operations and/or development activities are in South America. As of March 31, 2011, based on the net book value of our combined investment property and property, plant and equipment, approximately 33% of our assets were located in Argentina, 66% in Brazil and 1% in Uruguay. During the year ended 2010, 77% of our combined sales of manufactured products and services rendered and sales of agricultural produce and biological assets were attributable to our Argentine operations, 22% were attributable to our Brazilian operations and 1% were attributable to our Uruguayan operations. We sell our products and produce and offer services to a large base of customers across the countries in which we operate. On a consolidated basis, the customers for our crops business are primarily located in Argentina, where more than 60% of our crop sales are concentrated in six crop exporters. Our customers for our cattle business are dispersed throughout Argentina and the customer for our dairy business is usually our joint venture company La Lácteo S.A. Our customers for our ethanol and sugar businesses are mainly concentrated in a few customers located in Brazil. We expect that in the future we will have additional operations in the South American countries in which we now operate or in other countries with similar political, economic and social conditions. Many of these countries have a history of economic instability or crises (such as inflation or recession), government deadlock, political instability, civil strife, changes in laws and regulations, expropriation or nationalization of property, and exchange controls which could adversely affect our business, financial condition and results of operations.
     In particular, fluctuations in the economies of Argentina and Brazil and actions adopted by the governments of those countries have had and may continue to have a significant impact on companies operating in those countries, including us. Specifically, we have been affected and may continue to be affected by inflation, increased interest rates, fluctuations in the value of the Argentine Peso and Brazilian Real against foreign

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currencies, price and foreign exchange controls, regulatory policies, business and tax regulations and in general by the political, social and economic scenarios in Argentina and Brazil and in other countries that may affect Argentina and Brazil.
The economies of the countries in which we operate may be adversely affected by the deterioration of other global markets.
     Financial and securities markets in the countries in which we operate are influenced, to different degrees, by the economic and market conditions in other countries, including other South American and emerging market countries and other global markets. Although economic conditions in these countries may differ significantly from economic conditions in the countries in which we operate, investors’ reactions to developments in these other countries, such as the recent developments in the global financial markets, may substantially affect the capital flows into, and the market value of securities of issuers with operations in, the countries in which we operate. A crisis in other emerging market countries could dampen investor enthusiasm for securities of issuers with South American operations, including our common shares. This could adversely affect the market price for our common shares, as well as make it difficult for us to access capital markets and obtain financing for our operations in the future, on acceptable terms or under any conditions.
     A significant deterioration in the economic growth of any of the main trading partners of Brazil or Argentina could have a material impact on the trade balance of those countries and could adversely affect their economic growth.
     In 2008, the global financial crisis had an adverse impact on global economic conditions. Even though by 2010 the world economies showed certain signs of recovery, it is yet uncertain how the current financial crisis will impact the countries in which we operate, which could include a reduction in exports, a decline in tax revenues and a reduced ability to access international capital markets.
Governments have a high degree of influence in the economies in which we operate, which could adversely affect our results of operations or financial condition.
     Governments in many of the markets in which we currently or may in the future operate frequently intervene in their respective economies and occasionally make significant changes in monetary, credit, industry and other policies and regulations. Government actions to control inflation and other policies and regulations have often involved, among other measures, price controls, currency devaluations, capital controls and limits on imports. We have no control over, and cannot predict, what measures or policies governments may take in the future. The results of operations and financial condition of our businesses may be adversely affected by changes in governmental policy or regulations in the jurisdictions in which they operate that impact factors such as:
    labor laws;
 
    economic growth;
 
    currency fluctuations;
 
    inflation;
 
    exchange and capital control policies;
 
    interest rates;
 
    liquidity of domestic capital and lending markets;
 
    monetary policy;

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    liquidity and solvency of the financial system;
 
    limitations on ownership of rural land by foreigners;
 
    developments in trade negotiations through the World Trade Organization or other international organizations;
 
    environmental regulations;
 
    tax laws, including royalties and the effect of tax laws on distributions from our subsidiaries;
 
    restrictions on repatriation of investments and on the transfer of funds abroad;
 
    expropriation or nationalization;
 
    import/export restrictions or other laws and policies affecting foreign trade and investment;
 
    price fixing regulations;
 
    restrictions on land use or agricultural commodity production; and
 
    other political, social and economic developments, including political, social or economic instability, in or affecting the country where each business is based.
     Uncertainty over whether governments will implement changes in policy or regulation affecting these or other factors in the future may contribute to economic uncertainty and heightened volatility in the securities markets, which may have a material and adverse effect on our business, results of operations and financial condition.
Currency exchange rate fluctuations relative to the U.S. dollar in the countries in which we operate our businesses may adversely impact our results of operations and financial condition.
     We operate exclusively outside the United States, and our businesses may be impacted by significant fluctuations in foreign currency exchange rates. Our exposure to currency exchange rate fluctuations results from the translation exposure associated with the preparation of our consolidated financial statements, the transaction exposure associated with generating revenues and incurring expenses in different currencies and the devaluation of local currency revenues impairing the value of investments in U.S. dollars. While the consolidated financial statements presented herein are, and our future consolidated financial statements will be, presented in U.S. dollars, the financial statements of our subsidiaries are prepared using the local currency as the functional currency and translated into U.S. dollars by applying: (i) a period-end exchange rate for assets and liabilities; and (ii) an average exchange rate for the period for income and expenses. Resulting exchange differences arising from the translation to our presentation currency are recognized as a separate component of equity. Currencies in Argentina and Brazil have fluctuated significantly against the U.S. dollar in the past. Accordingly, fluctuations in exchange rates relative to the U.S. dollar could impair the comparability of our results from period to period and have a material adverse effect on our results of operations and financial condition.
     After reaching a high of Ps.3.87 per $1 in June 2002, the exchange rate of the Argentine Peso to the dollar has remained relatively stable. However, the increasing level of inflation is generating pressure for further depreciation of the Peso. The Peso depreciated 2.27% against the U.S. dollar in 2007, 9.49% in 2008, 10.40% in 2009, 4.72% in 2010 and 1% as of March 2011. It is impossible to predict future fluctuations in the exchange rate of the Argentine Peso or whether the Argentine government will change its currency policy.
     The Brazilian currency has historically suffered frequent fluctuations. As a consequence of inflationary pressures, in the past, the Brazilian government has implemented various economic plans and adopted a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from daily to monthly, floating exchange rate systems, exchange

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controls and dual exchange rate markets. Currently, the value of the Real against foreign currencies is determined under a free-floating exchange rate regime. Periodically, there are significant fluctuations in the value of the Real against the U.S. dollar. The Real appreciated 16.9% against the U.S. dollar in 2007, depreciated 31.6% in 2008, appreciated 25.4% in 2009 and appreciated 4.4% in 2010. Against the euro, the Real appreciated 7.5% in 2007, depreciated 24.1% in 2008, appreciated 22.6% in 2009 and appreciated 11.14% in 2010. On March 31, 2011, the Real/U.S. dollar exchange rate was R$1.6287 per U.S. dollar, and the Real/euro exchange rate was R$2.3129 per euro, as reported by the Central Bank of Brazil. We cannot predict whether the Brazilian Central Bank will continue to let the Real float freely. Accordingly, it is not possible to predict what impact the Brazilian government’s exchange rate policies may have on us. We cannot assure you that the Brazilian government will not in the future impose a band within which the Real/U.S. dollar exchange rate could fluctuate or set a fixed exchange rate, nor can we predict what impact such an event might have on our financial condition or results of operations.
     Future fluctuations in the value of the local currencies relative to the U.S. dollar in the countries in which we operate may occur, and if such fluctuations were to occur in one or a combination of the countries in which we operate, our results of operations or financial condition could be adversely affected.
Inflation in some of the countries in which we operate, along with governmental measures to combat inflation, may have a significant negative effect on the economies of those countries and, as a result, on our financial condition and results of operations.
     In the past, high levels of inflation have adversely affected the economies and financial markets of some of the countries in which we operate, particularly Argentina and Brazil, and the ability of their governments to create conditions that stimulate or maintain economic growth. Moreover, governmental measures to curb inflation and speculation about possible future governmental measures have contributed to the negative economic impact of inflation and have created general economic uncertainty. A portion of our operating costs in Argentina are denominated in Argentine Pesos and most of our operating costs in Brazil are denominated in Brazilian Reais. Inflation in Argentina or Brazil, without a corresponding Peso or Real devaluation could result in an increase in our operating costs without a commensurate increase in our revenues, which could adversely affect our financial condition and our ability to pay our foreign denominated obligations.
     After several years of price stability in Argentina, the devaluation of the Peso in January 2002 imposed pressures on the domestic price system that generated high inflation throughout 2002. In 2003, inflation decreased significantly and stabilized. However, since 2004, encouraged by the pace of economic growth, according to the Argentine Statistics and Census Agency (Instituto Nacional de Estadísticas y Censos, or “INDEC”), the consumer price index increased by 6.1% in 2004, 12.3% in 2005, 9.8% in 2006, 8.5% in 2007, 7.2% in 2008, 7.7% in 2009 and 10.9% in 2010; while the wholesale price index went up 7.9% in 2004, 10.6% in 2005, 7.2% in 2006, 14.6% in 2007, 8.8% in 2008, 10.3% in 2009 and 14.6% in 2010. The accuracy of the measurements of the INDEC is in doubt, and the actual consumer price index and wholesale price index could be substantially higher than those indicated by the INDEC. For example, according to a research center of the University of Buenos Aires, School of Economics, the consumer price index increased by 10.7% (rather than 9.8%) in 2006, 25.7% (rather than 8.5%) in 2007, 23.0% (rather than 7.2%) in 2008, 15.0% (rather than 7.7%) in 2009 and 23.4% from January through November 2010 (last available information). See “—Risks Related to Argentina—There are concerns about the accuracy of the INDEC’s measurements.”
     Brazil has historically experienced high rates of inflation. Inflation, as well as government efforts to curb inflation, had significant negative effects on the Brazilian economy, particularly prior to 1995. Inflation rates were 7.7% in 2007 and 9.8% in 2008, compared to deflation of 1.7% in 2009 and inflation of 11.32% in 2010, as measured by the General Market Price Index (Indice Geral de Preços Mercado), compiled by the Getúlio Vargas Foundation (Fundação Getúlio Vargas). A significant proportion of our cash costs and our operating expenses are denominated in Brazilian Reais and tend to increase with Brazilian inflation. The Brazilian government’s measures to control inflation have in the past included maintaining a tight monetary policy with high interest rates, thereby restricting the availability of credit and reducing

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economic growth. As a result, interest rates have fluctuated significantly. The Special System for Settlement and Custody (Sistema Especial de Liquidação e Custódia, or “SELIC”) interest rate in Brazil at year-end was 13.25% in 2006, 11.25% in 2007, 13.75% in 2008, 8.75% in 2009 and 10.75% in 2010, as determined by the Comitê de Política Monetária, or COPOM. If inflation in Brazil increases, the Brazilian government may choose to increase the SELIC interest rate.
     Argentina and/or Brazil may experience high levels of inflation in the future, which may impact domestic demand for our products. Inflationary pressures may also weaken investor confidence in Argentina and/or Brazil, curtail our ability to access foreign financial markets and lead to further government intervention in the economy, including interest rate increases, restrictions on tariff adjustments to offset inflation, intervention in foreign exchange markets and actions to adjust or fix currency values, which may trigger or exacerbate increases in inflation, and consequently have an adverse impact on us. In an inflationary environment, the value of uncollected accounts receivable, as well as of unpaid accounts payable, declines rapidly. If the countries in which we operate experience high levels of inflation in the future and price controls are imposed, we may not be able to adjust the rates we charge our customers to fully offset the impact of inflation on our cost structures, which could adversely affect our results of operations or financial condition.
     Depreciations of the Peso or the Real relative to the U.S. dollar or the euro may also create additional inflationary pressures in Argentina or Brazil that may negatively affect us. Depreciations generally curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciations also reduce the U.S. dollar or euro value of dividends and other distributions on our shares and the U.S. dollar or euro equivalent of the market price of our shares. Any of the foregoing might adversely affect our business, operating results, and cash flow, as well as the market price of our common shares.
     Conversely, in the short term, a significant increase in the value of the Peso or the Real against the U.S. dollar would adversely affect the respective Argentine and/or Brazilian government’s income from exports. This could have a negative effect on gross domestic product (“GDP”) growth and employment and could also reduce the public sector’s revenues in those countries by reducing tax collection in real terms, as a portion of public sector revenues are derived from the collection of export taxes.
Disruption of transportation and logistics services or insufficient investment in public infrastructure could adversely affect our operating results.
     One of the principal disadvantages of the agricultural sector in the countries in which we operate is that key growing regions lie far from major ports. As a result, efficient access to transportation infrastructure and ports is critical to the growth of agriculture as a whole in the countries in which we operate and of our operations in particular. Improvements in transportation infrastructure are likely to be required to make more agricultural production accessible to export terminals at competitive prices. A substantial portion of agricultural production in the countries in which we operate is currently transported by truck, a means of transportation significantly more expensive than the rail transportation available to U.S. and other international producers. Our dependence on truck transportation may affect our position as a low-cost producer so that our ability to compete in the world markets may be impaired.
     Even though road and rail improvement projects have been considered for some areas of Brazil, and in some cases implemented, substantial investments are required for road and rail improvement projects, which may not be completed on a timely basis, if at all. Any delay or failure in developing infrastructure systems could reduce the demand for our products, impede our products’ delivery or impose additional costs on us. We currently outsource the transportation and logistics services necessary to operate our business. Any disruption in these services could result in supply problems at our farms and processing facilities and impair our ability to deliver our products to our customers in a timely manner.

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Risks Related to Argentina
Argentine economic and political conditions and perceptions of these conditions in the international market may have a direct impact on our business and our access to international capital and debt markets, and could adversely affect our results of operations and financial condition.
     A significant portion of our operations, properties and customers are located in Argentina. The Argentine economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high and variable levels of inflation and currency devaluation. Between 2001 and 2003 Argentina experienced a period of severe political, economic and social crisis. In 2002, the enactment of Law No. 25,561 (the “Public Emergency Law”) ended more than a decade of uninterrupted Peso/dollar parity, and the value of the Peso against the U.S. dollar has fluctuated significantly since then.
     Although general economic conditions in Argentina have recovered significantly during the past years, there is uncertainty as to whether this growth is sustainable. This is mainly because the economic growth was initially dependent on a significant devaluation of the Argentine Peso, a high excess production capacity resulting from a long period of deep recession and high commodity prices. The global economic crisis of 2008 has led to a sudden economic decline, accompanied by political and social unrest, inflationary and Peso depreciation pressures and lack of consumer and investor confidence. According to the INDEC, Argentina’s GDP, in real terms, grew by 8.7% in 2007, 6.8% in 2008, 0.9% in 2009 and 9.2% in 2010. See “—There are concerns about the accuracy of the INDEC’s measurements” and “—Risks Associated with the Countries in which We Operate—Inflation in some of the countries in which we operate, along with governmental measures to combat inflation, may have a significant negative effect on the economies of those countries and, as a result, on our financial condition and results of operations” in this section. We cannot assure you that GDP will increase or remain stable in the future. The economic crisis in Europe, beginning with the financial crisis in Greece, Spain, Italy and Portugal, the international demand for Argentine products, the stability and competitiveness of the Peso against foreign currencies, confidence among consumers and foreign and domestic investors, a stable and relatively low rate of inflation and the future political uncertainties, among other factors, may affect the development of the Argentine economy.
     Additionally, Argentine presidential elections will take place in October 2011. In Argentina, the president has significant power to determine public policies and introduce measures affecting the Argentine economy and companies such as ours. The new government, whether or not controlled by the current president’s political party, may seek to implement changes to existing public policies. For example, the current or future government may face pressure to increase taxes (including export taxes), due to increasing inflation and public debt. This could have a material adverse impact on our Argentine subsidiaries’ operations.
The economy of Argentina may be affected by its government’s limited access to financing from international markets.
     Argentina has very limited access to foreign financing. As of December 31, 2010, Argentina’s total public debt amounted to $144.5 billion. In 2002, Argentina defaulted on over $81.8 billion in external debt to bondholders. In addition, since 2002, Argentina suspended payments on over $15.7 billion in debt to multilateral financial institutions (e.g. International Monetary Fund and the Paris Club) and other financial institutions. In 2006, Argentina cancelled all its outstanding debt with the International Monetary Fund totaling approximately $9.5 billion, and through various exchange offers made to bondholders between 2004 and 2010, restructured over approximately $74.2 billion of the defaulted debt. As of December 31, 2010, the Argentine government was still in default with respect of over $6.8 billion of debt to bondholders. As of such date, Argentina’s total public debt amounts to $164.3 billion (excluding the debt in default to bondholders).

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     In 2010, the Argentine government applied US$6.4 billion of the Argentine Central Bank’s reserves to the payment of public debt. Due to the lack of access to the international capital markets, the Argentine government may continue to use the Argentine Central Bank’s foreign-currency reserves for the payment of Argentina’s current debt. The reduction of the Argentine Central Bank’s reserves may weaken Argentina’s ability to overcome economic deterioration in the future. Without access to international private financing, Argentina may not be able to finance its obligations, and financing from multilateral financial institutions may be limited or not available. This could also inhibit the ability of the Argentine Central Bank to adopt measures to curb inflation and could adversely affect Argentina’s economic growth and public finances, which could, in turn, adversely affect our operations in Argentina, our financial condition or the results of our operations.
Proposed changes in Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina.
     On April 27, 2011, the President of Argentina submitted a proposal for new legislation that seeks to establish restrictions on foreign ownership and acquisition of rural land in Argentina. According to its terms, foreign entities are defined to include (1) legal entities incorporated in Argentina or abroad, whose capital is owned more than 51% by foreign natural or legal entities; (2) legal entities, whether Argentine or foreign, with 25% foreign holders, or who are controlled by foreign holders; (3) companies that have issued bonds or debentures allowing foreign holders to increase their shareholding at a percentage greater than 25%; and (4) any legal entity, including partnerships and joint ventures, regulated by the Argentine companies law (Ley de Sociedades), or that may be regulated by such law in the future, whenever foreign natural or legal persons participate in them at a proportion greater than that authorized by the proposed legislation. The proposed legislation seeks to limit total ownership of rural land in Argentina by foreign persons or entities to no more than 20%, with all foreign persons or entities of the same nationality owning not more than 30% of such total. In addition, each foreign holder is limited to a maximum ownership of 1,000 hectares of rural land. The legislation would not affect current landholdings by foreigners or vested property rights.
     The proposed legislation remains subject to the approval of a majority in the Argentine Congress, as well as constitutional and other legal challenges. If approved, the new legislation may limit and restrict the investments of foreign entities in rural land in Argentina and therefore impair our ability to continue acquiring farmland in Argentina. The enactment of the proposed legislation could adversely affect our financial condition and results of our operations.
The lack of financing for Argentine companies may have an adverse effect on the results of our operations in Argentina and on the market price of our common shares.
     The prospects for Argentine companies accessing financial markets are limited in terms of the amount of the financing available and the conditions and costs of such financing. The default on the Argentine sovereign debt and the global economic crisis have significantly limited the ability of Argentine companies to access international financial markets.
     In addition, in November 2008, the Argentine congress passed a law eliminating the private pension fund system and transferring all retirement and pension funds held by the pension fund administrators (Administradoras de Fondos de Jubilaciones y Pensiones, or “AFJPs”) to the National Social Security Administrative Office (Administración Nacional de la Seguridad Social). Because the AFJPs had been the major institutional investors in the Argentine capital markets, the nationalization of the pension fund system has led to a reduction of the liquidity available in the local Argentine capital markets. As of March 31, 2011, our subsidiaries in Argentina have relied on local Argentine financing for 25% of our total indebtedness. Lack of access to international or domestic financial markets could affect the projected capital expenditures for our operations in Argentina and, therefore, may have an adverse effect on the results of our operations in Argentina and on the market price of our common shares.

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There are concerns about the accuracy of the INDEC’s measurements.
     In January 2007, the INDEC modified its methodology used in calculating the consumer price index. At the same time, the Argentine government also replaced several key personnel at the INDEC, prompting complaints of government interference from the technical staff at the INDEC. In addition, the International Monetary Fund requested that the government clarify its inflation rates. In June 2008, the INDEC published a new consumer price index that eliminated nearly half of the items included in previous surveys and introduced adjustable weightings for fruit, vegetables and clothing, which have seasonal cost variations.
     The new index has been criticized by economists and investors after its initial report found prices rising well below expectations. These events have affected the credibility of the consumer price index published by INDEC, as well as other indices published by INDEC that use the consumer price index in their calculation, including the poverty index, the unemployment index and real GDP. See “Risks Associated with the Countries in which We Operate—Inflation in some of the countries in which we operate, along with governmental measures to combat inflation, may have a significant negative effect on the economies of those countries and, as a result, on our financial condition and results of operations.”
     If it is determined that it is necessary to correct the consumer price index and other INDEC indices, there could be a significant decrease in confidence in the Argentine economy, which could, in turn, have a materially adverse effect on our ability to access international credit markets at market rates to finance our operations.
Government intervention in Argentina may have a direct impact on our prices and sales.
     The Argentine government has in the past set certain industry market conditions and prices. In March 2002, the Argentine government fixed the price for milk after a conflict among producers and the government. In 2005, the Argentine government adopted measures in order to increase the domestic availability of beef and reduce domestic prices. The export tax rate was increased and a minimum weight requirement for animals to be slaughtered was established. In March 2006, sales of beef products to foreign markets were temporarily suspended until prices decreased. Furthermore, in 2007 the Argentine government significantly increased export tax rates on exports of crops. A number of restrictions are also imposed on the grain and oilseed markets that essentially limit the access of traders to exports, resulting in a disparity between domestic and world prices. We cannot assure you that the Argentine government will not interfere in other areas by setting prices or regulating other market conditions. Accordingly, we cannot assure you that we will be able to freely negotiate the prices of all our Argentine products in the future or that the prices or other market conditions that the Argentine government might impose will allow us to freely negotiate the prices of our products, which could have a material and adverse effect on our business, results of operations and financial condition.
Government measures to preempt or respond to social unrest may adversely affect the Argentine economy and our business.
     During the Argentine economic crisis in 2001 and 2002, Argentina experienced significant social and political turmoil, including civil unrest, riots, looting, nationwide protests, strikes and street demonstrations. Despite Argentina’s economic recovery and relative stabilization, social and political tension and high levels of poverty and unemployment continue. In 2008, Argentina faced nationwide strikes and protests from farmers due to increased export taxes on agricultural products, which disrupted economic activity and have heightened political tensions. Future government policies to preempt, or in response to, social unrest may include expropriation, nationalization, forced renegotiation or modification of existing contracts, suspension of the enforcement of creditors’ rights, new taxation policies, including royalty and tax increases and retroactive tax claims, and changes in laws and policies affecting foreign trade and investment. Such policies could destabilize the country and adversely and materially affect the Argentine economy, and thereby our business, results of operations and financial condition.

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Disputes between the Argentine government and the agricultural sector may adversely affect the Argentine economy and our business.
     In 2008, the Ministry of Economy and Public Finance issued a resolution which applied variable export tariffs (retenciones móviles) to the agricultural sector, thereby increasing the tariffs applicable to such exports. The resolution caused a strong reaction by organizations and individuals related to the agricultural sector, who considered the increase a direct confiscation of their private property. This reaction was publicly evidenced by large-scale demonstrations all over the country, resulting in the largest agricultural strike in Argentina’s history, which included road blocks by strikers to prevent traffic of any freight related to agricultural production. As a consequence, markets reacted adversely, causing a recession in local demand and a disruption in the local financial markets. After a serious institutional crisis between the Argentine congress and the executive branch, the Argentine government issued decrees limiting the effectiveness of the original resolution. However, we cannot assure you that the government’s dispute with the agricultural sector will not resume or whether a similar reaction or conflict with the same sector will not arise. Although, to date, the dispute has not materially affected us, we cannot assure you that a similar dispute will not arise and, if it were to arise, that it will not have a material and adverse effect on our business, results of operations and financial condition in the future.
The Argentine government may order salary increases to be paid to employees in the private sector, which would increase our operating costs.
     In the past, the Argentine government has passed laws, regulations and decrees requiring companies in the private sector to maintain minimum wage levels and provide specified benefits to employees and may do so again in the future. In the aftermath of the Argentine economic crisis, employers both in the public and private sectors have experienced significant pressure from their employees and labor organizations to increase wages and to provide additional employee benefits. Due to the high levels of inflation, the employees and labor organizations have begun again demanding significant wage increases. It is possible that the Argentine government could adopt measures mandating salary increases and/or the provision of additional employee benefits in the future. Any such measures could have a material and adverse effect on our business, results of operations and financial condition.
An increase in export duties and controls may have an adverse impact on our sales.
     Since 2002, the Argentine government has imposed duties on the exports of various primary and manufactured products, including some of our products. During the last eight years, such export taxes have undergone significant increases, reaching a maximum of 35%. We cannot assure you that there will not be further increases in the export taxes or that other new export taxes or quotas will not be imposed. Imposition of new export taxes or quotas or a significant increase in existing export taxes or the application of export quotas could adversely affect our financial condition or results of operations.
Exchange controls could restrict the inflow and outflow of funds in Argentina.
     In 2001 and 2002, the Argentine government implemented a number of monetary and currency exchange control measures that included restrictions on the withdrawal of funds deposited with banks and stringent restrictions on the outflow of foreign currency from Argentina, including for purposes of paying principal and interest on debt and distributing dividends.
     Although most of these restrictions have been eased in some respects, some restrictions on transfer of funds from Argentina (e.g., to make payments of principal and interest) still remain in effect, and other controls on capital inflows have been established. Further, similar or new restrictions relating to the purchase of foreign currency and its transfer abroad for the payment of dividends, which were abolished in 2003, could be reinstated in the future and, if that were to occur, we may default in the payment of external debt obligations from Argentina, we may not be able to fund and/or finance our operations in Argentina, or we may not be able to distribute dividends from Argentina. This could adversely affect our financial condition and the results of our operations, or the market price of our common shares.

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Risks Related to Brazil
Brazilian economic and political conditions and perceptions of these conditions in international markets have a direct impact on our business and our access to international capital and debt markets and could adversely affect our results of operations and financial condition.
     A significant portion of our operations, properties and customers are located in Brazil. Accordingly, our financial condition and results of operations are substantially dependent on economic conditions in Brazil. The Brazilian economy has experienced significant volatility in recent decades, characterized by periods of low or negative growth, high and variable levels of inflation and currency devaluation. Brazil’s GDP, in real terms, grew by 6.1% in 2007, 5.1% in 2008, decreased 0.2% in 2009 and increased by 7.5% in 2010. We cannot assure you that GDP will increase or remain stable in the future. Future developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, the consumption of sugar, ethanol, and our other products. As a result, these developments could impair our business strategies, results of operations and financial condition.
     Historically, Brazil’s political situation has influenced the performance of the Brazilian economy, and political crises have affected the confidence of investors and the general public, which has resulted in economic deceleration and heightened volatility in the securities issued abroad by Brazilian companies. Future developments in policies of the Brazilian government and/or the uncertainty of whether and when such policies and regulations may be implemented, all of which are beyond our control, could have a material adverse effect on us.
Changes in Brazilian tax laws may increase our tax burden.
     The Brazilian government frequently implements changes to the Brazilian tax regime that may affect us and our customers. These changes include changes in prevailing tax rates and, occasionally, imposition of temporary taxes, the proceeds of which are earmarked for designated government purposes. Some of these changes may result in increases in our tax payments, which could adversely affect industry profitability and increase the prices of our products, restrict our ability to do business in our existing and target markets and cause our financial results to suffer. We cannot assure you that we will be able to maintain our projected cash flow and profitability following any increases in Brazilian taxes applicable to us and our operations.
Widespread corruption and fraud relating to ownership of real estate may adversely affect our business, especially our land transformation business.
     Under Brazilian Legislation, real property ownership is normally transferred by means of a transfer deed, and subsequently registered at the appropriate Real Estate Registry Office under the corresponding real property record. There are uncertainties, corruption and fraud relating to title ownership of real estate in Brazil, mostly in rural areas. In certain cases, the Real Estate Registry Office may register deeds with errors, including duplicate and/or fraudulent entries, and, therefore, deed challenges frequently occur, leading to judicial actions. Property disputes over title ownership are frequent in Brazil, and, as a result, there is a risk that errors, fraud or challenges could adversely affect us.
Social movements and the possibility of expropriation may affect the normal use of, damage, or deprive us of the use of or fair value of, our properties.
     Social movements, such as Movimento dos Trabalhadores Rurais Sem Terra and Comissão Pastoral da Terra, are active in Brazil and advocate land reform and mandatory property redistribution by the federal government. Land invasions and occupations of rural areas by a large number of individuals is common practice for these movements, and, in certain areas, including those in which we have invested or are likely to invest, police protection and effective eviction proceedings are not available to land owners.As a result, we cannot assure you that our properties will not be subject to invasion or occupation by these groups. In addition, our land may be subject to expropriation by the federal government. Under the Brazilian legal system, the federal government may expropriate land that is not in compliance with mandated local

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“social functions” for purposes of land reform. “Social function” is described in the Brazilian Constitution as rational and adequate exploitation of land, adequate use of natural resources available and preservation of the environment, compliance with labor laws, and exploitation of land to promote welfare of owners and employees. If the Brazilian government decides to expropriate any of our properties, our results of operations may be adversely affected, to the extent that potential compensation to be paid by the federal government may be less than the profit we could make from the sale or use of such land. Disputing the federal government’s expropriation of land is usually time-consuming and the outcomes at such challenges are uncertain. In addition, we may be forced to accept public debt bonds, which have limited liquidity, as compensation for expropriated land instead of cash. A land invasion or occupation also could materially impair the normal use of our lands or have a material adverse effect on our results of operations, financial condition or the value of our common shares.
Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.
     Brazilian federal law establishes certain restrictions on the acquisition of rural property by foreigners, including that (i) foreign investors may only acquire rural properties in which agricultural, cattle-raising, industrial or colonization projects are going to be developed as approved by the relevant authorities; (ii) the total rural area to be acquired by a foreign investor cannot exceed one quarter of the surface of the municipality in which it is located, and foreigners with the same nationality may not own, cumulatively, more than 10% of the surface of the municipality in which it is located; and (iii) the acquisition or possession (or any in rem right) by a foreigner of rural property situated in an area considered important to national security must be previously approved by the General Office of the National Security Council (Conselho de Defesa Nacional). The restrictions mentioned in items (i) and (ii) above are also applicable for rural lease agreements executed by foreigners. In addition, the acquisition or lease by a foreigner of a rural property exceeding 100 módulos de exploração indefinida (“MEI,” a measurement unit defined by the National Institute for Colonization and Agrarian Reform (Instituto Nacional de Colonização e Reforma Agraria, or “INCRA”) in hectares for each region of the country) must be previously approved by the Brazilian National Congress. Brazilian federal law enacted in 1971 also establishes that the same restrictions apply to Brazilian companies that are controlled by foreign investors. Any acquisition of rural property by foreigners in violation of these terms would be considered null and void under Brazilian law.
     However, the Brazilian Constitution enacted in 1988 and its amendments, in particular Constitutional Amendment No. 6, of August 15, 1995, set forth that (i) no restrictions on the acquisition of rural land in Brazil should apply to Brazilian companies; and (ii) any company incorporated and headquartered in Brazil and controlled by foreign investors must receive the same treatment as any other company incorporated and headquartered in Brazil and controlled by Brazilian investors. Since the enactment of the Brazilian Constitution in 1988, the interpretation had been that the restrictions imposed by federal law on the acquisition or lease of rural property above-mentioned did not apply to Brazilian companies controlled by foreigners, pursuant to the legal opinion issued by the Federal General Attorney’s Office (the “AGU”) in 1994, which was ratified in 1998. However, the Brazilian Justice National Council issued an Official Letter on July 13, 2010 addressed to all the Brazilian local State Internal Affairs Bureaus in order for them to adopt procedures within 60 days and instruct the local State Notary and Real Estate Registry Offices to observe the restrictions of the Brazilian law on the acquisitions of rural land by Brazilian companies with foreign equity holders. Thereafter, on August 19, 2010, the AGU revised its prior opinion, and published a new opinion confirming that Brazilian entities controlled by foreigners should be subject to the restrictions described above, and the transactions entered into by foreigners in connection with rural properties shall be subject to the analysis and approval from INCRA, the Ministry of Agrarian Development and the Brazilian National Congress, when applicable. This revised opinion was ratified by the President of Brazil and published in the Official Gazette of the Federal Executive on August 23, 2010, becoming binding as of such date. We therefore believe that the acquisitions of rural properties by Brazilian companies controlled by foreigners registered in the appropriate real estate registry prior to August 23, 2010 will not be affected by this binding opinion. However, going forward, the acquisition and leasing of rural land in Brazil,including through corporate transactions, will be subject to the above-mentioned restrictions, and will require several additional layers of review and approvals which may be discretionary (including the approvals from INCRA, Ministry of Agrarian Development and the Brazilian National Congress, when applicable),

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burdensome and time consuming. While we conduct our operations in Brazil through local subsidiaries, we would be considered a foreign controlled entity within the meaning of the restrictions articulated above. Therefore, if we are not able to comply with these restrictions and obtain the required approvals in connection with future acquisitions, our business plan, contemplated expansion in Brazil and results of operations will be adversely affected.
     Furthermore, there is currently proposed legislation under analysis in the Brazilian National Congress regarding the acquisition of rural land by Brazilian companies controlled by foreign holders, which if approved may further limit and restrict the investments of companies with foreign equity capital in rural land in Brazil. Such further restrictions may place more strain on our ability to expand our operations in Brazil.
The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy.
     The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations have often involved, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on exports and imports. We may be adversely affected by changes in policy or regulations involving or affecting factors such as:
    interest rates;
 
    monetary policy;
 
    limitation on ownership of rural land by foreigners;
 
    exchange controls and restrictions on remittances abroad;
 
    currency fluctuations;
 
    inflation;
 
    the liquidity of domestic capital and financial markets;
 
    tax policy; and
 
    other political, social and economic policies or developments in or affecting Brazil.
     Uncertainty over whether the Brazilian government will implement changes in policy or regulations affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and securities issued abroad that are supported by Brazilian issuers. As a result, these uncertainties and other future developments in the Brazilian economy may adversely affect our business, financial condition and results of operations and may adversely affect the price of our common shares.
Our business in Brazil is subject to governmental regulation.
     Our Brazilian operations are subject to a variety of national, state, and local laws and regulations, including environmental, agricultural, health and safety and labor laws. We invest financial and managerial resources to comply with these laws and related permit requirements. Our failure to do so could subject us to fines or penalties, enforcement actions, claims for personal injury or property damages, or obligations to investigate and/or remediate damage or injury. Moreover, if applicable laws and regulations, or the interpretation or enforcement thereof, become more stringent in the future, our capital or operating costs could increase beyond what we currently anticipate, and the process of obtaining or renewing licenses for our activities could be hindered or even opposed by the competent authorities.

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     We are also subject to several laws and regulations, among others, imposed in Brazil by (i) the National Agency of Petroleum, Natural Gas and Biofuels (Agência Nacional do Petróleo, Gás Natural e Biocombustível) and by the Brazilian Electricity Regulatory Agency (Agência Nacional de Energia Elétrica) (“ANEEL”) due to our production of sugarcane and ethanol and (ii) the Ministry of Agriculture, Breeding Cattle and Supply (Ministerio da Agricultura, Pecuaria e Abastecimento), due to our agricultural, sugarcane and ethanol production activities. If an adverse final decision is issued in an administrative process, we could be exposed to penalties and sanctions derived from the violation of any of these laws and regulations, including the payment of fines, and, depending on the level of severity applied to the infraction, the closure of facilities and/or stoppage of activities and the cancellation or suspension of the registrations, authorizations and licenses, which may also result in temporary interruption or discontinuity of activities in our plants, and adversely affect our business, financial status, and operating results.
Government laws and regulations in Brazil governing the burning of sugarcane could have a material adverse impact on our business or financial performance.
     In Brazil, approximately 54% of sugarcane is currently harvested by burning the crop, which removes leaves in addition to eliminating insects and other pests. The state of São Paulo and some local governments have established laws and regulations that limit and/or entirely prohibit the burning of sugarcane and there is a likelihood that increasingly stringent regulations will be imposed by the state of São Paulo and other governmental agencies in the near future. We currently make significant investments to comply with these laws and regulations. Although our plans for the implementation of mechanized harvesting are underway, with 80% of our sugarcane harvest mechanized during the 2009-2010 harvest, the strengthening of these laws and regulations or the total prohibition of sugarcane burning would require us to increase our planned investment in harvesting equipment, which, in turn, would limit our ability to fund other investments. In addition, the state of São Paulo has imposed an obligation on growers to dedicate a certain percentage of land used for sugarcane cultivation for native or reclaimed forest area. The cost of setting aside this land is difficult to predict and may increase costs for us or our sugarcane suppliers. As a result, the costs to comply with existing or new laws or regulations are likely to increase, and, in turn, our ability to operate our plants and harvest our sugarcane crops may be adversely affected.
     Any failure to comply with these laws and regulations may subject us to legal and administrative actions. These actions can result in civil or criminal penalties, including a requirement to pay penalties or fines, which may range from US$5 to US$50 million and can be doubled or tripled in case of recidivism, an obligation to make capital and other expenditures or an obligation to materially change or cease some operations.
Risks Related to a Luxembourg Company
We are a Luxembourg corporation (“société anonyme”) and it may be difficult for you to obtain or enforce judgments against us or our executive officers and directors in the United States.
     We are organized under the laws of the Grand Duchy of Luxembourg. Most of our assets are located outside the United States. Furthermore, most of our directors and officers and the experts named in this annual report reside outside the United States, and most of their assets are located outside the United States. As a result, you may find it difficult to effect service of process within the United States upon these persons or to enforce outside the United States judgments obtained against us or these persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the U.S. federal securities laws. Likewise, it may also be difficult for you to enforce in U.S. courts judgments obtained against us or these persons in courts located in jurisdictions outside the United States, including actions predicated upon the civil liability provisions of the U.S. federal securities laws. It may also be difficult for an investor to bring an action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against us or these persons. Luxembourg law, furthermore, does not recognize a shareholder’s right to bring a derivative action on behalf of the company.
     As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and the Grand Duchy of Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment

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rendered by a U.S. court. The enforceability in Luxembourg courts of judgments entered by U.S. courts will be subject prior any enforcement in Luxembourg to the procedure and the conditions set forth in the Luxembourg procedural code in its article 678, which conditions may include the following conditions:
    the judgment of the U.S. court is enforceable (exécutoire) in the United States;
 
    the U.S. court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was established in compliance both with Luxembourg private international law rules and with the applicable domestic U.S. federal or state jurisdictional rules);
 
    the U.S. court has applied to the dispute the substantive law which would have been applied by Luxembourg courts;
 
    the judgment was granted following proceedings where the counterparty had the opportunity to appear, and if it appeared, to present a defense;
 
    the U.S. court has acted in accordance with its own procedural laws; and
 
    the judgment of the U.S. court does not contravene Luxembourg international public policy.
     Under our articles of incorporation, we indemnify and hold our directors harmless against all claims and suits brought against them, subject to limited exceptions. Under our articles of incorporation, to the extent allowed or required by law, the rights and obligations among or between us, any of our current or former directors, officers and company employees and any current or former shareholder will be governed exclusively by the laws of Luxembourg and subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of their capacities as such. Although there is doubt as to whether U.S. courts would enforce such provision in an action brought in the United States under U.S. securities laws, such provision could make enforcing judgments obtained outside Luxembourg more difficult to enforce against our assets in Luxembourg or jurisdictions that would apply Luxembourg law.
You may have more difficulty protecting your interests than you would as a shareholder of a U.S. corporation.
     Our corporate affairs are governed by our articles of incorporation and by the laws governing joint stock companies organized under the laws of the Grand Duchy of Luxembourg as well as such other applicable local law, rules and regulations. The rights of our shareholders and the responsibilities of our directors and officers under Luxembourg law are different from those applicable to a corporation incorporated in the United States. There may be less publicly available information about us than is regularly published by or about U.S. issuers. Also, Luxembourg regulations governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg law and regulations in respect of corporate governance matters may not be as protective of minority shareholders as state corporation laws in the United States. Therefore, you may have more difficulty protecting your interests in connection with actions taken by our directors and officers or our principal shareholders than you would as a shareholder of a corporation incorporated in the United States.
You may not be able to participate in equity offerings, and you may not receive any value for rights that we may grant.
     Pursuant to Luxembourg corporate law, existing shareholders are generally entitled to preemptive subscription rights in the event of capital increases and issues of shares against cash contributions. However, under our articles of incorporation, the board of directors has been authorized to waive, limit or suppress such preemptive subscription rights until the fifth anniversary of the publication of the authorization granted to the board in respect of such waiver by the general meeting of shareholders.

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Item 4. Information on the Company
     A. HISTORY AND DEVELOPMENT OF THE COMPANY
General Information
     Adecoagro is a Luxembourg société anonyme (a joint stock corporation). The Company’s legal name is “Adecoagro S.A.” Adecoagro was incorporated on June 11, 2010 and on October 26, 2010 all the shares in issue in Adecoagro were acquired by IFH LLC.
     On October 30, 2010, the members of IFH LLC transferred pro rata approximately 98% of their membership interests in IFH LLC to Adecoagro in exchange for common shares of Adecoagro.
     On January 28, 2011, Adecoagro completed the IPO of its shares listed on the New York Stock Exchange (“NYSE”). The shares are traded under the symbol “AGRO.”
     Adecoagro is registered with the Luxembourg Registry of Trade and Companies under number B153681. Adecoagro has its registered office at 13-15 Avenue de la Liberté, L-1931, Luxembourg, Grand Duchy of Luxembourg. Our telephone number is (+352) 2689-8213.
History
     Since our inception in 2002, we have optimized the use of our portfolio of land acquired from time to time and effectively worked towards reaching its productive potential. We replaced the production model used by former owners of our assets with one that is more efficient and sustainable at the same time. Every hectare of our land capable of growing crops, other than land subject to land reserve requirements, is allocated to growing crops or producing sugarcane, while our other land is used for raising dairy cows or leased for raising cattle.
     In September 2002, we commenced our operations with the acquisition of 100% of the equity interests of Pecom Agropecuaria S.A. (“Pecom”), an Argentine corporation (sociedad anónima), and we rapidly became one of the largest agricultural companies in Argentina. Involving more than 74,000 hectares of farmland, this acquisition represented one of the largest stock purchase transactions in South America in 2002. In connection with the acquisition, Pecom changed its name to Adeco Agropecuaria S.A. (“Adeco Agropecuaria”).
     Adeco Agropecuaria was the platform from which we executed our expansion plans, including the acquisition of additional land and the diversification of our business activities.
     In 2004, we began our regional expansion and acquired one farm in Uruguay (approximately 5,000 hectares). In 2005, we continued the expansion of our crop business in Argentina with the acquisitions of La Agraria S.A. (approximately 4,857 hectares) and Establecimientos El Orden S.A. and Cavok S.A. (approximately 15,157 hectares).
     In 2005, we acquired our first sugar and ethanol mill, Usina Monte Alegre S.A., with a crushing capacity of 0.9 million tons of sugarcane per year at that time.
     In 2006 and 2007, we continued our land portfolio expansion and vertical integration through the acquisitions of Pilagá S.A. (formerly Pilagá S.R.L. and before that, Pilagá S.A.G.), one of the largest and oldest agriculture companies in Argentina, with more than 88,000 hectares and two rice processing facilities, and one additional farm of approximately 2,400 hectares in Argentina and five farms of approximately 24,000 hectares in Brazil for the production of sugar and coffee. In 2007, we also acquired La Lácteo S.A., our Argentine dairy processing joint venture company, with two milk production facilities and an installed processing capacity of 150,000 liters of milk per day at that time, and created our joint-venture with Agropur Cooperative, Canada’s second largest milk processing company.

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     Also, in December 2007, we acquired Bañado del Salado S.A. and Agro Invest S.A., with more than 43,000 hectares for crop production in Argentina, and one farm in Uruguay of approximately 3,177 hectares. In Brazil, we bought more than 13,000 hectares for the planting of sugarcane for our sugarcane cluster in Mato Grosso do Sul.
     Additionally, in August 2010, we acquired Dinaluca S.A., an agricultural company consisting of several farms located in the province of Corrientes, Argentina, and with more than 14,000 hectares for crop production in Argentina.
     On October 30, 2010, the members of IFH LLC transferred pro rata approximately 98% of their membership interests in IFH LLC to Adecoagro in exchange for common shares of Adecoagro. As part of the corporate reorganization, referred to herein as the Reorganization, AFI Ltd., a subsidiary of IFH LLC and the parent of Adecoagro LLC, distributed its interest in Adecoagro LLC to IFH LLC and commenced a process of dissolution, making IFH LLC the direct parent of Adecoagro LLC. Thereafter, our shareholders transferred pro rata 98% of their membership interests in IFH LLC to Adecoagro (a corporation organized under the laws of the Grand Duchy of Luxembourg with no prior holdings or operations, formed for the purpose, among others, of facilitating our IPO) in exchange for 100% of the common shares of Adecoagro.
     In connection with the Reorganization, Adecoagro transferred a de minimis amount of its interest in IFH LLC (0.00001%) to its newly-formed substantially wholly-owned subsidiary, Ona Ltd., a Maltese corporation. Adecoagro then converted IFH LLC from a limited liability company to a limited liability partnership, IFH LP, a Delaware limited partnership. Following the Reorganization, IFH LP was owned 2% by our shareholders, approximately 98% by Adecoagro, in each case as limited partners, and the remainder by Ona Ltd., as its general partner. Also in connection with the Reorganization, IFH LLC transferred a de minimis amount of its interest in Adecoagro LLC (0.00001%) to its newly-formed substantially wholly-owned subsidiary, Toba Ltd., a Maltese corporation. IFH LLC then converted Adecoagro LLC to Adecoagro LP, a Delaware limited partnership. Following the Reorganization, Adecoagro LP was owned approximately 100% by IFH LP as limited partner, and the remainder by Toba Ltd. as its general partner.
     The diagrams below illustrate the effect of our corporate reorganization:
(GRAPHIC)
 
 
*   Existing Shareholders refer to shareholders of record prior to our IPO.
 
**   Does not account for an immaterial amount of shares required to be owned by other persons pursuant to Maltese law.
 
***   Existing Shareholders retained a 2% stake in IFH in amounts corresponding to their ownership of the Company. The 2% ownership does not carry any preferential treatment.

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     On January 28, 2011, we successfully completed the IPO of our shares listed on the NYSE. We issued 28,405,925 shares, at a price of US$11 per share. The shares trade under the symbol “AGRO.”
     On January 28, 2011, we issued and sold to Al Gharrafa Investment Company (“Al Gharrafa”), a wholly owned subsidiary of Qatar Holding LLC and one of our shareholders, 7,377,598 common shares at a purchase price of $10.65 per share, pursuant to an agreement entered into on January 6, 2011.
     In addition, on February 11, 2011, we issued 4,285,714 shares when the over-allotment option was exercised by the underwriters in our IPO.
     Principal Capital Expenditures
     Capital expenditures totaled $130.6 million, $138.6 million and $217.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.
     For a discussion of our capital expenditures and future projections, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Capital Expenditure Commitments.”
     B. BUSINESS OVERVIEW
Our Company
     We are a leading agricultural company in South America, with operations in Argentina, Brazil and Uruguay. We are currently involved in a broad range of businesses, including farming crops and other agricultural products, cattle and dairy operations, sugar, ethanol and energy production and land transformation. Our sustainable business model is focused on (i) a low-cost production model that leverages growing or producing each of our agricultural products in regions where we believe we have competitive advantages, (ii) reducing the volatility of our returns through product and geographic diversification and use of advanced technology, (iii) benefiting from vertical integration in key segments of the agro-industrial chain, (iv) acquiring and transforming land to improve its productivity and realizing land appreciation through strategic dispositions; and (v) promoting sustainable agricultural production and development.
     As of December 31, 2010, we owned a total of 282,798 hectares, comprised of 21 farms in Argentina, fifteen farms in Brazil and one farm in Uruguay. In addition we own and operate several agro-industrial production facilities including four rice processing facilities in Argentina, a dairy operation with approximately 4,413 milking cows in Argentina, two coffee processing plants in Brazil, eleven grain and rice conditioning and storage plants in Argentina and two sugar and ethanol mills in Brazil with a sugarcane crushing capacity of 5.2 million tons as of December 31, 2010.
     The table below sets forth certain key metrics for our businesses:
                         
    Year Ended December 31, 2010  
            Sugar, Ethanol &        
Key Metrics   Farming     Energy     Land Transformation  
Owned Hectares(1)
    269,577       13,221          
Leased Hectares(2)
    37,707       43,892          
Total Planted Hectares 2010/2011(3)
    196,155       53,799          
Production 2009/2010(4)
  Crops, Rice, Coffee:   Sugar: 235,690 tons   6,490 hectares(5)
 
    618,834     Ethanol: 174,303 m3        
 
  Milk: 41.6 million liters   Energy: 168,644MWh        
Sales (in thousands of $)(6)
    197,741       228,526       20,837  

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(1)   Owned hectares in Farming business includes land used for productive activities (crops, rice, coffee, cattle), land which is potentially croppable and land set aside as legal reserve and other reserves.
 
(2)   Includes leased planted land (excluding second harvest) with crops and rice during the 2010/2011 harvest year.
 
(3)   Includes owned and leased planted land (including second harvest) with crops, rice, forage and coffee during the 2010/2011 harvest year. Includes data as of March 31, 2011, to reflect full harvest year.
 
(4)   Production in tons of crops, rice and coffee for 2009/2010 harvest year. Production in liters of raw milk, tons of sugar, cubic meters of ethanol and MWh of energy for the period indicated. See “Presentation of Financial and Other Information.”
 
(5)   Consists of undeveloped and/or undermanaged land put into production.
 
(6)   Sales in Land Transformation business represents capital gain from the sale of one of our farms.
     We believe that we are:
    one of the largest owners of productive farmland in South America, with more than 225,676 owned hectares as of December 31, 2010 used in productive activities (excluding legal land reserves pursuant to local regulations and other land reserves) located in Argentina, Brazil and Uruguay, producing a wide range of agricultural products.
 
    a leading producer of agricultural commodities in South America. During the 2009/2010 harvest year, we harvested 168,016 hectares (including 48,001 leased hectares) and produced 524,890 tons of grains, including soybeans, corn, wheat, sunflower and cotton.
 
    one of the largest producers of rough (unprocessed) rice in the world, planting 18,142 hectares (including 7,311 leased hectares) and producing over 91,000 tons during the 2009/2010 harvest year, which accounted for 8% of the total Argentine production according to the Confederacion de Molinos Arroceros del Mercosur (“Conmasur”). As of December 31, 2010, we planted 27,542 hectares of rice (including 4,389 leased hectares). We are also a large processor and exporter of white rice in Argentina, accounting for 12.8% of total white rice produced in Argentina and 15.5% of total Argentine white rice exports during 2010, according to Aduana Argentina and the Federacion de Entidades Arroceras, respectively.
 
    a leading dairy producer in South America in terms of our cutting-edge technology, productivity per cow and grain conversion efficiencies, producing over 41.6 million liters of raw milk during 2010 and 11.2 million liters of raw milk during the first quarter of 2011.
 
    one of the largest producers of green bean coffee in the world, with 1,632 fully integrated and mechanized hectares devoted to coffee production as of December 31, 2010.
 
    a growing producer of sugar and ethanol in Brazil, where we are in the process of building what we expect will be one of the most cost-efficient sugarcane crushing clusters in Brazil. In the sugar and ethanol area:
    we currently own two sugar and ethanol mills in Brazil with an aggregate installed crushing capacity of 5.2 million tons per year and cogeneration (the generation of electricity from sugarcane bagasse, the fiber portion of sugarcane that remains after the extraction of sugarcane juice) capacity of 112 MW as of December 31, 2010;

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    we are currently in the process of obtaining the necessary authorizations to start building our third sugar and ethanol mill in Brazil, which, when combined with our existing Angélica mill (“Angélica”), will form a cluster that we believe will allow us to become one of the lowest-cost producers of sugar, ethanol and energy from sugarcane in Brazil; and
    we expect our planned cluster to have a total installed sugarcane crushing capacity of 10.3 million tons per year and a cogeneration capacity of 296 MW once it reaches full capacity in 2017, resulting in a total sugarcane crushing capacity of 11.5 million tons per year for our three mills together at that time.
    one of the leading companies in South America involved in the acquisition and transformation of undermanaged land to more productive uses, generating higher cash yields. During the last five fiscal years, we sold over 27,169 hectares of developed land, generating capital gains of approximately $95 million.
     We are engaged in three main businesses:
     Farming Business: We believe we are one of the largest owners of productive farmland in South America. As of December 31, 2010 we owned 269,577 hectares (excluding sugarcane farms) of farmland in Argentina, Brazil and Uruguay, of which 118,801 hectares are croppable, 18,409 hectares are being evaluated for transformation, 78,559 hectares are suitable for raising beef cattle and are mostly leased to a third party beef processor, constituting a total of 215,769 productive hectares, and 53,808 hectares are legal land reserves pursuant to local regulations or other land reserves. During 2010/2011 harvest year we held leases or have entered into agriculture partnerships for an additional 37,707 croppable hectares. We own the facilities and have the resources to store and condition 100% of our crop and rice production. We do not depend on third parties to condition our production for sale. Our farming business is subdivided into five business areas:
    Crop business: We produce a wide range of agricultural commodities including soybeans, corn, wheat, sunflower and cotton, among others. In Argentina, our farming activities are conducted mainly in the Argentine humid pampas region, where agro-ecological conditions are optimal for low-cost production. Since 2004, we have expanded our operations throughout the center-west region of Uruguay and the western part of the state of Bahia, Brazil, as well as in the northern region of Argentina. During the 2009/2010 harvest year, we planted approximately 168,016 hectares of crops, including second harvests, producing 524,890 tons of grains, including soybeans, wheat and corn, sunflower and cotton. We also produced over 52,000 tons of forage that we used for cow feed in our dairy operation. During 2010/2011 harvest year we planted 166,981 hectares of crops, including second harvests.
 
    Rice business: We own a fully-integrated rice operation in Argentina. We produce irrigated rice in the northeast provinces of Argentina, where the availability of water, sunlight, and fertile soil results in one of the most ideal regions in the world for producing rice at low cost. We believe that we are one of the largest producers of rough (unprocessed) rice in Argentina, producing 91,000 tons during the 2009/2010 harvest year, which accounted for 8% of the total Argentine production according to Conmasur. As of December 31, 2010, we planted 27,542 hectares of rice, including 4,389 leased hectares. We own four rice mills that process our own production, as well as rice purchased from third parties. We produce different types of white and brown rice that are both sold in the domestic Argentine retail market and exported.
 
    Coffee business: Our integrated coffee operation is located in the western part of the state of Bahia, Brazil, where conditions are well-suited for producing “specialty coffee” due to the availability of water for irrigation, the absence of frosts and the flat topography that allows for a fully mechanized harvest. We grow coffee on 1,632 owned hectares and have available land and water to expand our operations to 2,700 hectares.

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    Dairy business: We believe that we are a leading dairy producer in South America in terms of our utilization of cutting-edge technology, productivity per cow and grain conversion efficiencies, producing over 41.6 million liters of raw milk during 2010, with an average of 4,225 milking cows, delivering an average of 27 liters of milk per cow per day. During the first quarter of 2011, we produced 11.2 million liters of raw milk, with an average of 4,413 milking cows, delivering an average of 28.3 liters of milk per cow per day. Through the production of raw milk, we are able to transform forage and grains into value-added animal protein. We believe that our “free-stall” dairy in Argentina is the first of its kind in South America and allows us to optimize our use of resources (land, dairy cow feed and capital), increase our productivity and maximize the conversion of forage and grain into raw milk.
 
    Cattle business: Until December 2009, we owned 58,348 head of cattle, which we fattened for sale to meat processors and in Argentina’s livestock auction markets. In December 2009, we sold 55,543 head of cattle from our herd, not including cattle used in our dairy business, to a meat processor for a total price of $14.2 million. Additionally, we entered into a long-term lease agreement pursuant to which the meat processor leases approximately 74,000 hectares of grazing land from us to raise and fatten the purchased cattle. The lease agreement is tied to the market price of beef at the end of each quarter.
The following table sets forth, for the periods indicated, certain data relating to our farming business:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Sales   (In thousands of $)  
Crops(l)
    108,162       92,029       95,987       59,293  
Rice(2)
    61,585       69,350       56,925       26,422  
Coffee
    7,572       14,265       15,948       7,267  
Dairy(3)
    14,297       11,894       14,821       17,841  
Cattle(4)
    6,125       28,478       9,357       7,258  
Total
    197,741       216,016       193,038       118,081  
                                 
    2010/2011     2009/2010     2008/2009     2007/2008  
    Harvest     Harvest     Harvest     Harvest  
Production   Year(5)     Year     Year     Year  
Crops (tons)(6)
    N/A       524,890       317,582       351,787  
Rice (tons)(7)
    N/A       91,723       94,968       98,577  
Coffee (tons)
    N/A       2,221       2,412       3,028  
Total
    N/A       618,723       414,962       453,392  
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Dairy (thousands of liters)(8)
    41,597       47,479       43,110       34,592  
Cattle (tons)(4)(9)
    359       4,149       7,229       6,632  

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    2010/2011     2009/2010     2008/2009     2007/2008  
    Harvest     Harvest     Harvest     Harvest  
    Year     Year     Year     Year  
Planted Area   (In hectares, including second harvest)  
Crops(10)
    166,981       168,241       139,518       107,027  
Rice
    27,542       18,142       17,258       14,820  
Coffee(11)
    1,632       1,632       1,632       1,632  
Cattle(12)
    78,559       87,392       106,375       124,635  
 
(1)   Includes soybeans, corn, wheat, sunflower and cotton, among others.
 
(2)   Sales of processed rice, including rough rice purchased from third parties and processed in our facilities.
 
(3)   Sales of raw milk and whole milk powder produced in 2007 pursuant to an agreement with a third party.
 
(4)   In December 2009, we sold 55,543 head of cattle to a third party. The third party currently leases grazing land from us to raise and fatten the cattle, and our payments under the lease are tied to the market price of beef. See “—Operations and Principal Activities—Farming—Cattle Business.”
 
(5)   As of the date of this annual report, the 2010/2011 harvest year crops were not fully harvested. 2010/2011 harvesting operations began in October 2010, with the harvest of winter crops, and will finish in August 2011, with the harvest of coffee.
 
(6)   Crop production does not include 52,482 tons, 52,960 tons and 53,398 tons of forage produced in the 2009/2010, 2008/2009 and 2007/2008 harvest years, respectively.
 
(7)   Expressed in tons of rough rice produced on owned and leased farms.
 
(8)   Raw milk produced at our dairy farms.
 
(9)   Measured in tons of live weight. Production is the sum of the net increases (or decreases) during a given period in “live weight” of each head of beef cattle.
 
(10)   Includes 3,653 hectares, 4,561 hectares, 5,382 hectares and 4,454 hectares used for the production of forage during the 2010/2011, 2009/2010, 2008/2009 and 2007/2008 harvest years, respectively.
 
(11)   Reflects the size of our coffee plantations, which are planted only once every 18 to 20 years.
 
(12)   Comprised of land devoted to raising beef cattle, which, since December 2009, is mostly leased to a third party. See “—Operations and Principal Activities—Farming—Cattle Business.”
     Sugar, Ethanol and Energy Business: We believe we are a growing and efficient producer of sugar and ethanol in Brazil. We cultivate and harvest sugarcane which is then processed in our own mills to produce sugar, ethanol and energy. As of December 31, 2010, our total sugarcane plantation consisted of 53,799 hectares, planted over both own and leased land. We currently own and operate two sugar and ethanol mills, UMA and Angélica, with a total crushing capacity of 5.2 million tons of sugarcane per year. UMA is a small but efficient mill with over 75 years of history which is located in the state of Minas Gerais, Brazil, with a sugarcane crushing capacity of 1.2 million tons per year, full cogeneration capacity and an associated sugar brand with strong presence in the regional retail market (Açúcar Monte Alegre). We plant and harvest 99% of the sugarcane milled at UMA, with the remaining 1% acquired from third parties. Angélica is a new, advanced mill, which we built in the state of Mato Grosso do Sul, Brazil, with a current sugarcane crushing capacity of 4 million tons per year, highly mechanized harvest, two high pressure boilers and three turbo-generators with the capacity to use all the sugarcane bagasse by-product to generate electricity that is used to power the mill, with excess electricity being sold to the grid, resulting in the mill having full cogeneration capacity. We plant and harvest over 91% of the sugarcane milled at Angélica and are able to vary the product slate between ethanol and sugar with a 60%/40% production ratio for both sugar and ethanol.
     We are currently in the process of starting the construction of our third mill, Ivinhema, in the state of Mato Grosso do Sul, Brazil, 45 km from our Angélica mill, in order to complete our planned sugarcane cluster (consisting of Angélica and Ivinhema) in that region. We plan to fund part of the construction costs of the Ivinhema mill using $230 million from the proceeds of our IPO. Subject to procuring the necessary licenses and the remainder of the required funding, we anticipate completing the construction of the Ivinhema mill in 2017. See “—Sugar,

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Ethanol and Energy—Our Mills” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industries—Adverse conditions may create delays in or the suspension of the construction of our Ivinhema mill and/or significantly increase the amount of our expected investments.” We expect the Ivinhema mill to begin operating during the first half of 2013, reaching 2.0 million tons of nominal crushing capacity during that year, and gradually increasing its milling capacity until it reaches a full milling capacity of 6.3 million tons of sugarcane per year by 2017.
     In the year ended December 31, 2010, we crushed 4.1 million tons of sugarcane. Our mills produce both sugar and ethanol, and accordingly, we have some flexibility to adjust our production (within certain capacity limits that generally vary between 40% and 60%) between sugar and ethanol, to take advantage of more favorable market demand and prices at given points in time. In the year ended December 31, 2009, we produced 52,968 tons of sugar and 132,492 cubic meters of ethanol. During the first half of 2010, we completed the construction of our Angélica mill in Mato Grosso do Sul with the sugar factory commencing the production of sugar in July 2010. As a result, in the year ended December 31, 2010, sugar production increased to 235,690 tons while ethanol production reached 174,303 cubic meters.
     As of December 31, 2010, our overall sugarcane plantation consisted of 53,799 hectares of sugarcane in the states of Mato Grosso do Sul and Minas Gerais, Brazil, of which 9,907 hectares of sugarcane were planted on owned land, and 43,892 hectares were planted on land leased from third parties under long term agreements.
     The following table sets forth, for the periods indicated, certain data relating to our sugar, ethanol and energy business:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Sales   (In thousands of $)  
Sugar
    98,385       26,143       20,495       17,133  
Ethanol
    114,793       62,811       29,385       7,289  
Energy
    15,040       8,216              
Other
    308       417       1,291        
Total(1)
    228,526       97,587       51,171       24,422  
 
(1)   Includes sales of sugarcane and other miscellaneous items to third parties.
                                 
    Year Ended December 31,  
Production   2010     2009     2008     2007  
Sugar (tons)
    235,690       52,968       67,772       72,372  
Ethanol (cubic meters)
    174,303       132,492       70,067       29,375  
Energy (MWh exported)
    168,644       128,291              
                                 
    Year Ended December 31,  
Other Metrics   2010     2009     2008     2007  
Sugarcane milled (% owned)
    95 %     94 %     98 %     100 %
Sugarcane crushing capacity (millions of tons)
    5.2       3.3       1.7       0.9  
% Mechanized harvesting operations — Consolidated
    80 %     66 %     32 %     0 %
% Mechanized /harvesting operations — Angélica mill
    100 %     99 %     99 %   NA  
     Land Transformation Business: We believe we are one of the leading companies in South America involved in the acquisition and transformation of land. We acquire farmlands we believe are underdeveloped or underutilized and, by implementing cutting-edge production technology and agricultural

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best practices, transform the land to be suitable for more productive uses, enhance yields and increase the value of the land. During the eight-year period since our inception, we have effectively put into production 140,570 hectares of land that was previously undeveloped or undermanaged. During 2010, we put into production 6,490 hectares and in addition continued the transformation process of over 120,738 hectares we own. We realize and capture land transformation value through the strategic disposition of assets that have reached full development potential. We believe that the rotation of our land portfolio allows us to re-allocate capital efficiently, maximizing our return on invested capital. Our current owned land portfolio consists of 282,798 hectares, distributed throughout our operating regions as follows: 86% in Argentina, 13% in Brazil, and 1% in Uruguay. During the last five years, we have traded 27,169 hectares of developed land, generating capital gains of approximately $95 million.
     We promote sustainable land use through our land transformation activities, which seek to promote environmentally responsible agricultural production and a balance between production and ecosystem preservation. We do not operate in heavily wooded areas or primarily wetland areas.
     The company is continuously seeking to recycle its capital by disposing of a portion of its fully developed mature farms and by acquiring farms with higher potential for transformation. This allows the company to monetize the capital gains generated by its fully transformed farms and allocate its capital to acquire land with higher transformation potential, thereby enhancing the return on invested capital. Please see also “—Risks Related to Argentina—Proposed changes in Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina” and “—Risks Related to Brazil— Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.”
     The following table sets forth, for the periods indicated, certain data relating to our land transformation business:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Undeveloped/Undermanaged land put into production (hectares)
    6,490       11,255       33,387       17,591  
Ongoing transformation of croppable land (hectares)
    120,738       110,751       80,720       66,562  
Number of farms sold
    1 *     1       3       2  
Hectares sold
    5,086       5,005       4,857       8,714  
Capital gains from the sale of land ($ thousands)
    20,837       18,839       15,201       33,114  
 
*   On December 21, 2010, we completed the sale of La Macarena, a 5,086 hectare farm located in Rio Negro, Uruguay, for US$34 million.
Our Strengths
     We believe the following are our competitive strengths:
    Unique and strategic asset base. We own strategically located farmland and agro-industrial assets in Argentina, Brazil and Uruguay. We engage in continued improvement of our operations and practices, resulting in the reduction of operating costs and an increase in productivity, ultimately enhancing the value of our properties and generating capital gains. Our operations also benefit from strategically located industrial facilities throughout Argentina and Brazil, increasing operating efficiencies and reducing operating and logistical costs. We are vertically integrated where economics and returns are attractive, where the efficiency of our primary operation is significantly enhanced, or where lack of a competitive market results in the absence of a transparent price determination mechanism. Our diversified asset base creates valuable synergies and economies of scale, including (i) the ability to transfer the technologies and best practices that we have developed across our business lines, (ii) the ability to apply value-adding land transformation strategies to farmland in connection with our farming and sugarcane operations, and (iii) a greater ability to negotiate more favorable terms with our suppliers and customers.

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      Owning a significant portion of the land on which we operate is a key element of our business model.
 
    Low-cost production leveraging agro-ecological competitive advantages. Each of the commodity products we grow is produced in regions where agro-ecological conditions provide competitive advantages and which, through the implementation of our efficient and sustainable production model, allow us to become one of the lowest cost producers.
    Our grain and oilseed production is based in the Argentine humid pampas region where soil fertility, regular rainfalls, temperate climate, availability of land and proximity to ports contribute to the reduced use of fertilizers and agrochemicals, high productivity and stable yields and efficient logistics, ultimately resulting in one of the lowest costs per ton of grain produced and delivered.
 
    Our cotton and coffee production is focused in western Bahia, Brazil. This region is excellent for producing high quality cotton fiber and specialty coffee at a low cost due to its ideal climate, well drained soils, high altitude, availability of water for irrigation, and absence of frosts.
 
    Our rice operation is located in the northeast provinces of Argentina, one of the best rice farming regions in the world due to plentiful sunlight, abundant availability of water for low cost irrigation and large potential for expansion.
 
    Our dairy operation is situated in the Argentine humid pampas region, where cow feed (grains, oilseeds and forage) is efficiently and abundantly produced at a low cost and climate and sanitary conditions are optimal for cow comfort, which enhances productivity, cow reproduction rates and milk quality.
 
    We produce sugarcane in the center-south region of Brazil, which has the lowest production costs in the world, significantly lower than other major sugar producing regions, including India, China, the United States, the United Kingdom, France and Germany.
    Standardized and scalable agribusiness model applying technological innovation. We have consistently used innovative production techniques to ensure that we are at the forefront of technological improvements and environmental sustainability standards in our industry. We are implementing an agribusiness model that consists of specializing our workforce and defining standard protocols to track crop development and control production variables, thereby enhancing management decision-making. We further optimize our agribusiness model through the effective implementation and constant adaptation of a portfolio of advanced agricultural and information technologies and best practices tailored to each region in which we operate and commodity we produce, allowing us to improve our crop yields, reduce operating costs and maximize margins in a sustainable manner.
    In our farming business, we use “no-till” technology as the cornerstone of our crop production and have been able to implement this technique in areas within our production regions where it had not been used before. Furthermore, we also utilize crop rotation, second harvests, integrated pest management, balanced fertilization, water management and mechanization. Additionally, we use the innovative silo bag storage method, utilizing large polyethylene bags with a capacity of 180-200 tons which can be left on the field for 12 months, resulting in low-cost, scalable and flexible storage on the field during harvest, which we believe allows us to expand our crop storage capacity at a low cost, generate important logistic and freight savings by moving our production in the off-season when freight fares are lower, and time the entry of our production into the market at optimal price points. See “—Operations and Principal Activities—Farming—Storage and Conditioning.”

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    In our dairy business, we believe that we were the first company in South America to implement the “free-stall” infrastructure in dairy operations, resulting in more efficient conversion of feed to raw milk and higher production rates per cow compared to our peers in the region.
 
    In our sugar, ethanol and energy business, our Angélica mill (i) has a highly mechanized planting and harvesting operation, which has increased our sugarcane production, reduced our operating costs and contributed to environmental sustainability by eliminating the need to burn the sugarcane before harvest; (ii) has the capacity to use all the bagasse (a by-product of the sugar and ethanol production process) that is produced, with no incremental cost, to cogenerate 96 MW of clean and renewable electricity; (iii) is what we believe to be one of the largest continuously operating sugar plants in Brazil designed for enhanced efficiency and non-stop processing, producing 1,800 tons of sugar per day; and (iv) has the ability to recycle by-products such as filter cake and vinasse by using them as fertilizers in our sugarcane fields, as well as recycling water and other effluents, generating important savings in input costs and protecting the environment.
    Unique diversification model to mitigate cash flow volatility. We pursue a unique multi-tier diversification strategy to reduce our exposure to production and market fluctuations that may impact our cash flow and operating results. We seek geographic diversification by spreading our portfolio of farmland and agro-industrial assets across different regions of Argentina, Brazil and Uruguay, thereby lowering our risk exposure to weather-related losses and contributing to stable cash flows. Additionally, we produce a variety of products, including cotton, coffee, soybeans, corn, wheat, sunflower, rice, barley, sorghum, safflower, rapeseed, raw milk, sugar, ethanol and energy, which lowers our risk exposure to potentially depressed market conditions of any specific product. Moreover, through vertical integration in the rice, dairy, sugar, ethanol and energy businesses, and to a lesser extent in our coffee business, we process and transform a portion of our agricultural commodities into branded retail products, reducing our commodity price risk and our reliance on the standard market distribution channels for unprocessed products. Finally, our commercial committee defines our commercial policies based on market fundamentals and the consideration of logistical and production data to develop a customized sale/hedge risk management strategy for each product.
 
    Expertise in acquiring farmland with transformation and appreciation potential. During the last eight fiscal years, we have executed transactions for the purchase and disposition of land for over $460 million and sold 27,169 hectares of developed land, generating capital gains of approximately $95 million. We believe we have a superior track record and have positioned ourselves as a key player in the land business in South America. Our business development team has gained extensive expertise in evaluating and acquiring farmland throughout South America and has a solid understanding of the productivity potential of each region and of the potential for land transformation and appreciation. To date, we have analyzed over 8.9 million hectares of farmland spread throughout the regions in which we operate and other productive regions in the world. We have developed a methodology to assess farmland and to appraise its potential value with a high degree of accuracy and efficiency by using information generated through sophisticated technology, including satellite images, rain and temperature records, soil analyses, and topography and drainage maps. Our management team has gained extensive experience in transforming and maximizing the appreciation potential of our land portfolio through the implementation of our agribusiness techniques described above. We also have an extensive track record rotating our asset portfolio to generate capital gains and monetize the transformation and appreciation generated through our operations.
 
    Experienced management team, knowledgeable employees. Our people are our most important asset. We have an experienced senior management team with an average of more than 20 years of experience working in our sector and a solid track record of implementing and executing large scale growth projects such as land transformations, greenfield developments of industrial plants, and integrating acquisitions within our organization. Recruiting technically qualified employees at each of our farms and operating sites is a main

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      focus of our senior management and a key to our success.
Our Business Strategy
     We intend to maintain our position as a leading agricultural company in South America by expanding and consolidating each of our business lines, creating value for our shareholders. The key elements of our business strategy are:
    Expand our farming business through organic growth, leasing and strategic acquisitions. We will continue to seek opportunities for organic growth, target attractive acquisition and leasing opportunities and strive to maximize operating synergies and achieve economies of scale in each of our four main farming business areas (coffee, rice, crops and dairy). We plan to continue expanding and consolidating our crop production throughout South America. We also intend to continue expanding our rice segment in terms of production and processing capacity, consolidating our leading position in Argentina and increasing our presence throughout Brazil, Uruguay and other regions, to become a leading regional player. We plan to expand our current dairy production capacity using the “free-stall” model. We believe that the know-how and skills gained from the construction of our first “free-stall” module can be easily replicated, allowing us to scale-up our production efficiently and at a fast rate.
 
    Consolidate our sugar and ethanol cluster in the state of Mato Grosso do Sul, Brazil. Our main strategy for our sugar and ethanol business is to build our cluster in Mato Grosso do Sul, Brazil, through the construction of the Ivinhema mill, our second greenfield project, which we expect to reach a full crushing capacity of 6.3 million tons per year by 2017. See “—Sugar, Ethanol and Energy—Our Mills.” Completion of the Ivinhema mill will allow us to complete our advanced cluster with a planned total crushing capacity of 10.3 million tons per year. The consolidation of the cluster will generate important synergies, operating efficiencies and economies of scale such as (i) one centralized management team, reducing total administration cost per ton of sugarcane milled; (ii) a large sugarcane plantation supplying two mills, allowing for non-stop harvesting; and (iii) a reduction in the average distance from the sugarcane fields to the mills, generating important savings in sugarcane transportation expenses. We believe that the Ivinhema mill will allow us to become one of the most efficient and low cost producers of sugar, ethanol and energy in Brazil. Additionally, we plan to continue to monitor closely the Brazilian sugar and ethanol industries and may pursue selective acquisitions that provide opportunities to increase our economies of scale, operating synergies and profitability.
 
    Further increase our operating efficiencies while maintaining a diversified portfolio. We intend to continue to focus on improving the efficiency of our operations and maintaining a low-cost structure to increase our profitability and protect our cash flows from commodity price cycle risk. We seek to maintain our low-cost platform by (i) making additional investments in advanced technologies, including those related to agricultural, industrial and logistical processes and information technology, (ii) improving our economies of scale through organic growth, strategic acquisitions, and more efficient production methods, and (iii) fully utilizing our resources to increase our production margins. In addition, we intend to mitigate commodity price cycle risk and minimize our exposure to weather related losses by (i) maintaining a diversified product mix and vertically integrating production of certain commodities and (ii) geographically diversifying the locations of our farms.
 
    Continue to implement our land transformation strategy. We plan to continue to enhance the value of our owned farmland and future land acquisitions by making them suitable for more profitable agricultural activities, thereby seeking to maximize the return on our invested capital in our land assets. In addition, we expect to continue rotating our land portfolio through strategic dispositions of certain properties in order to realize and monetize the transformation and appreciation value created by our land transformation activities. We also plan to leverage our knowledge and experience in land asset- management to identify superior buying and selling opportunities.

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Operations and Principal Activities
Farming
     Our Farming business line is divided into five main reportable operating businesses, namely crops, rice, coffee, dairy and cattle. We conduct our farming operations primarily on our own land and, to a lesser extent, on land leased from third parties. During harvest year 2010-11 our farming operations were conducted on a total of 307,284 hectares of land, of which we own 269,577 hectares (excluding sugarcane farms) and we lease the remaining 37,707 hectares from third parties. Some of the farms we own are used for more than one production activity at a time. The following table sets forth our production volumes for each of our farming business lines.
                                 
    Harvest Year  
    2010/2011     2009/2010     2008/2009     2007/2008  
Crops (thousands of tons)(1)
    91,910       524,890       317,582       351,787  
Rice(2) (thousands of tons)
  NA       91,723       94,968       98,577  
Coffee (thousands of tons)
  NA       2,220       2,412       3,028  
                         
    Year Ended December 31,  
    2010     2009     2008  
Dairy(3) (thousands of liters)
    41,597       47,479       43,110  
Cattle (thousands of tons)(4)(5)
    359       4,149       7,229  
 
(1)   Crop production volume for the 2010/2011 harvest year includes only our wheat and barley harvest, as the remaining crops were not yet harvested as of December 31, 2010.
 
(2)   Expressed in tons of rough rice produced in farms we own or lease.
 
(3)   Raw milk produced.
 
(4)   Measured in tons of live weight. Production is the sum of the net increases (or decreases) during a given period in live weight of each head of beef cattle we own.
 
(5)   In December 2009, we sold 55,543 head of cattle to a third party. The third party currently leases most of our grazing land to raise and fatten the cattle. Lease prices under the lease agreements are tied to the market price of cattle. See “—Cattle Business”
Crops Business (Grains, Oilseeds and Cotton)
     Our agricultural production is mainly based on growing crops on a total area of approximately 166,981 hectares for the 2010/2011 harvest year, which includes leased land and hectares planted in second harvests. Our main products include soybean, corn, wheat, sunflower, and cotton. Other products, such as rapeseed, sorghum and barley, among others, are sown occasionally and represent only a small percentage of total sown land.
     The following table sets forth, for the harvest years indicated, the planted hectares for our main products:
                                 
    Harvest Year  
    2010/2011     2009/2010     2008/2009     2007/2008  
Product Area   (In hectares)  
Soybeans(l)
    90,167       87,522       63,973       47,409  
Corn(l)
    30,505       27,720       20,200       24,189  
Wheat
    25,656       21,728       18,917       15,792  
Sunflower
    9,943       14,784       16,539       7,775  

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    Harvest Year  
    2010/2011     2009/2010     2008/2009     2007/2008  
Product Area   (In hectares)  
Cotton
    3,242       425       3,159       3,478  
Other crops
    3,815       11,501       11,348       3,930  
Forage
    3,653       4,561       5,382       4,454  
Total(2)
    166,981       168,241       139,518       107,027  
 
(1)   Includes hectares planted in second harvests.
 
(2)   Includes 3,653 hectares, 4,561 hectares, 5382 hectares and 4,454 hectares used for the production of forage during the 2010/2011, 2009/2010, 2008/2009 and 2007/2008 harvest years, respectively.
     The following table sets forth, for the harvest years indicated, the production volumes for our main products
                                 
    Harvest Year  
    2010/2011(1)     2009/2010     2008/2009     2007/2008  
Crop Production   (In thousands of tons)  
Soybeans
    N/A       241,848       96,982       90,724  
Corn
    N/A       180,613       115,900       153,751  
Wheat
    N/A       49,592       41,556       61,951  
Sunflower
    N/A       17,193       22,128       15,841  
Cotton
    N/A       1,068       9,218       15,748  
Other crops
    N/A       34,576       31,799       13,772  
Total
    N/A       524,890       317,582       351,787  
 
(1)   As of the date of this annual report, the 2010/2011 harvest was not fully completed. 2010/2011 harvesting operations began in October 2010 with the harvest of winter crops, and will finish in August 2011, with the harvest of coffee.
     The following table below sets forth, for the periods indicated, the sales for our main products:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Sales   (In thousands of $)  
Soybeans(l)
    64,890       44,116       39,025       26,829  
Corn
    23,968       14,654       22,547       11,186  
Wheat
    7,939       10,218       15,407       8,310  
Sunflower
    4,880       5,517       5,615       1,096  
Cotton
    2,395       11,905       5,813       6,941  
Other crops(2)
    4,090       5,619       7,580       4,931  
Total
    108,162       92,029       95,987       59,293  
 
(1)   Includes sales of soybean oil and soybean meal accounting for $8,420 thousand and $1,692 thousand for the years ended December 31, 2009 and 2008, respectively.
 
(2)   Includes other crops and farming services.
Soybeans
     Soybeans are an annual legume widely grown due to their high content of protein (40%) and oil (20%). They have been grown for over 3,000 years in Asia and, more recently, have been successfully cultivated around the world. Today, the world’s top producers of soybeans are the United States, Brazil, Argentina, China and India. Soybeans are one of the few plants that provide a complete protein supply as they contain

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all eight essential amino acids. About 85% of the world’s soybeans are processed, or “crushed,” annually into soybean meal and oil. Approximately 98% of soybean meal is further processed into animal feed, with the balance used to make soy flour and proteins. Of the oil content, 85% is consumed as edible oil and the rest is used for industrial products such as fatty acids, soaps and biodiesel. We sell our soybeans mainly to crushing and processing industries, which produce soybean oil and soybean meal used in the food, animal feed and biofuel industries.
     We grow soybeans in Argentina, Brazil and Uruguay. In the 2007/2008 harvest year, our total soybean production was 90,724 tons, representing 26% of our total crop production and 46% of our total planted area. In the 2008/2009 harvest year, our total soybean production was 96,982 tons, representing 31% of our total crop production and 48% of our total planted area. In the 2009/2010 harvest year, we planted a total area of 87,522 hectares of soybeans, producing a total of 241,848 tons representing 54% of our total planted area that year, and 46% of our total crop production. In the 2010/ 2011 harvest year, we planted a total area of 90,167 hectares of soybeans. Soybeans comprised 19% of our total sales in 2007, 16% of our total sales in 2008, 14% of our total sales in 2009 and 15% of our total sales in 2010.
Corn
     Corn is a cereal grown around the world and is one of the world’s most widely consumed foods. The main component of corn grain is starch (72% to 73% of grain weight), followed by proteins (8% to 11%). Corn grain is directly used for food and animal feed (beef, swine and poultry meat production and dairy). Corn is also processed to make food and feed ingredients (such as high fructose corn syrup, corn starch and lysine), or industrial products such as ethanol and polylactic acid (PLA). Oil, flour and sugar are also extracted from corn, with several uses in the food, medicine and cosmetic industries. Additionally, there are specific corn types used for direct human consumption such as popcorn and sweet corn.
     We grow corn in Argentina, Brazil and Uruguay. In the 2007/2008 harvest year, our total corn production was 153,751 tons, representing 44% of our total crop production and 24% of our total planted area. In the 2008/2009 harvest year, our total corn production was 115,900 tons, representing 36% of our total crop production and 15% of our total planted area. In the 2009/2010 harvest year, we planted a total area of approximately 27,720 hectares of corn, including the second harvest, producing a total of 180,613 tons of corn representing 17% of our total planted area that year, and 34% of our total crop production. In the 2010/2011 harvest year, we planted a total area of approximately 30,505 hectares of corn, including the second harvest.
     Corn comprised 8% of our total sales in 2007, 9% of our total sales in 2008, 5% of our total sales in 2009 and 6% of our total sales in 2010.
Wheat
     Wheat is the world’s largest cereal-grass crop. Unlike other cereals, wheat grain contains a high amount of gluten, the protein that provides the elasticity necessary for excellent bread making. Although most wheat is grown for human consumption, other industries use small quantities to produce starch, paste, malt, dextrose, gluten, alcohol, and other products. Inferior and surplus wheat and various milling byproducts are used for livestock feed. We sell wheat to exporters and to local mills that produce flour for the food industry.
     We grow wheat in Argentina and Uruguay. In the 2007/2008 harvest year, our total wheat production was 61,951 tons, representing 18% of our total crop production and 15% of our total planted area. In the 2008/2009 harvest year, our total wheat production was 41,556 tons, representing 13% of our total crop production and 14% of our total planted area. In the 2009/2010 harvest year, we planted a total area of approximately 21,728 hectares of wheat, producing a total of 49,592 tons of wheat representing 13% of our total planted area that year, and 10% of our total crop production. In the 2010/2011 harvest year, we planted a total area of approximately 25,656 hectares of wheat.

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     Wheat comprised 6% of our total sales in 2007, 6% of our total sales in 2008, 3% of our total sales in 2009 and 2% of our total sales in 2010.
Sunflower
     There are two types of sunflower, the most important in terms of volume being the oilseed sunflower, which is primarily grown for the oil extracted from the seed. Sunflower oil is considered one of the top three oils for human consumption, due to its high oil content (39-49%) and its oil composition (90% of oleic and linoleic oil). The other type of sunflower is the confectionary sunflower, which is used for direct human consumption. Sunflower seeds are an exceptional source of vitamin E, omega-6 fatty acids, dietary fiber and minerals. We grow both types of sunflower.
     We grow sunflower in Argentina and Uruguay. In the 2007/2008 harvest year, our total sunflower production was 15,841 tons, representing 5% of our total crop production and 5% of our total planted area. In the 2008/2009 harvest year, our total sunflower production was 22,128 tons, representing 7% of our total crop production and 7% of our total planted area. In the 2009/2010 harvest year, we planted a total area of approximately 14,784 hectares of sunflower, producing a total of 17,193 tons of sunflower, representing 9% of our total planted area that year, and 3% of our total crop production. In the 2010/2011 harvest year, we planted a total area of approximately 9,943 hectares of sunflower. Sunflower comprised 1% of our total sales in 2007, 2% of our total sales in 2008, 2% of our total sales in 2009 and 1% of our total sales in 2010.
Cotton
     Cotton is the world’s most popular natural fiber. The cotton fiber is made primarily into yarns and threads for use in the textile and apparel sectors. Clothing accounts for approximately 60% of cotton consumption. Cotton is also used to make home furnishings, such as draperies (the third major end use), or professional garments (about 5% of cotton fiber demand). The cottonseed is used in animal feeding or crushed in order to separate its three products — oil, meal and hulls. Cottonseed oil is used primarily for cooking oil and salad dressing. In recent years, there has been a growing demand for cotton oil for biodiesel production.
     We plant upland cotton, the most common type of cotton planted and processed around the world. We produce and sell cotton lint and cotton seed.
     We grow cotton in the western part of Bahia, Brazil. In the 2007/2008 harvest year, our total cotton production was 15,748 tons, representing 4% of our total crop production and 3% of our total planted area. In the 2008/2009 harvest year, our total cotton production was 9,218 tons, representing 3% of our total crop production and 2% of our total planted area. In the 2009/2010 harvest year, we planted a total area of approximately 425 hectares of cotton, including the second harvest, producing a total of 1,068 tons of cotton, representing 1% of our total planted area that year, and 1% of our total crop production. In the 2010/2011 harvest year, we planted a total area of approximately 3,242 hectares of cotton. Cotton comprised 5% of our total sales in 2007, 2% of our total sales in 2008, 4% of our total sales in 2009 and 0.6% of our total sales in 2010.
Other Crops
     In addition to wheat, sunflower, corn, soybeans, and cotton, we produce barley, sorghum and rapeseed on approximately 3,800 hectares in certain farms located in Argentina and Uruguay. In addition, we also provide farming services.
     In the 2007/2008 harvest year, our total production from these crops was 13,772 tons, representing 4% of our total crop production and 4% of our total planted area. In the 2008/2009 harvest year, our total production from these crops was 31,799 tons, representing 10% of our total crop production and 8% of our total planted area. In the 2009/2010 harvest year, we planted a total area of approximately 11,501 hectares of other crops, producing a total of 34,576 tons, representing 7% of our total planted area that year, and 7% of our total crop production. In the 2010/2011 harvest year, we planted a total area of approximately 3,815

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hectares of other crops. Other crops comprised 3% of our total sales in 2007, 3% of our total sales in 2008, 2% of our total sales in 2009 and 1.0% of our total sales in 2010.
Forages
     In addition to the above mentioned crops, we are engaged in the production of forage in Argentina, including corn silage, wheat silage, soybean silage and alfalfa silage. We use forage as cow feed in our dairy operation. During the 2009/2010 harvest year, we planted 4,561 hectares and produced 52,482 tons of forage. During the 2010/2011 harvest year, we planted 3,653 hectares of forage.
Crop Production Process
     Our crop production process is directly linked to the geo-climatic conditions of our farms and our crop cycles, which define the periods for planting and harvesting our various products. Our crop diversification and the location of our farms in various regions of South America enable us to implement an efficient planting and harvesting system throughout the year, which includes second harvests in many cases. Our production process begins with the planting of each crop. After harvesting, crops may go through a processing phase where the grain or seeds are cleaned and dried to reach the required market standards.
     For additional discussion of our harvest years and the presentation of production and product area information in this annual report, see “Presentation of Financial and Other Information—Fiscal Year and Harvest Year.”
Rice Business
     Rice is the main food staple for about half of the world’s population. Although it is cultivated in over 100 countries and on almost every continent, 90% of the world’s rice is grown and consumed in Asia. Globally, rice is the most important crop in terms of its contribution to human diets and production value. There are three main types of rice: short grain, medium grain and long grain rice. Each one has a different taste and texture. We produce long grain rice and Carolina double rice, a variety of medium grain rice.
     We conduct our rice operation in the northeast of Argentina, which is one of the most efficient locations in the world for producing rice at a low cost. This is a result of optimum natural agronomic conditions, including plentiful sunlight, abundant availability of water for low cost irrigation and large quantities of land. The use of public water for artificial irrigation is governed by provincial regulations and is subject to the granting of governmental permits. We have current permits for our use of water in our production of rice in the provinces of Corrientes and Santa Fe. Maintenance of our permits is subject to our compliance with applicable laws and regulations, which is supervised by the corresponding governmental authority (e.g., the Ministry of Water, Public Services and Environment (Ministerio de Agua, Servicios Publicos y Media Ambiente), in the province of Santa Fe, and the Water Institute of the Province of Corrientes (Instituto Correntino del Agua)).
     The following table sets forth, for the harvest years indicated, the total number of planted rice hectares we owned and leased as well as the overall rough rice we produced:
                                 
    Harvest Year  
Rice Product Area & Production   2010/2011     2009/2010     2008/2009     2007/2008  
Owned planted area (hectares)
    22,973       10,831       13,417       11,981  
Leased planted area (hectares)
    4,568       7,311       3,840       2,839  
Total rice planted (hectares)
    27,542       18,142       17,258       14,820  
Rough rice production (thousands of tons)
  N/A       91.723       94.968       98.577  
     We grow rice on 5 farms we own and 5 farms we lease, all located in Argentina. In the 2007/2008 harvest year, our total rice production was 98,577 tons, representing 22% of our total farming production and 12% of our total planted area. In the 2008/2009 harvest year, our total rice production was 94,968 tons, representing 23% of our total farming production and 11% of our total planted area. In the 2009/2010

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harvest year, our total rice production was 94,968 tons, representing 23% of our total farming production and 11% of our total planted area. In the 2009/2010 harvest year, we planted a total area of approximately 18,142 hectares of rice, producing a total of 91,723 tons, representing 10% of our total planted area that year, and 15% of our total farming production. In the 2010/2011 harvest year, we planted a total area of approximately 27,542 hectares of rice, representing 14% of our total planted area.
     During mid 2010, we began the construction of our fourth rice mill. The new mill is located in the province of Santa Fe, Argentina. As of March 31, 2011, assembly of storage and drying facilities and equipment was completed and the mill began receiving, drying and storing rice produced at our San Joaquin farm. We expect the facility to be ready to start milling operations during the third quarter of 2011.
Production Process
     The rice production year lasts approximately five to six months, beginning in September of each year and ending in April of the following year. Rice planting continues until November, followed by treatment of the rice, which lasts approximately three months, until January. In February we begin harvesting, which lasts until April. After harvesting, the rice is ready for processing.
     We process rice in our 4 rice mills in Argentina, where we are able to process our entire rice crop and utilize our excess milling capacity to process rough rice we purchase from third party growers.
     At the mill, we clean the rice to remove all impurities. We then put it through a dryer to remove excess moisture from the grains. Proper drying results in increased storage life prevents deterioration in quality and leads to optimum milling. Once dried, the rice grain, now known as rough rice or paddy rice, is ready for storage. We store rice in elevators or in silo bags until milling. During the milling process, the rough rice goes through a de-husking machine that removes the husk from the kernel. The rice that is obtained after this process is known as brown rice and is ready for human consumption. Brown rice is then polished to remove the excess bran, thereby creating white rice.
     The main objective of the milling process is to remove the husk and the bran, preserving the quality of the whole grain. Although the process is highly automated and uses advanced technology, some rice grains are broken in the process. The percentage of broken rice depends on a number of factors such as the crop development cycle at the farm, the variety of the grain, the handling and the industrial process. Average processing of rough rice results in 58% white rice, 11% broken rice and 31% rice husk and bran which is sold for use as cattle feed or floor bedding in the poultry business.
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Processed Rice Production           (In thousands of tons)          
Rough rice processed — own
    75,752       94,968       98,577       98,980  
Rough rice processed — third party
    52,957       62,083       20,587       27,732  
Total rough rice processed
    128,709       157,051       119,164       126,712  
White rice
    66,035       77,440       66,841       70,300  
Brown rice
    6,699       11,559       2,557       4,940  
Broken rice
    14,792       19,859       12,407       11,739  
Total processed rice
    87,526       108,858       81,804       86,980  
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Processed Rice Sales           (In thousand of $)          
Total Sales
    61,585       69,350       56,925       26,422  
     Rice comprised 19% of our total sales in 2007, 23% of our total sales in 2008, 22% of our total sales in 2009 and 14% of our total sales 2010.

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   Rice Seed Production
     In our rice seed facility in Argentina, we are involved in the genetic development of new rice varieties adapted to local conditions to increase rice productivity and quality to improve both farm production as well as the manufacturing process. In connection with these efforts, we have entered into agreements with selected research and development institutions such as the National Institute of Agriculture Technology (Institute Nacional de Tecnología Agropecuaria, or “INTA”) in Argentina, the Latin American Fund for Irrigated Rice (Fondo Latinoamericano para Arroz de Riego, or “FLAR”) in Colombia, the Santa Catarina State Agricultural Research and Rural Extension Agency (Empresa de pesquisa Agropecuária e Extensão Rural de Santa Catarina, or “EPAGRI”) in Brazil and Badische Anilin- und Soda-Fabrik (“Basf”) in Germany. Our own technical team is continuously testing and developing new rice varieties. Our first rice seed variety was released to the market in 2008, and we are currently in the final stages of releasing three new varieties. These seeds are both used at our farms and sold to rice farmers in Argentina, Brazil, Uruguay and Paraguay. We are also developing, alongside Basf, a herbicide-tolerant rice variety to assist in the control of harmful weeds.
Coffee Business
     The coffee plant is a woody perennial evergreen. Brazil is the biggest coffee producing country in the world, followed by Vietnam and Colombia. Coffee is exported as a green bean and is then processed depending on the market. While there are several different coffee species, two main species of coffee are cultivated today. Arabica coffee accounts for approximately 60% of the world’s production, and Robusta coffee accounts for about 40% and differs from the Arabica coffees in terms of quality and taste. We produce Arabica coffee, distinguished by its high quality, that is considered to be an “estate coffee,” which, according to international markets standards, is coffee produced and processed on a specific farm and thus not mixed with coffee from other farms or farmers.
     Our Mimoso farm produces world renowned “specialty coffee,” which is sold to the best roasters in Europe, the U.S. and Japan. Coffee quality experts consistently select our coffee as a top quality estate coffee. It is certified according to the rigorous sustainability standards of the Rainforest Alliance, Utz and the Brazil Specialty Coffee Association — BSCA. We are equally concerned with the quality of our coffee and with bridging the gap between the consumer and the producer to assure the sustainable quality demanded in the specialty market. We strive to develop long-term relationships with our clients to guarantee consistent supply.
     We grow mainly high quality coffee varieties, using center pivot and drip irrigation, adopting a stress period to induce flowering, which guarantees a gradual and uniform maturation.
     The following table sets forth, for the harvest years indicated, the production and sales volumes for our coffee:
                                 
    Harvest Year  
Coffee Production & Sales   2010/2011     2009/2010     2008/2009     2007/2008  
Coffee plantation (hectares)
    1,632       1,632       1,632       1,632  
Coffee pruning area (hectares)
    227       406       241        
Coffee production (thousands of tons)
  NA     2,220       2,412       3,028  
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
            (In thousands of $)          
Coffee sales
    7,572       14,265       15,948       7,267  
     We grow coffee in western Bahia, Brazil, where agro-ecological conditions are well-suited for producing “specialty coffee” due to the availability of water for irrigation, the absence of frosts, and the possibility of having a fully mechanized harvest due to flat topography. These conditions allow us to obtain a stable bean quality and to reduce yield volatility. We grow coffee on 3 farms and have 1,632 hectares of planted coffee trees and have available land and water to expand our operations to 2,700 hectares. In the 2007/2008 harvest year, our total coffee

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production was 3,028 tons. In the 2008/2009 harvest year, our total coffee production was 2,412 tons. In the 2009/2010 harvest year, we produced 2,412 tons of coffee. Coffee comprised 5% of our total sales in 2007, 7% of our total sales in 2008, 5% of our total sales in 2009 and 2% of our total sales 2010.
Coffee Production Process
     Coffee seeds are initially planted in nursery beds where they are raised and nurtured in a protected environment until they reach a height of approximately 50 to 60 cm, which takes between 8 to 12 months. Coffee plants are then transplanted to the coffee fields where they grow for about two years, after which the coffee tree is harvested for the first time and begins its productive cycle. Productive maturity is achieved during the fifth year, and coffee trees remain productive until the tree reaches 15 to 20 years of age, at which point the tree must be replaced. Coffee trees require annual maintenance consisting of fertilization, pest and disease control and irrigation if necessary. Additionally, coffee trees must undergo a pruning program every 4 to 5 years to maintain the shape of the tree adequate for mechanized harvesting, which usually results in higher yields.
     The coffee harvest year lasts from August of each year to August of the following year. The plantation is treated for approximately nine months, from August of each year until May of the following year. In late May or early June, the harvest begins, which lasts until mid-August. After harvesting, we begin the processing process, which lasts until the end of October.
     We process coffee at our facilities. The three processing stages coffee undergoes prior to commercialization are pulping, drying and sorting into various types according to world market demand.
Dairy Business
     We conduct our dairy operation in two of our farms located in the Argentine humid pampas region. This region is one of the best places in the world for producing raw milk at a low cost, due to the availability of grains, forage and grass produced efficiently and at low cost and the favorable weather for cow comfort.
     The following table sets forth, for the periods indicated below, the total number of our dairy cows, average daily liter production per cow and our total milk production:
                                 
    Year Ended December 31,  
Dairy Herd & Production   2010     2009     2008     2007  
Total dairy herd (head)
    9,178       9,743       9,587       8,838  
Average milking cows
    4,225       4,594       4,377       3,837  
Average daily production (liters per cow)
    27.0       28.3       26.9       24.7  
Total production (thousands of liters)
    41,597       47,479       43,110       34,592  
                                 
    Year Ended December 31,
    2010   2009   2008   2007
            (In thousands of $)        
Sales (thousands of $)
    14,297       11,894       14,821       17,841  
     As of December 31, 2010, we owned a dairy herd of 9,178 head, including 4,225 cows and heifers in milk. Our dairy operation consists of three dairy facilities — two traditional grazing dairies and one advanced “free-stall” dairy. In 2010, our cows produced an average of 27.0 liters of milk per cow per day compared to approximately 28.3 liters per cow per day in 2009. Our facilities allow us to milk 5,000 cows per day.
     Dairy comprised 13% of our total sales in 2007, 6% of our total sales in 2008, 4% of our total sales in 2009 and 3% of our total sales 2010.

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Production Process
     We have genetically improved our Holando Argentine Holstein dairy herd through the use of imported semen from North American Holstein bulls. We wean calves during the 24 hours subsequent to birth and during the next 60 days raise them on pasteurized milk and high protein meal. Male calves are fed concentrates and hay for an additional 30 days in the farm before they are sent to our feedlot to be fattened for sale. Young heifers remain in open corrals during the next 13 months where they are fed with concentrates and forage until they are ready for breeding. Calving occurs nine months later. Heifers are subsequently milked for an average of 320 days. Dairy cows are once again inseminated during the 60- to 90-day period following calving. This process is repeated once a year for a period of six or seven years. The pregnancy rate for our herd is between 85% and 90% per year.
     Each cow in our dairy herd is mechanically milked two or three times a day depending on the production system. The milk obtained is cooled to less than four degrees centigrade in order to preserve its quality and is then stored in a tank. Milk is delivered to our joint venture, “La Lácteo,” on a daily basis by tank trucks. We feed our dairy cows mainly with corn and alfalfa silages, some grass and corn grain, supplemented as needed with soybean by-products, hay, vitamins and minerals.
     We have invested in technology to improve the genetics of our cows, animal health and feeding in order to enhance our milk production. These investments include top quality semen from genetically improved North American Holstein bulls, agricultural machinery and devices, use of dietary supplements and modern equipment to control individual milk production and cooling. Our feeding program is focused on high conversion of feed into milk, while maintaining cows in good health and comfort. We have also invested in technology and know-how so as to increase our forage production and utilization.
     In 2007, we began the construction of an advanced “free-stall” dairy in Argentina, which we believe was the first of its kind in South America, and started operating in March 2008. This new technology allows large- scale milk production at increased efficiency levels. Our free-stall dairy model consists of 3,000 cows confined inside a large barn where they are free to move within the indoor corrals. We feed our cows specific protein rich diets composed of corn grain and silage and milk them three times a day, using a milking mechanism consisting of an 80-cow rotary platform, which milks an average of 400 cows per hour.
     Implementation of the free-stall system allows us to position ourselves as a key player in the dairy industry and will boost our agricultural and industrial integration presence in the South American agricultural sector. By eliminating cow grazing, we reduce the amount of land utilized for milk production and free up more land for our agricultural and land development activities. Cow productivity (measured in liters of milk produced per day) using the free-stall system increases by up to 40% compared to traditional grazing systems. These productivity gains are because the free-stall system significantly improves the conversion rate of animal feed to milk, resulting in an approximate 40% increase in the conversion ratio, or the production of 1.4 liters of milk for each 1 kg of animal feed as compared to the average of 1 liter of milk for each 1 kg of feed associated with the usual grazing model.
     This increased productivity and conversion rate are mainly due to improved cow comfort and an enhanced diet quality. We assess cow comfort through the engagement of expert consultants, who recommended designing beds covered with sand. The sand plays a significant role in helping cows to rest comfortably. Additionally, we installed a cooling system to increase cow comfort as well. This system relies on water sprinklers and ventilation fans located all over the facility to create a controlled, cool atmosphere, which improves cow comfort since the Holstein herd is originally adapted to cold regions. Additionally, we manage diet quality by adapting our feeding regimen based on the various feeding stages in the lifetime of each cow. The actual feeding is fully mechanized, and we carefully control the harvesting and storage of feed. The control of all productivity variables, such as reproduction, health and operations, supports efficiency gains through standardized processes. Finally, the physical concentration of the animals facilitates efficient overall management of the dairy business as a whole. In terms of the environment, the free-stall model allows for a better effluent treatment, which includes a sand-manure separator stage, a decantation pool and an anaerobic lagoon. All these processes help to decrease the organic matter content of the effluent and deliver a cleaner output. The final treated effluent is used to fert-irrigate crops adjacent to the dairy operation. Accordingly, we transform dairy waste into a high value-added by-product, which reduces fertilizer usage.

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     The free-stall dairy is expected to allow us to become an efficient large-scale milk producer and optimize the use of our resources (land, cattle and capital) through the standardization of processes. Process standardization provides high operational control and allows us to scale-up our production efficiently and quickly.
La Lácteo Joint Venture
     In 2007, Adecoagro entered into an agreement with Agropur Cooperative, a Canadian-based dairy cooperative, to form a joint venture named Grupo La Lácteo. In this transaction, we contributed our wholly owned subsidiary La Lácteo S.A., an entity engaged in the processing and sale of milk and milk-related products (previously acquired in August 2007), while Agropur Cooperative contributed cash. Each of us and Agropur Cooperative owns 50% of the joint venture, and the joint venture agreement in place creates joint control over Grupo La Lácteo. The formation of this joint venture was completed in December 2007. As of December 31, 2010, La Lácteo manages approximately 250,000 liters of milk per day, producing a broad variety of dairy products including fluid milk, yogurt, butter, cheese, and others.
     On November 7, 2007, Adeco Agropecuaria S.A. entered into a Milk Supply Offer Agreement with La Lácteo S.A. (as amended on February 1, 2010), pursuant to which we committed to sell and La Lácteo S.A. committed to purchase, approximately 80,000 liters of Adeco Agropecuaria S.A.’s milk production per day. See “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Milk Supply Agreement.” All of our production for the domestic market is industrialized at La Lácteo S.A., while our export volumes of powdered milk are industrialized in plants operated by third parties.
Cattle Business
     Until December 2009, we owned approximately 58,348 head of cattle — other than our cows used for the production of raw milk — which we fattened for sale to meat processors and in local livestock auction markets. Our cattle business primarily consisted of beef breeding and fattening activities during the years ended December 31, 2009, 2008 and 2007. In December 2009, we strategically decided to sell almost all of our cattle herd — other than our dairy cows — to Quickfood S.A. (“Quickfood”), an Argentine company listed on the Buenos Aires Stock Exchange and a subsidiary of the Brazilian company Marfrig Alimentos S.A. (“Marfrig”), for a purchase price of $14.2 million. Additionally, we entered into a lease agreement under which Quickfood leases grazing land from us to raise and fatten the purchased cattle. As required by antitrust law, we reported this transaction to Argentina’s National Commission for the Defence of Competition (Comision Nacional de Defensa de de la Competencia, or “CNDC”). The CNDC’s administrative approval of the transaction is pending. We do not believe that the CNDC will object to the form and substance of the transaction. See “—Material Agreements—Argentina—Agreement with Quickfood S.A.”
     After this sale, our cattle business primarily consists of leasing (i) approximately 74,000 hectares of grazing land located in the Argentine provinces of Corrientes, Formosa, Santa Fe and Santiago del Estero, for an annual price equal to the equivalent in Argentine Pesos of 30 kilograms of meat per hectare, calculated in accordance with the Steer Index of the Liniers Market (INML), for a period of 10 years, renewable by the parties and (ii) two feed lots located in the Argentine provinces of Corrientes and Santa Fe, for an annual price of $25,000 each. Additionally, as of March 31, 2011, owned approximately 1,254 head of cattle and two cattle feedlots with a capacity to hold 6,500 heads, which we use for fattening activities. We may purchase additional cattle in the future.

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     The following table indicates, for the periods set forth below, the number of cattle (other than dairy cows) for each activity we pursued:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
            (Head of cattle)          
Breeding(l)
          79,784       91,263        
Fattening
    1,254       2,804       15,881       13,278  
Total
    1,254       2,804       95,665       104,541  
 
(1)   For classification purposes, upon birth, all calves are considered to be in the breeding process.
     The cattle business comprised 5% of our total sales in 2007, 4% of our total sales in 2008, 9% of our total sales in 2009 and 1% of our total sales 2010.
Storage and Conditioning
     Our storage and conditioning facilities for our farming line of business allow us to condition, store and deliver our products with no third-party involvement. All our crop storage facilities are located close to our farms, allowing us to (i) reduce storage and conditioning costs; (ii) reduce freight costs since we only commence moving the product once the final destination is determined, whether locally or to a port, (iii) capitalize on fluctuations in the prices of commodities; and (iv) improve commercial performance by mixing grains to avoid discounts due to sub-standard quality.
     We own five conditioning and storage facilities for grains and oilseeds, with a total built storage capacity of 28,800 tons. Our largest storage facility, with a capacity of 18,700 tons, is located in the province of Santa Fe, Argentina, in the town of Christophersen. It has a railway loading terminal, providing logistical flexibility and savings. We also own in Argentina four rice mills, which account for over 255,000 tons of total storage capacity, and two additional storage and conditioning facilities for rice handling, with a total storage capacity of 5,700 tons.
     Set forth below is our storage capacity as of December 31, 2010:
         
Storage Capacity   Nominal  
Crops (tons)
    28,800  
Rice (tons)
    135,919  
     In addition, we use silo bags to increase our storage capacity at low cost. Silo bags are a revolutionary and efficient low-cost method for grain storage. As crops are harvested, they are placed inside large polyethylene bags that can be left in the fields for approximately 12 months without damaging the grain. Each silo bag can hold up to 180 to 200 tons of product, depending on the type of grain. During the 2009/2010 harvest year, we stored approximately 30% of our grain production through silo bags.
     Silo bags offer important operational and logistic advantages, such as (i) low cost storage; (ii) flexible and scalable capacity that is adapted based on production and commercial strategy; (iii) harvest efficiencies since the bags are filled on the field allowing for a non-stop harvest operation regardless of any logistical setbacks; (iv) logistic efficiencies leading to lower freight since grains are transported during the off-season when truck fares are lower; (v) increased ability to monitor quality and identify different grain qualities, since grains are stored in relatively small amounts (200 tons) and easily monitored, maximizing our commercial performance; and (vi) better use of our drying capacity throughout the year. Silo bags are commercially accepted. Grains stored in silo bags can be sold in the market, and if such grains are to be delivered post harvest, we charge storage costs. Additionally, we can store grains to be used as seed during the following season (soybeans, rice and wheat), achieving quality seed management. We have expanded the use of silo bags from Argentina to our operations in Brazil and Uruguay. Currently, we are extending the usage of silo bags to store fertilizers and are developing their use with respect to coffee beans.
     Grain conditioning facilities at our farms allow our trade desk to optimize commercialization costs and to achieve commercial quality standards and avoid price discounts. These facilities are operated to dry, clean, mix and separate different qualities of each grain in order

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to achieve commercial standards. By mixing different batches of a same grain type, differentiated by quality parameters such as moisture, percentage broken, and percentage damaged, among others, we can achieve commercial standards without having to discount a lower-quality stand-alone batch. Efficient management of these facilities results in a lower cost for grain conditioning and a better achievable price. In order to maximize this situation, our conditioning facilities trend to process as much grain as possible, which is roughly more than four times their storage capacity.
Set forth below is our drying capacity as of December 31, 2010:
         
Drying Capacity   Nominal  
Crops (tons/day)
    2,400  
Rice (tons/day)
    6,600  
     Some grains such as soybeans, wheat and rice, can be used for seed during the next planting season. We produce almost 97% of the seed used for planting these crops in our fields. The seed is stored in silo bags and/or grain facilities, where it can be processed, classified, and prepared for planting during next crop season. A deep survey and monitoring process is carried out in order to evaluate, control and deliver high quality seed to our farms.
     The rest of our seed requirements are purchased from seed suppliers in order to incorporate new enhanced varieties into our planting plan.
     Additionally, as of December 31, 2010, we owned two coffee processing facilities in Brazil, where we clean, dry and classify different types of commercial coffee beans. Apart from processing, those facilities have a storage capacity of 30,400 bags, or 1,800 tons of processed coffee.
Marketing, Sales and Distribution
Crops
     In Argentina, grain prices are based on the market prices quoted on Argentine grain exchanges, such as the Bolsa de Cereales de Buenos Aires and the Bolsa de Cereales de Rosario, which use as a reference the prevailing prices in international grain exchanges (including CBOT and ICE-NY). In Uruguay, local prices are based on an export parity (during harvest) or import parity in the case of post-harvest sales, which, in each case, take into account the prices and costs associated with each market. In Brazil, the grain market includes the Bolsa de Mercadorias e Futuros (Brazilian Grain Exchange), which, as in Argentina, uses as a price reference the international grain exchanges (including CBOT and ICE-NY). Prices are quoted in relation to the month of delivery and the port in which the product is to be delivered. Different conditions in price, such as terms of storage and shipment, are negotiated between us and the end buyer. We negotiate sales with the top traders and industrial companies in our markets. We also engage in hedging positions by buying and selling futures and options in commodities exchanges, including the Chicago Board of Trade, the New York Board of Trade, BM&FBOVESPA and the Mercado a Término de Buenos Aires (MATBA).
     Soybeans: Our soybean crop is sold to local companies and is ultimately exported or diverted to the crushing industry. Approximately 74% of the soybean crop is hedged pre-harvest, by forward sales, sales in the futures markets, and production agreements. Post-harvest sales are a function of the export market versus local premiums paid by crushers (oil, meal and biodiesel). Our largest customers are Noble Americas Corp. (“Noble”), Bunge International Commerce Ltd. (“Bunge”), Cargill S.A.C.I. and Molinos Rio de la Plata S.A., comprising approximately 66% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate on soybeans is 35%.
     Corn: Approximately 60% to 70% of our Argentine and Uruguayan production, respectively, is exported, with the remainder destined for domestic use in feedlots, the poultry industry and in our dairy operations. All of our Brazilian production is sold domestically for regional consumption. We typically sell about 50% of our corn pre-harvest due to logistical issues. We sell approximately 10% of our corn production

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for special products such as popcorn and corn seed. Our largest customers are Leiva Chavés María Luz, Bunge, Noble and POP Argentina S.A., comprising approximately 60% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate on corn is 20%.
     Wheat: We sell the majority of our wheat into the export market (63% of our Argentine production and 47% of our Uruguayan production), followed by local mills (29% of our Argentine production and 43% of our Uruguayan production) and feed wheat buyers. Brazil is the main importer of our wheat. Due to logistics, we sell to the export market during harvest time and store the higher quality wheat to sell later in the year to local millers. We typically sell half of our wheat production pre-harvest. Our largest customers are Bunge, Granar S.A., ADM Argentina S.A., and Alfredo C. Teopfer International, comprising approximately 60% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate on wheat is 23%.
     Sunflower: Our sunflower production from Argentina and Uruguay is sold to local crushing companies. Sales are made pursuant to forward sales, spot sales and production agreements (as sunflower for confectionary and seed). Our largest customers are Molinos Río de la Plata S.A., Nidera S.A. and Granar S.A., comprising approximately 84% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate is 32%.
     Cotton: We typically make pre-harvest sales of cotton fiber produced in Brazil into the export market. Sales for the textile industry are based on domestic demand and premiums. Our largest customers are Vicunha Textil SA and Multigrain Argentina S.A., comprising approximately 77% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate is 32%. Cottonseed is sold in the domestic market to meet feed demand and to crushers (producing oil for domestic use or biodiesel).
     Rice: Rough rice is available for sale commencing after the harvest of each year. White rice availability is based on our milling capacity. 68% of our total rice production is sold into the export market, with the remainder sold in Argentina in the retail market. Brazil is the largest importer of our rice with 39% of our exported volume, followed by Iraq with 25%, and the remainder sold to Europe, South America and West Africa. In November 2007, we began to promote our rice in the Brazilian retail market, promoted by our Monte Alegre brand of sugar. Argentina’s retail market is comprised of four types of rice and three brands that have a 14.3% market share. Rice prices are based on regional supply demand and exchange rate in Brazil.
     Our largest customers for rice are Josapar Joaquim Oliveira S.A. Participacoes, Carreteiro Alimentos Ltda., Sao Joao Alimentos Ltda. and VA Intertrading Aktiengesellschaft, comprising approximately 46% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate is 10% for rough rice and 5% for white rice.
     Coffee: Coffee is available for sale commencing after it is harvested and processed in July — August of each year. We export our own high quality coffee to the European, U.S. and Japanese markets, where our “specialty coffee” grade product is received by the gourmet segment. Our coffee is certified by the most respected organizations in the sector such as UTZ and Rainforest Alliance. Our largest importer is the United States with 26% of our sales, followed by the European Union with 62% of our coffee production is sold in the domestic Brazilian market. Coffee prices are based on international grain exchanges (ICE-NY) and have a local reference in BM&FBOVESPA. We negotiate quality premiums or discounts and delivery conditions to the end buyer. Our largest customers for coffee are Paragon Coffee Trading Company L.P. and Eisa — Empresa Interagricola S.A., comprising approximately 42% of our net sales in the year ended December 31, 2010.
   Dairy
     During most of 2007, we sold our entire raw milk production to top Argentine dairy companies such as Groupe Danone, Nestlé Dairy Partners Americas and Mastellone Hermanos S.A. These companies manufacture a range of consumer products sold in Argentina and

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abroad. On November 7, 2007, we entered into a Milk Supply Agreement with La Lácteo S.A., pursuant to which we committed to sell to La Lácteo S.A. approximately 80,000 liters of our milk production per day subject to certain conditions. See “Material Agreements—Argentina—Milk Supply Agreement” and “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions.” We negotiate the price of raw milk on a monthly basis in accordance with domestic supply and demand with these companies, including La Lácteo S.A. The price of the milk we sell is mainly based on the percentage of fat and protein that it contains and the temperature at which it is cooled. The price we obtain for our milk also rises or falls based on the content of bacteria and somatic cells.
Sugar, Ethanol and Energy
Sugarcane
     Sugarcane is the most efficient agricultural raw material used in the production of sugar and ethanol. Ethanol produced from sugarcane is highly regarded as an environmentally friendly biofuel with the following characteristics.
    Renewable: Sugarcane ethanol, unlike coal or oil, which can be depleted, is produced from sugarcane plants that grow back year after year, provided that they are replanted every six to eight years.
 
    Sustainable: Sugarcane only needs to be replanted every five to seven years, as a semi-perennial crop. It can be harvested without uprooting the plant, and therefore its cultivation has less of an impact on the soil and the surrounding environment. The mechanization of the harvesting and planting process further improves sustainable agricultural management.
 
    Energy Efficient: Sugarcane is highly efficient in converting sunlight, water and carbon dioxide into stored energy. The energy output of sugarcane is equal to nine times the energy input used in the production process, whereas the energy output of corn ethanol is only about 1.9 to 2.3 times the energy input used in its production process. Sugarcane produces seven times more energy compared to corn in ethanol production.
 
    Low Carbon Emissions: Compared to gasoline, sugarcane ethanol reduces greenhouse gases by more than 61%, which is the greatest reduction of any other liquid biofuel produced today in large quantities. Ethanol made from sugarcane is deemed an advanced biofuel by the United States EPA.
 
    Synergies: The main raw material used in the production of electricity in sugar mills is bagasse, which is a by-product of the sugarcane milling process, allowing for a renewable source of co- generated electricity.
     Sugarcane is a tropical grass that grows best in locations with stable, warm temperatures and high humidity, although cold and dry winters are an important factor for the sucrose concentration of sugarcane. The climate and topography of the center-south region of Brazil is ideal for the cultivation of sugarcane and accounts for approximately 85% of Brazil’s sugarcane production.
     We grow sugarcane in the center-south region of Brazil on 9,907 hectares of our own land and 43,892 hectares of land leased through agriculture partnerships. Under these agreements, our partners lease land to us on which we cultivate sugarcane for six-year terms. Lease payments are based on the market value of the sugarcane set forth by the regulations of the State of Sao Paulo Sugarcane, Sugar and Alcohol Growers Counsel (Conselho dos Produtores de Cana-de-Açúcar, Açúcar e Álcool do Estado de Sao Paulo, or “Consecana”). We planted and harvested approximately 95% of the total sugarcane we milled during 2010, with the remaining 5% purchased directly from third parties at prices set forth by the Consecana system, based on the sucrose content of the cane and the prices of sugar and ethanol. The following table sets forth a breakdown during the time periods indicated of the amount of sugarcane we milled that was grown on our owned and leased land or purchased from third parties:

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    Year Ended December 31,  
    2010     2009     2008     2007  
Grown on our owned and leased land (tons)
    3,869,283       2,075,531       1,376,763       889,355  
Purchased from third parties (tons)
    196,833       139,498       29,695       1,792  
 
                       
Total (tons)
    4,066,115       2,215,029       1,406,458       891,147  
Sugarcane Harvesting Cycle
     The annual sugarcane harvesting period in the center-south region of Brazil begins in April and ends in December of each year. We plant several sugarcane varieties, depending on the quality of the soil, the local microclimate and the estimated date of harvest of such area. Once planted, sugarcane can be harvested, once a year, up to six to eight consecutive years. With each subsequent harvest, agricultural yields decrease. The plantations must be carefully managed and treated during the year in order to continue to attain sugar yields similar to a newly-planted crop.
     We believe we own one of the most mechanized harvesting operations in Brazil. Our sugarcane harvesting process is currently 80% mechanized (100% at Angélica mill and 27% at UMA mill) and the remaining 20% is harvested manually. Mechanized harvesting does not require burning prior to harvesting, significantly reducing environmental impact when compared to manual harvesting. In addition, the leaves that remain on the fields after the sugarcane has been harvested mechanically create a protective cover for the soil, reducing evaporation and protecting it from sunlight and erosion. This protective cover of leaves decomposes into organic material over time, which increases the fertility of the soil. Mechanized harvesting is more time efficient and has lower costs when compared to manual harvesting. Sugarcane is ready for harvesting when the crop’s sucrose content is at its highest level. Sucrose content and sugarcane yield (tons of cane per hectare) are important measures of productivity for our harvesting operations. Geographical factors, such as soil quality, topography and climate, as well as agricultural techniques that we implement, affect our productivity. Since most sugar mills produce both sugar and ethanol in variable mixes, the industry has adopted a conversion index for measuring sugar and ethanol production capacity, the Total Recoverable Sugar (“TRS”) index, which measures the amount of kilograms of sugar per ton of sugarcane.
     During the 2010 harvest, UMA harvested sugarcane with a TRS of 140, compared to an average of 138 in the center-south region of Brazil generally. Angélica’s TRS for the same period reached 134. In addition, during the 2010 harvest, we harvested an average of 96.1 tons of sugarcane per hectare of our own and leased land.
     Once the sugarcane is harvested, it is transported to our mills for inspection and weighing. We utilize our own trucks and trailers for transportation purposes. The average transportation distance from the sugarcane fields to the mills is approximately 20 kilometers at UMA and 40 kilometers at Angélica. The construction of our new mill at Ivinhema is expected to halve the average transportation distance for Angélica, significantly reducing our transportation costs, as 42% of the cane currently processed at Angélica has been planted closer to the site where the Ivinhema mill is being built.
Our Mills
     We currently own and operate two sugar mills in Brazil, Angélica and UMA, and are in the process of commencing the construction of our third sugar mill, Ivinhema, to complete our sugarcane crushing cluster in Mato Grosso do Sul. Our mills produce sugar, ethanol and energy, and accordingly, we have some flexibility to adjust our production between sugar and ethanol, to take advantage of more favorable market demand and prices at given points in time. As of December 31, 2010, our sugar mills had a total installed crushing capacity of 5.2 million tons of sugarcane. As of the date of this annual report, we have concluded the 2010 harvest at both mills, crushing an aggregate volume of 4.06 million tons of sugarcane.

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     The Usina Monte Alegre mill (“UMA”) is located in the state of Minas Gerais, Brazil, and has a sugarcane crushing capacity of 1.2 million tons per year, full cogeneration capacity and an associated sugar brand with strong presence in the regional retail market (Açúcar Monte Alegre). We plant and harvest 99% of the sugarcane milled at UMA, with the remaining 1% acquired from third parties. On December 31, 2010, UMA concluded its harvest operations for the 2010 season, crushing 1.13 million tons of sugarcane.
     Angélica is a new, advanced mill, which we built in the state of Mato Grosso do Sul, Brazil, with a total sugarcane crushing capacity of 4.0 million tons per year. Angélica has been equipped with two modern high pressure boilers and three turbo-generators with the capacity to use all the sugarcane bagasse by-product to generate approximately 96 MW of electricity that is used to power the mill with an excess of 64MW available for sale to the power grid. During the first half of 2010, we concluded the construction of the sugar factory commencing the production of sugar in July 2010. Angélica now has the flexibility to vary the product slate between 60% to 40% for either product. During the 2009/2010 harvest, we grew and harvested over 93% of the sugarcane milled at Angélica, allowing us to have a stable supply and superior quality control of our raw material. On December 22, 2010, Angélica concluded its harvest operations for the 2010/2011 season, crushing a total of 2.92 million tons of sugarcane. Although construction of the mill and industrial equipment has been concluded, Angélica will not mill at full capacity until 2012, when the size of our sugarcane plantations are expected to support the capacity of the mill.
     As of December 31, 2010, accumulated capital expenditures in Angélica, including cost expensed in cane planting and excluding investments in land and working capital, reached R$922 million, or approximately $124.6 per ton of crushing capacity. The table below shows our investment breakdown:
                 
Capital Expenditures   R$ millions     US$ per ton(l)  
Industrial equipment
    531.1       71.7  
Agricultural equipment
    134.0       18.1  
Sugarcane planting cost
    257.3       34.8  
 
           
Total
    922.5       124.6  
 
(1)   Considers a weighted average R$/US$ exchange rate of 1.851.
     We plan to fund a part of the construction costs of our third mill, Ivinhema, using $230 million from the proceeds raised in our IPO. The Ivinhema mill is expected to have a crushing capacity of 6.3 million tons of sugarcane per year when it reaches full capacity in 2017, increasing our total sugarcane crushing capacity to 11.5 million tons per year. We expect to source a majority of sugarcane for the Invinhema mill from our own supply and expand our cluster’s plantation to over 110,000 hectares. The Ivinhema mill will be built on our Carmen farm, which is approximately 45 kilometers from our existing Angélica mill. With the construction of the Ivinhema mill, we expect to capitalize on the synergies and economies of scale that will result from large-scale sugarcane production and industrial operation, including centralized management of both mills, harvesting efficiencies due to the ability to conduct non-stop harvesting and a reduction in sugarcane transportation costs.
     We have commenced the acquisition of equipment for the Ivinhema mill. As of March 31, 2011, we have incurred $8.4 million in manufacturing costs for a high pressure steam boiler and project design expenses. Furthermore, as of the date of this report, we have contracted the manufacturing of certain key equipment for a total of $33.9 million, including sugarcane mills and shredders, reducers, a turbo generator and electric power station, among other equipment. We estimate that we will need to invest an additional $725 million to complete the construction of the Ivinhema mill. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industries—Adverse conditions may create delays in or the suspension of the construction of our Ivinhema mill and/or significantly increase the amount of our expected investments.” In addition, we have acquired three farms constituting 8,363 hectares of land for a total purchase price of $30.2 million and leased or have agriculture partnerships for an additional 15,031 hectares in the region, which have been planted with sugarcane.

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     The construction and operation of the Ivinhema mill is subject to environmental licensing. Generally, the environmental agencies of each state are responsible for issuing environmental permits. The criteria for environmental licensing is defined and regulated by the National Council of the Environment (CONAMA), under Resolution No. 237 of December 19, 1997. On June 27, 2011, we obtained the installation license (licença de instalaçâo) from Instituto de Meio Ambiente de Mato Grosso do Sul (“IMASUL”) for the commencement of the construction and assembly of the first and second phase of the Ivinhema mill, for a nominal crushing capacity of up to 3.6 million tons of sugarcane.
     In addition to the installation license, the Ivinhema mill must obtain operational licenses and other permits including licenses for water capture and use of controlled products, among others. Failure to obtain the necessary environmental licenses may prevent us from operating the Ivinhema mill or may subject us to sanctions.
Our Main Products
     The following table sets forth a breakdown of our production volumes by product for the years indicated:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
Sugar
    235,690       52,968       67,772       72,372  
Ethanol
    174,303       132,492       70,067       29,375  
Energy
    168,644       128,291              
 
Note: Sugar volumes are measured in thousands of tons (raw value), ethanol volumes are measured in thousand cubic meters and electricity is measured in MWh.
     The following table sets forth our sales for each of the sugarcane by-products we produce for the years indicated:
                                 
    Year Ended December 31,  
    2010     2009     2008     2007  
            (In thousands of $)          
Sugar
    98,385       26,143       20,495       17,133  
Ethanol
    114,793       62,811       29,385       7,289  
Energy
    15,040       8,216              
Other(1)
    308       417       1,291        
Total
    228,526       97,587       51,171       24,422  
 
(1)   Includes sales of sugarcane and other miscellaneous items to third parties.
Sugar
     Our current maximum sugar production capacity is 2,400 tons per day which, in a normal year of 4,400 hours of milling, results in an annual sugar maximum production capacity of over 455,000 tons of sugar. Angélica’s sugar factory started operations during 2010 and has a production capacity of 1,800 tons per day. UMA’s capacity was increased last year to 600 tons per day when cogeneration was installed.

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In 2009, we produced 52,968 tons of sugar at the UMA mill compared to 87,388 tons of sugar in 2010.
     We produce two types of sugar: very high polarization (“VHP”) standard draw sugar and white crystal sugar. VHP sugar, a raw sugar with a 99.3% or higher sucrose content, is similar to the type of sugar traded in major commodities exchanges, including the standard NY11 contract. The main difference between VHP sugar and NY11 raw sugar is the sugar content of VHP sugar, and it therefore commands a price premium over NY11 raw sugar. Crystal sugar is a non-refined white sugar (color 150 ICUMSA) produced directly from sugarcane juice.
     Sugar sales comprised 12% of our total sales in 2007, 8% of our total sales in 2008, 8% of our total sales in 2009 and 23% of our total sales in 2010.
Ethanol
     Our current maximum ethanol production capacity is of 1,400 cubic meters per day which, in a normal year of 4,400 hours of milling, results in an annual ethanol maximum production capacity of over 263,000 cubic meters of ethanol. In 2010, we produced 174,303 cubic meters of ethanol.
     We produce and sell two different types of ethanol: hydrous ethanol and anhydrous ethanol (as further described in “—Production Process—Ethanol”). Ethanol sales comprised 5% of our total sales in 2007, 12% of our total sales in 2008, 20% of our total sales in 2009 and 27% of our total sales in 2010.
Cogeneration
     We generate electricity from sugarcane bagasse (the fiber portion of sugarcane that remains after the extraction of sugarcane juice) in our two mills located in Brazil. Our total installed cogeneration capacity is approximately 112 MW, and 75 MW are available for resale to third parties after supplying our mills’ energy requirements. Having this ability to generate electricity from the by-product of the sugarcane crushing process on a large enough scale to fully power a mill with excess electricity being available is referred to as having full cogeneration capacity. Our two mills are duly licensed by ANEEL to generate and sell electricity. During the year ended December 31, 2010 we sold 178,914 MWh to the local electricity market, comprising 3.5% of our total sales in 2010. During the year ended December 31, 2009, we sold 128,291 MWh to the local electricity market, comprising 3% of our total sales in 2009. We did not sell electricity in 2008.
Production Process
     Sugar. There are essentially five steps in the sugar manufacturing process. First, we crush the sugarcane to extract the sugarcane juice. We then treat the juice to remove impurities. The residue is used to make an organic compost used as fertilizer in our sugarcane fields. The juice is then boiled until the sugar crystallizes, and sugar is then separated from the molasses (glucose which does not crystallize) by centrifugation. The resulting sugar is dried and sent to storage and/or packaging. We use the molasses in our production of ethanol.
     Ethanol. Ethanol is produced through the fermentation of sugarcane juice or diluted molasses. Initially, we process the sugarcane used in ethanol production the same way that we process it for sugar production. The molasses resulting from this process is mixed with clear juice and then with yeast in fermentation vats, and the resulting wine has an ethanol content of approximately 8% to 10%. After the fermentation is complete, the yeast is separated for recycling in the ethanol production process. We distill the wine to obtain hydrous ethanol. In order to produce anhydrous ethanol, hydrous ethanol undergoes a dehydration process in a molecular sieve. The liquid remaining after these processes is called vinasse, which we further process to make liquid organic fertilizer that we use in our sugarcane plantations.
     Cogeneration. Sugarcane is composed of water, fibers, sucrose and other sugars and minerals. When the sugarcane goes through the milling process, we separate the water, sugar and minerals from the fibers or sugarcane bagasse. Bagasse is an important sub-product of sugarcane, and

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it is used as fuel for the boilers in our mills. Sugarcane bagasse is burned in our state-of-the-art boilers to produce high pressure steam (67 atm) which is used in our high-efficiency turbo-generators to generate electricity to power our mills. The excess electricity, about 67% of production, is sold to the national power grid.
     The following flow chart demonstrates the sugar, ethanol and cogeneration production process:
(GRAPHICS)
     Historically, the energy produced by Brazilian mills has not been price competitive when compared to the low-cost Brazilian hydro-electricity, which accounts for almost 90% of the country’s electricity matrix. Consequently, the majority of the groups in the sugar and ethanol sector have not invested in expanding their energy generation for sale, and the majority of the mills were constructed with less efficient, low-pressure boilers. Since 2000, the Brazilian economy has experienced significant growth, which in turn has resulted in increased demand for energy.
     However, hydro- and thermo-electricity have not been able to keep pace for the following reasons: (1) new hydro-electric plants are located in regions (such as the Amazon) distant from consumption centers; (2) significant lead-time is required to construct new hydro- and thermo-electric plants; (3) significant investments are required for transmission lines, pipelines (for natural gas used in thermo-electric plants) and barges; (4) significant environmental costs are associated with both types of electricity generation; and (5) prices for fuel (natural gas) used in the generation of thermo-electricity have increased resulting in greater dependence on Bolivia (Brazil’s principal natural gas supplier). As a result, energy prices in Brazil have been increasing, and alternative sources, such as the electricity from the cogeneration of sugarcane bagasse, have become increasingly competitive and viable options to satisfy the increasing energy demands. Sugarcane bagasse cogeneration is particularly competitive since sugarcane-based electricity is generated following the sugarcane harvest and milling which occurs during the dry season in Brazil, when hydroelectric generation is at its lowest levels.

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     The main advantages of energy generated by sugarcane bagasse are:
    It is a clean and renewable energy;
 
    It complements hydropower, the main source of Brazilian energy, as it is generated during the sugarcane harvest period (April to December) when water reservoirs are at their lowest level;
 
    It requires a short period of time to start operations; and
 
    It requires only a small investment in transmission lines when plants are located close to consumer centers.
     Our total installed cogeneration capacity at the Angélica and UMA mills together is 112 MW, of which 75 MW are available for sale to the market. The Ivinhema mill is planned to have full cogeneration capacity as well and is expected to generate 184 MW by 2017, of which 131 MW are expected to be available for sale to the market.
     We believe that there is a high potential for growth in the generation of electricity, and we are prepared to make investments to the extent that prices of Brazilian energy justify making such investments. We are currently investing $7.2 million in a “trash separation” system at Angélica, which will allow us to increase our energy output by over 50%.
Storage and Conditioning
     Our sugar and ethanol storage and conditioning facilities are located at our mill sites and allow us to deliver our products when they are ready to be commercialized with no third-party involvement. Having such facilities at mill sites allows us to (i) reduce storage and conditioning costs; (ii) reduce freight costs since we only commence moving the product once the final destination is determined, whether locally or to a port; and (iii) capitalize on fluctuations in the prices of sugar and ethanol.
                         
Nominal Storage Capacity   Angélica     UMA     Total  
Ethanol (cubic meters)
    120,800       27,000       147,800  
Sugar (tons)
    90,000       36,400       126,400  
Marketing, Sales and Distribution
     Sugar: We sell sugar both in the domestic and the international markets at prices that depend on our price parity calculation, which considers each market’s price and the associated costs. Prices for the sugar we sell in Brazil are set, using an index calculated by the Agriculture College of the University of São Paulo (Escola Superior de Agricultura Luiz de Queiroz, or “ESALQ”), with a premium in the state of Minas Gerais due to the use of our regional brand, “Monte Alegre,” the market leader in the southern part of that state. Prices for the sugar we export are set in accordance with international market prices. International prices for raw sugar are established in accordance with the NY11 futures contracts. Our largest customers for sugar are ED&F Man Sugar Ltd., Bunge, Noble and Copersucar Trading AVV, comprising approximately 87% of our sales in the period ended December 31, 2010.
     Ethanol: Almost all of our ethanol sales are in the domestic Brazilian market given the increasing demand generated from the increase in flex-fuel vehicles in Brazil. Our ethanol sales are not made through the execution of formal agreements. Instead, sales are made through daily sale orders intermediated by specialized brokerage firms that act in the ethanol domestic market, whose role is to intermediate the sale of ethanol between the ethanol producers and the domestic ethanol distribution companies, and prices are set using the ESALQ and the futures and commodity exchange of the BM&FBOVESPA indices for ethanol as a reference. Our largest customers by volume were Petrobras Distribuidora S/A, Cosan Combustíveis e Lubrificantes S/A, Ipiranga Produtos de Petróleo S/A and Shell Brasil Ltda., comprising approximately 64% of our sales in the period ended December 31, 2010.

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     Cogeneration: We also sell electricity co-generated at our sugar and ethanol mills to local electricity commercialization companies and directly to the spot market. Sales are made in the spot market with brokers, through government auctions, to distributors and through long-term contracts. Our largest customers are Cemig Geração e Transmissão S/A, Câmara de Comercialização de Energia Elétrica and Nova Energia Comercializadora Ltda., comprising approximately 95% of our sales in the period ended December 31, 2010.
     The Brazilian energy agency, ANEEL, has organized yearly auctions for alternative energy and for renewable sources at favored rates. As a hedging strategy, we elect to sell only a portion of the electricity production of our mills through long-term contracts and sell the remainder on the spot market on a daily basis.
     In 2009, UMA entered into a 10-year agreement with CEMIG, a state distribution company, for the sale of 9 MW (approximately 52,704 MWh) during the harvest periods each year (May to November of each year) at a rate of R$173.88 per megawatt hour. In 2009, Angélica sold energy in a public auction carried out by Camara de Comercialização de Energia Elétrica (“CCEE”), whereupon Angélica entered into a 15-year agreement with CCEE for the sale of 87,600 MWh per year at a rate of R$169.52 per megawatt hour. In August 2010, Angélica participated in a public auction, whereupon Angélica entered into a second 15-year agreement with CCEE starting in 2011, for the sale of 131,400 MWh per year at a rate of R$154.25/MWh. The delivery period for both agreements starts in May and ends in November of each year. The rates under both agreements are adjusted annually for inflation by reference to the National Index of Consumer Prices (“IPCA”).
Land Transformation
     Land transformation is an important element of our business model and a driver of value creation. Through land transformation, we optimize land use and increase the productive potential and value of our farmland. Our land transformation model consists of changing the use of underutilized or undermanaged agricultural land to more profitable cash generating agricultural activities, such as turning low cash-yielding cattle pasture land into high cash-yielding croppable land, allowing profitable agricultural activities, such as crop, rice and sugarcane production.
     Since our inception, we have successfully identified multiple opportunities for the acquisition of undeveloped or undermanaged farmland with high potential for transformation. During the nine-year period since our inception, we have effectively put into production over 140,570 hectares of land that were previously undeveloped or inefficiently managed and are undergoing the transformation process.
     The land transformation process begins by determining the productive potential of each plot of land. This will vary according to soil properties, climate, productive risks, and the available technology in each specific region. Before commencing the transformation process, we perform environmental impact studies to evaluate the potential impact on the local ecosystem, with the goal of promoting environmentally responsible agricultural production and ecosystem preservation, thereby supporting sustainable land use. We do not operate in heavily wooded areas or primarily wetland areas.
     The transformation process for underdeveloped and undermanaged land requires us to make initial investments during a period of one to up to three years, and the land reaches stable productive capability the third to seventh year following commencement of the land transformation activities.
     We are engaged in three different categories of the land transformation process, which are defined by the previous use of the land:
     (i) Undeveloped land (savannahs and natural grasslands): This is the most drastic transformation phase since it demands both physical and chemical transformation of the soil. First, the land is mechanically cleared to remove native vegetation. The soil is then mechanically leveled for agricultural operations: in the case of land being transformed for rice production, this process involves heavy land movements and systematization required for irrigation and drainage channels, roads and

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bridges. In the case of land destined for sugarcane plantations, land movements will also be necessary for the construction of terraces to prevent the excess of water runoff. Certain soils must be chemically treated and corrected by incorporating nutrients such as limestone, gypsum and phosphorous, as is the case of the Brazilian ‘Cerrado’. Soil correction is not required in Argentina or Uruguay due to the natural fertility of the soil. Pesticides and fertilizers are then applied to the soil in preparation for planting. In the case of land destined for crop production (grains and oilseeds), soybean, which is sometimes referred to as a colonizing crop, is usually planted during the first years due to its resistance to pests, weeds and extreme weather and soil conditions. Thereafter, the land will enter into a crop rotation scheme to reduce the incidence of plague and disease and to balance soil nutrients. In the case of rice and sugar cane, which are produced in a monoculture system, there is no colonizing crop or rotation involved. Intensive plague and weed controls and additional soil correction will take place during these first three to five years. Land productivity or yields, measured in tons of soybean or other crops per hectare, will be initially low and will gradually increase year by year. During the first five to seven years, the yields will increase at high and sustained rates. After the seventh year we consider the land developed as yield volatility is reduced and growth is only achievable at marginal rates. Since our inception we have put into production 50,492 hectares of undeveloped land into productive croppable land.
     (ii) Undermanaged or underutilized farmland (cultivated pastures and poorly managed agriculture): This transformation process is lighter than the one described above since it does not require the initial mechanical clearing of vegetation or land leveling. Only in the case of land being prepared for rice production will leveling be required for efficient flood-irrigation. The transformation of cattle pastures or poor agriculture in the Brazilian ‘Cerrado’ will begin with soil correction and soil tillage in preparation for planting of the first soybean or sugarcane crop. The process will then continue as described in the case above. Land productivity or crop yields will grow at high rates during the first three to five years of the transformation process and will then commence to stabilize and grow at marginal rates, at which point we consider the land developed. Since our inception we have put into production 90,078 hectares of undermanaged or underutilized farmland into croppable land.
     (iii) Ongoing transformation of croppable land: The application of efficient and sustainable crop production technologies and best practices such as “no-till”, crop rotations, integrated pest and weed management and balanced fertilization, among others, incrementally increases soil quality and land productivity over time, maximizing return on invested capital and increasing the land value of our properties. Our entire farmland portfolio is constantly undergoing this phase of land transformation. During the 2010/2011 harvest year, we operated 120,738 hectares of developed farmland which were enhanced by the use of best productive practices and technology.
     In each of these categories of transformation, the metric the company uses to track the level and analyze the progress of the transformation process is the level and tendency of crop yields and the number of years the land has been under crop production. Consequently, the process of land transformation is evidenced by the results of the activities within our other business segments, primarily our crops, rice and sugarcane segments. Accordingly the costs associated to the transformation process described above are allocated within these other business segments. As a result, there may be variations in our results from one season to the next according to the amount of farmland undergoing transformation and the amount of land sold and our ability to identify and acquire new farmland.
     Our land transformation segment seeks not only to profit from crop and rice cultivation, but also from the opportunistic disposition of successfully transformed farmland. We strategically sell farms that have reached productive maturity with marginal potential for further productivity increases (years three to seven after commencing the land transformation process) to realize and monetize the capital gains arising from the land transformation process. Land transformation proceeds are in turn reinvested in the purchase of strategic farmland with potential for transformation and appreciation. The rotation of our land portfolio allows us to allocate capital efficiently. Since 2006 we have had a solid track record of selling farmland for highly profitable returns. During the last five years, we have sold 27,169 hectares of farm land, generating capital gains of approximately $95 million.

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     These capital gains are generated by three main factors:
     (i) general market appreciation of land driven by increase in commodity prices and supply and demand dynamics in the land market. In this regard, during the last ten years, since 2001, farmland prices in Argentina’s core production region have increased an average of 14.3% per year according to data published by Margenes Agropecuarios. The value of the farms we sold between 2006 and 2010, as well as our overall land portfolio, has been positively impacted by this external factor.
     (ii) the land transformation process described above enhances the productivity and profitability of land, ultimately increasing the value of the land; and
     (iii) the acquisition of land at opportunistic prices below the market value or fair value of the land.
     We believe we are one of the most active players in the land business in South America. During the last eight years, we have executed transactions for the purchase and sale of land for over $459 million. Our business development team is responsible for analyzing, selecting, acquiring and selling land. The team has gained extensive expertise in evaluating and acquiring farmland throughout South America, and has a solid understanding of the productivity potential of each region and of the potential for land transformation and appreciation. To date, the team has analyzed over 8.9 million hectares of farmland with a total value of approximately $12 billion. We have developed a methodology to analyze investment opportunities, taking into account price, transformation potential, productive model, financial projections, and investment requirements, among others. Our analysis also employs advanced information technology, including the use of satellite images, rain and temperature records, soil analyses, and topography and drainage maps. From time to time, we may leverage our favorable position in and knowledge of the land market to engage in opportunistic buying and selling transactions.
     The following table sets forth our acquisitions and divestitures since our inception:
                         
    Acquisition     Divestitures     Total Land Holdings  
Year Ended December 31,           (In hectares)          
2002
    74,924             74,924  
2003
                74,924  
2004
    34,659             109,583  
2005
    22,103             131,686  
2006
    5,759       3,507       133,938  
2007
    113,833       8,714       239,057  
2008
    43,940       4,857       278,140  
2009
          5,005       273,135  
2010
    14,749       5,086       282,798  
Our Farms
     Appraisal of Farms. In September 2010, in order to assess the market value of rural properties in Brazil, Argentina and Uruguay, we requested an appraisal by Cushman & Wakefield Argentina S.A., independent real estate valuation firm knowledgeable about the agriculture industry and the local real estate market. As part of these appraisals, the value of each of our properties was determined using the sales comparison approach taking into account current offerings and analyzed prices buyers had recently paid for comparable sites, adjusted for the differences between comparable properties and the subject property to arrive at an estimate of the value of the subject property. The major elements of comparison used to value the properties included the property rights conveyed, the financial terms incorporated into the transaction, the conditions or motivations surrounding the sale, changes in market conditions since the sale, the location of the real estate and the physical characteristics of the property.

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     The abovementioned valuations assumed good and marketable title to subject properties, which were assumed to be free and clear of all liens and encumbrances. The valuation did not include site measurements and no survey of the subject properties were undertaken. In addition, the valuations also assumed (a) responsible ownership and competent management of the subject properties; (b) there were no hidden or unapparent conditions of the subject properties, subsoil or structures that render the subject properties more or less valuable; (c) full compliance with all applicable federal, state and local zoning and environmental regulations and laws and (d) all required licenses, certificates of occupancy and other governmental consents were or can be obtained and renewed for any use on which the value opinion contained in the appraisals is based. Unless otherwise stated in the appraisals, the existence of potentially hazardous or toxic materials that may have been used in the construction or maintenance of the improvements or may be located at or about the subject properties was not considered in arriving at the opinion of value. These materials (such as formaldehyde foam insulation, asbestos insulation and other potentially hazardous materials) may adversely affect the value of the subject properties.
     Cushman & Wakefield has informed us that their assessment of the market value of our farmland property remained unchanged as of December 31, 2010. These valuations are only intended to provide an indicative approximation of the market value of our farmland property as of December 31, 2010 based on then current market conditions. This information is subject to change based on a host of variables and market conditions. Therefore, these valuations are not intended to provide an indication of the sale price of our properties. Their inclusion in this annual report is for informational purposes only and investors should not rely on these valuations as the current value of our properties may be materially different from the valuations set forth herein. The following table sets forth the result of the abovementioned appraisals:
                                 
                Book Value   Cushman Valuation    
        Gross Size   (In thousands of   (In thousands of    
Farm   State, Country   (Hectares)(1)   $)(1)   $)(1)   Current Use
El Meridiano
  Buenos Aires, Argentina     6,302       15,773       40,729     Grains
La Alegría
  Buenos Aires, Argentina     2,439       4,752       9,930     Grains
Las Horquetas
  Buenos Aires, Argentina     2,089       2,223       8,761     Grains & Cattle
San Carlos
  Buenos Aires, Argentina     4,239       3,983       26,701     Grains
Santa Regina
  Buenos Aires, Argentina     3,618       3,710       19,761     Grains
El Orden
  Santa Fe, Argentina     6,860       5,052       9,321     Grains & Cattle
La Carolina
  Santa Fe, Argentina     8,297       6,111       12,185     Grains & Cattle
La Rosa
  Santa Fe, Argentina     4,087       5,124       16,383     Grains & Cattle
San Jose
  Santa Fe, Argentina     7,630       1,273       5,361     Grains
San Joaquín
  Santa Fe, Argentina     37,082       11,070       38,235     Rice, Grains & Cattle
Carmen
  Santa Fe, Argentina     10,020       19,628       85,382     Grains
Abolengo
  Santa Fe, Argentina     7,476       19,058       86,041     Grains
La Guarida
  Santiago del Estero, Argentina     15,451       11,354       20,326     Grains & Cattle
Santa Lucia
  Santiago del Estero, Argentina     17,495       27,474       39,765     Grains & Cattle
Los Guayacanes
  Salta, Argentina     7,241       17,688       31,548     Grains
La Garrucha
  Salta, Argentina     3,607       8,811       15,510     Grains
Ombú
  Formosa, Argentina     18,320       8,165       18,752     Grains & Cattle
Oscuro
  Corrientes, Argentina     33,429       7,687       43,937     Rice, Grains & Cattle
Itá Caabó
  Corrientes, Argentina     26,650       19,837       52,878     Rice, Grains & Cattle
San Agustín
  Corrientes, Argentina     5,067       2,153       12,896     Rice, Grains & Cattle
Alto Alegre
  Tocantins, Brazil     6,082       5,217       11,152     Grains & Cotton
Conquista
  Tocantins, Brazil     4,325       5,217       10,165     Grains & Cotton
Lagoa de Oeste
  Bahia, Brazil     1,132       2,312       4,249     Coffee
Palmeira
  Bahia, Brazil     1,000       2,723       2,717     Coffee
Heloisa
  Bahia, Brazil     800       2,164       2,702     Coffee
Mimoso
  Bahia, Brazil     902       2,701       3,021     Coffee
Rio de Janeiro
  Bahia, Brazil     10,012       20,828       32,438     Grains & Coffee
Bela Manhã
  Mato Grosso do Sul, Brazil     381       1,484       1,750     Sugarcane
Ouro Verde
  Mato Grosso do Sul, Brazil     683       2,406       2,912     Sugarcane
Don Fabrício
  Mato Grosso do Sul, Brazil     3,304       11,746       14,248     Sugarcane

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                Book Value   Cushman Valuation    
        Gross Size   (In thousands of   (In thousands of    
Farm   State, Country   (Hectares)(1)   $)(1)   $)(1)   Current Use
Takuarê
  Mato Grosso do Sul, Brazil     490       2,109       2,015     Sugarcane
Agua Branca
  Mato Grosso do Sul, Brazil     1,614       6,537       6,371     Sugarcane
Nossa Senhora Aparecida
  Mato Grosso do Sul, Brazil     540       1,958       1,807     Sugarcane
Sapálio
  Mato Grosso do Sul, Brazil     6,062       23,006       25,085     Sugarcane
Carmen (Agua Santa)
  Mato Grosso do Sul, Brazil     146       833       739     Sugarcane
La Pecuaria
  Duranzo, Uruguay     3,177       10,225       13,761     Grains
Dinaluca
  Corrientes, Argentina     14,749       21,450       23,500     Rice
 
                               
Total
        282,798       323,842       753,032      
 
(1)   Gross size, book value and valuation figures have been updated to reflect (i) foreign exchange rate on December 31, 2010, and (ii) the disposition of the La Macarena farm on December 21, 2010.
     A substantial portion of our assets consists of rural real estate. The agricultural real estate market in Brazil, Argentina and Uruguay is particularly characterized by volatility and illiquidity. As a result, we may experience difficulties in immediately adjusting our portfolio of rural properties in response to any alterations in the economic or business environments. The volatility of the local market could affect our ability to sell and receive the proceeds from such sales, which could give rise to a material adverse effect on our business, results of operations and financial condition. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industries—A substantial portion of our assets is farmland that is highly illiquid.”
     Land Leasing and Agriculture Partnerships. We enter into operating lease agreements based on criteria regarding the quality and projected profitability of the property, as well as our production and yield objectives in the short or medium term. Generally, we become aware of farms available for lease directly through the owners of farms near our farms and in some cases through regional brokers.
     We tend to be more open to leasing farmland for sugarcane production than for our farming businesses, where we own the majority of the land that we farm. We lease land for our sugarcane production primarily because leases in this sector are long term, lasting between one or two sugarcane cycles (with each cycle lasting generally 6 years), which allows us to implement and reap the productivity benefits of our land transformation strategies. Sugarcane lease payments are variable, depending on the productivity of the land in terms of tons per hectare and sucrose content per hectare and also on the distance from the land to the mill. Given the strategic location of our mills in the region and the inherent inefficiency of growing crops other than sugarcane in this region, we expect to be able to renew our leases for the sugarcane farmland with minimal issues.
     With respect to our farming business, the initial duration of lease agreements is generally one harvest year. Leases of farmland for production of grains include agreements with both fixed and variable lease payments in local currency or U.S. dollars per hectare.
     Land Management. We manage our land through an executive committee composed of a country manager, regional manager, farm manager and members of the Technology Adecoagro Group (“TAG”) that meet on a monthly basis. We delegate individual farm management to farm managers, who are responsible for farm operations and receive advisory support from TAG to analyze and determine the most suitable and efficient technologies to be applied. Our executive committee establishes commercial and production rules based on sales, market expectations and risk allocation, and fulfilling production procedures and protocols.
     Following an acquisition of property, we make investments in technology in order to improve productivity and to increase its value. Occasionally when we purchase property, a parcel of the property is sub-utilized or the infrastructure may be in need of improvement, including traditional fencing and electrical fencing, irrigation equipment and machinery, among other things.

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Property, Plant and Equipment
     In addition to our farmland, we also own the following principal industrial facilities:
             
Facility   Province, Country   Relevant Operational Data   Current Use
“Christophersen”
  Santa Fe, Argentina   18,700 tons of storage capacity. 2,400 tons per day of drying capacity   Seedbed and stockpiling plant (1)
 
           
“La Lácteo”(2)
  Cordoba, Argentina   250,000 liters per day processed   Dairy processing facilities
 
           
“Semillero Itá Caabó”
  Corrientes, Argentina       Rice genetic improvement
program
 
           
“Molino San Agustín”
  Corrientes, Argentina   Processing capacity of 3,500 tons of brown rice monthly, and husk rice drying capacity of 450 tons per day   Brown rice processing and drying plant
 
           
“Molino Ala — Mercedes”
  Corrientes, Argentina   Installed capacity of 5,000 tons of white rice monthly, and husk rice drying capacity of 2,400 tons per day   Rice processing and drying plant
 
           
“Molino Ala — San Salvador”
  Entre Ríos, Argentina   Installed capacity of 5,000 tons of white rice monthly, and husk rice drying capacity of 1,100 tons per day   Rice processing and drying plant
 
           
Molino Franck
  Santa Fe, Argentina   Processing capacity of 5,300 tons of brown rice monthly, and husk rice drying capacity if 1,700 tons per day   Rice processing and drying plant
 
           
“Angélica Agroenergía”
  Mato Grosso do Sul,
Brazil
  Installed milling capacity of 4.0 million tons of sugarcane annually, 330,000 tons of VHP sugar and over 220,000 cubic meters of ethanol, and over 250,000 MWh   Sugar and ethanol mill producing hydrated ethanol, anhydrous ethanol and VHP sugar. Sells energy to local network
 
           
“Usina Monte Alegre”
  Monte Belo, Brazil   Present milling capacity of 1.2 million tons of sugarcane annually, 120,000 tons of VHP and white sugar and over 40,000 cubic meters of ethanol and 50,000 MWh   Sugar mill producing VHP and white sugar and hydrated ethanol. Sells energy to local network
 
(1)   Classification of wheat and soybean seeds.
 
(2)   Joint venture of which we own 50%.
     For additional information regarding our property, plant and equipment, see Note 6 of the consolidated financial statements.
Customers
     In 2010, our sales amounted to approximately $426 million. Sales to our ten largest customers represented approximately 50% of our net sales in the year ended December 31, 2010. Of these customers, our biggest three customers represented, in the aggregate, approximately 23% of our sales for the year ended December 31, 2010, and the remaining seven customers, in the aggregate, represented approximately 27% of our net sales in the course of that year.
     In 2009, our sales amounted to approximately $314 million. Sales to our ten largest customers represented approximately 33.8% of our net sales in the year ended December 31, 2009. Of these customers, our biggest three customers represented, in the aggregate, approximately 13.7% of our sales for

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the year ended December 31, 2009, and the remaining seven customers, in the aggregate, represented approximately 20.2% of our net sales in the course of that year.
Competition
     The farming sector is highly fragmented. Although we are one of South America’s leading producers, due to the atomized nature of the farming sector, our overall market share in some of the industries in which we participate is insubstantial. Our production volume, however, improves our ability to negotiate favorable supply, transportation and delivery logistics with our suppliers, third-party transporters, ports and other facilities, and customers. Although competition in agriculture varies considerably by product and sector, in general, there are a large number of producers, and each one of them controls only a small portion of the total production. Therefore individual producers often have little influence on the market and cause little or no effect on market prices as a result of their individual strategies, explaining why producers are price takers and not price makers. In many cases, the price is established in international market exchanges. As the majority of agricultural products are commodities, which stifles product differentiation, the principal competition factors are cost of production and volume efficiency gains. In addition, agricultural producers face strong foreign competition, and with this competition the factors are often more difficult to identify.
     The majority of farming producers in developed countries can rely on specific protectionist policies and subsidies from their governments in order to maintain their position in the market. In general, we have been able to obtain discounts for the acquisition of supplies and excess prices for our production in the farming sector. In this sector, we view SLC Agrícola S.A., BrasilAgro — Companhia Brasileira de Propriedades Agrícolas, Sollus Agrícola, Radar Propriedades Agrícolas, El Tejar S.A., Cresud SACIF y A, MSU S.A. and Los Grobo Agropecuaria, among others, as our competitors. We also compete in Argentina with retailers of agricultural products, including other branded rice products, such as Molinos Río de la Plata S.A., Dos Hermanos S.H., Sagemüller S.A. and Cooperativa Arroceros Villa Elisa Ltda.
     The sugar and ethanol industries are highly competitive. In Brazil, we compete with numerous small-and medium-sized sugar and ethanol producers. Despite increased consolidation, the Brazilian sugar and ethanol industries remain highly fragmented, with more than 436 sugar mills. Some of the largest industry players with whom we compete are Cosan Ltd., Grupo São Martinho S.A., Açúcar Guarani S.A., Louis Dreyfus Commodities Brasil S.A., ETH Bioenergia S.A., Bunge, Grupo Zillo Lorenzetti, Grupo Carlos Lyra S.A. and Grupo Irmãos Biaggi. We also face competition from international sugar producers, such as those in the U.S. and the European Union, where local regulators have historically implemented tariffs, agriculture subsidies and/or other governmental incentive programs, of which some remain, to protect local sugar producers from foreign competition. The following table describes the Brazilian competitive landscape:
     
2009/2010 Harvest Year   Brazil
Number of Mills(l)
  436
Sugarcane crushed
  615.4 million tons
Ethanol Production
  27.4 billion liters
Sugar Production
  37.7 million tons
 
Source: Ministerio da Agricultura, Pecuaria e Abastacimento.
 
(1)   Based on Center-South region only.
     With respect to farmland, there have historically been few companies competing to acquire and lease farmland for the purpose of benefiting from land appreciation and optimization of yields in different commercial activities. However, we believe that new companies, some of them international, may become active players in the acquisition of farmland and the leasing of sown land, which would add competitors to the market in coming years.

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Supplies and Suppliers
     Our principal supplies for our farming business are seeds, fertilizers, pesticides and fuel, which represented, respectively, 12%, 7%, 17% and 11% of our total direct expenditures (including leasing cost) for supplies and services and were collectively 46% of our total expenditure for supplies in the farming business in the 2009/2010 harvest. Further, these supplies represented 14% of our total production cost in the 2009/10 harvest. As we use direct sowing in 99% of our planted area, without requiring soil preparation, fuel represents only 10% of the direct cost of production.
     Our principal supplies for our sugar, ethanol and energy business are diesel lubricants and fertilizers, which collectively represented 24% of our total expenditures incurred in the sugar, ethanol and energy business in 2010. Further, these supplies represented 24% of our total production cost in 2010. We have an extensive network of suppliers for each of our business segments and for each required input within each segment, resulting in lower reliance on any particular supplier. Our ten largest suppliers account for 18% of our total expenditures for supplies in 2010. While we value the relationships we have developed with each of our suppliers given the quality we have come to expect, we do not consider any single supplier to be key to our production.
     We have been able to obtain lower prices particularly due to the volume that derives from our large-scale operations.
Seasonality
     Our business activities are inherently seasonal. We generally harvest and sell our grains (corn, soybean, rice and sunflower) between February and August, with the exception of wheat, which is harvested from December to January, and rapeseed, which is harvested from November to December. Coffee and cotton are unique in that while both are typically harvested from June to August, they require processing which takes about two to three months. Sales in our dairy business segment tend to be more stable. However, milk production is generally higher during the fourth quarter, when the weather is more suitable for production. The sugarcane harvesting period typically begins in April/May and ends in November/December. This creates fluctuations in our sugarcane inventory, usually peaking in December to cover sales between crop harvests (i.e., January through April). As a result of the above factors, there may be significant variations in our financial results from one quarter to another. In addition our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs on the determination of changes in fair value of biological assets and agricultural produce. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies and Estimates—Biological Assets and Agricultural Produce.”
Sustainability
     Our production model is based on sustainability standards that seek to produce food and renewable energy on a long-term basis by preserving the natural resources involved in the production process. The sustainable approach to farming requires taking into account economic, social and environmental factors adapted to local circumstances. Natural resources are the main foundation of our activities, with land being the most relevant natural resource in our operations. We have developed a sustainable land use strategy that considers factors beyond the requirements of local law and regulations. There are ecosystems that we do not consider appropriate for the use of agricultural development, such as heavy forest and key wetlands, and there are others that we evaluate using (savannahs, natural grasses, bush land, lowlands) only after carrying out an environmental impact assessment. In addition to such evaluations, we analyze the agricultural potential of the land in respect of the soil, the climate, crop productivity and available technology, among other factors. We then consolidate our analysis into a land transformation plan, which includes the best land use option and implements best practices such as the “no-till” technology, crop rotations, integrated pest and weed management, balanced fertilization, responsible pesticide usage and water management. All these best practices aim to increase resource efficiency and to decrease the risk of contamination and waste production and are consolidated into an environmental management plan, which includes biodiversity management when applicable. We aim to properly implement our sustainable production model to enhance land productivity and therefore increase land value.

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Standardized and Scalable Agribusiness Model
     We are developing an agribusiness model that allows us to engage in large-scale farming activities in an efficient and sustainable manner. Our agribusiness model consists of developing a specialized workforce and defining standard protocols to track crop development and control production variables, thereby enhancing efficient decision making and facilitating continuous improvement. This approach allows us to grow in scale and execute our expansion plan and efficiently manage various production units spread across different regions by effectively replicating our productive model. Process standardization also helps us assure compliance with local law and regulations and reduce social and environmental risks.
     We continue to develop and implement crop protocols. The purpose of these protocols is to coordinate and consolidate the knowledge on crop management for each area in order to standardize the implementation of these protocols. The protocols contain all the technical information for managing crops. This information is constantly reviewed by agricultural teams and their advisors, making it possible to preserve the technical knowledge of the company and at the same time improve agricultural production and make decisions pursuant to the company’s guidelines. Based on the results of the application of these protocols, we conduct an annual review of the techniques used and their results. This evaluation is done by means of crop campaign analysis, in which all teams review and discuss the last harvest year’s productive performance and the technological package for the new harvest year.
     When processes and protocols are defined they can be audited and certified by qualified third parties. Adecoagro is currently in the process of certifying its crop production in Argentina under ISO 9001. We are also working to implement ISO 14001 and OHSAS 18001 in some operating units.
     In order to achieve efficient scales of production, we have redesigned our field sizes by removing useless cattle infrastructure such as fencing. Larger fields reduce the overlapping of farmworks, enhancing operating efficiency, reducing the use of inputs and achieving agronomic timing (planting or harvesting on time). The goal is to reduce operative time and to improve efficiency in the use of inputs. Large-scale production also requires the implementation of advanced technology such as GPS (Global Positioning System), GIS (Geographic Information System) and modern machinery as well.
Contractors
     Contractors play a significant role in our farming business model. We seek to outsource most of the typical farmwork, such as planting, spraying and harvesting. Outsourcing allows us to reduce our investments in heavy machinery and equipments such as tractors or harvesters, enhancing the efficient allocation of our capital in our core productive activities.
     The contractor model in the Argentine humid pampas region has existed for over fifty years and has developed into a highly competitive market. Contractors have gained extensive expertise and skill in the management of agricultural machinery and have access to modern advanced technology. We seek to develop win-win relationships with our contractors by considering them as partners in our production and providing constant technical training and support through our TAG (as defined below) activities. We strive to have a number of contractors associated with each farm to generate competition and allow benchmarking to enhance operational efficiency and ensure high-quality service.
     In regions where this model is not fully developed, we use a mixed system where we hire the most experienced contractors in the region and we also operate our own machinery. We promote the development of new contractors by providing training and selling them our used machinery. We also promote the movement of selected contractors from developed regions into new marginal regions by offering them an opportunity to grow their businesses. In other regions where there is no established contractor system or there is specific farmwork (rice land leveling for instance), we own 100% of the machinery. In our Sugar, Ethanol and Energy business, we own or lease and operate all the agricultural equipment and machinery needed for sugarcane planting and harvesting operations. Our main goal is to achieve high-quality farmwork, both when selecting any contractor or when using our own machinery. In Brazil we do not employ the contractor model.

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Technical Adecoagro Group (TAG)
     The TAG is an internal group formed by agronomists, farm managers, external advisors, contractors, trainees and suppliers, whose main goal is to excel in production management by providing constant technical education and analysis regarding production technologies. Although the TAG is focused on developing such knowledge under a common criteria for the whole company, it also considers different production systems, such as crops, rice and dairy in Argentina and Uruguay, crops in western Bahia, Brazil and sugarcane in Minas Gerais and Mato Grosso do Sul, Brazil. In order to achieve their goals, the group meets every 20 days to analyze and discuss technical aspects of the farming production processes.
     The TAG participates in the definition of the optimal crop production mix for each farm and region, and supervises and evaluates the implementation of the most profitable and sustainable technologies to be adapted and applied in each region. Additionally, the TAG promotes specific external training courses, facilitates participation in external technical groups, organizes technical farm tours, offers support in establishing the crop planting plan and delivers a full-season analysis for each crop annually. The crop analysis is essential in order to allow technical improvements to be implemented for the following crop season.
     Since the TAG is involved in different regions, it plays a relevant role in spreading best practices among productive regions, including “no-till” in western Bahia. In order to evaluate and adapt the proper technologies locally, a vast network of test plots in agrochemicals, seeds, and farm-works are being carried out under specific technical guidelines. Such development is performed to make the necessary technological adjustments in respect of fertilizer levels, choice of the best product varieties for each crop, determination of the best planting periods and improvement in crop management and agricultural mechanization, resulting in higher yields coupled with reduced costs.
     In order to continually improve our technical development, we participate in specialized industry groups, such as CREA and AAPRESID, with which we share values and goals. “CREA” is a 50-year-old farmers’ association focused on developing and supporting technical excellence with local farmers. “AAPRESID” is a technical association of highly innovative farmers specializing in no-till development. We participate in certain CREA and AAPRESID discussion groups in which we share and evaluate common technical matters. We take advantage of their vast network of test plots and we constantly exchange technological knowledge for implementation in our farms.
     Specific efforts include our participation in the development of standards for a project called “Certified Agriculture: The Evolution of ‘No-Till’” (“Agricultura Certificada: la evolution de la Siembra Directa”), led by AAPRESID in Argentina. In addition, the TAG is focusing its resources on pursuing improvements in inputs usage by type of soil based on precision agriculture technology, intensification techniques relating to soil occupation times and diversified crop rotations, adjusting “no-till” in rice production, developing sugarcane production technologies involving agricultural mechanization and minimum tillage, and developing cotton production technologies involving “no-till” and crop rotation among others.
Technology and Best Practices
     We have consistently used innovative production techniques to ensure that we are at the forefront of technological improvements and standards in our industry. For example, we use the “no-till” technology and “crop rotation” to improve our crop yields. We also practice the use of “second harvests” where conditions permit, allowing us to plant and harvest a second crop from the same farmland in the same harvest year. Our crop production model is based on balanced fertilization, integrated pest and weed management and crop intensification. In our coffee business, our ability to perform wet and dry grain treatment in the same productive facility contributes to obtaining the “specialty coffee” grade, opening up the gourmet coffee market to our products. We use the innovative silo bag storage method in our rice and crop businesses allowing us to time the entry of our rice production into the market at optimal price points. Additionally, we believe we were the first company in South America to implement the innovative “free-stall” infrastructure in dairy operations resulting in increased raw milk production compared to our peers. The free-stall method is a model that provides for better control over production variables by confining

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dairy cows to a large barn that is equipped with indoor corrals and a mechanical advanced milking system on a rotary platform, allowing us to utilize production efficiencies and thereby increase milk production volumes while maximizing our land use and resulting in significantly higher conversion rates of animal feed into milk.
     Our sugarcane harvesting is 77% mechanized, which has significantly improved productivity while simultaneously reducing operating costs. We have modern facilities in the sugar and ethanol business including advanced sugar and ethanol mills with high-pressure boilers and that achieve one of the highest ratios of energy produced per ton of cane milled, according to the Cane Technology Center Benchmark program. Our Angélica sugar plant was the first continuously operative facility in Brazil, requiring no production stoppages between sugar batches.
     Our TAG analyzes our land assets and meets on a monthly basis to design the most efficient and productive land use strategies for such land assets.
No-Till
     “No-till” is the cornerstone of our crop production technology and the key to maintaining and even increasing the value and productivity of our land assets. “No-till” — often called zero tillage or direct sowing — is a technology developed 25 years ago to grow crops from year to year without disturbing the soil through tillage.
     Conventional farming consists of using plows to turn and till the soil to remove weeds, mix in soil additives such as fertilizers, and prepare the surface for seeding. Soil tillage leads to unfavorable effects such as soil compaction, loss of organic matter, degradation of soil components, death or disruption of microorganisms, evaporation of soil humidity and soil erosion where topsoil is blown or washed away by wind or rain.
     “No-till” farming avoids these negative effects by excluding the use of tillage. The “no-till” technology consists of leaving crop plant residues on the surface of the soil after harvesting a crop. These residues form a mulch or permanent cover protecting the soil from erosion risks caused by heavy rains and strong winds. This protective cover also helps natural precipitation and irrigation water infiltrate the soil effectively and decreases water loss from evaporation. Fewer tillage passes helps prevent soil compaction, allowing the soil to absorb more water and roots to grow deeper into the soil. Furthermore, “no-till” reduces the emergence of weeds and enhances biological processes that positively impact soil properties, conserving and even improving the presence of organic matter and microorganisms and associated nutrients (nitrogen, phosphorous, etc).
     The combination of these advantages results in important cost reductions due to a lower use of inputs, mainly diesel, fertilizers and pesticides, and higher crop yields, thus increasing the profitability of our business. These benefits are achieved in the medium to long term, resulting in a continuous increase of land productivity and value. From an operational standpoint, “no-till” reduces the period required for land preparation and planting, which enhances the development of large-scale operations and improves the probability of planting each crop at the optimum moment.
Crop Rotation
     Crop rotation is the practice of growing a series of dissimilar types of crops in the same area in sequential seasons. Crop rotation allows us to better control the buildup of harmful weeds and reduces the incidence of plagues and diseases that often occur when the same commodity is continuously cropped. Crop rotation also allows us to balance the fertility demands of various crops to avoid the excessive depletion of soil nutrients, contributing to a more efficient use of fertilizers and a sustainable use of herbicides and pesticides. Crop rotation results in increased yields and reduced production costs, providing a high rate of return. Our crop rotation model is tailored to each of our farming regions based on climatic and soil conditions. For example, in Argentina, our three-year crop rotation cycle involves the planting of a wheat crop followed by a soybean double-crop in the first year, a corn crop in the second year, and a soybean crop in the third year. In Brazil, we pursue a four-year crop

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rotation cycle whereby we plant soybeans during the first year, corn in the second year, and cotton during the third and fourth years.
Second Harvest — Double Cropping
     Second harvest, also known as “double cropping”, is the practice of consecutively producing two crops on the same land within the same year. Double cropping is possible only in regions with long growing seasons, which is determined mainly by climate conditions such as rain and temperature. Double cropping allows us to increase the profitability of our land, diversify our production and commercial risk and enhance operational efficiencies through a better utilization of machinery, freight, labor and other resources, resulting in a dilution of our fixed costs. Double cropping has important agronomical advantages as well, such as having crops on the land for a longer period of time, which, enhanced by “no-till” and crop rotation practices results in the improvement of the physical and chemical properties of the soil in the long term. We implement and adapt different double cropping systems for each of our productive regions in Argentina and Uruguay, with the most frequent being wheat/soybean, wheat/corn, sunflower/soybean, corn/soybean and sunflower/corn.
Integrated Pest Management (IPM)
     Integrated pest management (“IPM”) involves a deep analysis of agronomical, economical and environmental aspects with the goal of determining the most efficient use of pesticides. It simultaneously achieves two main goals: (i) enhancing crop productivity and (ii) decreasing the risk of agrochemical contamination. The first stage of IPM is to train the people who will be involved in pesticide usage. The pesticide to be applied is selected considering local regulations (only locally approved pesticides are used) and the minimum resulting environmental risks due to its chemical classification. Additionally, when selecting biotechnologically developed crops, we evaluate the potential reduction of pesticide uses that may be achieved. The doses of pesticides are defined by vendor recommendations and adjusted through agronomical expertise (specific to a crop and a pest). The timing of pesticide application is based on economic threshold that takes into account the crop situation (growing stage, climate conditions), the potential damage of the pest (type, population, growing stage), the presence of “beneficial” pests, and finally, the price relationship between grains and pesticides. We also use biological pest controls by breeding and releasing natural enemies of the relevant pest, as is the case with the borer plague. The relevance of the pest is measured by implementing specific scouting methodologies, which are adapted to large-scale farming. Scouting is carried out by trained employees who supervise all the fields on a weekly basis. The pesticide doses are applied by high-tech machinery, the majority of which is outsourced. IPM machinery is accurately calibrated to increase its application efficiency and to reduce any potential contamination risk. Climate conditions are taken into account, as well, in determining the optimal timing for spraying, to avoid drifting, evaporation and leakage risks.
Balanced Fertilization
     Balanced fertilization consists of determining an optimum use of fertilizers at the proper grades and in the proper amounts to supply the correct ratio of nutrients and to ensure that the soil will sustain high crop yields over time, consequently decreasing contamination risks. At the beginning of each crop season, we perform extensive soil studies in each of our farms to control the amount of organic matter, nitrogen, phosphorus and potassium levels in each field. Based on this analysis and considering the potential yield for each field, the crop rotation, and relative prices between fertilizers and agricultural products, we determine the optimum amount of fertilizer to be applied in order to maximize the economic response of the crop.
Water management
     Since crops need sufficient water to achieve their potential yields, we are engaged in techniques aimed to increase the efficiency of water usage and at the same time decrease soil erosion risks. In that regard, “no-till” presents strong advantages since it improves rainfall infiltration and increases the soil’s water storage capacity. In areas that may be subject to excess water, we are developing terraces, soil leveling and

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other techniques intended to decrease runoff and erosion risks. In some of the jurisdictions in which we operate, the use of water for irrigation requires obtaining special permits. For certain irrigated crops such as rice, we focus on the design and operation of rainwater harvesting, collecting water from rain in semi-natural reservoirs destined for future irrigation. Channels to conduct the water and drain the fields are developed by experts in order to deliver water in the most efficient manner. We are also developing the zero grade level system in some of our farms to increase productivity and reduce production costs. This technique involves a precise leveling of the land based on GPS and Laser technology. When fields are accurately leveled, water irrigation requirements are reduced, thus lowering the cost of labor and energy. Efficient management of irrigation results in a positive impact on yields. Additionally, as the fields can be larger, there are some operational benefits that can be achieved by reducing machinery working times. Other crops such corn seed, sunflower seed and coffee are irrigated by highly efficient pivot spraying systems. This type of irrigation system allows us to distribute water uniformly throughout the field, improving the use of water in terms of total millimeters per year. We conduct soil moisture sampling to define the best moment and amount of water to be used for irrigation in each plot.
Mechanization
     We incorporate all available mechanization technology into our business that is cost-effective. We believe that by employing mechanization technology we improve our operating efficiency and are better able to reach desired economies of scale in our operations. Mechanization also enables us to adopt new associated technologies faster and hastens our development efforts. In our farming business, we are using cutting-edge mechanized technology for planting, spraying, harvesting and irrigating and for soil rejuvenation, preparation and management. We also employ advanced mechanization technology in our logistics and product processing operations, including transportation, drying operations and grain sorting and storage. We are in the process of developing mechanization technology to benefit our other businesses, such as coffee and sugarcane planting, which traditionally have not benefitted from such mechanization.
Synergies
     The technologies we employ are very closely linked, and the joint implementation of a number of them will result in positive synergies for our entire production system. For example, implementation of the “no-till” technology can be enhanced by crop rotations, due to the positive biological effects generated by the different types of roots from each crop in the soil. Benefits of integrated pest management are improved when combined with the “no-till” and crop rotation strategies, since the crop stubble that remains on the soil can be a barrier to some plagues, and because some other pests are specific to a particular crop and the crop rotation can be sufficient to control them. We consider these synergies when we develop our crop seeding schedule.
Information Technology
     We employ the World Class ERP Oracle eBusiness Suite to standardize and integrate our processes throughout the company and improve controls and information accuracy and consolidation. The Oracle eBusiness Suite allows us to fulfill our local accounting and fiscal needs while facilitating operational coordination across our geographic areas and lines of business, reducing our operational costs and minimizing duplication and inefficiencies. It also provides our management with consolidated results in a timely manner. In addition, our integrated security plan includes an offsite safeguarded system that guarantees business continuity.
Environmental Responsibility
     We are developing a production model that reflects a strong commitment to the environment. Our responsibility to the environment begins with complying with local regulations. Natural resources such as land, water and biodiversity are taken into account when we evaluate both the development of a new production project and the operation of an on-going one. In that regard, we are constantly evaluating best practices to be implemented our operations. See “—Technology and Best Practices.” In order to be better stewards of the environment, we are in the process of developing and implementing environmental management plans for our operations. Those plans involve different stages, which are mainly

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educating our own and outsourced staff, monitoring ecological parameters, preventing negative effects, and correcting deviations. With respect to pesticide contamination risks, we are implementing a responsible pesticide use program, which includes personnel training, personnel protection elements, application recommendations, pesticide selection criteria, pesticide handling and storage and after-use pesticide packages management (which are specifically cleaned, collected and stored for recycling purposes under third parties’ programs such as AgroLimpio of Argentina).
     Additionally, in some regions where biodiversity is a concern, we are implementing biodiversity management plans, which mainly consists of periodically monitoring flora and fauna, detecting significant variations of their populations, and proposing measures to reduce any threats to local species. As a result of this, we are implementing some practices such as prohibiting hunting on our farms in Argentina, developing environmental private protection areas (where natural vegetation is protected by implementing sustainable production practices). As environmental matters require specific expertise and an understanding of complex relationships, we are entering into cooperative arrangements and agreements with educational institutions, such as the Faculty of Natural and Exact Sciences of the University of Buenos Aires (Facultad de Ciencias Exactas y Naturales de la Universidad de Buenos Aires, Argentina). We are also developing relationships with well recognized environmental non-governmental organizations, such as The Nature Conservancy and Fundación Habitat y Desarrollo.
     In Brazil, one of our main environmental focuses is compliance with the applicable provisions of the Brazilian Forestry Code (Código Florestal). Accordingly, we analyze and identify all natural areas inside our own farms and inside leased areas, and make a development plan that defines actions for their preservation. Some examples of these activities are the reforestation of Permanent Preservation Areas (Áreas de Preservación Permanente) and Legal Reserve Areas (Áreas de Reserva Legal), for which we are producing seedlings of more than 70 native species to reforest those areas. We are strongly committed to the preservation of forests, and we only develop areas for farming if they were previously used for agricultural purposes or for pasture. We do not engage in deforestation. We concern ourselves with the protection of riverbanks and surrounding areas of streams and springs, as they are important for soil conservation and as refuges for native fauna. In that regard, we are implementing periodic monitoring of wildlife and native flora as well. We have a partnership with The Nature Conservancy (“TNC”), an international environmental non-governmental organization, to organize the environmental preservation of areas of ecological importance by acquiring such areas to replace reserve areas on our own land and land we lease, through a reserve compensation scheme developed by TNC and adopted by the regional environmental authorities. This program will allow us to protect larger blocks of critical ecosystems instead of having smaller reserve areas in each farm, while allowing us to use areas in our farms that were previously developed and would have lesser environmental value as reserve areas.
     As part of our best practices programs, we are in the process of developing a certification process to achieve carbon credits from bagasse cogeneration at our Angélica and UMA sugarcane mills in Brazil. The pre-feasibility assessment was carried out using the methodologies of Clean Development Mechanism (“CDM”) of the United Nations, and delivered a potential reduction of approximately 300 thousands tons of CO2 during seven years. We are also evaluating bio-gas production from manure in our free-stall dairy operation in Argentina as another emissions reduction program. We plan to begin a pre-feasibility assessment subject to receiving a grant from Sustainable Energy and Climate Change Initiative from Inter-American Development Bank (SECCI). This project plans to consider the potential of capturing methane gas from adequately managed manure of dairy cows, which could be used to co-generate electricity. This emission reduction could also generate extra income from carbon credits under the CDM program. At UMA, we have implemented a pilot plant that produces biogas from vinasse, developed in partnership with Efficiencia, a subsidiary of Companhia Energética de Minas Gerais (“CEMIG”). The technology developed during this project will allow us to generate additional energy from vinasse while maintaining the fertilizer recycling potential of UMA. Additionally, we are developing potential schemes to realize the benefits of the “no-till” technology into a carbon credits income (from emissions reduction through less use of diesel and more sequestering of soil carbon).

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Social Programs
     Apart from complying with local labor regulations, we seek to promote the personal and professional development of our employees by offering them an adequate working environment with proper health and safety protections. In respect of our suppliers and clients, we strive to enter into and maintain long-term relationships based on trust, a solid business track record and safe conditions. We aim to develop a transparent relationship with local authorities. Finally, one of our main goals is to contribute positively to the social development of the communities where we have operations, creating new jobs, preserving the environment, providing trainee opportunities through our internship program and assisting with social development. In order to implement our social development programs, we analyze the areas in which we operate with the highest impact, education and poverty rates, possible alliances with other social actors, and potential synergies with local government programs. In addition to social development programs, we contribute to community organizations in each area where we operate, such as hospitals, schools, daycare centers and fire stations among others. We are engaged in global collaborations as well, such as the Haiti Relief Program in February 2010, through which we donated rice and milk. We also have a voluntary matching program where each donation from our employees is matched three times by Adecoagro.
Education
     Our sugarcane and rice operations have a very important economic impact in the communities where they are located, and our management and employees have developed a Social Action Program in the various municipalities. In 2005, we commenced a partnership with Cimientos in Corrientes and Santa Fe in Argentina, through which we have awarded 22 educational programs in urban and rural areas located close to our rice operations. Additionally, in the Santa Fe province in Argentina, where our dairy operations are located, we are carrying out a partnership with Conciencia to develop a scholarship program. This program targets children of low-income families in nearby towns who are being sponsored by our own staff. We have partnered with Fundação Bradesco in Mato Grosso do Sul, Brazil, working with the local municipalities of Angélica and Ivinhema to re-train teachers at their schools, aiming at improving the performance of public schools to a level of regional excellence. In addition, our technical teams, such as our Sugar & Ethanol Environmental Team, hold regular seminars at local schools where they promote the participation of students in environmental related projects, such as the reforestation efforts at the Angélica mill site. In addition, our employees perform educational volunteer work at several local institutions and non-governmental organizations.
Nutrition
     In Argentina, we work in partnership with the Conin Foundation, which fights malnourishment in children, dealing with malnutrition in an integral way and focusing its actions in three main aspects: education, assistance and research. We work in partnership with the Argentine Food Bank Network, to whom we are currently donating processed rice. This network operates in 14 cities and is a nonprofit distribution enterprise that serves the community by acquiring donated food and making it available to people who are hungry through a network of community agencies. These agencies include school feeding programs, food pantries, soup kitchens, hospices, substance abuse clinics, after-school programs and other nonprofit organizations. Additionally, we have been contributing food to Solidagro, an alliance between rural corporate institutions and civic organizations that seek to solve famine and malnutrition problems, since 2007. We are also collaborating with selected soup kitchen initiatives such as Mercedes City Soup Kitchen and Manuel Alberti Neighborhood, to whom we donate processed rice and wholemilk powder.
     In Brazil, we support various local schools, daycare centers, homes for the elderly, and APAEs (local associations supporting the seriously handicapped in the community) through sugar donations. Due to these initiatives, UMA was certified by the ABRINQ Foundation as a Child Friendly Enterprise.
Internship Program
     The purpose of our internship program is to promote the development of highly qualified professionals for the community by providing first-time work experience, good quality training and access to highly technology-oriented operations. We seek to facilitate interns’ future access to the job market while detecting potential key employees. The interns actively participate in the TAG training program which

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includes monthly technical meetings, external training and farm tours. In order to accomplish those goals we promote institutional relationships with local and international universities and high schools. Over 235 interns have participated in our program during the last 8 years, 51 of which were subsequently incorporated into our teams.
Material Agreements
     For a description of the material agreements relating to our indebtedness, please see “Item 5.—Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Indebtedness and Financial Instruments.”
Argentina
Agreement with Quickfood S.A.
     Until December 2009, we owned approximately 58,348 head of cattle — other than our cattle used for the production of raw milk — which we fattened for sale to meat processors and in local livestock auction markets. Our cattle business primarily consisted of beef fattening activities during the years ended December 31, 2009, 2008 and 2007. In December 2009, we strategically decided to sell substantially all of our cattle herd — other than our cattle used for the production of raw milk — to Quickfood, an Argentine company listed on the Buenos Aires Stock Exchange that is a subsidiary of the Brazilian company Marfrig, for a purchase price of $14.2 million payable in two equal annual installments. The first installment was paid on the closing date and the second installment was paid one year thereafter. The transaction contemplated the sale of 55,543 head of cattle, certain equipment related thereto and the trademark “Pilagá” for certain international classes. In addition, we agreed to lease Quickfood (i) approximately 74,000 hectares of grazing land located in the Argentine provinces of Corrientes, Formosa, Santa Fe and Santiago del Estero, under an operating lease agreement for an annual price equal to the equivalent in Argentine Pesos of 30 kilograms of meat per hectare, calculated in accordance with the Steer Index of the Liniers Market (INML), for a period of 10 years, renewable by the parties; and (ii) two feed lots located in the provinces of Corrientes and Santa Fe, Argentina, for an annual price of $25,000 each. Marfrig jointly and severally guarantees the obligations of Quickfood. As required by antitrust law, we reported this transaction to the CNDC. The CNDC’s administrative approval of the transaction is pending. We do not believe that the CNDC will object to the form and substance of the transaction. In March, 2011, we authorized Quickfood to sublease approximately 27,000 hectares to Equity Trust Company Argentina S.A. as trustee for the trust Fideicomiso Financiero Ganadero Cría I. Notwithstanding such sublease, the duties and obligations of Quickfood under the original lease agreement remain unchanged.
Joint-Venture with COPRA S.A.
     On November 23, 1999, our subsidiary Pilagá S.A. entered into a joint-venture agreement (union transitoria de empresas, or “UTE”) with COPRA S.A., Tupantuva S.A., the Serrano family and Establecimientos Agrícola Ganaderos Santa Clara y Yuquerí S.A. The UTE was created for purposes of obtaining water rights and the construction and development of a reservoir on the Ayui Grande stream, to be used for rice irrigation. Pilagá’s participation in the UTE is 20%. COPRA S.A. is the legal representative of the UTE, but decisions must be made with the affirmative vote of Pilagá S.A. and COPRA S.A. There are no restrictions in the event Pilagá S.A. desires to exit the UTE. As of the date of this annual report, the UTE has not started operations and is in the process of obtaining the appropriate governmental approvals.
Milk Supply Agreement
     In November 2007, Adeco Agropecuaria S.A. entered into a milk supply offer agreement with La Lácteo S.A., that was later amended on February 1, 2010, and pursuant to which Adeco Agropecuaria S.A. committed to sell to La Lácteo, and La Lácteo committed to purchase, approximately 80,000 liters of our milk production per day, subject to certain conditions. Notwithstanding the above, Adeco Agropecuaria S.A. is not obligated to sell to La Lácteo and La Lácteo is not obligated to purchase from Adeco Agropecuaria S.A. more than 50% of its milk requirements for a four-month period, provided however, that our milk production in excess of such volume is managed by La Lácteo S.A. in

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order to take advantage of the best valuation opportunities as industry sales in the raw milk spot market. The milk supply offer agreement fixes the price of milk that La Lácteo pays to Adeco Agropecuaria S.A. at the average milk price for each month plus a 3% premium. The milk supply agreement terminates in November 2017. In addition, if Adeco Agropecuaria S.A. receives a proposal from a third party for the supply of milk that is more favorable to Adeco Agropecuaria S.A. than the terms set forth in the milk supply agreement with La Lácteo, Adeco Agropecuaria S.A. may sell milk to such third party. However, La Lácteo has a right of first refusal upon Adeco Agropecuaria S.A.’s receipt of such third-party offer to purchase milk from Adeco Agropecuaria S.A. at the specified higher price.
Consignment Contract with Establecimiento Las Marías
     Pursuant to a consignment contract dated February 19, 2000, entered into by Establecimiento Las Marias S.A.C.I.F.A. (“Las Marias”) and Molinos Ala S.A. (currently Pilagá S.A.), Las Marias has an exclusive license to sell the products or imports of Pilagá S.A. in Argentina. For its services, Las Marias collects a commission of 11.56%, calculated over the gross amounts of the sales made by Las Marias on behalf of Pilagá S.A., net of 10% of commercial discounts, before VAT and any other applicable tax that is applied in any invoicing. The term of the agreement is one year as from March 1, 2000, automatically renewable for additional one-year periods.
Acquisition of Assets from Galicia Warrants S.A.
     On July 8, 2009, Pilagá S.A. acquired from Galicia Warrants S.A. the following assets: (i) real property consisting of a silo plant facility located in San Salvador, Province of Entre Ríos, Argentina for a purchase price of $1,823,226, to be paid in 10 annual installments of $192,500 each, plus interest at a rate of 1% per annum over any unpaid amount; and (ii) certain equipment including (a) 22 silos; (b) four grain dryers; (c) four grain pre-cleaning machines; and (d) plant control equipment, for the amount of $3,385,991 plus VAT at a rate of 10.5%, to be paid in 10 annual installments of $357,500 each, plus interest at a rate of 1% per annum over any unpaid amount. As collateral for its payment obligations, Pilagá S.A. granted a first priority mortgage over the acquired real property in favor of Galicia Warrants S.A. in the amount of $5.5 million.
Brazil
Sugar Sale Agreement
     On March 23, 2010, Angélica entered into a Sugar Sales Agreement with Bunge that was later amended on June 17, 2010. Under this agreement, Angélica would sell Bunge a total amount of 230,000 metric tons of Brazilian VHP (very high polarization) rough sugar to be delivered throughout 2010 and 2012. The term of the agreement is for two crop years, beginning in 2010/2011 and ending in 2011/2012. For each crop year, the price shall be fixed by Angélica or as agreed to by the parties by reference to the NY11 futures contract prices for any specific month and the degree of polarization, less certain defined delivery. Deliveries are to take place between August and January of each crop year.
Electric Energy Agreements
     In the beginning of 2009, UMA entered into a 10-year agreement for the sale of energy to CEMIG, under which UMA sells to CEMIG 9 MW of energy (approximately 52,704 MWh) during the harvest periods each year (May to November of each year) at a rate of R$173.88 per megawatt hour. As of December 31, 2010, UMA had received R$8 million under this agreement corresponding to the full contractual supply. The above-mentioned rate is adjusted annually to account for inflation and tariff discounts.
     Angélica entered into an agreement under which Angélica supplies energy to CCEE. This agreement is a result of a public auction promoted by the Brazilian federal government, carries a term of 15 years, and involves Angélica supplying CCEE with 87,600 MWh annually during the harvest periods each year (May to November), at a rate of R$169.52 per megawatt hour. The agreement sets forth annual fixed revenues for

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Angélica of R$13.8 million, adjusted annually to account for inflation. As of December 31, 2010 Angélica had received R$9.8 million under this agreement.
     In addition, in June 2008, Angélica entered into an agreement for connection to the electricity distribution grid with Enersul — Empresa Energética do Mato Grosso do Sul (“Enersul”), through which Angélica would connect to Enersul’s electric distribution grid in order to effect the transportation of Angélica’s produced energy within Enersul’s concession area. The agreement is effective until the termination of Angélica’s authorization to generate electricity or the termination of the concession of Enersul, whichever occurs first.
     In August 2010, Angélica participated in a public auction promoted by the Brazilian federal government. As a result of this auction, Angélica entered into second 15-year agreement with CCEE starting in 2011, for the sale of 131,400 MWh per year at a rate of R$154.25/MWh. The delivery period for both agreements starts in May and ends in November of each year. The rates under both agreements are adjusted annually for inflation by reference to the IPCA
Intellectual Property
     As of December 31, 2010, our corporate group owned 40 trademarks registered with the Argentine National Intellectual Property Institute and had 8 trademarks in registration process. Also, Adeco Brasil and UMA owned 6 trademarks registered with the Brazilian National Industrial Property Institute (“INPI”), and had submitted 18 trademark registration requests, all of which are currently being challenged by third parties or were initially denied by INPI.
     In Argentina, we are required to renew our trademark registrations when they expire at the end of their respective terms. Under the Argentine Trade and Service Marks Law No. 22,362, the term of duration of a registered trademark is 10 years from its issue date, and a trademark may be indefinitely renewed for equal periods thereafter if, within the five-year period prior to each expiration, the trademark was used in the marketing of a product, in the rendering of a service or as the designation of an activity.
     In Brazil, title to a trademark is acquired only once its valid registration has been issued by the INPI. During the registration process, the person requesting the trademark merely has an expectation of the right to use the trademark to identify its products or services. Under Law No. 9,279, of May 14, 1996 (the Brazilian Industrial Property Law), the holder of a trademark has the right to its exclusive use throughout Brazil. The term of duration of a registered trademark is 10 years from its issue date, and a trademark may be indefinitely renewed for equal periods thereafter. Within a five-year period from the issue date, the owner has an obligation to use the trademark in the marketing of a product, in the rendering of a service or as the designation of an activity. If the owner does not use the trademark within such five-year period, it may be subject to a forfeiture process, upon request of any third party with legitimate interest in the trademark. The same forfeiture process may occur if the owner fails to use the trademark for any five-year period, continuously. If the trademark is declared forfeited, the trademark rights are terminated.
     We do not own any registered patents, industrial models or designs.
Insurance
     The type and level of insurance coverage we obtain is determined based on consultation with leading insurance brokers. We carry policies with leading U.S., European, and local insurance companies, and we are currently insured against a variety of risks, including losses and damages relating to our plants, equipment and buildings. We believe our level of insurance coverage is customary and appropriate for a company of our size and with respect to our activities. Our insurance currently covers only part of the losses we may incur and does not cover losses on crops due to hail storms, fires or similar risks.

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Legal and Administrative Proceedings
     In the ordinary course of business, we are subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, social security, labor lawsuits and other matters. We accrue liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal and Administrative Proceedings.”
Environmental Regulations and Compliance
     Our businesses in the various emerging market countries in which we operate are subject to comprehensive national, state and municipal laws and regulations relating to the preservation and protection of the environment to which those businesses must adhere. These laws and regulations require some of our businesses to obtain permits or licenses that have to be renewed periodically in order to allow us to continue to operate. If such permits or licenses lapse or are not renewed or if we fail to obtain any required environmental licenses and permits, or if we do not comply with any other requirements or obligations established under the applicable environmental laws and regulations, we may be subject to fines or criminal sanctions and might face partial or total suspension of our operations and suspension or cancellation of our environmental licenses and permits. In addition, our businesses which hold debt from banks, and multilateral lenders in particular, are typically required to adhere to environmental standards that exceed those of the country in which the business operates (e.g., World Bank standards).
     We are currently either in compliance with or are in the process of applying for permits that would put us in compliance with all applicable environmental laws and material environmental licenses and permits. Specifically, the operational license of UMA is currently being renewed. In December 2008 we requested operational licenses for our Lagoa do Oeste, Heloísa, Palmeira and Mimoso farms in Brazil, which as of December 31, 2010 are still pending. We are currently finalizing the process of “geo-referencing” our Conquista and Alto Alegre farms in Brazil in order to apply for the relevant operational licenses. On May 25, 2010, we applied for the operational license for the Angélica mill to mill up to 4 million tons of sugarcane per year, and the license was granted by IMASUL on November 11, 2010. On November 26, 2010, we obtained a preliminary license (licença prévia) for the Ivinhema mill, and on June 27, 2011, we obtained the installation license (licença de instalação) from IMASUL for the commencement of the construction and assembly of the first and second phase of the Invinhema mill, for a nominal crushing capacity of up to 3.6 million tons of sugarcane.
     Our operating businesses have the required environmental monitoring, equipment and procedures, and we utilize third-party contractors to conduct regular environmental audits. Our environmental expenses relate to consultants we use to perform environmental impact studies for our development projects and control and monitoring procedures. However, as environmental regulations are expected to become more stringent in some of the countries where we operate, our environmental compliance costs are likely to increase due to the cost of compliance with any future environmental regulations. While we are not aware of any material environmental liabilities related to our ongoing operations, we may be subject to cleanup costs, which we do not expect to be material.

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     C. ORGANIZATIONAL STRUCTURE
Corporate Structure
     We hold approximately 98% of the interests in IFH, which, directly and indirectly, owns approximately 100% of the outstanding interests in Adecoagro LP, a holding company with operating subsidiaries owning farmland and facilities throughout Argentina, Brazil and Uruguay. Existing shareholders prior to our IPO own a 2% stake in IFH, with a de minimis remaining interest owned by Ona Ltd., our substantially wholly-owned subsidiary. We are a corporation organized under the laws of the Grand Duchy of Luxembourg under the form of a société anonyme and were formed as a holding company for the purpose, among others, of facilitating an IPO of common shares. Prior to the IPO, IFH completed certain reorganization transactions, which we refer to as the “Reorganization”, and became our majority-owned subsidiary.
     As of May 31, 2011, our principal shareholders were Pampas Humedas LLC, HBK Master Fund, Al Gharrafa, Stichting Pensioenfonds Zorg en Welzijn and Ospraie Special Opportunities. See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”
     Our current corporate structure is depicted below:
(GRAPHICS)
 
*   Existing Shareholders refer to shareholders of record prior to our IPO.
 
**   Does not account for an immaterial amount of shares required to be owned by other persons pursuant to Maltese law.
 
***   2% was owned pro rata among Existing Shareholders in amounts corresponding to their ownership of the Company prior to our IPO. The 2% ownership held by current members of IFH does not carry any preferential treatment.
     D. PROPERTY, PLANTS AND EQUIPMENT
See “—B. Business Overview—Land Transformation—Our Farms”; “—Property, Plant and Equipment.”

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Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating and Financial Review and Prospects
Overview
     We are engaged in agricultural, manufacturing and land transformation activities. Our agricultural activities consist of harvesting certain agricultural products, including crops (soybeans, corn, wheat, etc.), rough rice, coffee and sugarcane, for sale to third parties and for internal use as inputs in our various manufacturing processes. Our agricultural activities also include producing raw milk and fattening beef cattle for sale to third parties. Our manufacturing activities consist of (i) selling manufactured products, including processed rice, sugar, ethanol and energy, among others, and (ii) providing services, such as grain warehousing and conditioning and handling and drying services, among others. Our land transformation activities consist of the acquisition of farmlands or businesses with underdeveloped or underutilized agricultural land and implementing production technology and agricultural best practices to enhance yields and increase the value of the land. Please see also “—Risks Related to Argentina—Proposed changes in Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina” and “—Risks Related to Brazil— Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.”
     As further described below, we are organized into three main lines of business: farming; sugar, ethanol and energy; and land transformation. These lines of business consist of seven reportable operating segments, which are evaluated by the chief operating decision-maker based upon their economic characteristics, the nature of the products they offer, their production processes and their type and class of customers and distribution methods. Our farming business is comprised of five reportable operating segments: Crops, Rice, Dairy, Coffee and Cattle. Each of our sugar, ethanol and energy and land transformation lines of business is also a reportable operating segment.
     There are significant economic differences between our agricultural and manufacturing activities. Some of our agricultural activities generally do not involve further manufacturing processes, including those within the crops, dairy, coffee and cattle segments. However, from time to time, some of the harvested crops may be used to produce manufactured products, like soybean oil. These activities are also included within the crops segment. Our other agricultural activities in the rice and sugar, ethanol and energy segments generally involve further manufacturing processes, comprising our manufacturing activities. The table below sets forth our agricultural and manufacturing activities by segment.
         
Segment   Agricultural Product   Manufactured Product & Services Rendered
Crops
  Soybean Corn Wheat Sunflower Cotton   Soybean oil & soybean meal
 
      Grain drying & conditioning
 
       
Rice
  Rough rice   White rice & brown rice
 
       
Dairy
  Raw milk   Whole milk powder
 
       
Coffee
  Coffee   Trading
 
       
Cattle
  Head or kilograms of cattle   Land leasing
 
       
Sugar,
  Sugarcane   Sugar
Ethanol and
      Ethanol
Energy
      Energy
     We structure the revenue and cost section of our statement of income to separate our “Gross Profit from Manufacturing Activities” from our “Gross Profit from Agricultural Activities” as further described below:

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Manufacturing Activities
     The gross profit of our manufacturing activities is a function of our sales of manufactured products and services rendered and the related costs of manufacturing those products or delivering those services. We recognize an amount of revenue representing the actual dollar amount collected or to be collected from our customers. Our principal costs consist of raw materials, labor and social security expenses, maintenance and repairs, depreciation, lubricants and other fuels, among others. We obtain our raw materials principally from our own agricultural activities and, to a lesser extent, from third parties.
Agricultural Activities
     Our agricultural activities involve the management of the biological transformation of biological assets into agricultural produce for sale to third parties, or into agricultural products that we use in our manufacturing activities. We measure our biological assets and agricultural produce in accordance with IAS 41 “Agriculture.” IAS 41 requires biological assets to be measured on initial recognition and at each balance sheet date at their fair value less costs to sell, with changes in fair value recognized in the statement of income as they occur. As market determined prices are generally not available for biological assets while they are growing, we use the present value of expected net cash flows as a valuation technique to determine fair value, as further discussed below in “—Critical Accounting Policies and Estimates.” In addition, agricultural produce at the point of harvest is measured at fair value less costs to sell, which is generally determined by reference to the quoted market price in the relevant market. Consequently, the gains and losses arising on initial recognition and changes in fair value of our biological assets and the initial recognition of our agricultural produce at the point of harvest are accounted for in the statement of income in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce.”
     After agricultural produce is harvested, we may hold it in inventory at net realizable value up to the point of sale, which includes market selling price less direct selling expenses, with changes in net realizable value recognized in the statement of income when they occur. When we sell our inventory, we sell at the prevailing market price and we incur direct selling expenses.
     We generally recognize the agricultural produce held in inventory at net realizable value with changes recognized in the statement of income as they occur. Therefore, changes in net realizable value represent the difference in value from the last measurement through the date of sale on an aggregated basis.
     We consider gains and losses recorded in the line items of the statement of income “Initial recognition and changes in fair value of biological assets and agricultural produce” and “Changes in net realizable value of agricultural produce after harvest” to be realized only when the related produce or manufactured product is sold to third parties and, therefore, converted into cash or other financial assets. Therefore, “realized” gains or losses mean that the related produce or product has been sold and the proceeds are included in revenues for the year.
     The sale of agricultural produce is revenue as defined in IAS 18. However, IAS 41 does not provide guidance on the presentation of revenues and costs arising from the selling of biological assets and agricultural produce. Due to the lack of guidance in IAS 41 and based on IAS 1, “Presentation of financial statements,” we present, as a matter of accounting policy, our sales of biological assets and agricultural produce and their respective costs of sale separately in two line items in the statement of income. The line item “Sales of agricultural produce and biological assets” represents the consideration received or receivable for the sale to third parties based generally on the applicable quoted market prices of the respective produce or biological asset in the relevant markets at the point of sale. At the point of sale, our agricultural produce is measured at net realizable value, which reflects the sale price less the direct cost to sell, and our biological assets are measured at fair value less cost to sell, in each case, using the applicable quoted market prices in the relevant markets.
     The line item “Cost of agricultural produce sold and direct agricultural selling expenses” consists of two components: (i) the cost of our sold agricultural produce and/or biological assets as appropriate plus (ii) in the case of agricultural produce, the direct costs of selling, including but not limited to, transportation costs, export taxes and other levies. The cost of our agricultural produce sold represents the recognition as an expense of our agricultural produce held in inventory valued at net realizable value. The cost of our biological assets and/or agricultural produce sold at the point of harvest represents the recognition as an expense of our biological assets and/or agricultural produce measured at

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fair value less costs to sell, generally representing the applicable quoted market price at the time of sale. Accordingly, the line item “Sales of agricultural produce and biological assets” is equal to the line item “Cost of agricultural produce plus direct agricultural selling expenses.”
     Accordingly, we receive cash or consideration upon the sale of our inventory of agricultural produce to third parties but we do not record any additional profit related to that sale, as that gain or loss had already been recognized under the line items “Initial recognition and changes in fair value of biological assets and agricultural produce” and “Changes in net realizable value of agricultural produce after harvest,” as described above.
Land Transformation
     The Land Transformation segment includes two types of operations. The first relates to the acquisition of farmlands or businesses with underdeveloped or underutilized agricultural land (land which we have identified as capable of being transformed into more productive farmland by enhancing yields and increasing its future value). When we acquire a farmland business for an acquisition price below its estimated fair value, we recognize an immediate gain (a “purchase bargain gain”). The land acquired is recognized at its fair value at the acquisition date and is subsequently carried at cost under the cost model in IAS 16.
     The second type of operation undertaken within this segment relates to the realization of value through the strategic disposition of assets (i.e. farmland) that may have reached full development potential. Once we believe certain land has reached full growth potential, we may decide to realize such incremental value through the disposition of the land.
     The results of these two activities (purchase bargain gains as a result of opportunistic acquisitions of businesses with underdeveloped or underutilized land below fair market value, and gains on dispositions reflecting the ultimate realization of cash value on dispositions of transformed farmlands) are included separately in the Land Transformation segment.
     Land transformation activities themselves are not reflected in this segment; rather, they are reflected in all of our other agricultural activities in other segments. The results of our land transformation strategy are realized as a separate activity upon disposition of transformed farmlands and other rural properties.
     A. OPERATING RESULTS
Trends and Factors Affecting Our Results of Operations
     Our results of operations have been influenced and will continue to be influenced by the following factors:
     (i) Effects of Yield Fluctuations
     The occurrence of severe adverse weather conditions, especially droughts, hail, floods or frost, are unpredictable and may have a potentially devastating impact on agricultural production and may otherwise adversely affect the supply and prices of the agricultural commodities that we sell and use in our business. The effects of severe adverse weather conditions may also reduce yields at our farms. Commencing during the middle of 2008 and lasting until the middle of 2009, the countries in which we operate suffered one of the worst droughts of the last 50 to 70 years, which resulted in a reduction of approximately 15.0% to 40.0% in our yields, depending on the affected commodity, compared with our historical averages. These yield reductions directly impacted the yields of our Crops segment, which is reflected in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce” of the statement of income. The average expected yields for the 2008/2009 harvest for crops before the drought were 2.5 tons per hectare for soybean and 7.7 tons per hectare for corn. The actual yields following the drought were 1.5 tons per hectare for soybean and 5.5 tons per hectare for corn, which generated a decrease in initial recognition and changes in fair value of biological assets and agricultural produce in respect of soybeans, corn and the remaining crops of $13.0 million,

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$3.1 million and $0.3 million, respectively, for the year ended December 31, 2009.
     The average expected yield for the 2008/2009 harvest for rice before the drought was 6.7 tons per hectare. The actual yield for the 2008/2009 harvest following the drought was 5.5 tons per hectare, which generated a decrease in initial recognition and changes in fair value of biological assets and agricultural produce of $4.2 million for the year ended December 31, 2009.
     The following table sets forth our average crop, rice and sugarcane yields for the periods indicated:
                                         
    Year ended        
    December 31,     % Change  
    2010     2009     2008     2009-2010     2008-2009  
Corn
    5.9       5.5       6.8       7,2 %     (18.5 %)
Soybean
    3.1       1.5       2.1       112.5 %     (30.9 %)
Soybean (second harvest)
    1.9       1.6       1.7       21.3 %     (7.3 %)
Cotton
    2.5       2.9       4.5       (13.9 %)     (35.6 %)
Wheat
    3.3       2.3       2.4       41.3 %     (4.4 %)
Rice
    5.1       5.5       6.7       (8.1 %)     (17.3 %)
Coffee
    1.4       1.5       2.3       (7.9 %)     (21.7 )%
Sugarcane
    96.1       93.4       89.4       3.3 %     4.5 %
     Since the mid 2009, rain levels have normalized generating, in general, a recovery of yields for the 2009/2010 harvest.
     (ii) Effects of Fluctuations in Production Costs
     During the last three years, we have experienced fluctuations in our production costs. The primary reason is the fluctuation in the costs of (i) fertilizers, (ii) agrochemicals, (iii) seeds, (iv) fuel and (v) farm leases. The use of advanced technology, however, has allowed us to increase our efficiency, in large part mitigating the fluctuations in production costs. Some examples of how the implementation of production technology has allowed us to increase our efficiency and reduce our costs include using no-till (also known as “direct sowing”, which involves farming without the use of tillage, leaving plant residues on the soil to form a protective cover which positively impacts costs, yields and the soil (see “Item 4. Information on the Company—B. Business Overview—Technology and Best Practices—No-Till”)), crop rotation, second harvest in one year, integrated pest management, and balanced fertilization techniques to increase the productive efficiency in our farmland. Increased mechanization of harvesting and planting operations in our sugarcane plantations and utilization of modern, high pressure boilers in our sugar and ethanol mills has also yielded higher rates of energy production per ton of sugarcane.
     (iii) Effects of Fluctuations in Commodities Prices
     Commodity prices have historically experienced substantial fluctuations. For example, based on Chicago Board of Trade (“CBOT”) data, from January 4, 2010 to December 31, 2010, wheat prices increased by approximately 42.4%, and soybean prices increased by approximately 32.8%. Prices in Argentina are highly correlated with CBOT prices. Also, between January 4, 2010 and May 6, 2010, sugar prices decreased by 50.5% and between May 6, 2010 and December 31, 2010 increased by 135%, according to Intercontinental Exchange of New York (“ICE-NY”) data. Ethanol prices increased by 4.3% during 2010, according to ESALQ data. Commodity price fluctuations impact our statement of income as follows:

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  Initial recognition and changes in the fair value of biological assets and agricultural produce in respect of unharvested biological assets undergoing biological transformation;
  Changes in net realizable value of agricultural produce for inventory carried at its net realizable value; and
  Sales of manufactured products and sales of agricultural produce and biological assets sold to third parties.
     The following graphs show the spot market price of some of our products for the periods indicated:
     
Soybean in U.S. cents per bushel (CBOT)
  Coffee in U.S. cents per pound (ICE-NY)
     
(GRAPH)   (GRAPH)
     
Sugar in U.S. cents per pound (ICE-NY)   Ethanol in Reais per cubic meter (ESALQ)
     
(GRAPH)   (GRAPH)
     (iv) Fiscal Year and Harvest Year
     Our fiscal year begins on January 1 and ends on December 31 of each year. However, our production is based on the harvest year for each of our crops and rice. A harvest year varies according to the crop or rice plant and to the climate in which it is grown. Due to the geographic diversity of our farms, the planting period for a given crop or rice may start earlier on one farm than on another, causing differences for their respective harvesting periods. The presentation of production volume (tons) and product area (hectares) in this annual report in respect of the harvest years for each of our crops and rice starts with the first day of the planting period at the first farm to start planting in that harvest year to the last day of the harvesting period of the crop, rice or coffee planting on the last farm to finish harvesting that harvest year.
     Product area for cattle is presented on a harvest year basis, as land used for cattle operations is linked to our farming operations and use of farmland during a harvest year, while production volumes for dairy and cattle are presented on a fiscal year basis. On the other hand, production volume and product area in our sugar, ethanol and energy business are presented on a fiscal year basis.
     The financial results in respect of all of our products are presented on a fiscal year basis. See “Item 4. Information on the Company—B. Business Overview.”

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     (v) Effects of Fluctuations of the Production Area
   Our results of operations also depend on the size of the production area. The size of our own and leased area devoted to crop, rice, coffee and sugarcane production fluctuates from period to period in connection with the purchase and development of new farmland, the sale of developed farmland, the lease of new farmland and the termination of existing farmland lease agreements. Lease agreements are usually settled following the harvest season, from July to June in crops and rice, and from May to April in sugarcane. The length of the lease agreements are usually one year for crops, one to five years for rice and five to six years for sugarcane. Regarding crops, the production area can be planted and harvested one or two times per year. As an example, wheat can be planted in July and harvested in December. Right after its harvest, soybean can be planted in the same area and harvested in April. As a result, planted and harvested area can exceed the production area during one year. Regarding sugarcane and coffee, the production area can exceed the harvested area in one year. Grown sugarcane can be left in the fields and then harvested the following year. Coffee trees are pruned from time to time, in which case they do not produce beans and accordingly, are not harvested the following year. The increase in the production area of 2010 is mainly driven by an increase in leased area and transformation of undeveloped/undermanaged own land that was put into production
     The following table sets forth the fluctuations in the production area for the periods indicated:
                         
    Year ended December 31,  
    2010     2009     2008  
    Hectares  
Crops
    136,193       104,986       77,221  
Rice
    18,142       17,258       14,820  
Coffee
    1,632       1,632       1,632  
Sugar, Ethanol and Energy
    53,799       49,470       32,616  
     (vi) Effect of Acquisitions and Dispositions
   The comparability of our results of operations is also affected by the completion of significant acquisitions and dispositions. Our results of operations for earlier periods that do not include a recently completed acquisition or do include farming operations subsequently disposed of may not be comparable to the results of a more recent period that reflects the results of such acquisition or disposition.
     (vii) Macroeconomic Developments in Emerging Markets
   We generate nearly all of our revenue from the production of food and renewable energy in emerging markets. Therefore, our operating results and financial condition are directly impacted by macroeconomic and fiscal developments, including fluctuations in currency exchange rates, inflation and interest rate fluctuations, in those markets. In recent years, the emerging markets where we conduct our business (including Argentina, Brazil and Uruguay) have generally experienced significant macroeconomic improvements but remain subject to such fluctuations.
     (viii) Effects of Export Taxes on Our Products
     Following the economic and financial crisis experienced by Argentina in 2002, the Argentine government increased export taxes on agricultural products, mainly on soybean and its derivatives, wheat, rice and corn. Soybean is subject to an export tax of 35.0%; wheat is subject to an export tax of 23.0%, rough rice is subject to an export tax of 10.0%, processed rice is subject to an export tax of 5.0%, corn is subject to an export tax of 20.0% and sunflower is subject to an export tax of 32.0%.
     As local prices are determined taking into consideration the export parity reference, any increase in export taxes would affect our financial results.

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     (ix) Effects of Foreign Currency Fluctuations
     Each of our Argentine, Brazilian and Uruguayan subsidiaries uses local currency as its functional currency. A significant portion of our operating costs in Argentina are denominated in Argentine Pesos and most of our operating costs in Brazil are denominated in Brazilian Reais. For each of our subsidiaries’ statements of income, foreign currency transactions are translated into the local currency, as such subsidiaries’ functional currency, using the exchange rates prevailing as of the dates of the relevant specific transactions. Exchange differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income under “finance income” or “finance costs,” as applicable. Our consolidated financial statements are presented in U.S. dollars, and foreign exchange differences that arise in the translation process are disclosed in the consolidated statement of comprehensive income.
     As of December 31, 2010, the Peso-U.S. dollar exchange rate was Ps.3.97 per U.S. dollar as compared to Ps.3.8 and Ps.3.45 per U.S. dollar as of December 31, 2009 and 2008, respectively. As of December 31, 2010, the Real-U.S. dollar exchange rate was R$1.65 per U.S. dollar as compared to R$1.74 and R$2.34 per U.S. dollar as of December 31, 2009 and 2008, respectively.
     The following graph shows the Real-U.S. dollar rate of exchange for the periods indicated:
(GRAPH)
     Our principal foreign currency fluctuation risk involves changes in the value of the Real relative to the U.S. dollar. Periodically, we evaluate our exposure and consider opportunities to mitigate the effects of currency fluctuations by entering into currency forward contracts and other hedging instruments. As of December 31, 2010, the Company was committed to buy $20 million Reais during 2011 at R$1.81 per U.S. dollar.
     (x) Seasonality
     Our business activities are inherently seasonal. We generally harvest and sell corn, soybean, rice and sunflower between February and August, and wheat from December to January. Coffee and cotton are unique in that while both are typically harvested from May to August, they require a conditioning process that takes about two to three months before being ready to be sold. Sales in other business segments, such as in our Cattle and Dairy segments, tend to be more stable. However, milk sales are generally higher during the fourth quarter, when weather conditions are more favorable for production. The sugarcane harvesting period typically begins between April and May and ends between November and December. As a result of the above factors, there may be significant variations in our results of operations from one quarter to another, since planting activities may be more concentrated in one quarter whereas harvesting activities may be more concentrated in another quarter. In addition our quarterly results may vary as a result of the effects of fluctuations in commodity prices and production yields and costs related to the “Initial recognition and changes in fair value of biological assets and agricultural produce” line item. See “—Critical Accounting Policies and Estimates—Biological Assets and Agricultural Produce.”

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     (xi) Land Transformation
     Our business model includes the transformation of pasture and unproductive land into land suitable for growing various crops and the transformation of inefficient farms into farms suitable for more efficient uses through the implementation of advanced and sustainable agricultural practices, such as “no-till” technology and crop rotation. During approximately the first three to five years of the land transformation process of any given parcel, we must invest heavily in transforming the land, and, accordingly, crop yields during such period tend to be lower than crop yields once the land is completely transformed. After the transformation process has been completed, the land requires less investment, and crop yields gradually increase. As a result, there may be variations in our results from one season to the next according to the amount of land in the process of transformation.
     Our business model also includes the identification, acquisition, development and selective disposition of farmlands or other rural properties that after implementing agricultural best practices and increasing crop yields we believe have the potential to appreciate in terms of their market value. As a part of this strategy, we purchase and sell farms and other rural properties from time to time.
     The results included in the Land Transformation segment are related to the acquisition and disposition of farmland businesses and not to the physical transformation of the land. The decision to acquire and/or dispose of a farmland business depends on several market factors that vary from period to period, rendering the results of these activities in one financial period when an acquisition of disposition occurs not directly comparable to the results in other financial periods when no acquisitions or dispositions occurred.
     (xii) Capital Expenditures and Other Investments
     Our capital expenditures during the last three years consisted mainly of expenses related to (i) acquiring land, (ii) transforming and increasing the productivity of our land, (iii) planting non-current sugarcane and coffee and (iv) expanding and upgrading our production facilities. Our capital expenditures incurred in connection with such activities were $217.3 million for the year ended December 31, 2008, $138.6 million for the year ended December 31, 2009 and $130.6 million for the year ended December 31, 2010. See also “—Capital Expenditure Commitments.”
     (xiii) Effects of Corporate Taxes on Our Income
     We are subject to a variety of taxes on our results of operations. The following table shows the income tax rates in effect for 2010 in each of the countries in which we operate:
         
    Tax Rate (%)  
Argentina
    35  
Brazil(1)
    34  
Uruguay
    25  
 
(1)   Including the Social Contribution on Net Profit (CSLL)
Critical Accounting Policies and Estimates
     We prepared our consolidated financial statements in accordance with IFRS as issued by the IASB and the interpretations of the IFRIC. The critical accounting policies are policies important to the portrayal of a company’s financial condition and operating results, and which require management to make difficult and subjective judgments that are inherently uncertain. Based on this definition, we have identified the following significant accounting policies as critical to the understanding of our consolidated financial statements. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. The principal area where our management is required to make significant

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judgments about estimates where actual results could differ materially from such estimates is in the carrying amount of our biological assets. These estimates and judgments are subject to an inherent degree of uncertainty. We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us at the time that these estimates and judgments are made. We continually evaluate our judgments, estimates and assumptions. To the extent there are material differences between these estimates and actual results, our consolidated financial statements will be affected.
     We believe the following to be our more significant critical accounting policies and estimates used in the preparation of the consolidated financial statements:
     Biological Assets and Agricultural Produce
     Before harvest, our crops are biological assets. Subsequent to harvest, biological transformation ceases and the harvested crops meet the definition of agricultural produce under IAS 41 “Biological Assets.” As prescribed by IAS 41, we measure growing crops which have not attained significant biological growth at cost less any impairment losses, which approximates fair value. Capitalized expenses for growing crops include land preparation expenses and other direct production expenses incurred during the sowing period including costs of labor, fuel, seeds, agrochemical and fertilizer, among others. We measure biological assets (at initial recognition, when the biological asset has attained significant biological growth, and at each subsequent measurement reporting date) and agricultural produce at the point of harvest at fair value less selling costs. The objective of the fair value model under IAS 41 is to recognize gains and losses arising from such measurements gradually over the asset’s life rather than only on sale or realization. IAS 41 prescribes, among other things, the accounting treatment for biological assets during the period of growth, degeneration, production and procreation, and for the initial measurement of agricultural produce at the point of harvest.
     We account for agricultural produce after harvest as inventory, as further described below.
     The following table sets forth the way in which we value biological assets and agricultural produce for each of our principal products:
                 
    Biological Asset        
    No significant   Significant        
    biological growth   biological growth   Agricultural Produce   Manufactured Product
Crops
  Crop from planting
through
approximately 60
days
  Crop, approximately 60 days after planting up to the moment of harvest (total period of approximately 3 to 5 months).   Harvested crop (soybean, corn, wheat, etc.)   Soybean oil and soybean meal
 
               
Rice
  Rice plant from
planting through
approximately 60
days
  Rice plant, approximately 60 days after planting up to the moment of harvest (total period of approximately 3 to 4 months).   Harvested rough rice   Processed Rice
 
               
Coffee
  Coffee tree from
planting through
approximately 18
months
  Coffee tree, approximately 18 months after planting until exhausted in 15-20 harvests (total period of approximately 16 years).   Harvested coffee   Coffee
 
               
Dairy   Dairy cow is considered a biological asset from birth/purchase to death or sale.   Raw milk   Processed milk (whole milk powder) and dairy products
 
               
Cattle   Beef cattle are considered a biological asset from birth/purchase to death or sale.   N/A   N/A
 
               
Sugar, ethanol and energy
  Sugarcane from
planting through
approximately 30
days
  Sugarcane, approximately 30 days after planting until exhausted in 5-6 harvests (total period of approximately 5.5 years).   Sugarcane   Sugar, ethanol and energy

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    Biological Asset        
    No significant   Significant        
    biological growth   biological growth   Agricultural Produce   Manufactured Product
VALUATION CRITERIA
  Cost, which approximates fair value less accumulated impairment losses, if any. For dairy and cattle, fair value less estimated cost to sell.   Fair value (using discounted cash flow valuation) less cost to sell.   Net realizable value, except for rough rice and milk which are valued at cost.   Cost
     Gains and losses that arise from measuring biological assets at fair value less selling costs and measuring agricultural produce at the point of harvest at fair value less selling costs are recognized in the statement of income in the period in which they arise as “Initial recognition and changes in fair value of biological assets and agricultural produce.” We value our inventories of agricultural produce after harvest at net realizable value, except for rice, which is valued at cost.
     When an active market exists for biological assets, we use the quoted market price in the most relevant market as a basis to determine the fair value of our biological assets, as in the case of cattle. For other biological assets where there is neither an active market nor market-determined prices during the growth cycle, we determine their fair value through the use of DCF valuation techniques. Therefore, we generally derive the fair value of our growing biological assets from the expected cash flows of the related agricultural produce. The DCF method requires the input of highly subjective assumptions, including observable and unobservable data. Generally, the estimation of the fair value of biological assets is based on models or inputs that are not observable in the market, and the use of unobservable inputs is significant to the overall valuation of the assets. Various factors influence the availability of observable inputs, including, but not limited to, the type of asset and its location, climate changes and the technology used, among others.
     Unobservable inputs are determined based on the best information available, for example, by reference to historical information regarding past practices and results, statistical and agronomical information and other analytical techniques. Changes in the assumptions underlying such subjective inputs can materially affect the fair value estimate and impact our results of operations and financial condition from period to period.
     The DCF method requires the following significant inputs to project revenues and costs:
    Production cycles or number of harvests;
 
    Production area in hectares;
 
    Estimated crop and rice yields;
 
    Estimated sucrose content (Total Recoverable Sugar or TRS) for sugarcane;
 
    Estimated costs of harvesting and other costs to be incurred until the crops and rice reach maturity (mainly costs of pesticides, herbicides and spraying);
 
    Estimated transportation costs;
 
    Market prices; and
 
    Discount rates.
     In contrast to biological assets whose fair value is generally determined using the DCF method, we typically determine the fair value of our agricultural produce at the point of harvest using market prices.

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     Market prices used in the DCF model are determined by reference to observable data in the relevant market (e.g. for crops, sugar and coffee). Harvesting costs and other costs are estimated based on historical and statistical data. Yields are estimated by our agronomic engineers based on several factors, including the location of the farmland, soil type, environmental conditions, infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a high degree of uncertainty and may be affected by several factors out of our control, including but not limited to extreme or unusual weather conditions, plagues and other diseases. Discount rates reflect current market assessments of the assets involved and the time value of money.
     As of December 31, 2010, the impact of a reasonable 10% increase (decrease) in estimated market prices, with all other variables held constant, would result in an increase (decrease) in the fair value of our plantations less cost to sell of $35.7 million for sugarcane, $13.1 million for coffee, $2.6 million for crops and $3.2 million for rice. As of December 31, 2010, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a increase (decrease) in the fair value of our plantations less cost to sell of $30.8 million for sugarcane, $8.0 million for coffee, $1.3 million for crops and $2.0 million for rice. As of December 31, 2010, the impact of a reasonable 5% increase (decrease) in estimated yields, with all other variables held constant, would result in an increase (decrease) in the fair value of our plantations less cost to sell of $11.5 million for sugarcane and $4.9 million for coffee. As of December 31, 2010, the impact of a reasonable 20% increase (decrease) in estimated yields, with all other variables held constant, would result in an increase (decrease) in the fair value of our plantations less cost to sell of $4.6 million for crops and $6.0 million for rice. As of December 31, 2010, the impact of a reasonable 100 basic points increase (decrease) in discount rates, with all other variables held constant, would result in an increase (decrease) in the fair value of our plantations less cost to sell of $1.8 million for sugarcane and $1.6 million for coffee.
     All of the key assumptions discussed above are highly sensitive. Reasonable shifts in assumptions, including but not limited to increases or decreases in prices and discount rates used would result in a significant increase or decrease of the fair value of biological assets and significantly impact our statement of income. In addition, cash flows are projected over the following year or a number of years (depending on the type of biological asset) and based on estimated production. Estimates of production in and of themselves depend on various assumptions, in addition to those described above, including but not limited to several factors such as location, environmental conditions and other restrictions. Changes in these estimates could materially impact estimated production and could, therefore, affect estimates of future cash flows used in the assessment of fair value.
     The valuation models and their assumptions are reviewed annually, or quarterly if warranted, and, if necessary, adjusted. During the year ended December 31, 2009, we made no changes to the models and assumptions. During the year ended December 31, 2010, new information has been gained and accordingly we introduced an adjustment to the valuation model for sugarcane. Projected revenues are now calculated based on the average of daily prices for sugar future contracts (Sugar # 11 ICE-NY contract) during the six-month period ended at period end rather than the single price for sugar future contracts at year end used during 2009. We determined that the use of 6-month average of daily prices of future contracts was a more appropriate estimate for price inputs in the valuation model than the single price for sugar future contracts at period-end, as it would mitigate any additional variability that a single-day price may have on the sugarcane valuation model and was necessary to properly measure the fair value of the related biological assets given changes in market conditions in 2010. The effect of this change in the valuation model recognized in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce” was an increase in the loss before income tax for $90.9 million for the year ended December 31, 2010.
     The aggregate gains and losses arising during a period on initial recognition and from the changes in fair value less costs to sell of biological assets is affected by the way we treat our harvesting and production costs for accounting purposes. Since IAS 41 does not provide guidance on the treatment of these costs, we generally capitalize all costs directly involved with the management of biological assets. These costs may include labor, planting, fertilizers, agrochemicals, harvesting, irrigation and feeding, among others. Then, the cost of the biological asset is adjusted periodically by the re-measurement of the biological asset at fair value less cost to sell. For example, before significant biological

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growth is attained, costs and expenses are capitalized as biological assets, and once biological assets reach significant biological growth we adjust biological assets to fair value less cost to sell. Accordingly, capitalized biological assets are adjusted periodically at fair value less cost to sell. At the point of harvest, we recognize the agricultural produce at fair value less cost to sell. The periodic adjustments in fair value less cost to sell reflect period to period gains or losses. After agricultural produce is harvested, we may hold it in inventory at net realizable value up to the point of sale, which includes market selling price less direct selling expenses, with changes in net realizable value recognized in the statement of income as incurred. When we sell our inventory, we sell at the prevailing market price and we incur direct selling expenses.
     We generally recognize the agricultural produce held in inventory at net realizable value with changes recognized in the statement of income as they occur. Therefore, changes in net realizable value represent the difference in value from the last measurement through the date of sale on an aggregated basis.
     We consider gains and losses recorded in the line items of the statement of income “Initial recognition and changes in fair value of biological assets and agricultural produce” and “Changes in net realizable value of agricultural produce after harvest” to be realized only when the related produce or manufactured product is sold to third parties and, therefore, converted into cash or other financial assets. Therefore, “realized” gains or losses means that the related produce or product has been sold and the proceeds are included in revenues for the year.
     The sale of agricultural produce is revenue as defined in IAS 18. However, IAS 41 does not provide guidance on the presentation of revenues and costs arising from the selling of biological assets and agricultural produce. Due to the lack of guidance in IAS 41 and based on IAS 1, “Presentation of financial statements,” we present, as a matter of accounting policy, our sales of biological assets and agricultural produce and their respective costs of sale separately in two line items in the statement of income. The line item “Sales of agricultural produce and biological assets” represents the consideration received or receivable for the sale to third parties based generally on the applicable quoted market prices of the respective produce or biological asset in the relevant markets at the point of sale. At the point of sale, our agricultural produce is measured at net realizable value, which reflects the sale price less the direct cost to sell, and our biological assets are measured at fair value less cost to sell, in each case, using the applicable quoted market prices in the relevant markets.
     The line item “Cost of agricultural produce sold and direct agricultural selling expenses” consists of two components: (i) the cost of our sold agricultural produce and/or biological assets as appropriate plus (ii) in the case of agricultural produce, the direct costs of selling, including but not limited to, transportation costs, export taxes and other levies. The cost of our agricultural produce sold represents the recognition as an expense of our agricultural produce held in inventory valued at net realizable value. The cost of our biological assets and/or agricultural produce sold at the point of harvest represents the recognition as an expense of our biological assets and/or agricultural produce measured at fair value less costs to sell, generally representing the applicable quoted market price at the time of sale. Accordingly, the line item “Sales of agricultural produce and biological assets” is equal to the line item “Cost of agricultural produce plus direct agricultural selling expenses.”
     Accordingly, we receive cash or consideration upon the sale of our inventory of agricultural produce to third parties but we do not record any additional profit related to that sale, as that gain or loss had already been recognized under the line items “Initial recognition and changes in fair value of biological assets and agricultural produce” and “Changes in net realizable value of agricultural produce after harvest,” as described above.
     Based on the foregoing, the gross profit of our agricultural activities is solely a function of the “Initial recognition and changes in fair value of biological assets and agricultural produce” and of the “Changes in net realizable value of agricultural produce after harvest.”

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     Business Combinations—Purchase Price Allocation
     Accounting for business combinations requires the allocation of our purchase price to the various assets and liabilities of the acquired business at their respective fair values. We use all available information to make these fair value determinations. In some instances, assumptions with respect to the timing and amount of future revenues and expenses associated with an asset might have to be used in determining its fair value. Actual timing and amount of net cash flows from revenues and expenses related to that asset over time may differ materially from those initial estimates, and if the timing is delayed significantly or if the net cash flows decline significantly, the asset could become impaired.
     Impairment Testing
     We review the carrying amounts of our property, plant and equipment and intangible assets of finite life at the date of each statement of financial position to determine whether there is any indication that such assets have suffered an impairment loss. Based on the circumstances prevailing in each location, we use either a fair value less costs-to-sell model or a value-in-use model. An impairment loss, if any exists, is recognized immediately in the statement of income.
     Due to the characteristics of our investments in Argentina and Uruguay, we tested all of our cash generating units (“CGUs”) based on a fair value less costs-to-sell model. In using this model, we applied the “sales comparison approach” as the method of valuing most properties. This approach is based on the theory that the fair value of a property is directly related to the selling prices of similar properties. The fair value of farmland property is the amount of money we would realize if it were sold at arm’s length by a willing seller to a willing buyer. We base the values of our farmland on the lands’ productive capability (the ability of the land to produce crops and/or maintain livestock) and other factors such as climate and location. Farmland ratings are established by considering such factors as soil texture and quality, yields, topography, drainage and rain levels. Farmland may contain farm outbuildings, which include any improvement or structure that is used for farming operations, and are valued based on their size, age and design. Based on the factors described above, we assign each farm property a different soil classification for the purposes of establishing a value. Soil classifications quantify the factors that contribute to the agricultural capability of the soil. Soil classifications range from the most productive to the least productive. We refer to Note 4 to the consolidated financial statements for a detailed description of amounts tested. Based on the testing performed, we determined that none of the CGUs, with or without allocated goodwill, were impaired as of December 31, 2010, 2009 and 2008. For our investments in Brazil, we tested all CGUs based on a value-in-use model. In performing the value-in-use calculation, we applied pre-tax rates to discount the future pre-tax cash flows. We made key assumptions based on our past experience and we believe they are consistent with relevant external sources of information, such as appropriate market data. See Note 4 to our consolidated financial statements for further details.
     We based our discount rates on the risk-free rate for U.S. government bonds, adjusted for a risk premium to reflect the increased risk of investing in South America and Brazil in particular. As of December 31, 2010, the discount rate used for Brazil was 8.7%. We refer to Note 4 to the consolidated financial statements for a detailed description of amounts tested. Based on the testing performed we determined that none of the CGUs, with and without allocated goodwill, were impaired as of December 31, 2010, 2009 and 2008. A reasonably possible change of 10% in the key assumptions used to determine the projections (excluding discount rates) would have had no effect on the goodwill impairment testing results for any of the years presented. The base case was then stress-tested using a zero growth assumption and continued to show no impairment. A reasonably possible change of 1% in the perpetuity growth rates would have had no effect on the goodwill impairment testing results. A reasonably possible change of 1% in the discount rates would have had no effect on the goodwill impairment testing results.
     Fair Value of Derivatives and Other Financial Instruments
     Fair values of derivative financial instruments are computed with reference to quoted market prices on trade exchanges, when available. The fair values of commodity options are calculated using year-end market value together with common option pricing models. The fair value of interest rate swaps has been calculated using a DCF analysis.

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     Income Taxes
     Adecoagro is a joint stock corporation (société anonyme) organized under the laws of the Grand Duchy of Luxembourg. We believe that Adecoagro’s corporate structure is organized in a form that will meet substantially all of the requirements provided for by Luxembourg law to benefit from the participation exemption regime, and we have not received an objection, nor any indication to the contrary, from the relevant Luxembourg tax authorities, to whom the proposed structure has been disclosed. Accordingly, Adecoagro believes that it can rely on the participation exemption from tax on income pursuant to the laws of Luxembourg. Our operating subsidiaries in Argentina, Brazil and Uruguay are subject to income taxes. We do not prepare or file a consolidated income tax return. Each operating subsidiary prepares and files its respective income tax returns based on the applicable tax legislation in the country in which the subsidiary operates. There are many transactions and calculations for which the ultimate tax determination is uncertain. We recognize liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact our current and deferred income tax assets and liabilities in the period in which such determination is made.
     Income taxes of each subsidiary are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as operating losses and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
     Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.
     Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are not discounted. In certain jurisdictions, the annual effect of available tax losses is limited to a percentage of taxable income. In assessing the realizability of deferred tax assets, we consider whether it is probable that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
     Allowance for Trade Receivables
     We maintain an allowance for trade receivables to account for estimated losses resulting from the inability of customers to make required payments. When evaluating the adequacy of an allowance for trade receivables, we base our estimates on the aging of accounts receivable balances and historical write-off experience, customer credit worthiness and changes in customer payment terms. If the financial condition of customers were to deteriorate, actual write-offs might be higher than expected.
Operating Segments
     IFRS 8, “Operating Segments,” requires an entity to report financial and descriptive information about its reportable segments, which are operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The amount reported for each segment item is the measure reported to the chief operating decision maker for these purposes.
     We are organized into three main lines of business, which are farming; sugar, ethanol and energy; and land transformation, comprising seven reportable operating segments, which are organized based upon their similar economic characteristics, the nature of the products they

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offer, their production processes, the type and class of their customers and their distribution methods.
     Our farming business is comprised of five reportable operating segments as follows:
    Our Crops segment includes the planting, harvesting and sale to grain traders of grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing and conditioning and handling and drying services to third parties. Production activities in our Crop segment reflect the most productive use of the land to maximize economic return and not the performance of any one underlying crop. Accordingly, the relative mix of underlying crops may change from harvest year to harvest year. A single manager is responsible for the management of operating activity of all crops rather than a manager for each individual crop.
 
    Our Rice segment consists of planting, harvesting, processing and marketing of rice.
 
    Our Dairy segment consists of the production and sale of raw milk, which is processed into manufactured products and marketed through our joint venture with Grupo La Lácteo.
 
    Our Coffee segment consists of cultivating coffee and marketing our own and third party coffee production.
 
    Our Cattle segment consists of purchasing and fattening beef cattle for sale to meat processors and in local livestock auction markets and leasing land.
     Our Sugar, Ethanol and Energy business is its own reporting operating segment and consists of cultivating sugarcane, which we process in our own sugar mills, transform into sugar, ethanol and electricity and market and sell.
     Our Land Transformation business is its own reporting operating segment and includes (i) the ultimate cash realization through sales to third parties of the increase in value of land which is generated through the transformation of its productive capabilities and (ii) bargain gains arising from business combinations, which represent the excess of the fair value of the land acquired over the actual price paid, typically in connection with purchases of undeveloped or undermanaged farmland businesses. See Note 4 to our consolidated financial statements for a description of the basis used to determine fair values.
     The following table presents selected historical financial and operating data solely for the periods indicated below as it is used for our discussion of results of operations.
                         
    Year Ended December 31,  
  2010     2009     2008  
Sales   (In thousands of $)  
Farming Business
    197,741       216,016       193,038  
Crops
    108,162       92,029       95,987  
Soybean(l)
    64,890       44,116       39,025  
Corn
    23,968       14,654       22,547  
Wheat
    7,939       10,218       15,407  
Sunflower
    4,880       5,517       5,615  
Cotton
    2,395       11,905       5,813  
Other crops(2)
    4,090       5,619       7,580  
Rice(3)
    61,585       69,350       56,925  
Coffee
    7,572       14,265       15,948  
Dairy
    14,297       11,894       14,821  
Cattle(4)
    6,125       28,478       9,357  
Sugar, Ethanol and Energy Business(5)
    228,526       97,587       51,171  

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    Year Ended December 31,  
    2010     2009     2008  
Sales   (In thousands of $)  
Sugar
    98,385       26,143       20,495  
Ethanol
    114,793       62,811       29,385  
Energy
    15,040       8,216        
Other
    308       417          
Total
    426,267       313,603       244,209  
Land Transformation Business(6)
    20,837       18,839       15,201  
                                         
    2010/2011     2009/2010     2008/2009     2007/2008     2006/2007  
    Harvest     Harvest     Harvest     Harvest     Harvest  
Production   Year (7)     Year     Year     Year     Year  
Farming Business
                                       
Crops (tons)(8)
    N/A       524,890       317,582       351,787       343,799  
Soybean (tons)
    N/A       241,848       96,982       90,724       149,619  
Corn (tons)
    N/A       180,613       115,900       153,751       117,974  
Wheat (tons)
    N/A       49,592       41,556       61,951       55,075  
Sunflower (tons)
    N/A       17,193       22,128       15,841       4,435  
Cotton (tons)
    N/A       1,068       9,218       15,748       9,236  
Other crops (tons)(2)
    N/A       34,576       31,799       13,772       7,461  
Rice(9) (tons)
    N/A       91,723       94,968       98,577       98,980  
Coffee (tons)(10)
    N/A       2,110       2,412       3,028       1,236  
                         
    Year Ended December 31,  
    2010     2009     2008  
Processed rice(l1) (tons)
    87,526       108,858       81,804  
Dairy(11) (liters)
    41,597       47,479       43,110  
Cattle (tons)(4)(12)
    359       4,149       7,229  
Sugar, Ethanol and Energy Business
                       
Sugar (tons)
    235,690       52,968 (12)     67,772  
Ethanol (cubic meters)
    174,303       132,492 (12)     70,067  
Energy (MWh exported)
    168,644       128,291 (12)      
Land Transformation Business (hectares traded)
    5,086       5,005       4,857  
                                 
    2010/2011     2009/2010     2008/2009     2007/2008  
    Harvest     Harvest     Harvest     Harvest  
Planted Area   Year     Year     Year     Year  
Farming Business(13)
    (Hectares)  
Crops(14)
    163,070       168,241       139,518       107,027  
Soybean
    90,167       87,522       63,973       47,409  
Corn
    30,505       27,720       20,200       24,189  
Wheat
    25,656       21,728       18,917       15,792  
Sunflower
    9,943       14,784       16,539       7,775  
Cotton
    3,242       425       3,159       3,478  
Other crops(2)
    3,815       11,501       11,348       3,930  
Forage
    3,653       4,561       5,382       4,454  
Rice
    27,542       18,142       17,258       14,820  
Coffee(15)
    1,632       1,632       1,632       1,632  
Total Planted Area
    196,155       188,015       158,468       123,480  
Second Harvest Area
    35,829       29,119       29,150       25,352  
Leased Area
    37,707       47,709       13,645       14,264  

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    2010/2011     2009/2010     2008/2009     2007/2008  
    Harvest     Harvest     Harvest     Harvest  
Planted Area   Year     Year     Year     Year  
Owned Croppable Area(16)
    122,619       111,187       115,613       83,864  
Cattle Area(17)
    78,559       87,392       106,375       124,635  
Total Productive Area
    201,178       198,579       221,988       208,499  
                         
    Year Ended December 31,  
    2010     2009     2008  
Sugar, Ethanol and Energy Business
                       
Sugarcane plantation
    53,799       49,470       32,616  
Owned land
    9,907       9,085       3,369  
Leased land
    43,892       40,385       29,247  
Land Transformation Business
                       
Undeveloped/Undermanaged land put into production (hectares)
    6,490       11,255       33,387  
 
(1)   Includes soybean, soybean oil and soybean meal.
 
(2)   Includes barley, rapeseed and sorghum and farming services.
 
(3)   Sales of processed rice including rough rice purchased from third parties and processed in our own facilities, rice seeds and services.
 
(4)   In December 2009, we sold 55,543 head of cattle to a third party. See “Item 4. Information on the Company—B. Business Overview—Cattle Business.”
 
(5)   Includes sales of sugarcane and other miscellaneous items to third parties of $417 thousand and $1,291 thousand during 2009 and 2008, respectively.
 
(6)   Represents capital gains from the sale of land.
 
(7)   As of the date of this annual report, the 2010/2011 harvest was not completed. 2010/2011 harvesting operations began in October 2010 with the harvest of winter crops, and will finish in August 2011, with the harvest of coffee.
 
(8)   Crop production does not include 46,749 tons, 52,482 tons and 52,960 tons of forage produced in the 2010/2011, 2009/2010 and 2008/2009 harvest years, respectively.
 
(9)   Expressed in tons of rough rice produced on owned and leased farms. The rough rice we produce, along with additional rough rice we purchase from third parties, is ultimately processed and constitutes the product sold in respect of the rice business.
 
(10)   Includes rough rice purchased from third parties and processed in our own facilities. Expressed in tons of processed rice (1 ton of processed rice is approximately equivalent to 1.6 tons of rough rice).
 
(11)   Raw milk produced at our dairy farms.
 
(12)   Measured in tons of live weight. Production is the sum of the net increases (or decreases) during a given period in live weight of each head of beef cattle we own.
 
(13)   Includes hectares planted in the second harvest.
 
(14)   Includes 3,653 hectares, 4,561 hectares and 5,382 hectares used for the production of forage during the 2010/2011, 2009/2010 and 2008/2009 harvest years, respectively.
 
(15)   Reflects the size of our coffee plantations, which are planted only once every 18 to 20 years.
 
(16)   Does not include potential croppable areas being evaluated for transformation.
 
(17)   Comprised of land devoted to raising beef cattle, which is mostly leased to a third party.

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Year ended December 31, 2010 as compared to year ended December 31, 2009
     The following table sets forth certain financial information with respect to our consolidated results of operations for the periods indicated.
                 
    2010     2009  
    (In thousands of $)  
     
Sales of manufactured products and services rendered
    294,529       183,386  
Cost of manufactured products sold and services rendered
    (219,201 )     (180,083 )
 
           
Gross Profit from Manufacturing Activities
    75,328       3,303  
 
           
Sales of agricultural produce and biological assets
    131,738       130,217  
Cost of agricultural produce sold and direct agricultural selling expenses
    (131,738 )     (130,217 )
Initial recognition and changes in fair value of biological assets and agricultural produce
    (30,528 )     71,668  
Changes in net realizable value of agricultural produce after harvest
    7,999       12,787  
 
           
Gross (Loss) / Profit from Agricultural Activities
    (22,529 )     84,455  
 
           
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
    52,799       87,758  
 
           
General and administrative expenses
    (56,562 )     (52,393 )
Selling expenses
    (52,528 )     (31,169 )
Other operating income, net
    18,224       13,071  
Share of loss of joint ventures
    (50 )     (294 )
 
           
(Loss)/ Profit from Operations Before Financing and Taxation
    (38,117 )     16,973  
 
           
Finance income
    16,559       11,553  
Finance costs
    (39,496 )     (34,216 )
 
           
Financial results, net
    (22,937 )     (22,663 )
 
           
(Loss) Before Income Tax
    (61,054 )     (5,690 )
 
           
Income tax benefit
    16,263       5,415  
 
           
(Loss) for the Year
    (44,791 )     (275 )
 
           
     Sales of Manufactured Products and Services Rendered
                                                         
                                            Sugar,        
                                            Ethanol and        
    Crops     Rice     Dairy     Coffee     Cattle     Energy     Total  
    (In thousands of $)  
       
2010
    344       59,280             2,709       3,718       228,478       294,529  
2009
    9,667       67,317       752       7,984       172       97,494       183,386  
     Sales of manufactured products and services rendered increased 60.6%, from $183.4 million in 2009, to $294.5 million in 2010, primarily as a result of:
    a $131.0 million increase in our Sugar, Ethanol and Energy segment due to: (i) a 73.5% increase in the volume of sugar and ethanol sold, measured in TRS, from 325 thousand tons of TRS equivalent in 2009 to 564 thousand tons of TRS equivalent in 2010. On average, one metric ton of sugarcane is equivalent to 140 kilograms of TRS equivalent. While a mill can produce either sugar or ethanol, the TRS input requirements differ between the two products. On average, 1.045 kilogram of TRS equivalent is required to produce 1.0 kilogram of sugar, while 1.691 kilograms of TRS equivalent is required to produce a liter of ethanol. The increase in the volume of TRS equivalent sold in 2010 was due to an increase of 84% in the volume of sugarcane crushed in our mills, from 2.2 million tons in 2009 to 4.1 million tons in 2010 due to the expansion of the crushing capacity at our Angélica mill; (ii) a 41.1% increase in the average market price of ethanol, from $430.5 per cubic meter in 2009 to $607.5 per cubic meter in 2010; (iii) a 20.9% increase in the average market price of sugar, from $348.2 per ton in 2009 to $421.1 per ton in 2010; (iv) a 39.4% increase in the volume of energy sold, from 128.3 thousand MWh in 2009 to 178.9 thousand MWh in 2010. The following table sets forth the breakdown of sales by product for the periods indicated.
                                                                         
    Period Ended December 31,     Period Ended December 31,     Period Ended December 31,  
    2010     2009           2010     2009           2010     2009        
    (In millions of $)     %Change     (In thousands units)     %Change     (In dollars per unit)     %Change  
Ethanol(M3)
    114.8       62.8       82.8 %     189.0       145.9       29.5 %     607.5       430.5       41.1 %
Sugar(Tons)
    98.4       26.1       276.3 %     233.6       75.1       211.2 %     421.1       348.2       20.9 %
Energy(MWh)
    15.0       8.2       76.1 %     178.9       128.3       39.4 %     84.1       66.6       26.3 %
Others
    0.3       0.4       0.0 %                                                
                                                     
Total
    228.5       97.5       134.4 %                                                
                                                         

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    During 2010, the sugar facility at the Angélica mill was completed which increased sugar production proportionally, therefore increasing sugar sales more than ethanol sales.
    a $3.5 million increase in our Cattle segment due to the revenues from the lease of most of our cattle land to a third party in December 2009 for beef cattle grazing;
    partially offset by:
    a $8.0 million decrease in our Rice segment due to a 17.9% decrease in the volume of white and brown rice sold, mainly as a result of a 18.0% decrease in the volume of rough rice processed in our mills, as a result of a lower volume of rough rice purchased from third parties due to increases in the price of rough rice. The decrease in volume was partially offset by a 14.1% increase in price, from $347.9 per ton of rough rice equivalent, which reflects the sale price of white and brown rice in 2009 to $397.0 per ton of rough rice equivalent in 2010;
 
    a $9.3 million decrease in our Crops segment mainly due to a one-time production and sale of 18.9 thousand tons of soybean meal and oil in a leased industrial facility during 2009;
 
    a $5.3 million decrease in our Coffee segment resulting from our cessation of coffee trading activities related to third-party production (we continue to commercialize of our own coffee production); and
 
    a $0.8 million decrease in our Dairy segment due to the cessation of whole milk powder selling activities following our entry into the Grupo La Lácteo joint venture.
     Cost of Manufactured Products Sold and Services Rendered
                                                     
                                        Sugar,    
                                        Ethanol and    
    Crops   Rice   Dairy   Coffee   Cattle   Energy   Total
                            (In thousands of $)                  
     
2010
          (52,017 )           (2,546 )       (164,638 )     (219,201 )
2009
    (5,447 )     (56,576 )     (613 )     (7,120 )       (110,327 )     (180,083 )
    Cost of manufactured products sold and services rendered increased 21.7%, from $180.1 million in 2009, to $219,2 million in 2010. This increase was primarily due to:
 
    a $54.3 million increase in our Sugar, Ethanol and Energy segment as a result of a 73.5% increase in the volume of sugar and ethanol sold coupled with a 34.1% increase in the actual price of sugarcane, which was partially offset by decreases in the operating costs per unit of TRS produced at the Angélica mill as compared to the prior year, which had resulted from the unusual, sporadic rainfall pattern observed during the 2009/2010 harvest year that led to interruptions in harvesting activities, disruptions to milling operations and less stable production rates during 2009;
Partially offset by:
    a $4.6 million decrease in our Rice segment due to a 17.9% decrease in the volume of white and brown rice sold which was partially offset by a 12.0% increase in the cost per unit sold, mainly as a result of an increase in the market price of rough rice, which is the main component of the cost of the processed rice;
    a $5.4 million decrease in our Crops segment mainly due to the cost of raw materials (soybeans) associated with the one-time sale of soybean meal and oil during 2009;
 
    a $4.6 million decrease in our Coffee segment due to a decrease in the volume of coffee traded as a result of the cessation of coffee trading activities since May 2010; and
 
    a $0.6 million decrease in our Dairy segment due to the cessation of whole milk powder selling activities following our entry into the Grupo La Lácteo joint venture.

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     Sales and Cost of Agricultural Produce and Biological Assets
                                                         
                                            Sugar,        
                                            Ethanol and        
    Crops     Rice     Dairy     Coffee     Cattle     Energy     Total  
    (In thousands of $)  
     
2010
    107,818       2,305       14,297       4,863       2,407       48       131,738  
2009
    82,362       2,033       11,142       6,281       28,306       93       130,217  
Sales of agricultural produce and biological assets increased 1.1%, from $130.2 million in 2009, to $131.7 million in 2010, primarily as a result of:
    A $25.5 million increase in our Crops segment mainly due to: (i) a 28.2% increase in the production area, from 104,986 hectares in 2009 to 134,562 hectares in 2010, and (ii) an increase in the average yields obtained in the 2009/2010 harvest as a result of better weather conditions. The following table sets forth the breakdown of sales for the periods indicated.
                                                                         
    Year Ended December 31,     Year Ended December 31,     Year Ended December 31,  
    2010     2009           2010     2009           2010     2009        
    (In millions of $)       %Change    (In thousands of tons)       %Change    (In $ per ton)       %Change 
Soybean.
    64.9       35.7       81.8 %     250.3       120.3       108,0 %     259.3       296.7       (12.6 %)
Corn
    24.0       14.7       63.6 %     182.0       100.5       81.0 %     128.3       145.8       (12.0 %)
Cotton
    2.4       11.9       (79.9 %)     1.8       14.9       (87.7 %)     1,314.7       801.5       64.0 %
Wheat
    7.9       10.2       (22.3 %)     51.7       62.7       (17.4 %)     153.5       163.1       (5.9 %)
Sunflower
    4.9       5.5       (11.6 %)     16.7       27.8       (39.9 %)     291.8       198.1       47.3 %
Barley
    1.2       3.1       (62.3 %)     8.6       21.4       (59.7 %)     135.8       145.1       (6.5 %)
Others
    2.6       1.3       102.4 %     19.7       2.0       905.9 %                        
                                       
Total
    107.8       82.4       30.9 %     530.9       349.6       51.9 %                        
                                       
    a $3.1 million increase in our Dairy segment due to a 46.4% increase in the market price of raw milk, from 23.5 cents per liter in 2009 to 34.4 cents per liter in 2010, partially offset by a 12.4% decrease in the volume of liters produced, from 47.5 million liters in 2009 to 41.6 million liters in 2010 due to a new production system for cows (from the grazing dairy system to the free-stall dairy system); and
 
    a $0.3 million increase in our Rice segment mainly attributable to higher sales of rice seeds to third parties as a result of an increase of the planting area in Argentina, primarily due to better weather conditions;
partially offset by:
    a $25.8 million decrease in our Cattle segment due to a 96.6% decrease in the number of head of beef cattle sold, from 107.4 thousand head in 2009 to 3.7 thousand head in 2010, as a result of the reduced herd size following the sale of most of our beef cattle herd in December 2009; and
 
    a $1.4 million decrease in our Coffee segment primarily due to a 29.2% decrease in the volume sold, from 2,808 tons in 2009 to 1,989 tons in 2010 as a result of a 7.9% decrease in production from 2,412 tons in 2009 to 2,221 tons in 2010 and a 531.2% increase of inventories at end of period from 141 tons in 2009 to 890 tons in 2010. The decrease in production was mainly driven by a decrease

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      in harvested area generated by an increase in the area under pruning, from 276 hectares in 2009 to 406 hectares 2010.
While we receive cash or consideration upon the sale of our inventory of agricultural produce to third parties, we do not record any additional profit related to that sale, as that gain or loss had already been recognized under the line items “Initial recognition and changes in fair value of biological assets and agricultural produce” and “Changes in net realizable value of agricultural produce after harvest.” Please see “—Critical Accounting Policies and Estimates—Biological Assets and Agricultural Produce” above for a discussion of the accounting treatment, financial statement presentation and disclosure related to our agricultural activity.
     Initial Recognition and Changes in Fair Value of Biological Assets and Agricultural Produce