UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 20-F

¨
oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x
þANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED ON DECEMBER 31, 20102013

OR

¨
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROMTO

FOR THE TRANSITION PERIOD FROMTO

OR

¨
oSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

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

Vertigo Naos Building, 6, Rue Eugène Ruppert,

L - 2453 Luxembourg
R.C.S. Luxembourg B 153 681
+352 2689-8213

Tel: +352.2644.9372

(Address of principal executive offices)

Abdelhakim Chagaar
13-15, avenue de la Liberté

Vertigo Naos Building, 6, Rue Eugène Ruppert,

L — 19312453 Luxembourg

Email: abdelhakim.chagaar@atcgroup.com
abdelhakim.chagaar@intertrustgroup.com

Tel: +352.2689.0112
+352.2644.9372

(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:
120,069,2222013:

121,742,124 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

Yeso¨    Noþx

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

1934.    Yeso¨    Noþx

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.

Yesþx    Noo¨

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).

(*)    Yeso¨    Noo¨

(*)This requirement does not apply to the registrant in respect of this filing.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of
“accelerated “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer¨o Accelerated filerxo 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¨

International Financial Reporting Standards as issued

by the International Accounting Standards Boardx

Other¨

o International Financial Reporting Standards as issued by the International Accounting Standards Boardþ Othero

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 17o¨    Item 18o¨

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).

Yeso¨    Noþx

 

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

   iv  
Page

Forward-Looking StatementsPRESENTATION OF FINANCIAL AND OTHER INFORMATION

   iv  
Presentation of Financial and Other Information
ii

PART I

Item 1. Identity of Directors, Senior Management and Advisers

   1  

Item 2. Offer Statistics1.

Identity of Directors, Senior Management and Expected TimetableAdvisers

   1  

Item 3. Key Information2.

Offer Statistics and Expected Timetable

   1  

Item 3.

A. Selected Financial DataKey Information

   1  

A.

SELECTED FINANCIAL DATA

1

B. Capitalization and Indebtedness

CAPITALIZATION AND INDEBTEDNESS

   9  

C.

C. Reasons for the Offer and Use of ProceedsREASONS FOR THE OFFER AND USE OF PROCEEDS

   9  

D.

D. Risk FactorsRISK FACTORS

   9  

Item 4.

Information on the Company

   3439  

A.

A. History and Development of the CompanyHISTORY AND DEVELOPMENT OF THE COMPANY

   3439  

B.

B. Business OverviewBUSINESS OVERVIEW

   3643  

C.

C. Organizational StructureORGANIZATIONAL STRUCTURE

   85  
D. Property, Plants and Equipment
 85

D.

  

Item 4A. Unresolved Staff CommentsPROPERTY, PLANTS AND EQUIPMENT

   86  

Item 5. Operating and Financial Review and Prospects4B.

Unresolved Staff Comments

   86  

Item 5.

A. Operating Resultsand Financial Review and Prospects

86

A.

OPERATING RESULTS

   88  

B.

B. Liquidity and Capital ResourcesLIQUIDITY AND CAPITAL RESOURCES

   119121  
C. Research And Development, Patents and Licenses, Etc.
 127

C.

  

D. Trend InformationRESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

   128  

D.

E. Off-Balance Sheet ArrangementsTREND INFORMATION

   128  

E.

F. Tabular Disclosure of Contractual ObligationsOFF-BALANCE SHEET ARRANGEMENTS

   128  

F.

G. Safe HarborTABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

   128129  

G

SAFE HARBOR

129

Item 6.

Directors, Senior Management and Employees

   128129  

A.

A. Directors and Senior ManagementDIRECTORS AND SENIOR MANAGEMENT

   128129  

B.

B. CompensationCOMPENSATION

   133  

C.

C. Board PracticesBOARD PRACTICES

   133134  

D.

D. EmployeesEMPLOYEES

   136  

E.

E. Share OwnershipSHARE OWNERSHIP

   136137  

Item 7.

Major Shareholders and Related Party Transactions

   140  

A.

A. Major ShareholdersMAJOR SHAREHOLDERS

   140  

B.

B. Related Party TransactionsRELATED PARTY TRANSACTIONS

   141  

C.

C. Interests of Experts and CounselINTERESTS OF EXPERTS AND COUNSEL

142

i

Item 8.

Financial Information

   142  

A.

Item 8. Financial InformationCONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

   143142  
A. Consolidated Statements and Other Financial Information
 143

B. Significant Changes

  143

Item 9. The Offer and ListingSIGNIFICANT CHANGES

143
A. Offer and Listing Details

   144  

Item 9.

B. Plan of DistributionThe Offer and Listing

   144  

A.

C. MarketsOFFER AND LISTING DETAILS

   144  

B.

D. Selling ShareholdersPLAN OF DISTRIBUTION

   144145  

C.

MARKETS

   145  
 Page

D.

  

E. DilutionSELLING SHAREHOLDERS

   144145  

E.

F. Expenses of the IssueDILUTION

   144145  

F.

Item 10. Additional InformationEXPENSES OF THE ISSUE

   144145  

Item 10.

A. Share CapitalAdditional Information

   144145  

A.

B. Memorandum and Articles of AssociationSHARE CAPITAL

   144145  

B.

MEMORANDUM AND ARTICLES OF ASSOCIATION

145

C. Material Contracts

MATERIAL CONTRACTS

   154  

D.

D. Exchange ControlsEXCHANGE CONTROLS

   154  

E.

E. TaxationTAXATION

   156157  

F.

F. Dividends and Paying AgentsDIVIDENDS AND PAYING AGENTS

   163  

G.

G. Statement by ExpertsSTATEMENT BY EXPERTS

   163  

H.

H. Documents on DisplayDOCUMENTS ON DISPLAY

   163  

I.

I. Subsidiary InformationSUBSIDIARY INFORMATION

   163  

Item 11.

Quantitative and Qualitative Disclosures About Market Risk

   163  

Item 12.

Description of Securities Other than Equity Securities

   163  

A.

A. Debt SecuritiesDEBT SECURITIES

   163  

B.

B. Warrants and RightsWARRANTS AND RIGHTS

   163  

C.

C. Other SecuritiesOTHER SECURITIES

   163  

D.

D. American Depositary SharesAMERICAN DEPOSITORY SHARES

   163164  

PART II

   163164  

Item 13.

Defaults, Dividend Arrearages and Delinquencies

   163164  

Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds

   164  

Item 15.

Controls and Procedures

   164  

Item 16

165

Item 16A.

Audit Committee Financial Expert

   164165  

Item 16B.

Code of Ethics

   164165  

Item 16C.

Principal Accountant Fees and Services

   164165  

Item 16D.

Exemptions from the Listing Standards for Audit Committees

   165166  

Item 16E.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   165166  

Item 16F.

Change in Registrant’s Certifying Accountant

   165166  

Item 16G.

Corporate Governance

   165166  

Item 16H.

PART IIIMine Safety Disclosure

   169  

ii

Item 17. Financial StatementsPART III

   168169  

Item 18. 17.

Financial Statements

   168169  

Item 19. Exhibits18.

Financial Statements.

   168169

Item 19.

Exhibits

169  

 

iii

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

i

statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

iv

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 asociété anonymeunder 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 combinedconsolidated sales of manufactured products and services rendered plus sales of agricultural produce and biological assets.

References to “IFRS” are International Financial Reporting Standards issued by the the International Accounting Standards Board (“IASB”) and the interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”), together “IFRS.”

Financial Statements

Background

As part of a corporate reorganization (the “Reorganization”), Adecoagro, a Luxembourg corporation under the form of asociété 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,shares, completed on January 28, 2011. Before the IPO, 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

During 2011, we contributed the controlnet proceeds of the same shareholder group and was implementedIPO to increase our interest in partIFH from 98% to facilitate the IPO. In accordance with IFRS, the Reorganization did not qualify as98.64%. During 2012, we issued, in a business combination under common control; rather, it was a simple reorganizationseries 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.

ii

     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 119,999,997transactions, 1,654,752 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 sharescertain limited partners of IFH in exchange for their residual interest in IFH, totaling 1.3595%, thereby increasing our interest in IFH to 120,069,222, after giving effect to the exercise of the underwriters over-allotment option on February 11, 2011.
approximately 100%.

The consolidated financial statements as of December 31, 2010, 20092013, 2012, and 20082011 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”).IFRS. 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, 20092013, 2012 and 20082011 and for the years then ended are hereinafter referred to as the “consolidated financial statements”“Consolidated Financial Statements”.

v

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 EBITDAsEBITDA for each of our operating segments. We define “Adjusted Consolidated EBITDA” as consolidated net profit or loss(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 (loss) 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(loss) for the year, as applicable, before interest expense, income taxes, foreign exchange gains or losses, other net

iii

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

vi

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)

iv

LOGO

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.

vii

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

v

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.

vi

viii

PART I
Item 1. Identity of Directors, Senior Management and Advisers

Item 1.Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Item 2.Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information
A. SELECTED FINANCIAL DATA

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 and cash flow and balance sheet data as of and for the years ended December 31, 2010, 20092013, 2012 and 20082011 and the selected historical statement of financial position data as of December 31, 2013 and 2012 from the consolidated financial statementsour 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 summaryselected historical statement of income and cash flow data for the year ended December 31, 2010 and balance sheetthe selected historical statement of financial position data as of December 31, 2011 from our Consolidated Financial Statements as of and for the year ended December 31,2010 as restated, which are not included in this annual report but have been filed with the Securities and Exchange Commission under separate cover of Form 6-K on September 6, 2013 (the “2012 Consolidated Financial Statements”).

We have derived the selected historical statement of income and cash flow data for the year ended December 31, 20072009 and 2006the selected historical statement of financial position data as of December 31, 2010 and 2009 from theour consolidated financial statements as of and for the yearyears ended December 31, 20072011, 2010 and 2006,2009 which are not included in this annual report. Certain reclassifications have been made to the consolidated financial statements as of December 31, 20072010 and 2006,2009, and for the yearyears then ended, to conform to the current presentation.

presentation, to reflect the discontinued operations of La Lácteo (See Note 2.3 to the 2012 Consolidated Financial Statements and Note 11 to our Consolidated Financial Statements).

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 statementsConsolidated 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,”Prospects”, “Item 8. Financial Information”, “Item 18. Financial Statements” and the consolidated financial statementsConsolidated 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 

1

   As of December, 
   2013  2012  2011  2010  2009 
��  (In thousands of $) 

Statement of Income Data:

      

Sales of manufactured products and services rendered

   425,307    379,526    365,857    294,529    183,386  

Cost of manufactured products sold and services rendered

   (272,261)   (263,978)   (237,404)   (219,201)   (180,083) 

Gross profit from manufacturing activities

   153,046    115,548    128,453    75,328    3,303  

Sale of agricultural produce and biological assets

   219,317    225,174    182,227    131,738    130,217  

Cost of agricultural produce sold and direct agricultural selling expenses(l)

   (219,317)   (225,174)   (182,227)   (131,738)   (130,217) 

Initial recognition and changes in fair value of biological assets and agricultural produce

   (39,123)   16,643    86,811    (30,528)   71,668  

Changes in net realizable value of agricultural produce after harvest

   12,875    16,004    10,523    7,999    12,787  

Gross profit/(loss) from agricultural activities

   (26,248)   32,647    97,334    (22,529)   84,455  

Margin on manufacturing and agricultural activities before operating expenses

   126,798    148,195    225,787    52,799    87,758  

General and administrative expenses

   (53,352)   (57,691)   (65,142)   (56,562)   (52,393) 

Selling expenses

   (68,069)   (58,602)   (59,404)   (52,528)   (31,169) 

Other operating income, net

   49,650    31,097    24,581    18,224    13,071  

Share of loss of joint ventures

   (219)   —      —      —      —    

Profit /(loss) from operations before financing and taxation

   54,808    62,999    125,822    (38,067)   17,267  

Finance income

   7,234    11,538    9,132    16,559    11,553  

Finance costs

   (98,916)   (66,654)   (62,341)   (39,496)   (34,216) 

Financial results, net

   (91,682)   (55,116)   (53,209)   (22,937)   (22,663) 

(Loss) / Profit before income tax

   (36,874)   7,883    72,613    (61,004)   (5,396) 

Income tax benefit/(expense)

   9,277    5,436    (14,662)   16,263    5,415  

(Loss) / Profit / for the year from continuing operations

   (27,597)   13,319    57,951    (44,741)   19  

Profit /(loss) for the year from discontinued operations

   1,767    (4,040)   (1,034)   (50)   (294) 

(Loss) / Profit for the year

   (25,830)   9,279    56,917    (44,791)   (275) 

Attributable to: Equity holders of the parent

   (25,828)   9,397    56,018    (43,904)   (260) 

Non-controlling interest

   (2)   (118)   899    (887)   (15) 

Earnings/(Loss) per share from continuing and discontinued operations attributable to the equity holders of the parent during the year:

      

Basic earnings per share

      

From continuing operations

   (0.226)   0.111    0.488    (0.548)   0.000  

From discontinued operations

   0.014    (0.034)   (0.009)   (0.001)   (0.003) 

Diluted earnings per share

      

From continuing operations

   (0.226)   0.111    0.484    (0.548)   0.000  

From discontinued operations

   0.014    (0.034)   (0.009)   (0.001)   (0.003) 

   For the Year Ended December 31, 
   2013  2012  2011  2010  2009 

Cash Flow Data:

      

Net cash generated from/ (used in) operating activities

   102,080    67,823    56,586    60,221    (20,010) 

Net cash used in investing activities

   (161,536)   (300,215)   (140,493)   (111,725)   (114,386) 

Net cash generated from financing activities

   104,671    133,508    360,792    46,545    130,250  

Other Financial Data:

      

Adjusted Segment EBITDA (unaudited)(2)

      

Crops

   36,720    34,313    42,563    33,613    21,120  

Rice

   12,902    4,943    6,652    7,121    13,244  

Dairy

   9,801    (2,402)   3,426    2,649    484  

Coffee

   (1,547)   161    1,285    (2,854)   (3,550) 

Cattle

   2,894    4,119    4,686    4,369    1,525  

Farming subtotal

   60,770    41,134    58,612    44,898    32,823  

Ethanol, sugar and energy

   115,239    97,505    109,507    51,735    (26,903) 

Land transformation

   28,172    27,513    8,832    20,837    18,839  

Corporate

   (23,478)   (25,442)   (26,885)   (22,353)   (22,262) 

Adjusted Consolidated EBITDA

   180,703    140,710    150,066    95,117    2,497  

                     
  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 

2

   As of December 31, 
   2013   2012   2011   2010   2009 
   (In thousands of $) 

Statement of Financial Position Data:

          

Biological assets

   292,144     298,136     239,600     186,757     230,454  

Inventories

   108,389     95,321     96,147     57,170     57,902  

Property, plant and equipment, net

   790,520     880,897     759,696     751,992     682,878  

Total assets

   1,711,476     1,777,955     1,700,695     1,320,444     1,239,717  

Non-current borrowings

   512,164     354,249     203,409     250,672     203,134  

Total borrowings

   660,131     539,133     360,705     389,472     306,781  

Share Capital

   183,573     183,331     180,800     120,000     120,000  

Equity attributable to equity holders of the parent

   854,304     1,025,978     1,079,876     708,532     741,934  

Non-controlling interest

   45     65     14,993     14,570     15,222  

Number of shares (1)

   122,382     122,221     120,533     80,000     80,000  

(1)After giving effect to the Reorganization and related transactions.

                     
  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 

3

The following tables show a reconciliation of our segments’ profit / (loss) 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 

4

  As of December 31, 2013 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
Subtotal		  Sugar,
Ethanol
and
Energy		  Land
Trans-
formation		  Corporate  Total 
  (In thousands of $) 

Adjusted Segment EBITDA (unaudited)

          

Profit/(Loss) from

          

Operations Before Financing and Taxation

  34,549    8,171    6,714    (10,043)   2,805    42,196    7,918    28,172    (23,478)   54,808  

Profit from discontinued operations

  —      —      1,767    —      5    1,767    —      —      —      1,767  

Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)

  —      —      234    8,121    —      8,355    47,341    —      —      55,696  

Adjusted Segment EBIT (unaudited)(2)

  34,549    8,171    8,715    (1,922)   2,805    52,318    55,259    28,172    (23,478)   112,271  

Depreciation and amortization

  2,171    4,731    1,086    375    89    8,452    59,980    —      —      68,432  

Adjusted Segment EBITDA (unaudited)(2)

  36,720    12,902    9,801    (1,547)   2,894    60,770    115,239    28,172    (23,478)   180,703  

Reconciliation to Profit

          

Loss for the year

           (25,830) 

Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)

           55,696  

Income tax expense / (benefit)

           (9,277) 

Interest expense, net

           42,367  

Foreign exchange, net

           21,087  

Other financial results, net

           28,228  

Adjusted Consolidated EBIT (unaudited)(2)

           112,271  

Depreciation and amortization

           68,432  

Adjusted Consolidated EBITDA (unaudited)(2)

           180,703  

  As of December 31, 2012 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
Subtotal		  Sugar,
Ethanol
and
Energy		  Land
Trans-
formation		  Corporate  Total 
  (In thousands of $) 

Adjusted Segment EBITDA (unaudited)

          

Profit/(Loss) from

          

Operations Before Financing and Taxation

  32,240    1,120    857    (3,041)   3,930    35,106    25,822    27,513    (25,442)   62,999  

Loss from discontinued operations

  —      —      (4,040)   —      —      (4,040)   —      —      —      (4,040) 

Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)

  —      —      (115)   2,615    —      2,500    24,783    —      —      27,283  

Adjusted Segment EBIT (unaudited)(2)

  32,240    1,120    (3,298)   (426)   3,930    33,566    50,605    27,513    (25,442)   86,242  

Depreciation and amortization

  2,073    3,823    896    587    189    7,568    46,900      54,468  

Adjusted Segment EBITDA (unaudited)(2)

  34,313    4,943    (2,402)   161    4,119    41,134    97,505    27,513    (25,442)   140,710  

Reconciliation to Profit

          

Profit for the year

           9,279  

Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)

           27,283  

Income tax expense / (benefit)

           (5,436) 

Interest expense, net

           16,423  

Foreign exchange losses, net

           26,080  

Other financial results, net

           12,613  

Adjusted Consolidated EBIT (unaudited)(2)

           86,242  

Depreciation and amortization

           54,468  

Adjusted Consolidated EBITDA (unaudited)(2)

           140,710  

                                         
  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 

5

  As of December 31, 2011 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
Subtotal		  Sugar,
Ethanol
and
Energy		  Land
Trans-
formation		  Corporate  Total 
  (In thousands of $) 

Adjusted Segment EBITDA (unaudited)

          

Profit/(Loss) from

          

Operations Before Financing and Taxation

  41,094    3,547    5,363    (639)   4,460    53,825    90,050    8,832    (26,885)   125,822  

Loss from discontinued operations

  —      —      (1,034)   —     —     (1,034)   —     —      —      (1,034) 

Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)

  —      —      (1,503)   1,394    —     (109)   (8,797)   —      —      (8,906) 

Adjusted Segment EBIT (unaudited)(2)

  41,094    3,547    2,826    755    4,460    52,682    81,253    8,832    (26,885)   115,882  

Depreciation and amortization

  1,469    3,105    600    530    226    5,930    28,254    —      —      34,184  

Adjusted Segment EBITDA (unaudited)(2)

  42,563    6,652    3,426    1,285    4,686    58,612    109,507    8,832    (26,885)   150,066  

Reconciliation to Profit

          

Profit for the year

           56,917  

Initial recognition and changes in fair value of “long term” biological assets(l) (unrealized)

           (8,906) 

Income tax expense / (benefit)

           14,662  

Interest expense, net

           25,998  

Foreign exchange, net

           12,683  

Other financial results, net

           14,528  

Adjusted Consolidated EBIT (unaudited)(2)

           115,882  

Depreciation and amortization

           34,184  

Adjusted Consolidated EBITDA (unaudited)(2)

           150,066  

  As of December 31, 2010 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
Subtotal		  Sugar,
Ethanol
and
Energy		  Land
Trans-
formation		  Corporate  Total 
  (In thousands of $) 

Adjusted Segment EBITDA (unaudited)

          

Profit/(Loss) from Operations Before Financing and Taxation

  31,902    5,041    5,886    (5,753)   4,000    41,076    (77,627)   20,837    (22,353)   (38,067) 

Loss from discontinued operations

  —      —      (50)   —      —      (50)   —      —      —      (50) 

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 (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 gains, net

           (7,324) 

Other financial results, net

           (2,767) 

Adjusted Consolidated EBIT (unaudited)(2)

           57,554  

Depreciation and amortization

           37,563  

Adjusted Consolidated EBITDA (unaudited)(2)

           95,117  

  As of December 31, 2009 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
Subtotal		  Sugar,
Ethanol
and
Energy		  Land
Trans-
formation		  Corporate  Total 
  (In thousands of $) 

Adjusted Segment EBITDA (unaudited)

       

Profit/(Loss) from Operations Before Financing and Taxation

  19,054    11,792    407    (16,782)   1,299    15,770    4,920    18,839    (22,262)   17,267  

Loss from discontinued operations

  —      —      (294)   —      —      (294)   —      —      —      (294) 

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 (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 gains, net

           (10,903) 

Other financial results, net

           5,816  

Adjusted Consolidated EBIT (unaudited)(2)

           (27,859) 

Depreciation and amortization

           30,356  

Adjusted Consolidated EBITDA (unaudited)(2)

           2,497  

                                         
  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 

6

                                         
  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 

7

                                         
  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.

8

B.CAPITALIZATION AND INDEBTEDNESS

B. CAPITALIZATION AND INDEBTEDNESS
Not Applicable.
C. REASONS FOR THE OFFER AND USE OF PROCEEDS

C.REASONS FOR THE OFFER AND USE OF PROCEEDS

Not Applicable.

D. RISK FACTORS

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 statementsConsolidated 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 or diseases 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.activities. 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.

We experienced drought conditions during the first half of 2013 in the countries where we operate, which resulted in a reduction of approximately 21% to 31% in our yields for the 2012/2013 harvest, for corn and soybean, compared with our historical averages. The actual yields following the drought generated a decrease in Initial Recognition and Changes in Fair Value of Biological Assets and Agricultural Produce in respect of corn, soybean and the remaining crops of $5.9 million, $16.6 million and $2.7 million, respectively, for the year ended December 31, 2013. See “ See Item 5 - Operating and Financial Review and Prospects - Trends and Factors Affecting Our Results of Operations - (i) Effects of Yield Fluctuations

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.

9

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,grains, 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;

•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.

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 $71 million loss of $96.8 million for the year ended December 31, 2010in 2013 compared to a gain of $57.3$23 million in the same period in 2009loss for 2012 for our sugarcane business segment in the line item “Initial recognition and Changes in Fair Value of Biological Assets and Agricultural produce.”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, 20102013 as compared to year ended December 31, 2009.”

2012.

Further, because we intentionally 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 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.

In addition, 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.

10

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 willwould have an adverse effect on the financial performance of our ethanol and sugar businesses, and a decline in oil prices maymight 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 Brazilthe region 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 commencingconstructing the second phase of the Ivinhema mill, which will increase nominal crushing capacity to 5.0 million tons per year. The second phase of Ivinhema is expected to commence commercial operations during the second quarter of 2015. See “Item 4. Information on the Company—B. Business Overview.”

As of December 31, 2013 we have incurred $227 million in the first phase of the Ivinhema greenfield mill, including the acquisition and assembly of industrial equipment, manufacturing costs, agricultural equipment and sugarcane planting expenses. We estimate that we will need to invest an additional $242 million to complete the construction of the Ivinhema mill, which is expected to commence operations in 2013. See “Item 4. Information onbe financed with proceeds from a loan from the Company—B. Business Overview.” Through March 31, 2011, we have invested $64.1 million in this project through the purchase of industrial equipmentBNDES (“Banco Nacional de Desenvolvimento”) dated December 27, 2012, and 8,363 hectares of land, and we estimate that we will need to invest an additional $725 million to complete the constructioncash flow from operations. The completion 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

11

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)(i) construction is delayed or suspended, (2)(ii) 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)(iii) we fail to operate the mill or operate it at a lower capacity than we anticipate or (5)(iv) 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 primarily 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 MarchFor the year ended December 31, 2011,2013, in our farming business, fertilizers and agrochemicals constituted approximately 25%22% of our cost of production for the 2009/2010 harvest.2013/2014 harvest year. In our Sugar, Ethanol and Energy business, fertilizers and agrochemicals constituted 12% of our cost of production for 2013. On a consolidated basis, fertilizers and agrochemicals constituted 16.0% of our cost of production for 2013. 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 ofFor the year ended December 31, 2013, fuel constituted approximately 11.3%10% of the cost of production of our farming business during the 2012/2013 harvest year. In our Sugar, Ethanol and Energy business, fuel constituted 12% of our cost of production asfor 2013. On a consolidated basis, fuel constituted 11.4% of March 31, 2011.our cost of production for 2013 . 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

12

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

The European Union has a zero tolerance policy with respect tolimits 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.

A worldwide economic downturn could weaken demand for our products or lower prices.

The demand for the products we sell may be affected by international, national and local economic conditions. Adverse changes in the perceived or actual economic climate, such as higher fuel prices, higher interest rates, stock and real estate market declines and/or volatility, more restrictive credit markets, higher taxes, and changes in governmental policies could reduce the level of demand or prices of the products we produce. We cannot predict the duration or magnitude of this downturn or the timing or strength of economic recovery. If the downturn continues for an extended period of time or worsens, we could experience a prolonged period of decreased demand and price. In addition, the economic downturn has and may continue to adversely impact our suppliers, which can result in disruptions in service and financial losses.

Our business is seasonal, and our revenuesresults 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 areCotton is harvested from June to August, but requirerequires 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 November/December. This creates fluctuations in our inventory, usually peaking in December to cover sales between crop harvests (i.e.(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,May 1, 2013, the Sugar and Alcohol Interministerial Council of Brazil (Conselho(Conselho Interministerial do Açúcar e Álcool)Álcool) has set the required blend of anhydrous ethanol to gasoline (currentlyat 25% ethanol to 75% gasoline by volume).

Approximately 32%40% of all fuel ethanol in Brazil is used to fuel automobiles that run on a blendconsumed in the form of anhydrous ethanol andblended with gasoline; the remaining 68%60% of fuel ethanol is consumed in the form of hydrous ethanol, which is mostly used to power flex-fuel vehicles. Flex-fuel vehicles have the flexibility to run either on gasoline (blended with anhydrous ethanol) or hydrous ethanol. In the United States, almost all gasoline sold contains 10% ethanol. The European Union aims for 10% of the energy used in flex-fuel vehicles poweredthe transport sector to derive from renewable energy sources by hydrous2020, without specific targets for certain renewable energy sources and without intermediate targets, to be determined by each Member State. As an example, in Sweden the ethanol alone. Five districts in China requireblending ratio is 5%, which is the addition of 10% ethanol to gasoline. Japan is discussing requiring the addition of 3% of ethanol to gasolinesame mandate for other non-European countries, such as Argentina, Canada 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.India. Other countries in the world such as Colombia, South Africa, Thailand and China have similar governmental policies requiring various blends of anhydrous ethanol and gasoline.a 10% biofuel blending mandate. In addition, flex-fuel vehicles in Brazil have a tax benefit in the form of a lower tax rate on manufactured products (Imposto sobre Produtos Industrializados) and therefore 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 eighttwelve years, we have executed transactions for the purchase and disposition of land for over $460$602 million. OwningOwnership 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 Marchof December 31, 2011,2013, approximately 82%91% of our area of sugarcane plantations were leased or were subject tothrough 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 may not possess all of the permits and licenses required to operate our business, or we may fail to maintain the licenses and permits we currently hold. This could subject us to fines and other penalties, which could materially adversely affect our results of operations.

We are required to hold a variety of permits and licenses to conduct our farming and industrial operations, including but not limited to permits and licenses concerning land development, agricultural and harvesting activities, seed production, labor standards, occupational health and safety, land use, water use and other matters. We may not possess all of the permits and licenses required for each of our business segments. In addition, the approvals, permits or licenses required by governmental agencies may change without substantial advance notice, and we could fail to obtain the approvals, permits or licenses required to expand our business. If we fail to obtain or to maintain such permits or licenses, or if renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products that we could offer. As a result, our business, results of operations and financial condition could be adversely affected.

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., Ivinhema in respect of alleged environmental damage on the Ivinhema mill licensing)lvinhema river), 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 competentthe relevant 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.yours

As of March 31, 2011,the date of this annual report, our principal shareholders arewere the beneficial owners of approximately 71.89%47.3% 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 related to biological assets require us to make numerous estimates in the compilation and preparation of our financial resultsstatements and therefore limit the comparability of our financial statements to similar issuers using U.S. GAAP.GAAP
     IFRS accounting standards for agricultural companies require

IAS 41 “Biological Assets” requires that we measure our biological assets and agriculture produce at the point of harvest at fair value. Therefore, we are required to 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.(i.e., sugarcane, coffee, dairy and cattle) generated initial recognition and changes in fair value of biological assets amounting to 78.8a $71.8 million loss for the year ended December 31, 2010 (2009: $52.9 million gain; 2008: $25.1 million gain). For 2010, an amount of $60.1in 2013, a $25.3 million loss (2009: $29.8in 2012 and a $38.7 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 recentlygain 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. These2011. The assumptions and estimates used to determine the fair value of biological assets, 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 MarchDecember 31, 2011,2013, we had $403.9$660.1 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 flowflows 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.

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. See “Item 5. – Operating and Financial Review and Prospects – Liquidity and Capital Resources—Indebtedness and Financial Instruments”

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.”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.”

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 MarchDecember 31, 2011,2013, approximately 58%40.4% of our total debt was subject to variablefixed interest rates and 42%59.6% was subject to fixedvariable interest rates. As of MarchDecember 31, 2011,2013, borrowings incurred by the variable-rateCompany’s subsidiaries in Brazil are repayable at various dates between January 2014 and September 2023 and bear either fixed 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 ofrates ranging from 2.50% to 13.47% per annum or variable rates based on LIBOR or other country-specific rates such as theTaxa de Juros de Longo Prazo(TJLP) orCertificado de Depósito Interbancario(CDI)specific base-rates plus spreads ranging from 4.72% to 14.11% per annum. At December 31, 2013, LIBOR (six months) was 0.28%. Borrowings incurred by the Company’s subsidiaries in Argentina are repayable at various dates between 2.65%January 2014 and 8.65%November 2019 and bear either fixed interest rates ranging from 5.70% and 7.00% 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.”

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 uncommitted 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 Associatedassociated with the Countries in which We Operate

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 MarchDecember 31, 2011,2013, based on the net book value of our combinedconsolidated investment property and property, plant and equipment, approximately 33%26.2% of our assets were located in Argentina, 66%72.6% in Brazil and 1%1.3% in Uruguay. During the year ended 2010, 77%2013, 51.1% of our combinedconsolidated sales of manufactured products and services rendered and sales of agricultural produce and biological assets were attributable to our ArgentineBrazilian operations, 22%46.3% were attributable to our BrazilianArgentine operations and 1%2.6% 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 inIn the future we willexpect to 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;

labor laws;

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economic growth;

currency fluctuations;

inflation;

exchange and capital control policies;

interest rates;

liquidity of domestic capital and lending markets;

monetary policy;

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;

•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.

restrictions on land acquisition or 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,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 statementsConsolidated Financial Statements presented herein are, and our future consolidated financial statementsConsolidated 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-endyear-end exchange rate for assets and liabilities; and (ii) an average exchange rate for the periodyear 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

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, 5.89% 2011, 14.27% in 2012 and 1%32.5% in 2013. In the beginning of 2014, the Argentine government accelerated the devaluation of the Argentine Peso, which depreciated an additional 22.9% during January. However, due to the restrictions on the purchase of foreign currency imposed by the Argentine government (see “ - Risks Related to Argentina-Exchange controls could restrict the inflow and outflow of funds in Argentina.”) there exists an unofficial market where the U.S. dollar is trading at a different market value than reflected in the official Argentine Peso – U.S. dollar exchange rate. The Company uses the official Argentine Peso-US Dollar exchange rate as the reference exchange rate for all re-measurement purposes, which is consistent with the economic reality that foreign currency transactions entered into or paid out of March 2011. ItArgentina are required to be converted at the official exchange rate. As of the date of this report the gap between the official rate and the unofficial rate is impossible toapproximately 30% and may increase or decrease in the future. We cannot 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,Formally the value of the Real against foreign currencies is determined under a free-floating exchange rate regime.regime, but in fact the Brazilian government is actually intervening on the Market, through currency swaps, trading in the spot market, among others, every time the currency exchange rate is above or below the levels that the Brazilian government considers appropriate, taking into account, inflation, growth, the performance of the Real against the U.S dollar in comparison with other currencies and other economic factors. Periodically, there are significant fluctuations in the value of the Real against the U.S. dollar. The Real appreciated 16.9%17.2% against the U.S.

dollar in 2007, depreciated 31.6%31.9% in 2008, appreciated 25.4%25.5% in 2009, appreciated 4.3% in 2010, depreciated 12.6% in 2011, depreciated 8.94% in 2012 and appreciated 4.4%depreciated 14.6% in 2010.2013. 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 2010.2010, depreciated 9.3% in 2011, depreciated 10.7% in 2012 and depreciated 19.7% in 2013. On MarchDecember 31, 2011,2012, the Real/U.S. dollar exchange rate was R$1.62872.0435 per U.S. dollar, and the Real/euroEuro exchange rate was R$2.31292.6954 per euro,Euro, as reported by the Central Bank of Brazil. We cannot predict whether the Brazilian Central Bank will continue to let the Real float freely. Accordingly, it is not possible to predict what impact the Brazilian government’s exchange rate policies may have on us. We cannot assure you that the Brazilian government will not in the future impose a band within whichOn December 31, 2013, the Real/U.S. dollar exchange rate could fluctuate or setwas R$ 2.3426, a fixeddepreciation of %14.6 in comparison with December 31, 2012, and as of December 31, 2013 the Real/Euro exchange rate nor can we predict what impact such an event might have on our financial condition or resultswas R$3.2265 per Euro, a depreciation of operations.

19.7%.

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”) (Argentine Statistics and Census Agency), 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, 10.9% in 2010, 9.5% in 2011, 10.8% in 2012 and 10.9% in 2010;2013; while the wholesale price index went upincreased 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 2010.2010, 12.7% in 2011, 13.1% in 2012, and 14.7% in 2013. The accuracy of the measurements of the INDEC ishas been questioned in doubt,the past, 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 and 15.0% (rather than 7.7%) in 2009 (last published information). Moreover, according to InflacionVerdadera.com, an initiative that is part of the Billion Prices Project at the Massachusetts Institute of Technology, the consumer price index increased by 25.77% (rather than 10.9%) in 2010, by 30.18% (rather than 9.5%) in 2011, by 25.9% (rather than 10.8%) in 2012 and 23.4% from January through November 2010 (last available information)24.3% (rather than 10.9%) in 2013.

During 2011 the Argentine Secretary of Commerce imposed fines on some private consulting firms for releasing inflation measurements. Since then, private inflation measurements have been released mainly by the Commission of Freedom of Expression of the Argentine Congress (the “Expression Commission”). According to the last information released by the Expression Commission and published in local newspapers, in 2011 the consumer price index increased by 22.8% (rather than 9.5%), by 25.6% (rather than 10.8%) in 2012 and by 28.38 (rather than 10.9%) in 2013. See “—Risks Related to Argentina—There are concerns about the accuracy of the INDEC’s measurements.”

In May 2013, four Chambers of the Court of Appeals in Administrative Matters (Cámara Nacional de Apelaciones en lo Contencioso Administrativo Federal) revoked the fines imposed by the Argentine Secretary of Commerce on the private consulting firms for releasing inflation measurements.

In February 2014 the INDEC modified the methodology for the calculation of the consumer price index and the gross domestic product and released a new consumer price index, which was equal to 3.7%, 3.4% and 2.4% for January 2014, February 2014 and for March 2014, respectively. According to InflacionVerdadera.com and the Expression Commission the consumer price index increased by 3.903%, 6.272% and 4.095% and by 4.61%, 4.30% and 3.30% for the same periods, respectively.

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, inflation of 11.3% in 2010, inflation of 5.1% in 2011, inflation of 7.8% in 2012 and inflation of 11.32%5.5% in 2010,2013, as measured by the General Market Price Index (Indice(Indice Geral de Preços—Mercado) Mercado), compiled by the Getúlio Vargas Foundation (Fundaç(Fundação Getúlio Vargas)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. This policy has changed in the last two years, when the Brazilian government decreased the interest rate by 525 basis points. Subsequently, the high inflation, arising from the lower interest rate, and the intention to maintain this rate at low levels, led, the Brazilian government to adopt other measures to control inflation, such as tax relief for several sectors of the economy and tax cuts for the products included in the basic food basket. These measures were not sufficient to control the inflation, which led the Brazilian government to reinstate a tighter monetary policy. As a result, interest rates have fluctuated significantly. The Special System for Settlement and Custody (Sistema(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, 11.0% in 2011, and 7.25% in 2012 and 10.0% in 2013 as determined by theComitê 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 suddenperiod of 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 2010.2010, 8.9% in 2011, 1.9% in 2012 and 5.6% in 2013. 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. The INDEC originally reported a GDP for 2013 equal to 5.6%, however, in February 2014 the INDEC modified the methodology for the calculation of the GDP and released a new GDP index for 2013, equal to 3.00%. We cannot assure you that GDP will increase or remain stable in the future. The lingering economic crisiscrises in Europe, beginning withincluding 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 stablethe stability and relatively low ratelevel of inflation and the future political uncertainties, among other factors, may affect the development of the Argentine economy.

     Additionally,

In October 2011, Mrs. Cristina Fernandez de Kirchner was re-elected. During her presidential campaign Mrs. Fernandez de Kirchner did not announce any particular actions to be undertaken by her administration. However, the prevailing economic conditions during 2011 and the beginning of 2012, including the rise of inflation, the continued demand for salary increases, the growth of the fiscal deficit (the highest since the first Kirchner administration despite the use of resources from the National Social Security System and the Central Bank), the required payments to be made on public debt in 2012 (including the Bonos del Gobierno Nacional en Dólares Estadounidenses Libor 2012), the reduction of industrial growth and the increase of the capital outflows from Argentina have forced the Argentine presidentialgovernment to adopt different measures, including the tightening of foreign exchange controls, the elimination of subsidies to the private sector and the proposal for new taxes. See “—Changes in the Argentine tax laws may adversely affect the results of our operations”. The economic conditions worsened during 2013 due to a higher inflation, an increase of capital outflows despite tighter foreign exchange controls and an increase in demand for U.S. Dollars.

On October 27, 2013, there were mid-term elections will take place in October 2011. Argentina, in which the current government lost a great portion of the support gained in the 2011 elections. As a result, President Fernández de Kirchner announced the replacement of the head of the Cabinet, Mr. Juan Manuel Abal Medina by the governor of the province of Chaco, Mr. Jorge Capitanich; the Minister of Economy and Public Finance, Mr. Hernán Lorenzino by Mr. Axel

Kicillof; the Minister of Agriculture, Mr. Norberto Yauhar by Carlos Casamiquela; and the President of the Central Bank, Mrs. Mercedes Marcó del Pont by Mr. Juan Carlos Fábrega. The market reacted negatively to these changes in the government and the MERVAL (the Buenos Aires Stock Exchange Index) lost more than 6% the day following these announcements. On November 19, 2013, the Secretary of Commerce, Mr. Guillermo Moreno, one of the most controversial members of the current government resigned his position, which he held since 2005. Accordingly, there remains uncertainly concerning the scope and direction of the new measures that may be adopted by the reconstituted Kirchner administration.

Despite the Argentina’s economic recovery from the 2001 crisis and GDP growth, social and political tension and high levels of poverty and unemployment continued. The deterioration of the economy significantly increased the social and political turmoil, including civil unrest, riots, looting, nationwide protests, strikes and street demonstrations. Due to the high levels of inflation and devaluation, employers both in the public and private sectors are experiencing significant pressure from organized labor unions and their employees to further increase salaries. See “—Risks related to Argentina—The Argentine government may order salary increases to be paid to employees in the private sector, which would increase our operating costs”.

In Argentina,addition, during the president has significant powerlast years the Argentine Central Bank’s reserves have suffered a substantial decrease mainly as a consequence of the increasing need to determineimport energy and payments of sovereign debt. The reduction of the Argentine Central Bank’s reserves may weaken Argentina’s ability to overcome economic deterioration. This could inhibit the ability of the Argentine Central Bank to adopt measures to curb inflation and could adversely affect Argentina’s economic growth and public policies and introduce measures affectingfinances.

A continued deterioration of the economic, social and/or political conditions may adversely affect the development of the Argentine economy and companiesforce the government to adopt future policies including 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 and salary increases, and/or the provision of additional employee benefits. Any such as ours. The new government, whether economic, social and/or not controlled by the current president’s political party, may seek to implement changes to existing public policies. For example, the current conditions and/or future government may face pressure to increase taxes (including export taxes), due to increasing inflationmeasures could materially affect our business, results of operations and public debt. This could have a material adverse impact on our Argentine subsidiaries’ operations.

financial condition.

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, 2010,2001, Argentina’s total public debt amounted to $144.5 billion.billion (including $6.6 billion owed to the Paris Club, an informal group of financial officials from some of the world’s biggest economies). In 2002,December 2001, 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.(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, 2010,2012, the Argentine government was still in default with respect of over $6.8 billion of debt to bondholders. As of such date,December 31, 2013, Argentina’s total public debt amountsamounted to $164.3$196.1 billion (excluding the debt in default to bondholders).

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     InSince 2010, the Argentine government applied US$6.4$6.4 billion of the Argentine Central Bank’s reserves to the payment of public debt. In the first quarter of 2011, the Argentine government applied $7.5 billion from the Central Bank’s reserves to repay indebtedness maturing in 2011. In March 2011, the Argentine government applied $2.1 billion of the Argentine Central Bank’s reserves to the payment of public debt, cancelling the entire debt with international financial institutions. During 2013, the Argentine government made the payment of approximately $4.5 billion of privately held public debt and approximately $2 billion of public debt with multilateral financial institutions and during 2013 refinanced approximately $8 billion of public debt with local public entities (i.e. Central Bank and the Administración Nacional de la Seguridad Social or ANSES –the social security authority-). During 2014, the Argentine government faces the payment of approximately $10 billion of public debt. In addition, the Argentine government faces several claims at the World Bank’s International Centre for Settlement of Investment Disputes for approximately $65 billion (on some of which the arbitral tribunal has already ruled against Argentina).

Pursuant to an order dated February 23, 2012, as amended by an order dated November 21, 2012, based on the equal treatment provision under the defaulted debt, the United States District Court for the Southern District of New York granted an injunction requiring Argentina to pay the holders of the defaulted debt as a precondition to making a single interest payment under the restructured debt. The injunction further required Argentina to pay into an escrow account over $1.3 billion prior to making the payment on the restructured debt on the December 15, 2012 scheduled payment. The injunctions directed that whenever Argentina pays on the bonds or other obligations that it issued in the 2005 or 2010 exchange offers, it must also make a “ratable payment” to the holders of the defaulted bonds who brought the actions under which the injunctions were granted. On August 23, 2013 the United States Court of Appeals for the Second Circuit affirmed the District Courts’ orders but stayed enforcement pending resolution of a petition to the Supreme Court for a writ of certiorari. On September 30, 2013, the Supreme Court did not include this case in its docket for the coming term.

On September 20, 2013 the Argentine Congress passed Law No. 26,886 approving the extension of the 2005 and 2010 exchange offers to holders of defaulted bonds excluded from the prior exchange offers. This new law authorized the Ministry of Economy and Public Finance to adopt all necessary measures to restructure the debt subject to the original terms and conditions of the bonds exchanged under the prior exchange offers. The restructuring proposal would include an offer to change the payment jurisdiction to Argentina so as to avoid injunctions on payments in New York. Other conditions such as currency and payment terms would remain unaltered from those of the originally exchanged bonds. The lack of a final solution on the outstanding defaulted debt limits the access of Argentina to foreign financing in the international markets. Due to the lack of access to the international capital markets on March 28, 2012, the Argentine government may continue to useapproved a reform of the Argentine Central Bank’s foreign-currencyCharter by which, among other things: (i) limited the availability of economic information (i.e. expected rate of inflation, amount and composition of reserves forand of the monetary base); (ii) significantly increased the Argentine government’s access to financing from the Argentine Central Bank; (iii) granted the Board of Directors of the Argentine Central Bank the discretion to determine the required level of reserves; (iv) determined that any reserves above the required level fixed by the Board of Directors constitutes freely available reserves; and (v) provided that in addition to the payment of Argentina’s current debt. obligations with international financial institutions, the freely available reserves may also be applied to the payment of official bilateral external debt (i.e. Paris Club). In addition, during the beginning of 2014 the Argentine government also sought to renegotiate the debt with the Paris Club but has not yet commenced formal negotiations.

The reduction of the Argentine Central Bank’s reserves may weaken Argentina’s ability to overcome economic deterioration in the future. As a result of this economic instability, the foreign debt rating of Argentina has been downgraded on multiple occasions based upon concerns regarding economic conditions and rising fears of increased inflationary pressures. This uncertainty may also adversely impact Argentina’s ability to attract capital. 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,

Law No. 26,737, passed by the Argentine Congress in December 2011, and its implementing regulation Decree No. 274/2012 of February 28, 2012, impose limits on the Presidentownership or possession of rural land by foreign legal entities or foreign individuals (excluding foreign individuals who have resided in Argentina submitted a proposalten years or more; who have Argentine children and also have resided at least five-years in Argentina; or who have been married to Argentine citizens for new legislationat least five years prior to the transfer of the property rights over rural land and have resided in Argentina for at least five years).

Law No. 26,737 and its implementing regulation require that, seeks to establish restrictions on foreign ownership and acquisition“foreign ownership” of rural land may not exceed 15% of the total amount of rural land in Argentina. Accordingthe Argentine territory calculated also in relation to its terms,the territory of the Province, Department or Municipality where the relevant lands are located. For purposes of the law, “foreign ownership” means the ownership (whether by acquisition, transfer, assignment of rights or otherwise) over rural land by: (i) foreign entitiesindividuals, regardless of whether they are defined to include (1)Argentine residents or not; (ii) legal entities incorporated in Argentina or abroad, whose capital is ownedwhere more than 51% of the stock is directly owned by foreign naturalindividuals or entities; (iii) legal entities which are

indirectly linked to or controlled by foreign entities or individuals through ownership of (a) 25% or more of their stock or (b) a number of votes sufficient to prevail in the local entity’s decision-making process; (iv) any foreign legal entity or individual operating as de facto shareholder; (v) companies that issue bonds (a) convertible in stock representing 25% or more of the company’s stock and (b) whose holders are foreign individuals or entities; (vi) trusts whose beneficiaries are foreign individuals or entities, as defined pursuant to (ii), (iii), (iv) or (v) above; (vii) joint ventures in which foreign entities or individuals hold a participating interest higher than those set forth by the law (51% under (ii) or 25% under (iii), (iv), (v) or (vi) above); (viii) foreign public law-governed legal entities; (2) legal entities, whether Argentineand (ix) simple associations or foreign, with 25% foreign holders,de facto corporations in which foreigners hold shares in the percentage set forth by the new law in relation to corporations or whowhich are controlled by foreign holders; (3)foreigners. Any modification to the capital stock of companies that have issued bondsown 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, regulatedpossess rural land, by the Argentine companies law (Ley de Sociedades),public or thatprivate instrument, may be regulated byreported to the National Registry of Rural Land (Registro Nacional de Tierras Rurales) within 30 days from the date of such law inmodification.

In addition, foreign entities or individuals of the future, whenever foreign natural or legal persons participate in them at a proportion greatersame nationality may not own more than that authorized by the proposed legislation. The proposed legislation seeks to limit total ownership4.5% of rural land in Argentina byand a single foreign personsentity or entities to noindividual may not own more than 20%1,000 hectares in the “core area”, or the “equivalent surface”, as determined by the Interministerial Council of Rural Land (Consejo Interministerial de Tierras Rurales) in accordance with all foreign personsthe provinces’ proposal, specifying districts, sub-regions or entitiesareas and taking into consideration the location of the same nationality owningland, the proportion of the land area in respect of the total territory of the relevant Province, Department or Municipality and, the quality of the land for use and exploitation. The “equivalent surface” regime may be modified by the Interministerial Council of Rural Lands (Consejo Interministerial de Tierras Rurales) taking into account possible changes in the quality of the land or the growth of urban populations. Pursuant to Decree No. 274/2012 the departments that comprise the “core area” are: Marcos Juarez and Union in the Province of Córdoba; Belgrano, San Martin, San Jeronimo, Iriondo, San Lorenzo, Rosario, Constitución, Caseros and General Lopez in the Province of Santa Fe; and the districts of Leandro N. Alem, General Viamonte, Bragado, General Arenales, Junin, Alberti, Rojas, Chivilcoy, Chacabuco, Colon, Salto, San Nicolas, Ramallo, San Pedro, Baradero, San Antonio de Areco, Exaltacion de La Cruz, Capitan Sarmiento and San Andres de Giles in the Province of Buenos Aires.

Foreign legal entities or individuals may not more than 30%own rural land that comprise or are located beside permanent and significant bodies of such total. In addition, each foreign holder is limitedwater to be determined by the Interministerial Council of Rural Land (Consejo Interministerial de Tierras Rurales) and will include hydrological works and projects considered strategic and of public interest.

Law No. 26,787 created a maximum ownershipNational Registry of 1,000 hectaresRural Land (Registro Nacional de Tierras Rurales) in charge of the enforcement of the provisions of the law and registry of rural land. The legislation wouldForeign owners were required to report their ownership of rural land to the National Registry of Rural Land within the 180 days immediately following the issuance of the law’s implementing regulations.

Acquisition of rural land will not be deemed as an “investment” under bilateral investment treaties signed by the Argentine Republic, since rural land is deemed as “a non-renewable natural resource”.

Certain provisions of Law No. 26,787 and its implementing regulation raise questions over their precise meaning. Law No. 26,787 states that any act in violation of its provisions will be considered null and void, notwithstanding, the law expressly provides that it “does not affect any vested rights”. Hence, it should not have an adverse effect on the current landholdingsrural land owned by foreigners or vested property rights.

     The proposed legislation remains subject to the approval of a majority in theour Argentine Congress, as well as constitutional and other legal challenges. If approved, the new legislationsubsidiaries. However, our Argentine subsidiaries may limit and restrict the investments of foreign entities inbe prevented from acquiring additional rural land in Argentina, and therefore impair our ability to continue acquiring farmland in Argentina. The enactment of the proposed legislation couldwhich may 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 havehas significantly limited the ability of Argentine companies to access international financial markets.

In addition, in November 2008, the Argentine congressCongress passed a law eliminating the private pension fund system and transferring all retirement and pension funds held by the pension fund administrators (Administradoras(Administradoras de Fondos de Jubilaciones y Pensiones,, or “AFJPs”) to the National Social Security Administrative Office

(Administración Nacional de la Seguridad Social)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 MarchDecember 31, 2011,2013, our subsidiaries in Argentina have relied on local Argentine financing for 25%52% 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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Official data regarding inflation may be unreliable.

There are concerns about the accuracy of the INDEC’s measurements.
     In JanuarySince 2007, the INDEC modified its methodology used in calculatinghas experienced a process of institutional and methodological reforms that have given rise to controversy with respect to the consumer price index. Atreliability of the same time,information produced by the INDEC. The intervention of the Argentine government also replaced several key personnel atin the INDEC prompting complaintsand the change in the way the inflation index is measured has resulted in disagreements between the Argentine government and private consultants as to the country’s actual annual inflation rate. Members of government interferencethe political opposition in the House of Representatives of the Argentine Congress periodically disseminate inflation data produced by certain private analysts and non-governmental sources which differ significantly from, and which present higher estimates of inflation than those published by the technical staff atINDEC. According to the INDEC inflation was approximately 8.5% for 2007, 7.2% for 2008, 7.7% for 2009, 10.9% for 2010, 9.5% for 2011, 10.8% for 2012 and 10.9% for 2013. Uncertainty surrounding future inflation rates has slowed the rebound in the long-term credit market. Private estimates, on average, refer to annual rates of inflation substantially in excess of those published by the INDEC. In addition, the International Monetary Fund requestedpast, inflation has materially undermined the Argentine economy and the government’s ability to create conditions that the government clarify itswould permit stable growth. High inflation rates.may also undermine Argentina’s foreign competitiveness in international markets and adversely affect economic activity and employment, as well as our business and results of operation. 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 the INDEC, as well as other indices published by the INDEC that use the consumer price index in their calculation, including the poverty index, the unemployment index and real GDP. See “Risks AssociatedBeginning November 23, 2010, the Argentine government consulted with the CountriesIMF for technical assistance in order to prepare a new national consumer price index with the aim of modernizing the current statistical system. During the first quarter of 2011, a team from the IMF started working in conjunction with the INDEC to create such new national consumer price index. Notwithstanding the foregoing, reports published by the IMF state that their staff also uses alternative measures of inflation for macroeconomic surveillance, including data produced by private sources, which We Operate—Inflation in somehave shown inflation rates considerably higher than those issued by the INDEC since 2007, and the IMF has called on Argentina to adopt remedial measures to address the quality of official data. In its meeting held on February 1, 2013, the Executive Board of the countriesIMF found that Argentina’s progress in which we operate, along with governmentalimplementing remedial measures to combat inflation, may have a significant negative effect on the economies of those countriessince September 2012 has not been sufficient, and as a result, the IMF issued a declaration of censure against Argentina in connection with its breach of its related obligations to the IMF under the Articles of Agreement, and called on our financial conditionArgentina to adopt remedial measures to address the inaccuracy of inflation and resultsGDP data without further delay.

In February 2014, the INDEC modified the methodology for the calculation of operations.”

     If it is determined that it is necessary to correct the consumer price index and otherthe gross domestic product and released a new consumer price index, which was equal to 3.7% ; 3.4% and 2.4% for January 2014, February 2014 and for March 2014, respectively. According to InflacionVerdadera.com and the Expression Commission the consumer price index increased by 3.903%, 6.272% and 4.095% and by 4.61%, 4.30% and 3.30% for the same periods, respectively. In addition, in February 2014, the INDEC indices, therereleased a new GDP index for 2013, equal to 3.003%, which differs from the GDP of 5.6%, originally reported by the INDEC for the same period.

The arbitrary manipulation of the INDEC indexes could beresult in a significantfurther decrease in confidence in the ArgentineArgentina’s economy, which could, in turn, have a materiallyan adverse effect on our ability to access the international credit markets at market rates to finance our operations.

operations and growth.

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. In March 2012, the Undersecretary of Transport created an “indicative price” for the transportation of grains by road which will be fixed on a quarterly basis. The actual price paid for the road transportation of grains should not be lower than 5% or higher than 15% of the “indicative price” fixed for the applicable period. In some cases, the imposition of this “indicative price” would produce increases in our transportation costs. In addition, on April 9, 2013, the Secretary of Commerce issued a resolution that established a fixed price for selling liquid hydrocarbons for a six months period. The fixed price would be the highest selling price on the date of issuance of the resolution, in certain regions of the country. Notwithstanding the April 9th resolution, YPF (the Argentine government-controlled oil and gas company) implemented gas price increases that were matched by other oil companies. Due to the increase in the price of the wheat, on July 4, 2013, the Secretary of Commerce issued a resolution mandating wheat producers and distributors to sell their stocks to satisfy the domestic demand, seeking to reduce the wheat price. On January 2014, the Secretary of Commerce launched a new program of prices control called Precios Cuidados. Producers and suppliers committed to fixprices for more than 300 basic products subject to review on a quarterly basis. As of the date of this annual report, one of our rice products sold under the trademark “Molinos Ala” is subject to this program. Violation of the program may producers and suppliers subject to sanctions, including fines of up to AR$5,000,000 (US$ 625,000).

The Argentine government may pursue other expropriations or similar interventions such as the one relating to YPF. See “—Risks related to Argentina—The economy of Argentina may be affected by its government’s limited access to financing from international markets.” On December 27, 2012 the Argentine Congress passed Law N° 26,831, known as the new Capital Markets Law, which modifies the public offer regime set forth by Law No. 17,811 as amended. On August 1, 2013 Decree No. 1023/2013, which regulates the Capital Markets Law, was enacted.

The Capital Markets Law modifies the applicable regime of the Exchange Markets, including local Stock Exchange and commodities markets, and of the agents and also the powers conferred to the Argentine Securities Commission (Comisión Nacional de Valores) (“CNV”). The main amendments introduced refer to the increase in the power of intervention by the CNV over the Exchange Markets and agents entitling the CNV to appoint supervisors with the ability to veto listed companies’ board decisions, and even separate the board of directors for a period of 180 days; and suspend the activities of agents and markets, without prior notice, when the CNV determines any breach of applicable regulations. Also the new Capital Markets Law introduces new and more stringent requirements for agents to obtain authorization to operate in the markets which may result in a reduction of the current number of authorized agents operating in the grain markets.

Moreover, the Argentine government may increase its level of intervention in certain areas of the economy. For example, on April 16, 2012, the Argentine government sent a bill to the Argentine Congress to expropriate 51% of the Class D Shares of YPF, S.A. (“YPF”), the largest Argentine oil and gas company in Argentina. The expropriation law was passed by Congress on May 3, 2012 and provided for the expropriation of 51% of the share capital of YPF, represented by an identical stake of Class D shares owned, directly or indirectly, by Repsol YPF S.A., a Spanish integrated oil and gas company. The national government and the Argentine provinces that are members of the Federal Organization of Hydrocarbon Producing Provinces now own 51% and 49%, respectively, of the YPF shares subject to the seizure. This particular measure also sparked a strong international condemnation and had a significant negative impact on foreign direct investment in Argentina as well as restricted more the limited country’s access to international capital and debt markets. In response to the nationalization of YPF by the Argentine government, the European Union Commission threatened with the imposition of commercial sanctions (i.e. unilateral tariff preferences to Argentina). However, during February 2014, the Argentine government and Repsol YPF S.A. agreed to a compensation of $5,000 million payable in Argentine sovereign bonds to compensate Repsol YPF S.A. for the seizure of the YPF shares. This settlement was ratified by Repsol YPF S.A.’s shareholders and by the Argentine Congress through a law passed on April 24, 2014. Political parties in opposition to the Government have threatened to challenge the agreement before the Argentine courts.

In addition, on November 28, 2012, the Argentine government, through YPF Inversora Energética S.A., YPF’s controlled company, exercised an option for the purchase of the shares of BG Inversiones Argentinas S.A. in Gas Argentino S.A. (the controlling company of Metrogas S.A., the major gas distributor in Argentina). Through this transaction, the Argentine government indirectly acquired control of Metrogas S.A.

Expropriations and other interventions by the Argentine government such as the one relating to YPF can have an adverse impact on the level of foreign investment in Argentina, the access of Argentine companies to the international capital markets and Argentina’s commercial and diplomatic relations with other countries. In the future, the level of governmental intervention in the economy may continue, which may have adverse effects on Argentina’s economy and, in turn, our business, results of operations and financial condition.

The Argentine government has been debating the creation of a National Grain Commission (Junta Nacional de Granos) and during February 2014 a senate representative member of the official party circulated a bill providing for the creation of such a commission with powers to regulate the production, commercialization and export of grains and related products. The bill has not yet been officially sent to the Congress for consideration.

Furthemore, on April 1, 2014 (i) the Argentine Tax Federal Authority (“Administración Federal de Ingresos Públicos – AFIP”) issued Resolution No. 3,593/14 which established a “Systematic Registration of Movements and Grains Stocks Regime” (“Régimen de Registración Sistemática de Movimientos y Existencias de Granos”) pursuant to which all persons involved in the commercialization and manufacturing of grains and dairy products registered with the National Registry of Operators of the Commercial Agri-Food Chain (Registro Unico de Operadores de la Cadena Comercial Agropecuaria Alimentaria, or “RUO”) must report the stock and stock variations (including locations, transport between the producer’s facilities, etc.) of all grains and other agricultural products (other than those to be applied to sowing) held in inventory or through third parties; and (ii) the Secretary of Commerce enacted Resolution No. 29 by which all producers and suppliers of goods and services with annual sales greater than AR$183 million must report to the Secretary of Commerce the prices of all their products on a monthly basis. Violations of these regimes may be sanctioned with fines, among other sanctions.

We cannot assure you that the Argentine government will not continue to interfere in other areasor increase its intervention 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.

Recent judicial reforms could adversely affect the operation of our business.

On April 8 2013, the Argentine government submitted to the Argentine Congress three bills for: (a) the creation of three courts of cassation and the amendment to the Civil and Commercial Procedure Code, which was passed by the Argentine Congress on April 2, 2013 (“Courts of Cassation Law”); (b) the amendment to the Law which regulates the Council of the Judiciary No. 24,937, which was passed by the Argentine Congress on May 8, 2013 (“Council of the Judiciary Law”); and (c) a new regulation of precautionary measures in proceedings involving the federal government or any of its decentralized entities, which was passed by the Argentine Congress on April 24, 2013 (“Precautionary Proceedings Law”).

The Court of Cassation Law created (i) a federal court of cassation on Administrative Law matters; (ii) a federal and national court of cassation on Labor and Social Security law matters; and (iii) a federal and national court of cassation on Civil and Commercial law matters, which has jurisdiction to decide the cassation, unconstitutionality and to review appeals against the decisions rendered by the Federal and National Court of Appeals on Administrative Law, Labor and Social Security and Civil and Commercial matters, respectively. The law sets forth that the judges of the Cassation Courts are required to be selected in the same manner and meet the same conditions as a Supreme Court judge. Finally, such law reduces the members of the Supreme Court of Argentina from seven to five. The Court of Cassation Law provides for additional judicial review before having access to the Federal Supreme Court. Judicial proceedings before federal and national courts may require additional time and likely result in higher legal costs.

The Council of the Judiciary Law increased the number of members of the Council of the Judiciary from thirteen to nineteen, including three judges, three lawyer’s representatives, six representatives from academia, six congressmen (four selected by the majority in the Argentine Congress and two selected by the minority) and a Federal Executive Branch representative. The law changed the method for appointing the Members of the Council.

Prior to the adoption of the Council of the Judiciary Law, Members of the Council were appointed by their peers. According to the new law, they will be appointed by means of open, compulsory and simultaneous primary elections. The Council of the Judiciary is entrusted with broad powers to organize and run the system to train, appoint and remove judges; approve the draft proposal for the annual budget, establish the system of compensation of all the judicial system and provide for the administration of all the judicial personnel; sanction judges and retired judges; and amend the regime applicable to the judiciary system. The election of the members of the Council of the Judiciary would be politically based and the majorities for the removal of judges would be limited.

According to the Precautionary Proceedings Law, when granting a precautionary measure against the Argentine government and its agencies, judges will have to establish, under penalty of nullity, a period of effectiveness of such measure of no longer than six months in normal proceedings and three months in abbreviated proceedings and in the cases of “amparo.” The term can be extended for six months considering the public interest involved in the process. Special consideration will be given to the dilatory tactics or proactive measures taken by the party that was awarded the measure. In addition, under such legislation, Judges are not allowed to grant precautionary measures that will affect or detract from its purposes or in any way disrupt the property or revenues of the Federal Government, nor impose personal monetary charges to public officers. Moreover, the law establishes that the precautionary measures against the Federal Government or its decentralized entities will be effective once the requesting party places an injunction bond for the expenditures or damages that the measure may cause. The injunction bond will not be required when the precautionary measure is granted in favor of the Federal Government or any of its decentralized entities.

On June 18, 2013, the Supreme Court declared certain sections of the Council of the Judiciary Law unconstitutional, in particular those referring to the increase in the number of members and the method for appointing such members. On July 7, 2013, the Federal Court on Administrative Law suspended the implementation of the Court of Cassation Law and declared the precautionary proceedings limitations provided for in the law to be unconstitutional. This law if implemented or other laws approving reforms to the Argentine judicial system may have a negative impact on our business and operations as such legislation could make a timely and impartial administrative process more difficult.

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. Currently, Argentina is facing national protests from the Argentine population. On November 8, 2012, there was a massive protest against the government and on November 20, 2012 opposition trade unions led a general strike. The social unrest increased during the last months of 2012, and in December there were new riots and lootings to shops and supermarkets in various cities around the country. Social unrest continued to increase during 2013 and the beginning of 2014, which was reflected by a general massive strike called for April 10, 2014.

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(retenciones móviles)viles) 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. In fact, on December 21, 2012, through Decree No. 2552 the Argentine government revoked the sale of a facility of the Argentine Rural Society (Sociedad Rural Argentina) in the City of Buenos Aires that has been occupied by the Argentine Rural Society since 1875 and title was transferred to it pursuant to Decree No. 2699 of the Argentine government in the 1990’s. Cattle farmers engaged in a one-day strike in protest of this decision and the Argentine Rural Society has warned that it will organize new protests against this decision and all other actions of the Argentine government against the agricultural and cattle sectors. However, in January 2013, the Federal Chamber of Appeals in Civil and Commercial Matters granted an injunction suspending the effects of Decree No. 2552. This injunction was confirmed on August 21, 2013 by the Supreme Court of Argentina.

Moreover, a decision of the Argentine government to pursue the creation of a National Grain Commission (Junta Nacional de Granos) could lead to a conflict greater than the one originated by the increase of the variable export tariffs. See “—Risks related to Argentina—Government intervention in Argentina may have a direct impact on our result of operations or financial condition”.

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

The Argentine government has passed laws, regulationsincreased the minimum salary from 2.875 Argentine Pesos to 3.300 Argentine Pesos in August 2013 and decrees requiring companiesto 3.600 Argentine Pesos in January 2014 (what represents an aggregate increase of 25% during 2013). Due to the private sector to maintain minimum wagehigh levels and provide specified benefits to employees and may do so again in the future. In the aftermath of the Argentine economic crisis,inflation, employers both in the public and private sectors have experiencedare experiencing significant pressure from organized labor and their employees to further increase salaries. During 2013 organized labor unions have agreed with employers’ associations on salary increases between 22% and labor organizations to increase wages and to provide additional employee benefits.25%. Due to the high levelsacceleration of the devaluation and inflation during the employeesend of 2013 and the beginning of 2014 labor organizations have begun again demanding significant wage increases.unions are requesting salary increases of 30% or more for 2014. It is possible that the Argentine government could adopt measures mandatingestablishing further minimum 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 and import 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 eightten years, such export taxes have undergone significant increases, reaching a maximum of 35%. in the case of soybean. 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.

Pursuant to a resolution of the AFIP since February 2012, prior to the execution of any purchase order or similar document, Argentine importers are required to file before the AFIP a “Prior Import Statement” (Declaración Jurada Anticipada de Importación) providing information on future imports. Compliance with this requirement will be verified by the Argentine Customs upon arrival of the goods into Argentina and will be condition for the authorization of the payment of the purchase price by the Argentine financial entities. Even though this is intended merely as an information regime, it may be used for purposes of restricting imports into Argentina. A similar regime was also imposed in respect of the import and export of services, and could result in additional restrictions being imposed on the payments made by Argentine residents on services provided by foreign residents. The imposition of this regime may restrict the imports of goods and the import and export of services of our Argentine subsidiaries which may adversely affect our financial conditions or results of operations.

On November 5, 2013, the Central Bank issued Communication “A” 5493 restricting lending by domestic bank to large export companies (“Grandes Empresas Exportadoras”) with the stated aim of increasing the flow of U.S. Dollars into Argentina. The objective of the new law is to cause large export companies to seek financing from foreign institutions. We believe that the Company’s subsidiaries in Argentina should not be deemed to be Grandes Empresas Exportadoras and therefore should not be subject to these limitations on borrowing from domestic banks. However, if the Company’s subsidiaries in Argentina become subject to these limitations in the future, the lack of access to financing in the domestic and foreign markets may have an adverse effect on the results of our operations in Argentina and on the market price of our common shares.

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 beenwere eased in some respects, somethe past, as a consequence of the increase of the demand in Argentina for U. S. Dollars and the capital flows out of Argentina during 2011, the Argentine government imposed additional 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 itson the transfer abroadof funds from Argentina (e.g., to make portfolio investments) and reduced the time required to comply with the mandatory transfer of funds into Argentina (e.g., the mandatory transfer into Argentina of the proceeds of loans disbursed outside of Argentina or the mandatory repatriation of export receivables). Since January 2012, the term for mandatory transfer was reduced from 365 days to 30 or 10 days following disbursement depending on the payment of dividends, which were abolished in 2003, could be reinstated in the future and, if that were to occur,indebtedness. Accordingly, we may defaultface difficulties 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. Additionally, by means of resolution 142/2012 issued by the Ministry of Economy and Public Finance on April 24, 2012, and Communication “A” 5300 issued by the Central Bank on April 27, 2012, the term to comply with the mandatory transfer into Argentina of export proceeds was reduced to 15 days following shipment. This last term was increased to 30 days pursuant to Resolution 231/2012 issued by the Ministry of Economy and Public Finance on May 24, 2012. These restrictions and requirements could adversely affect our financial condition and the results of our operations, or the market price of our common shares.

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Changes in the Argentine tax laws may adversely affect the results of our operations.

On September 23, 2013, Law No. 26,893 amending the Income Tax Law was enacted. According to the amendments the distribution of dividends is subject to income tax at a rate of 10% and the sale, exchange or disposition of shares and other securities not trading in or listed in capital markets and securities exchanges is subject to income tax at a rate of 15%. These amendments may adversely affect the results of our Argentine subsidiaries’ operations; and adversely impact the results of the sale or disposition of our Argentine subsidiaries’ shares.

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 2010.2010, increased 3.0% in 2011, increased 0.9% in 2012, and increased 2.3% in 2013. 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.

implemented.

Changes in Brazilian tax laws may increase our tax burden. have a material adverse impact on the taxes applicable to our business

The Brazilian government frequently implements changes to the Brazilian tax regime that may affect us and our customers.clients. 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. For example, in September 2011, the Brazilian government introduced a tax on currency derivative securities transactions (“IOF/Securities”) (where the underlying asset is linked to fluctuations in foreign currency exchange rates relative to the Reais) that are executed through the Brazilian markets at the time of the acquisition, sale or maturity of IOF/Securities. The tax is calculated at the rate of 1.0% on the notional adjusted value of the financial derivative transaction. On March 1, 2012, the Brazilian government issued new regulations effective immediately relating to new export prepayment financing, limiting the tenor of these financings to 360 days and excluding financial institutions as eligible lenders. In addition, the Brazilian government implemented a 6% IOF/Exchange tax rate applicable to foreign exchange transactions related to financing from foreign financial institutions (“IOF/Exchange”) on loan transactions with an average maturity of less than five years and reduced the IOF/Exchange rate for 360 days. In December 2012, the Brazilian government modified the regulation, allowing early receipt of resources for Brazilian exporters, for prepayment export facilities by importers or any corporate entity operating abroad, including financial institutions, without any incidence of taxes in certain cases. In June 2013, the Brazilian Government revoked those measures, and reduced to 0% of the IOF tax on inflows of investment capital destined to investments in fixed income as well in derivative securities transactions. The effects of these changes and any other change that could result from the enactment of additional legislation cannot be quantified. 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.

As an example, the Instituto Nacional de Colonização e Reforma Agrária (“INCRA”) is currently conducting an investigation to determine the falsehood of the Certificado de Cadastro do Imóvel Rural (“CCIR”) delivered to us by the former owner of Rio de Janeiro Farm (the “Farm”) back in January 2005 when we acquired the Farm. In the event that the INCRA determines the falsehood of such CCIR, the acquisition deed of the Farm may be subsequently declared null and void, and therefore the Company would either ratify the acquisition by executing a new public deed with the seller, or request before a competent court the execution of the ratification of the acquisition. Also, the INCRA is conducting another investigation related to the cadena dominial of the Farm and determine the correct chain of ownership through the successive transfers of ownership of the Farm, in order to confirm that the destaque publico occurred or that the State does not have interest in claiming the ownership of the Farm. If the INCRA determines the falsehood of the CCIR and subsequently the acquisition deed of the Farm is declared null and void,

and/or the INCRA cannot confirm a regular and licit chain of ownership of the Farm, and the Company cannot obtain a favorable judicial resolution to revert such decisions, it could result in materially adverse effect on our business, financial condition and operating results.

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 asMovimento dos Trabalhadores Rurais Sem TerraandComissão 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.Asowners. As a result, we cannot assure you that our properties will not be subject to invasion or occupation by these groups. A land invasion or occupation 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 In addition, our land may be subject to expropriation by the federal government. Under Article 184 of the Brazilian legal system,Constitution, the federal government may expropriate land that is not in compliance with mandated local

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“social “social functions” for purposes of land reform.. A “Social function” is describeddefined in Article 186 of the Brazilian Constitution as (i) rational and adequate exploitation of land,; (ii) adequate use of natural resources available and preservation of the environment, (iii) compliance with labor laws, and (iv) 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 of 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 establishesFederal Law No. 5,709, effective October 7, 1971 (“Law 5709”) established 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 whichwhere 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 anyin remright) 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 ((Secretaria-Geral do Conselho de Defesa Nacional)Segurança Nacional). ThePursuant to Article 23 of Law No. 8,629, of February 25, 1993 (“Law 8629”), the restrictions mentioned in items (i) and (ii) above established by Law 5709 are also applicable for rural lease agreements executed by foreigners. “Parcerias Agrícolas” (agriculture partnerships agreements) have not been subject to these restrictions. Although, a broader interpretation of the existing regulations could have also included these agreements within the limitations for foreigners, the Federal General Attorney’s Office (“AGU”) on October 8, 2012 issued a legal opinion 005/2012, pursuant to which the AGU confirmed the understanding that the “Parcerias Rurais” are not subject to the restrictions or limitations of Law 5709. In addition, pursuant to Law 8629, the acquisition or lease by a foreigner of a rural property exceeding 100módulos de exploração indefinida(“ -“MEI,” a measurement unit defined by the Regional Superintendence of the National Institute forof Colonization and AgrarianLand Reform ((Superintendencia Regional do Instituto Nacional de Colonizaçãoao e Reforma Agraria, orAgrária – “INCRA”) in hectares for each region of the country)country - must be previously approved by the Brazilian National Congress. Brazilian federal law enacted in 1971Law 5709 also establishes that the same restrictions apply to Brazilian companies that are directly or indirectly controlled by foreign investors. Any acquisition or lease of rural property by foreigners in violation of thesethe terms of Law 5709 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 forthprovides 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 lawFederal Law 5709 on the acquisition or lease of rural property above-mentioned did not apply to Brazilian companies controlled by foreigners, pursuant to the legal opinion No. GQ-22, issued by the Federal General Attorney’s Office (the “AGU”)“AGU in 1994, which was ratified by legal opinion No. GQ-181, also issued by the AGU 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 60sixty (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 legal opinion confirmingwhich: (i) revoked the AGU’s legal opinions No. GQ-22 and GQ-181; and (ii) confirmed 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 directly or indirectly controlled by foreigners registered in the appropriate real estate registry prior to August 23, 2010 willare not be affected by this bindingthe AGU’s legal opinion. As a confirmation of such understanding, pursuant to the Joint Normative Ruling N. 1 issued on September 27, 2012 by the Ministries of: (i) Agricultural Development; (ii) Agriculture, Cattle-raising and Supply; (iii) Industry Development and Foreign Commerce; and (iv) Tourism (the “Joint Normative Ruling N. 1”); and the Normative Ruling/IN INCRA No.76, issued on August 23, 2013, a Brazilian company controlled by foreign individuals or companies which acquired or leased rural properties, by means of an act or agreement entered into from June 7, 1994 and August 22, 2010, may register such property before the National System of Rural Registry (Sistema Nacional de Catastro Rural-SNCR), without any administrative sanction. However, going forward,as of said date, 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. Additionally, the Joint Normative Ruling N. 1 sets forth the administrative procedures applicable to requests for authorization for the acquisition or lease of rural properties by foreign investors pursuant to Law 5709. Under the Joint Normative Ruling, in order to obtain the authorization for the acquisition or lease of rural properties, foreign investors shall present a project to the INCRA, containing the following information: (i) the rationale for the relationship between the property to be acquired or leased and the project size; (ii) physical and financial schedule of the investment and implementation of the project; (iii) use of official credit (governmental funds) for the total or partial finance of the project; (iv) logistic viability of the execution of the project and, in case of an industrial project, proof of compatibility between the local industrial sites and the geographic location of the lands; and (v) proof of compatibility with the criteria established by the Brazilian Ecological and Economical Zoning (Zoneamento Ecológico Económico do Brasil- ZEE), relating to the location of the property.

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, if adopted, 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;

•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.

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 Biocombustívelvel(“ANP”)) 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 AbastecimentoAbastecimento(“MAPA”)), 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%a relevant percentage of sugarcane is currently harvested by burning the crop, which removes leaves in addition to eliminating insects and other pests. The statestates of São Paulo, Minas Gerais and some local governmentsMato Grosso do Sul, among others, 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 Paulothose states and other governmental agencies in the near future.

Such limitations arise from a Brazilian Federal Decree that set forth the complete elimination of the harvest by burning the crop until 2018 in areas where it is possible to carry out mechanized harvest. In the state of Minas Gerais, the deadline imposed by the State Government for the elimination of the harvest by burning the crop is 2014, for areas with declivity lower than 12%, and for areas with declivity higher than 12% it shall be given an additional term as per the State Environmental Agency decision, on a case by case basis. Nevertheless, in the state of Mato Grosso do Sul it is currently applicable the deadline of 2018 for the elimination of harvest by burning the crop for areas where mechanized harvest can be carried out, as per the Brazilian Federal Decree.

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%90.0% of our sugarcane harvest mechanized during the 2009-20102012-2013 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.

Service of process within Luxembourg upon the Company may be possible, provided that The Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of November 15, 1965 is complied with. 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 particular in the Luxembourg procedural code, in its article 678, which conditions may include the following conditions:
(subject to court interpretation which may evolve):

 • 

the judgment of the U.S. court is final and duly 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.

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 enforcingthe enforcement of judgments obtained outside Luxembourg more difficult as to enforcethe enforcement 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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The current authorization is valid until April 22, 2016 and we expect to seek a renewal and/extension of such authorization thereafter.

Item 4.Information on the Company

A.HISTORY AND DEVELOPMENT OF THE COMPANY

Item 4. Information on the Company
A. HISTORY AND DEVELOPMENT OF THE COMPANY
General Information

Adecoagro is a Luxembourgsociété anonyme(a joint stock corporation)company). 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.”

During 2011, we contributed net proceeds of the IPO to increase our interest in IFH from 98% to 98.64%. In a series of transactions during 2012, we transferred shares of Adecoagro to certain limited partners of IFH in exchange for their residual interest in IFH increasing our interest in IFH to approximately 100%.

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 Agropecuaria S.A. 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 oneour 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 sugarsugarcane 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 ourtime. This joint-venture was entered 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 farmsa farm 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. Asas 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 ade minimisamount 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., a newly formed Maltese corporation, as its general partner. Also in connection with the Reorganization, IFH LLC transferred ade minimisamount of its interest in Adecoagro LLC (0.00001%) to its newly-formed substantially wholly-owned subsidiary, Toba Ltd., a Maltese corporation. IFH LLC thenalso 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., a newly formed Maltese corporation, 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. WeNYSE and on February 2, 2011 we issued 28,405,925 shares, at a price of US$11 per share. The shares trade under the symbol “AGRO.”

On January 28,February 2, 2011, we also 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, which is equal to the price per common share paid by the underwriters acting in the initial public offering of the Company, 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.

During 2011, we contributed net proceeds of the IPO to IFH and increased our interest in IFH from 98% to 98.64%.

Furthermore, between August and November 2011, we acquired in Argentina: (i) Compañía Agroforestal de Servicios y Mandatos S.A., an agricultural Argentine company owner of more than 4,900 hectares of land in the province of Santiago del Estero, (ii) Simoneta S.A., an agricultural Argentine company owner of more than 4,600 hectares of land in the province of La Pampa, and (iii) 3,400 hectares of land for crop production in the province of San Luis.

During 2012, the Company issued in a series of transactions 1,654,752 shares to certain limited partners of International Farmland Holdings LP (“IFH”) in exchange for their residual interest, totaling 1.36% interest in IFH. After giving effect to this exchange, the Company held approximately 100% of IFH.

On February 26, 2013, Adecoagro formed CHS Agro S.A., a joint venture with CHS Inc. (www.chsinc.com) a leading farmer-owned energy, grains and foods company based in the United States. We hold 50% interest in CHS Agro. CHS Agro will build a sunflower processing facility located in the city of Pehuajo, Province of Buenos Aires, Argentina. The facility will process blackoil and confectionary sunflower into specialty products such as in-shell seeds and oil seeds, which will be entirely exported to markets in Europe and the Middle East. The joint venture will grow confectionary sunflower on leased farms, while blackoil sunflower will be originated from third parties. As of December 31, 2013 We and CHS Inc. have made a capital contribution to CHS Agro of approximately US$ 4 million each.

On February 5, 2013, we completed an underwritten secondary offering of 13.9 million common shares of Adecoagro offered by our shareholder, HBK Master Fund LP at a price per share to the public of $8.00. The shares were offered pursuant to an effective shelf registration statement on Form F-3 filed with the SEC.

On February 13, 2013, HBK Master Fund LP sold an additional 2,1 million common shares of Adecoagro pursuant to the overallotment option it granted to Morgan Stanley & Co. LLC, the sole underwriter in the secondary offering. As of March 31, 2013, and after the completion of the offering, public shareholdes held approximately 51.9% of our capital stock.

The diagram below illustrates our corporate structure as of December 31, 2013.

LOGO

*Private Shareholders refer to shareholders of record prior to our IPO and transferees.
**Does not account for an in material amount of shares required to be owned by other persons pursuant to Maltese law.

Principal Capital Expenditures

Capital expenditures totaled $130.6$226.6 million, $138.6$301.7 million and $217.3$165.3 million for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, 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

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, 2010,2013, we owned a total of 282,798269,838 hectares, comprised of 2119 farms in Argentina, fifteen11 farms in Brazil and one farm in Uruguay. In addition we own and operate several agro-industrial production facilities including fourthree rice processing facilities in Argentina, atwo dairy operation with approximately 4,4136,092 milking cows in Argentina, two coffee processing plants in Brazil, eleventen grain and rice conditioning and storage plants in Argentina and twothree sugar and ethanol mills in Brazil with a sugarcane crushing capacity of 5.27.2 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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2013.

(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 269,838 owned hectares as of December 31, 2013 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 2012/2013 harvest year, we harvested 181,985 hectares (including 51,114 leased hectares and 34,091 second crop hectares) and produced 496,583 tons of grains, including soybeans, corn, wheat, sunflower and cotton.

 • 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 18,14235,249 hectares (including 7,3113,083 leased hectares) and producing over 91,000202,589 tons during the 2009/20102012/2013 harvest year, which accounted for 8%15% of the total Argentine production according to theConfederacion 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%18% of total white rice producedproduction capacity in Argentina and 15.5%15% of total Argentine white rice exports during 2010,2013, according toAduana Argentinaand theFederacionCamara de Industriales Arroceros de Entre Ríos (Federacion de Entidades ArrocerasArroceras), 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:

a leading dairy producer in South America in terms of our cutting-edge technology, productivity per cow and grain conversion efficiencies, producing approximately 73.0 million liters of raw milk during 2013.

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. We currently own twothree sugar and ethanol mills in Brazil with an aggregate installed crushing capacity of 5.27.2 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 112152 MW as of December 31, 2010;

37

we2013. We are currently expanding our cluster in the process of obtaining the necessary authorizationsMato Grosso do Sul and expect 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 havereach a total installed sugarcane crushing capacity of 10.310.0 million tons per year and a cogeneration capacity of 296 MW once it reaches full capacity inby 2017, resulting in a totalconsolidated sugarcane crushing capacity of 11.511.2 million tons and cogeneration capacity of 232 MW 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 fiveseven fiscal years we have consistently sold over 27,169 hectaresa portion of developed land,our fully mature farmland every year. In aggregate, we have sold 15 farms generating capital gains of approximately $95$161 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, 20102013 we owned 269,577256,703 hectares (excluding sugarcane farms) of farmland in Argentina, Brazil and Uruguay, of which 118,801133,568 hectares are croppable, 18,40912,308 hectares are being evaluated for transformation, 78,55963,513 hectares are suitable for raising beef cattle and are mostly leased to a third party beef processor,cattle farmers, constituting a total of 215,769209,389 productive hectares, and 53,80851,304 hectares are legal land reserves pursuant to local regulations or other land reserves. During 2010/2011the 2013/2014 harvest year we held leases or have entered into agriculture partnerships for an additional 37,70760,065 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 fivefour main 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 2009/20102012/2013 harvest year, we planted approximately 168,016181,985 hectares of crops, including second harvests, producing 524,890496,583 tons of grains, including soybeans, wheat and corn, sunflower and cotton. We also planted an additional 5,172 hectares where we produced over 52,00030,123 tons of forage that we used for cow feed in our dairy operation. During 2010/2011the current 2013/14 harvest year, we planted 166,981approximately 181,992 hectares of crops, including second harvests.harvest, and also planted an additional 2,816 hectares of forage .

 • 

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 91,000202,589 tons during the 2009/20102012/2013 harvest year, which accounted for 8%15% 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 fourthree 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 During the western partcurrent 2013/14 harvest year, we planted 36,331 hectares 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.rice.

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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 41.6approximately 73.0 million liters of raw milk during 2010,2013, with an average of 4,2256,092 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 28.332.8 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” dairydairies in Argentina isare the first of itstheir 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 headOur cattle business consists primarily 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 74,000leasing 63,513 hectares of grazingpasture land from uswhich is not suitable for crop production to raise and fatten the purchased cattle. The lease agreement is tied to the market price of beef at the end of each quarter.third party cattle farmers.

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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   Year Ended December 31, 
   2013   2012   2011 

Sales

  (In thousands of $) 

Crops(l)

   185,117     196,206     147,946  

Rice(2)

   107,093     93,904     83,244  

Coffee

   439     8,363     14,170  

Dairy

   30,661     18,868     19,697  

Cattle(3)

   3,853     5,027     5,709  

Total

   327,163     322,368     270,766  

Production

  2012/2013
Harvest
Year		   2011/2012
Harvest
Year		   2010/2011
Harvest
Year		 

Crops (tons)(4)

   496,590     564,800     488,185  

Rice (tons)(5)

   202,589     171,137     172,034  

Coffee (tons)

   —       2,873     2,742  
  

 

 

   

 

 

   

 

 

 

Total

   699,179     738,810     662,961  

                 
  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 

   Year Ended December 31 
   2013   2012   2011 

Dairy (thousands of liters)(6)

   72,984     54,954     51,239  

Cattle (tons)(3)(7)

   46     146     118  

   2013/2014
Harvest
Year		   2012/2013
Harvest
Year		   2011/2012
Harvest
Year		   2010/2011
Harvest
Year		 

Planted Area

  (In hectares, including second harvest) 

Crops (8)

   187,807     184,802     204,097     167,104  

Rice

   36,604     35,249     31,497     27,542  

Coffee (9)

   —       1,632     1,632     1,632  

Cattle (10)

   63,513     69,369     74,017     78,891  

(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)SalesConsists 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. Theleasing payments received from 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.farmers. 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)(4)Crop production does not include 52,48230,628 tons, 52,96062,636 tons, 46,749 tons and 53,39852,482 tons of forage produced in the 2009/2010, 2008/20092012/2013, 2012/211 and 2007/20082010/2011 harvest years, respectively.
(7)(5)Expressed in tons of rough rice produced on owned and leased farms. As of December 31, 2013, the 2013/2014 harvest year of rice harvest had not began.
(8)(6)Raw milk produced at our dairy farms.
(9)(7)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)(8)Includes 3,6532,816 hectares, 4,5615,172 hectares, 5,3824,679 hectareas, 3,841 hectares and 4,4543,653 hectares used for the production of forage during the 2013/14, 2012/2013, 2011/2012 and 2010/2011 2009/2010, 2008/2009 and 2007/2008 harvest years, respectively.
(9)The “Lagoa de Oeste” and “Mimoso” coffee farms were sold in the second quarter of 2013. In addition, we leased the coffee production rights in respect of the “Rio de Janeiro” for an 8-year term in the second quarter of 2013. We do not expect the coffee business to generate sales in future periods.
(11)Reflects the size of our coffee plantations, which are planted only once every 18 to 20 years.
(12)(10)Comprised of land devoted to raising beef cattle, which, since December 2009, is mostly leased to a third party.party cattle farmers. 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, 2010,2013, our total sugarcane plantation consisted of 53,79999,409 hectares, planted over both own and leased land. We currently own and operate twothree sugar and ethanol mills, UMA, Angélica and Angélica,Ivinhema, with a total crushing capacity of 5.27.2 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 aand Ivinhema are two new, advanced mill,mills, which we built in the state of Mato Grosso do Sul, Brazil, with a current sugarcane crushing capacitycapacities of 44.0 and 2.0 million tons per year, highly mechanized harvest, tworespectively. Both mills are located 45km apart, and form a cluster surrounded by one large sugarcane plantation. Angelica and Ivinhema are equipped with high pressure steam 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 millmills 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 completingcommencing the construction of the Ivinhemasecond phase of theIvinhema 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 itswhich will expand milling capacity until it reaches a full milling capacity of 6.3to 5.0 million tons of sugarcane per year by 2017.
     In2015. Phase 2 will consist of expanding the milling equipment, building a new fluidized bed boiler, 2 new electrical generators and expanding the sugar factory and ethanol distillery. Annual production is expected to increase to 300,000 tons of sugar, 240,000 cubic meters of ethanol and 360,000 MWh of energy exports. Total capital expenditure for phase two is estimated at $243 million.

For the year ended December 31, 2010,2013, we crushed 4.16.4 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. InFor the year ended December 31, 2009,2013 we produced 52,968335,643 tons of sugar and 132,492268,053 cubic metersmeter 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, 2010,2013, our overall sugarcane plantation consisted of 53,79999,409 hectares of sugarcane in the states of Mato Grosso do Sul and Minas Gerais, Brazil, of which 9,9079,145 hectares of sugarcane were planted on owned land, and 43,89290,264 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 

   Year Ended December 31, 
   2013   2012   2011 

Sales

  (In thousands of $) 

Sugar

   133,597     134,766     130,348  

Ethanol

   150,382     121,544     116,599  

Energy

   32,463     25,649     24,393  

Total

   1,019     373     5,978  
  

 

 

   

 

 

   

 

 

 
   317,461     282,332     277,318  

   Year Ended December 31 

Production

  2013   2012   2011 

Sugar (tons)

   335,643     281,622     247,805  

Ethanol (cubic meters)

   268,053     183,713     161,385  

Energy (MWh exported)

   300,208     238,540     245,474  

   Year Ended December 31 

Other Metrics

  2013  2012  2011 

Sugarcane milled (% owned)

   87%   96%   93% 

Sugarcane crushing capacity (millions of tons)

   7.2    7.2    5.2  

% Mechanized harvesting operations — Consolidated

   94%   90%   87% 

% Mechanized /harvesting operations — Cluster

   100%   100%   100% 

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-yeartwelve-year period since our inception, we have effectively put into production 140,570164,157 hectares of land that was previously undeveloped or undermanaged. During 2010,2013, we put into production 6,4901,389 hectares and in addition continued the transformation process of over 120,738133,568 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 282,798269,838 hectares, distributed throughout our operating regions as follows: 86% in Argentina, 13% in Brazil, and 1% in Uruguay. During the last fiveseven years, we have traded 27,169 hectaressold 15 of developed land,our fully mature farms, generating capital gains of approximately $95$160 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

From time to time, the company is continuously seekingseeks to recycle its capital by disposing of a portion of its fully developed mature farms and by acquiringin order to acquire 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 changesRecent 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.

   Year Ended December 31, 
   2013   2012   2011 

Undeveloped/Undermanaged land put into production (hectares)

   1,389     8,961     13,676  

Ongoing transformation of croppable land (hectares)

   133,568     128,133     120,460  

Number of farms sold

   4     2     1  

Hectares sold

   14,176     9,475     2,439  

Capital gains from the sale of land ($ thousands)

   28,172     27,513     8,832  

During 2013 we sold a total of five farms or 14,176 hectares, which generated capital gains of $28.2 million. Each of these farms were sold at premiums to the Cushman & Wakefield independent farmland appraisal dated September 30, 2013 ranging between 7% and 19%.

San Agustín Farm Sale

In November, 2013, we entered into an agreement to sell the San Agustin farm for $17.5 million, equivalent to $3,445 per hectare, representing a 19% premium over the Cushman & Wakefield independent appraisal dated September 30, 2013. San Agustin is a 5,066 hectare farm located in the province of Corrientes, Argentina and was acquired by Adecoagro in 2004 for growing rice, grains and raising cattle. This transaction generated $15 million of operating profit in the fourth quarter of 2013.

San Martin Farm Sale

In October, 2013, we completed the sale of the San Martin farm for a total price of $ 8.0 million, equivalent to $2,294 per hectare, representing a 15% premium over the Cushman & Wakefield independent appraisal dated September 30, 2012. San Martin is a 3,502 hectare farm located in the province of Corrientes, Argentina. The farm is used for cattle grazing activities and is a subdivision of the Ita Caabo farm acquired by Adecoagro in 2007. This transaction generated $6.5 million of operating profit in the fourth quarter of 2013.

Santa Regina Farm Sale

Santa Regina is a 3,618 hectare farm that was purchased by Adecoagro in 2002 for a total of $2.3 million, or $625 per hectare. The farm has 3,200 hectares of croppable land that have been transformed and are currently used to produce corn, soybean and wheat. During the last ten years, we have operated Santa Regina under a sustainable production model focused on no-till farming, crop rotation, balanced fertilization and other best practices, which have enhanced productivity and soil quality. Considering the purchase price, transformation capital expenditures, operating cash flows and exit price, this investment generated an internal rate of return of 34.2%. The book value of Santa Regina in our balance sheet was $3.1 million. We recorded a $19.4 million gain in the fourth quarter of 2012 in connection with the sale of 51% stake of Santa Regina S.A. ($10.4 million of such gain corresponds to the fair value of the remaining 49% interest). We also recorded a $1.2 million gain in the second quarter of 2013 in connection with the sale of the 49% interest. On June 14, 2013, Adecoagro sold its remaining 49% interest in Santa Regina S.A., a company whose sole asset is the Santa Regina farm located in Buenos Aires, Argentina. The farm was sold for $13.1 million (equivalent to $7,370 per hectare), 16% above Cushman and Wakefield’s independent appraisal dated September 2012.

Sale of Mimoso and Lagoa de Oeste Coffee Farms

On May 2, 2013, Adecoagro entered into an agreement to sell the Lagoa do Oeste and Mimoso coffee farms located in Luis Eduardo Magalhaes, Bahia, Brazil. The farms have a total area of 3,834 hectares of which 904 hectares are planted with coffee trees. In addition, Adecoagro entered into an agreement whereby the buyer will operate and make use of 728 hectares of existing coffee trees in Adecoagro’s Rio de Janeiro farm during an 8-year period. The total consideration for this transaction was 49 million Brazilian Reais ($24 million). As of December 31, 2013, we collected 12.4 million Brazilian Reais ($6 million). The sale price represents a 7% premium to the aggregate value of the Cushman & Wakefield farm appraisal dated September 2012 and the fair value of the coffee plantation. This transaction resulted in a gain of $5.7 million recorded in other operating income.

Land transformation is an ongoing process, which consists of transforming undervalued or undermanaged land into its highest production capabilities. All our farmland is managed under a sustainable production model that is focused on cutting edge technologies, such as no-till farming, crop rotations, balanced fertilization and integrated pest management, among other practices, which enhances soil productivity and reduces the use of fertilizers and agrochemicals year after year.

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 continuedcontinuous 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 logisticallogistic 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.

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 production is focused in western Bahia, Brazil. This region is excellent for producing high quality cotton fiber due to its ideal climate, well drained soils and high altitude.

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.

 • 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 Cluster, constituted by the Ivinhema and Angélica mills (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 152 MW of clean and renewable electricity; (iii) is what we believe to be one of the largest continuously operating clusters in Brazil designed for enhanced efficiency and non-stop processing, with a production capacity of 2,800 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.

 • 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 eighttwelve fiscal years, we have executed transactions for the purchase and disposition of land for over $460$602 million and sold 27,16953,258 hectares of developed land, generating capital gains of approximately $95$160 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 8.910 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,(crops, rice, cropsdairy and dairy)coffee). 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 expandincrease our current dairymilk production capacity using the “free-stall” model. We believe thatexpect cow productivity to gradually increase to an average of 35 liters per cow per day as new cows adapt to our second free stall dairy, which started operating during the know-howend of 2012 and skills gained from the construction of our first “free-stall” module canwill be easily replicated, allowing us to scale-up our production efficiently and at a fast rate.fully populated with 3,500 milking cows by mid-2014.

 • 

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 constructionramping up of theour Ivinhema mill, our second greenfield project,and Angelica mills, which we expectare expected to reach a full crushing capacity of 6.39.0 million tons per year by 2015 and 10.0 million 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 2010-112012/13 our farming operations were conducted on a total of 307,284269,838 hectares of land, of which we own 269,577256,703 hectares (excluding sugarcane farms) and we leaseleased the remaining 37,70760,065 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 

   Harvest Year 
   2012/2013   2011/2012   2010/2011 

Crops (thousands of tons)(1)

   496,590     564,800     488,185  

Rice (thousands of tons)(2)

   202,589     171,137     172,034  

Coffee (thousands of tons)

   —       2,873     2,742  

   Year Ended December 31, 
   2013   2012   2011 

Dairy (thousands of liters)(3)

   72,984     54,954     51,239  

Cattle (thousands of tons)(4)

   47     146     118  

(1)Crop production volume forAs of the 2010/2011date of this annual report, the harvest of soybean, corn, sunflower and cotton, rice and coffee pertaining to the 2013/2014 harvest year includesis ongoing. The only ourcrop which has been fully harvested in the current 2013/2014 harvest year is wheat, and barley harvest, as the remaining crops were not yet harvested aswith a total production of December 31, 2010.77,168 tons.
(2)Expressed in tons of rough rice produced in farms we own or lease.rice.
(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 planting, growing and harvesting crops onover our owned croppable area. During the 2012/13 harvest year, we planted crops over a total area of approximately 166,981184,802 hectares, for the 2010/2011 harvest year, which includesincluding our owned land, land leased landfrom third parties and hectares planted in second harvests. During mid 2013

we began the planting of crops pertaining to the 2013/14 harvest year, which was concluded during the first quarter of 2014, with a total planted area of 187,807 hectares. 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 
   2013/2014   2012/2013   2011/2012   2010/2011 

Product Area

  (In hectares) 

Soybeans(l)

   83,153     92,103     92,789     90,126  

Corn(2)

   50,974     45,733     47,409     31,894  

Wheat(3)

   29,411     28,574     43,235     28,058  

Sunflower

   12,880     12,478     9,596     9,943  

Cotton

   6,217     3,098     6,389     3,242  

Forage(4)

   5,172     2,816     4,679     3,841  

Total

   187,807     184,802     204,097     167,104  

                 
  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 hectaressoybean first crop and second crop planted in second harvests.area.
(2)Includes sorghum crop.
(3)Includes 3,653 hectares, 4,561 hectares, 5382 hectaresbarley crop.
(4)Forage includes corn silage, wheat silage and 4,454 hectaresalfafa used for the production of forage during the 2010/2011, 2009/2010, 2008/2009 and 2007/2008 harvest years, respectively.cow feed in our dairy operation.

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 

   Harvest Year 
   2013/2014   2012/2013   2011/2012   2010/2011 

Crop Production(1)

  (In thousands of tons) 

Soybeans(2)

   —       175,478     189,014     199,533  

Corn(2)

   —       242,246     237,294     169,711  

Wheat

   77,168     52,308     113,121     92,908  

Sunflower(2)

   —       24,076     18,667     20,916  

Cotton lint(2)

   —       2,482     6,704     5,117  

Total(2)

   77,168     496,590     564,800     488,185  

(1)Does not include 6,350 tons, 30,628 tons, 46,749 tons and 52,482 tons of forage produced in the 2013/14, 2012/2013, 2011/2012, and 2010/2011 harvest years respectively.
(2)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,soybean, corn, sunflower and will finish in August 2011, withcotton pertaining to the 2013/14 harvest of coffee.year is ongoing. The only crop which has been fully harvested is wheat.

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 

   Year Ended December 31, 
   2013   2012   2011 

Sales

  (In thousands of $) 

Soybeans

   68,850     66,721     61,385  

Corn (l)

   79,423     68,790     44,196  

Wheat (2)

   21,798     34,831     25,060  

Sunflower

   8,030     7,887     7,413  

Cotton

   5,215     15,297     9,101  

Other crops(3)

   1,801     2,680     791  

Total

   185,117     196,206     147,946  

(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.sorghum.
(2)Includes barley.
(3)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, theThe world’s top producers of soybeans currently 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 2009/20102010/2011 harvest year, we planted a total area of 87,52290,126 hectares of soybeans, producing a total of 241,848199,533 tons representing 54% of our total planted area that year, and 46%41% of our total crop production. In the 2010/ 20112011/ 2012 harvest year, we planted a total area of 90,16792,789 hectares of soybeans. Soybeans comprised 19%soybeans, producing a total of 189,014 tons representing 45% of our total sales in 2007, 16%planted area that year, and 33% of our total sales in 2008, 14%crop production. In the 2012/2013 harvest year, we planted a total area of 92,103 hectares of soybeans, producing a total of 175,478 tons representing 51% of our total sales in 2009crop planted area that year, and 15%35% of our total crop production.

Soybeans comprised 11% of our total consolidated sales in 2010.

2011, 2012 and 2013.

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 30,50531,894 hectares of corn, including the second harvest.

harvest, producing a total of 169,711 tons of corn representing 19% of our total planted area that year, and 35% of our total crop production. In the 2011/2012 harvest year, we planted a total area of approximately 47,409 hectares of corn, including the second harvest, producing a total of 237,294 tons representing 24% of our total planted area that season and 42% of our total production. In the 2012/2013 harvest year, we planted a total area of approximately 45,733 hectares of corn, including the second harvest, producing a total of 242,246 tons of corn representing 35% of our total planted area that year, and 49% of our total crop production.

Corn comprised 8% of our total consolidated sales in 2007, 9%2011, 11% of our total consolidated sales in 2008, 5%2012 and 12% of our totalconsolidated sales in 2009 and 6% of our total sales in 2010.

2013.

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 25,65628,058 hectares of wheat.

48wheat, producing a total of 92,908 tons of wheat representing 17% of our total planted area that year, and 16% of our total crop production. In the 2011/12 harvest year we planted a total area of approximately 43,235 hectares of wheat, producing a total of 113,121 tons of wheat representing 21% of our total

planted area that year, and 20% of our total crop production. In the 2012/13 harvest year we planted a total area of approximately 28,574 hectares of wheat, producing a total of 52,308 tons of wheat. In the 2013/14 harvest year we planted a total area of approximately 29,288 hectares of wheat, producing a total of 77,168 tons of wheat.

Wheat comprised 4% of our total consolidated sales in 2011, 6% of our total consolidated sales in 2007, 6% of our total sales in 2008,2012 and 3% of our total consolidated sales in 2009 and 2% of our total sales in 2010.
2013.

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 2009/20102010/2011 harvest year, we planted a total area of approximately 14,7849,943 hectares of sunflower, producing a total of 17,19320,916 tons of sunflower, representing 9%6% of our total planted area that year, and 4% of our total crop production. In the 2011/2012 harvest year, we planted a total area of approximately 9,596 hectares of sunflower producing a total of 18,668 tons of sunflower representing 5% of our total planted area that year, and 3% of our total crop production. In the 2010/20112012/2013 harvest year, we planted a total area of approximately 9,94312,478 hectares of sunflower. sunflower producing a total of 24,076 tons of sunflower representing 7% of our total crop planted area that year, and 5% of our total crop production.

Sunflower comprised 1% of our total consolidated sales in 2007, 2% of our total sales in 2008, 2% of our total sales in 20092011, 2012 and 1% of our total sales in 2010.

2013.

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 northern Argentina and 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 2009/20102010/2011 harvest year, we planted a total area of approximately 4253,242 hectares of cotton producing a total of 5,117 tons of cotton lint, representing 2% of our total planted area that year, and 2% of our total crop production. In the 2011/12 harvest year, we planted a total area of approximately 6,389 hectares of cotton, including the second harvest, producing a total of 1,0686,704 tons of cotton lint, representing 1% of our total planted area that year, and 1% of our total crop production. In the 2010/20112012/2013 harvest year, we planted a total area of approximately 3,2423,098 hectares of cotton. Cotton comprised 5%cotton producing a total of our total sales in 2007,2,482 tons of cotton lint, representing 2% of our total sales in 2008, 4% of our total sales in 2009planted crop area that year, 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%0.5% of our total crop production and 4%production.

Cotton comprised 2% 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/consolidated sales in 2011, harvest year, we planted a total area of approximately 3,815

49

hectares of other crops. Other crops comprised 3% of our total consolidated sales in 2007, 3%2012 and 1% of our total consolidated sales in 2008, 2% of our total sales in 2009 and 1.0% of our total sales in 2010.
2013.

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 2009/20102012/2013 harvest year, we planted 4,5615,172 hectares of forage and produced 52,48230,628 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 MediaMedio 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 

   Harvest Year 

Rice Product Area & Production

  2013/2014   2012/2013   2011/2012   2010/2011 

Owned planted area (hectares)

   33,231     32,167     27,242     22,973  

Leased planted area (hectares)

   3,100     3,083     4,255     4,568  

Total rice planted (hectares)

   36,331     35,250     31,497     27,541  

Rough rice production (thousands of tons) (1)

   —       202,589     171,137     172,034  

(1)As of the date of this annual report, the harvest of rice pertaining to the 2013/2014 harvest year is ongoing.

We grow rice on 5 farms we own and 52 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

50

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 producing a total of 172,034 tons, representing 14%26% of our total farming production and 10% of our total planted area.
     During mid 2010, In the 2011/2012 harvest year, we began the constructionplanted a total area of approximately 31,497 hectares of rice, producing a total of 171,137 tons, representing 10% of our fourthtotal planted area that year, and 23% of our total farming production. In the 2012/2013 harvest year, we planted a total area of approximately 35,249 hectares of rice, mill. The new mill is located inproducing a total of 202,589 tons, representing 16% of our total planted area that year, and 29% of our total farming production. In the provincecurrent 2013/2014 harvest year, we planted a total of Santa Fe, Argentina. As36,331 hectares of March 31, 2011, assemblyrice, which have not been fully harvested as 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 quarterdate of 2011.
this report.

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 becomes white rice after it is then polished to remove the excess bran, thereby creating white rice.

bran.

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 

   Year Ended December 31, 
   2013   2012   2011 

Processed Rice Production

  (In thousands of tons) 

Rough rice processed — own

   189,484     163,035     163,033  

Rough rice processed — third party

   45,921     86,512     58,720  

Total rough rice processed

   235,405     249,547     221,753  

White rice

   138,267     86,092     91,176  

Brown rice

   3,741     57,505     33,166  

Broken rice

   32,550     28,787     23,880  

Total processed rice

   174,558     172,384     148,222  
   Year Ended December 31, 
   2013   2012   2011 

Processed Rice Sales

  (In thousand of $) 

Total Sales

   107,093     93,904     83,244  

Rice comprised 19%15% of our total consolidated sales in 2007, 23%2011, 16% of our total consolidated sales in 2008, 22% of our total sales2012 and 17% in 2009 and 14% of our total sales 2010.

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2013.

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 andBadische 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

During May 2013, Adecoagro entered into an agreement to sell the Mimoso farm and Lagoa do Oeste farm located in Luis Eduardo Magalhaes, Bahia, Brazil. The farms have a total area of 3,834 hectares of which 904 hectares are planted with coffee plant is a woody perennial evergreen. Brazil istrees. In addition, we entered into an agreement whereby the biggestbuyer will operate and

make use of 728 hectares of existing coffee producing countrytrees in our Rio de Janeiro farm for an 8-year period. The total consideration for this transaction was $24 million, of which $6.0 million were collected as of December 31, 2013 and the world, followed by Vietnambalance in three annual installments in 2014, 2015 and Colombia. Coffee is exported as a green bean and is then processed depending on2016. Pursuant to the market. While there are several different coffee species, two main species of coffee are cultivated today. Arabica coffee accounts for approximately 60%terms of the world’s production, and Robustaagreement, we will retain ownership of the coffee accounts for about 40% and differs fromtrees, which are expected to have an estimated useful life of 8 years upon the Arabica coffees in termsexpiration of quality and taste.the agreement. 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 thusdo 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 selectexpect our coffee as a top quality estate coffee. It is certified accordingbusiness 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 demandedgenerate sales 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.
future periods.

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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business:

   Harvest Year 

Coffee Production & Sales

  2013/2014   2012/2013   2011/2012   2010/2011 

Coffee plantation (hectares)

   —       1,632     1,632     1,632  

Coffee pruning area (hectares)

   —       —       62     227  

Coffee production (thousands of tons) (1)

   —       —       2,873     2,742  

(1)As of the date of this annual report, the 2012/2013 harvest year coffee had not yet been harvested.

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.

   Year Ended December 31, 
   2013   2012   2011 
   (In thousands of $) 

Coffee sales

   439     8,363     14,170  

Coffee comprised 5%3% of our total consolidated sales in 2007, 7%2011, 1% of our total consolidated sales in 2008, 5%2012 and 0.1% of our total consolidated 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 to2013. We do not expect 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 15business 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 resultsgenerate sales 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.
future periods.

Dairy Business

We conduct our dairy operation in our 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 grassforages 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 litermilk 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 

   Year Ended December 31, 

Dairy Herd & Production

  2013   2012   2011 

Total dairy herd (head)

   7,236     6,765     10,803  

Average milking cows

   6,092     5,025     4,603  

Average daily production (liters per cow)

   32.8     30.0     30.5  

Total production (thousands of liters)

   72,984     54,954     51,239  

   Year Ended December 31 
   2013   2012   2011 
   (In thousands of $) 

Sales

   30,661     18,868     19,697  

As of December 31, 2010,2013, 2012 and 2011, we owned a dairy herd of 9,178 7,236 6,765 and 10,803,head, respectively, including 4,2256,092, 5,025 and 4,603 milkings cows, respectively, with an average production of 32.8; 30.5 and heifers in milk.30.0 liters per cow per day, respectively. Our dairy operation consists of threetwo free stall dairy facilities — two traditional grazing dairies and one advanced “free-stall” dairy. In 2010, our cows produced an averagewith a total capacity 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.

6,500 milking cows.

Dairy comprised 13% of our total sales in 2007, 6% of our total sales in 2008, 4% of our total consolidated sales in 2009 and2011, 3% of our total consolidated sales 2010.

53in 2012 and 5% of our total consolidated sales in 2013.

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,”large third party milk processing facilities 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.

Having proved the success of our model we built a second free stall diary in 2011 and started operations during August 2012. We expect to gradually populate this facility until it reaches its full capacity (3,500 milking cows) by mid-2014.

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 freewhich frees 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.

54

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.

Sale of La Lácteo Joint Venture

     In 2007, Adecoagro entered into an agreement with Agropur Cooperative, a Canadian-based dairy cooperative, to form a

On June 6, 2013, the Company acquired the remaining 50% interest in its joint venture named Grupo La Lácteo. In this transaction, we contributed our wholly owned subsidiary Lacteo S.A. (“La Lácteo S.A., an entity engaged inLacteo”) for US$ 1, and collected US$ 5.1 million associated with 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%acquisition.

The acquisition of the joint venture,remaining 50% in La Lacteo was done exclusively with the view to resale and met the definition of discontinued operation. The Company elected to account for the acquisition applying the short-cut method under IFRS 5. As of the transaction date, it was determined that the fair value less costs to sell of La Lacteo was not significant. The Company’s previously held interest in La Lacteo was remeasured to fair value and the joint venture agreementcumulative exchange differences recognized in place creates joint control over Grupoequity were reclassified to the income statement. At the acquisition date La Lácteo. The formation of this joint ventureLacteo was completedvalued at fair value less costs to sell.

On July 31, 2013, the Company sold its 100% interest in December 2007. AsLa Lacteo for Argentine Pesos 1. In addition, the Milk Supply Offer Agreement between La Lacteo and Adeco Agropecuaria S.A. (a Company’s subsidiary) was terminated without penalties.

Certain reclassifications have been made to the consolidated financial statements as of December 31, 2010 and 2009, and for the years then ended, to conform to the current presentation, to reflect the discontinued operations of La Lácteo manages approximately 250,000 liters of milk per day, producing a broad variety of dairy products including fluid milk, yogurt, butter, cheese,(See Note 2.3 to the 2012 Consolidated Financial Statements 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), pursuantNote 11 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.
Consolidated Financial Statements).

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”(now “Marfrig Argentina S.A.”), 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 10-year lease agreement under which QuickfoodMarfig Argentina S.A. leases grazing land from us to raise and fatten cattle.

In September 2013, Marfrig Argentina S.A. notified us of their intention to early terminate in the purchased cattle. fourth quarter of 2013 the lease agreements of the approximately 63,000 hectares of grazing land.

As required by antitrust law, we reportedof the date of this transaction to Argentina’s National Commissionreport, Adecoagro is seeking indemnification from Marfrig Argentina S.A. and Marfrig for the Defence of Competition (Comision Nacional de Defensa de de la Competencia, or “CNDC”). The CNDC’s administrative approvalearly termination 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—Agreementlease agreements. Adecoagro has also entered into new lease agreements with Quickfood S.A.”

     After this sale, ourthird party cattle business primarily consistsfarmers. The agreements consist of leasing (i) approximately 74,00036,768 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 locatedBuenos Aires. We are still in the Argentine provincesprocess of Corrientes and Santa Fe,negotiating lease agreements for an annual pricethe remaining 26,745 hectares of $25,000 each. farmland.

Additionally, as of MarchDecember 31, 2011, owned approximately 1,2542013, we sold the remaining 1,375 head of cattle and twodiscontinued our cattle feedlots with a capacity to hold 6,500 heads, which we use for fatteningraising 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 

   Year Ended December 31, 
   2013   2012   2011 
   (Head of cattle) 

Breeding(l)

   —       1,375     2,039  

Fattening

   —       —       —    

Total

   —       1,375     2,039  

(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 consolidated sales 2010.

in 2011, 2012 and 2013.

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 255,000135,919 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:

2013:

Storage Capacity

Nominal

Crops (tons)

   28,806  
Storage CapacityNominal
Crops

Rice (tons)

   28,800
Rice (tons)135,919116,854  

In addition, we use silo bags to increase our storage capacity at low cost. Silo bags are a revolutionary andan 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 2009/20102012/2013 harvest year, we stored approximately 30%36% 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:

2013:

Drying Capacity

  Nominal 
Drying CapacityNominal

Crops (tons/day)

   2,400  

Rice (tons/day)

   6,6005,300  

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 theBolsa de Cereales de Buenos Airesand theBolsa 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 theBolsa 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 theMercado 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%64% 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 five largest customers are Bunge International Commerce Ltd, Noble Americas Corp. (“Noble”), Bunge International Commerce Ltd. (“Bunge”), Cargill S.A.C.I. and Molinos Rio de la Plata S.A.S.A,, Vicentin and Louis Dreyfus Co.,comprising approximately 66%78% of our sales in the year ended December 31, 2010.2013 In Argentina, the applicable export tax rate on soybeans is 35%.

Corn: Approximately 60% to 70% 84%of our Argentine and Uruguayantotal production respectively, is exported, of which 64% are FOB sales, 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%Approximately 55% of ourthe corn crop is hedged pre-harvest, due to logistical issues. We sell approximately 10%2% of our corn production

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for special products such as popcorn and corn seed.seed . Our five largest customers are Leiva Chavés María Luz, Bunge,Nidera, Noble and POP Argentina S.A.Americas Corp. (“Noble”), Cargill Inc, Alfred C. Toepfer International, Desa-Agli Llc comprising approximately 60%51% of our sales in the year ended December 31, 2010.2013. In Argentina, the applicable export tax rate on corn is 20%.

Wheat: We sell the majority Approximately 60% of our production is for local industry, and 40% is exported of which 29% are FOB sales. Approximately 52% of the wheat intocrop is hedged pre-harvest, by forward sales, sales in the export market (63% of our Argentinefutures markets, and 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.agreements. Brazil is the main importer of ourArgentine 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 five largest customers are Bagley Argentina, Nidera, Glencore, Molino Chacabuco and Bunge Granar S.A., ADM Argentina S.A., and Alfredo C. Teopfer International Commerce Ltd, comprising approximately 60%61% of our sales in the year ended December 31, 2010.2013. 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, high oil content sunflower and seed). Our three largest customers are Molinos Río de la PlataDow Agrosciencies Argentina S.A., NideraArgensun S.A. and GranarCHS Argentina S.A., comprising approximately 84%99% of our sales in the year ended December 31, 2010.2013. In Argentina, the applicable export tax rate is 32%.

Cotton: We typically make pre-harvest sales of cotton fiber produced in Brazil and Argentina into the export market. Sales for the textile industry are based on domestic demand and premiums. OurpremiumsOur five largest customers are Vicunha Textil SA and Multigrain Argentina S.A.Noble Americas Corp. (“Noble”), Omnicotton, Glencore, Enod Sa Compass Cotton comprising approximately 77%87% of our sales in the year ended December 31, 2010. In Argentina, the applicable export tax rate is 32%.2013. Cottonseed is sold in the domestic market to meet feed demand and to crushers (producing oil for domestic use or biodiesel).

demand.

Rice: Rough rice is available for sale commencing after the harvest of each year. White rice availability is based on our milling capacity. 68%78% 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%28% of our exported volume, followed by IraqAngola with 25%, Europe with 21%, the Middle East with 12% and the remainder soldis exported 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.American countries. Argentina’s retail market is comprised of four types of rice and threefour brands that have a 14.3%16.6% market share. Rice prices are based on regional supply demand and exchange rate in Brazil.

Our largest customers for rice are Herba Rice Mills, Camil Alimentos, Webcor S.A., Glencore Grains, Ameropa AG, Josapar Joaquim Oliveira S.A. Participacoes, Carreteiro Alimentos Ltda., Sao Joao Alimentos Ltda. and VA Intertrading Aktiengesellschaft, comprising approximately 46%42% of our sales in the year ended December 31, 2010.2013. In Argentina, the applicable export tax rate is 10% for rough rice and 5% for white rice.

CoffeeDairy: 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 2007,2013, we sold our entire raw milk production to top Argentine dairy companies such as Groupe Danone, NestléMastellone Hnos. S.A., La Lácteo S.A and Dairy Partners Americas and Mastellone Hermanos S.A.of America (DPA). 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.companies. 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.
During 2014 we are planning to transform up to 15% of our raw milk production into powdered milk through a tolling agreement. The powdered milk will then be exported to the international market.

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

As of December 31, 2013, we grow sugarcane in the center-south region of Brazil on 9,9079,145 hectares of our own land and 43,89290,264 hectares of land leased through agriculture partnerships. Under these agreements, our partners lease

land to us for periods of between one and two sugarcane cycles, equivalent to periods of between 10 to 12 years, on which we cultivate sugarcane for six-year terms.sugarcane. 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%87% of the total sugarcane we milled during 2010,2013, with the remaining 5%13% 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, 
   2013   2012   2011 

Grown on our owned and leased land (tons)

   5,560,532     4,304,038     3,891,125  

Purchased from third parties (tons)

   857,599     184,897     276,957  

Total (tons)

   6,418,131     4,488,935     4,168,082  

                 
  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 November/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%94% mechanized (100% at Angélica mill and 27%Ivinhema mills and 65% at UMA mill) and the remaining 20%6% 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 20102013 harvest, UMAour mills harvested sugarcane with aan average TRS content of 140,127, compared to ana historical average of 138136 in the center-south region of Brazil generally. Angélica’s TRS for the same period reached 134. In addition, during the 20102013 harvest, we harvested an average of 96.171.8 tons of sugarcane per hectare offrom our ownowned and leased land.

Lower than expected TRS and yields are explained by excess rains during June 2013 and strong frosts during mid July 2013, which negatively affected all of the Brazilian center-south region.

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 2026 kilometers at UMA and 4030 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.

and Ivinhema.

Our Mills

We currently own and operate twothree sugar mills in Brazil, UMA, 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.Ivinhema. Our mills produce sugar, ethanol and energy, and accordingly, we have somethe flexibility to adjust ourbetween the production betweenof sugar and ethanol, to take advantage of more favorable market demand and prices at given points in time. As of December 31, 2010,2013, our sugar mills had a total installed crushing capacity of 5.27.2 million tons of sugarcane.sugarcane, out of which 6.0 million tons of crushing capacity correspond to our cluster. As of the date of this annual report, we have concluded the 20102013 harvest at both mills, crushing an aggregate volume of 4.066.4 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%97.7% of the sugarcane milled at UMA, with the remaining 1%2.3% acquired from third parties. On December 31, 2010,2013, UMA concluded its harvest operations for the 20102013 season, crushing 1.131.0 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,mid 2011, 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 ofstarted the construction costs of our third mill, Ivinhema, using $230 million fromlocated in the proceeds raisedstate of Mato Grosso do Sul, approximately 45 kilometers south of our existing Angelica mill, in order to complete our IPO.planned sugarcane cluster in that region. The construction of the first phase of the Ivinhema mill is expected to have a crushing capacitywas completed during the beginning of 6.32013 reaching 2.0 million tons of sugarcane per year when it reaches full capacity in 2017, increasing our total sugarcane crushing capacity, and milling operations commenced on April 25, 2013. The mill is equipped with state-of-the-art technology including full cogeneration capacity, flexibility to 11.5 million tons per year. We expect to source a majority of sugarcane for the Invinhema mill from our own supplyproduce sugar 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 synergiesethanol 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. fully mechanized agricultural operations.

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 manufacturingsecond phase 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.has commenced, which will expand milling capacity to 5.0 million tons per year by 2015. See “—Sugar, 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.” 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,March 23, 2012, 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 3.64.1 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.

Phase 2 will consist of expanding the milling equipment, building a new fluidized bed boiler, 2 new electrical generators and expanding the sugar factory and ethanol distillery. Annual production is expected to increase to 300,000 tons of sugar, 240,000 cubic meters of ethanol and 360,000 MWh of energy exports. Total capital expenditure is estimated at $243 million.

Our cluster is expected to have a crushing capacity of 9.0 million tons of sugarcane crushing capacity per year by 2015 and 10.0 million by 2017. We expect our cluster will generate operational synergies and economies of scale that will result from a 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.

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   —   — 

   Year Ended December 31, 
   2013   2012   2011 

Sugar

   335,643     281,662     247,805  

Ethanol

   268,053     183,713     161,385  

Energy (MWh exported)

   300,208     238,540     245,474  

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.

   Year Ended December 31, 
   2013   2012   2011 
   (In thousands of $) 

Sugar

   133,597     134,766     130,348  

Ethanol

   150,382     121,544     116,599  

Energy

   32,463     25,649     24,393  

Other

   1,019     373     5,978  

Total

   317,461     282,332     277,318  

Sugar

During 2013, sugar production capacity increased by approximately 1,000 tons per day, as a result of the completion of the first phase of the construction of the Ivinhema Mill. Our current maximum sugar production capacity is 2,400now of 3,000 tons per day which, in a normal year of 4,4004,500 hours of milling, results in an annual sugar maximum production capacity of over 455,000562,500 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 2009,2013, we produced 52,968335,643 tons of sugar, at the UMA mill compared to 87,388281,662 tons of sugar in 2010.
2012 and 247,805 tons of sugar in 2011.

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 consolidated sales in 2010.

2011, 22% of our total consolidated sales in 2012 and 21% of our total consolidated sales in 2013.

Ethanol

During 2013, ethanol production capacity increased by approximately 600 cubic meters per day, as a result of the completion of the first phase of the construction of the Ivinhema Mill. Our current maximum ethanol production capacity is now of 1,4002,000 cubic meters per day which, in a normal year of 4,4004,500 hours of milling, results in an annual ethanol maximum production capacity of over 263,000375,000 cubic meters of ethanol. In 2010,2011 we produced 174,303161,385 cubic meters of ethanol.

ethanol, compared to 183,713 cubic meters in 2012 and 268,053 cubic meters in 2013.

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% of21% or our total consolidated sales in 2007, 12% of our total sales in 2008,2011, 20% of our total consolidated sales in 20092012 and 27%21% of our total consolidated sales in 2010.

2013.

Cogeneration

We generate electricity from sugarcane bagasse (the fiber portion of sugarcane that remains after the extraction of sugarcane juice) in our twothree mills located in Brazil. Our total installed cogeneration capacity is approximately 112152 MW, and 7598 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 twothree mills are duly licensed by ANEELthe Agência Nacional de Energia Elétrica (“ANEEL”) to generate and sell electricity. During the year ended December 31, 20102013 , 2012 and 2011 we sold 178,914354,040 MWh, 317,211 MWh and 245,389 MWh to the local electricity market, comprising 3.5%4%, 3% and 4% of our totalconsolidated 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.

respectively.

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

63

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%66% of production, is sold to the national power grid.

The following flow chart demonstrates the sugar, ethanol and cogeneration production process:

(GRAPHICS)

LOGO

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 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.

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 Angélicaour cluster and UMA mills together is 112mill stands at 136 MW and 16MW respectively, of which 75 MW86MW and 12MW are available for saleto sell to the market. The Ivinhema millOur cluster is planned to have full cogeneration capacity as well and is expected to generate 184 MW216MW by 2017,2015 of which 131 MW are144MW is 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 

Nominal Storage Capacity

  Cluster   UMA   Total 

Ethanol (cubic meters)

   140,000     27,000     167,800  

Sugar (tons)

   155,000     36,400     191,400  

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.Louis Dreyfus., Bunge, Noble and Copersucar Trading AVV, Atlas, Noble, Bunge, Sucres Et Dendrees AS and Wilmar comprising approximately 87%81% of our sales in the period ended December 31, 2010.

2013.

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. OurBrazil and better ethanol parity at the gas stations. Around 35% of our ethanol sales are not made through the execution of formal agreements. Instead, salesThe remaining volumes are madesold 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,were: Ipiranga Produtos de Petróleo S/A, Raizen Combustíveis, Taurus Distribuidora, Petrobrás Distribuidora S/A, Greenergy and Shell Brasil Ltda.,Potencial Petroleo comprising approximately 64%68% of our sales in the period ended December 31, 2010.

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2013.

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,CEMIG, a state-owned power generator and distributor, Câmara de Comercialização de Energia Elétrica, BTG Pactual and Nova Energia Comercializadora Ltda., comprising approximately 95%94% of our sales revenues in the period ended December 31, 2010.
2013.

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 selladjusted for inflation by reference to the remainder on the spot market on a daily basis.

National Index of Consumer Prices (“IPCA”).

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)approximately 46,2 K MWh during the harvest periods each year (May to November of each year) at a rate of R$173.88 207,58 per megawatt hour. In 2009, Angélica sold energy in a public auction carried out byCamara 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$169.52202,21 per megawatt hour.MWh. 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$154.25/181.25/MWh. The delivery period for both agreementsthe first auction is April to December and for the second the delivery period 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”).

IPCA. In August 2013, Ivinhema sold 87,600 MWh in an auction carried out by CCEE at R$137,93 per MWh. This volume will start to be delivered in 2018 and its price is annually adjusted by 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-yeartwelve-year period since our inception, we have effectively put into production over 140,570164,157 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

66

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 in 2002, we have put into production 50,49263,930 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 in 2002 we have put into production 90,078100,227 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 2010/20112012/2013 harvest year, we operated 120,738133,568 hectares of own 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 highlyand achieving profitable returns. During the last fiveeight years, we have sold 27,169 hectares of farm land,15 farms, generating capital gains of approximately $95$160 million.

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These capital gains are generated by three main factors:

(i) the acquisition of land at opportunistic prices below the market value or fair value of the land;

(ii) the land transformation and ongoing land transformation process described above enhances the productivity and profitability of land, ultimately increasing the value of the land; and

(iii) 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 ten30 years, since 2001,1977, farmland prices in Argentina’s core production region have increased an average of 14.3%7.3% per year according to data published byMargenes Agropecuarios. The value of the farms we sold between 2006 and 2010,2013 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,Since our inception in 2002, we have executed transactions for the purchase and sale of land for over $459$602 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,Since 2002, the team has analyzed over 8.910 million hectares of farmland with a total value of approximately $12$14 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 

   Acquisition   Divestitures   Total Land Holdings 

Year Ended December 31,

  (In hectares) 

2002

   74,898     —       74,898  

2003

   —       —       74,898  

2004

   34,659     —       109,557  

2005

   22,262     —       131,819  

2006

   5,759     3,507     134,071  

2007

   113,197     8,714     239,274  

2008

   43,783     4,857     278,200  

2009

   —       5,005     273,195  

2010

   14,755     5,086     282,864  

2011

   12,992     2,439     293,417  

2012

   —       9,475     283,942  

2013

   —       14,176     269,838  

Our Farms

Appraisal of Farms. In September 2010,2013, 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.September 30, 2013. According to Cushman & Wakefield, the market value of our farmland totaled $919.0 million, out of which $791,915 million correspond to the market value of our farmland in Argentina and Uruguay, and the remaining $127,349 million correspond to the market value of our farmland in Brazil. These valuations are only intended to provide an indicative approximation of the market value of our farmland property as of December 31, 2010September 30, 2013 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)

Farm

  

State, Country

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 Size
(Hectares)

Current Use

El Meridiano

Buenos Aires, Argentina6,302Grains

Las Horquetas

Buenos Aires, Argentina2,086Grains & Cattle

San Carlos

Buenos Aires, Argentina4,215Grains

Huelen

La Macarena farm on December 21, 2010.Pampa, Argentina4,633Grains

La Carolina

Santa Fe, Argentina8,444Grains & Cattle

El Orden

Santa Fe, Argentina6,875Grains & Cattle

La Rosa

Santa Fe, Argentina4,087Grains & Cattle

San Joaquín

Santa Fe, Argentina37,273Rice, Grains & Cattle

Carmen

Santa Fe, Argentina10,021Grains

Abolengo

Santa Fe, Argentina7,473Grains

La Cañada

San Luis, Argentina3,400Grains

Santa Lucia

Santiago del Estero, Argentina17,484Grains & Cattle

El Colorado

Santiago del Estero, Argentina4,960Grains

La Guarida

Santiago del Estero, Argentina15,451Grains & Cattle

La Garrucha

Salta, Argentina3,606Grains

Los Guayacanes

Salta, Argentina7,242Grains

Ombú

Formosa, Argentina18,321Grains & Cattle

Oscuro

Corrientes, Argentina33,429Rice, Grains & Cattle

Itá Caabó

Corrientes, Argentina22,894Rice, Grains & Cattle

Alto Alegre

Tocantins, Brazil6,082Grains & Cotton

Conquista

Tocantins, Brazil4,325Grains & Cotton

Rio de Janeiro

Bahia, Brazil10,012Grains & Coffee

Bela Manhã

Mato Grosso do Sul, Brazil381Sugarcane

Ouro Verde

Mato Grosso do Sul, Brazil683Sugarcane

Don Fabrício

Mato Grosso do Sul, Brazil3,304Sugarcane

Takuarê

Mato Grosso do Sul, Brazil490Sugarcane

Agua Branca

Mato Grosso do Sul, Brazil1,675Sugarcane

Nossa Senhora Aparecida

Mato Grosso do Sul, Brazil540Sugarcane

Sapálio

Mato Grosso do Sul, Brazil6,062Sugarcane

Carmen (Agua Santa)

Mato Grosso do Sul, Brazil146Sugarcane

La Pecuaria

Duranzo, Uruguay3,177Grains

Doña Marina

Corrientes, Argentina14,755Rice

Total

269,838

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,established in terms of tons of sugarcane per hectare, 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. Sugarcane prices 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”). 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

 
FacilityProvince, CountryRelevant Operational Data

Current Use

“Christophersen” Santa Fe, Argentina 

18,700 tons of storage capacity.

2,400 tons per day of drying capacity

Capacity

 Seedbed and stockpiling plant (1)
“La Lácteo”(2)Cordoba, Argentina250,000 liters per day processedDairy processing facilities
“Semillero Itá Caabó” Corrientes, Argentina  Rice genetic improvement
program
“Molino San Agustín”Corrientes, ArgentinaProcessing capacity of 3,500 tons of brown rice monthly, and husk rice drying capacity of 450 tons per dayBrown 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 5,3005,600 tons

of brownwhite rice monthly, and husk

rice drying capacity if 1,700of 1,800 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
“Ivinhema Agroenergía” Mato Grosso do Sul, Brazil 

Installed milling capacity of

2.0 million tons of

sugarcane annually, 187,500 tons

of VHP sugar, 117,000

cubic meters of ethanol, and

over 82,000 MWh

 Sugar and ethanol mill producing hydrated 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,

We sell manufactured products, agricultural products and offer services to a large base of customers. The type and class of customers may differs depending on our sales amounted to approximately $426 million. Sales to our ten largest customers represented approximately 50% of our net sales inbusiness segments. For the year ended December 31, 2010.2013 more than 50% of our sales of crops were sold to 10 well-known customers (both multinational or local) with good credit history with us. 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, ourthe Sugar, Ethanol and Energy segment, sales amounted to approximately $314 million. Sales to our ten largestof ethanol were concentrated in 6 customers, which represented approximately 33.8%68% of our nettotal sales inof ethanol for the year ended December 31, 2009. Of these customers, our biggest three customers represented, in the aggregate, approximately 13.7%2013. Approximately 81% of our sales of sugar were concentrated in 7 well-known traders for

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the year ended December 31, 2009, and the2013. The remaining seven customers,19%, which mainly relates to “crystal sugar”, were dispersed among several customers. In 2013, energy sales are 94% concentrated in the aggregate, represented approximately 20.2% of our net sales in the course of that year.
4 major customers.

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 YearBrazil
Number of Mills(l)436
Sugarcane crushed615.4 million tons
Ethanol Production27.4 billion liters
Sugar Production37.7 million tons
Source:Ministerio da Agricultura, Pecuaria e Abastacimento.

2013/2014 Harvest Year

Brazil 
(1)

Number of Mills

  Based on Center-South region only.389

Sugarcane crushed (million tons)

641.2

Ethanol Production (million cubic meters)

27.4

Sugar Production (million tons)

36.5

Source: Ministry of Agriculture & CONAB

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%10%, 7%11%, 17%13% and 11%, respectively, of our total direct expenditures (including leasing cost) for supplies and services and were collectively 46%45% of our total expenditure for supplies in the farming business in the 2009/2010 harvest.for 2013. Further, these supplies represented 14%40% of our total production cost in the 2009/10 harvest.for 2013. As we use direct sowing in 99% of our planted area, without requiring soil preparation, fuel represents only 10% of the directtotal cost of production.

production for 2013.

Our principal supplies for our sugar, ethanol and energy business are diesel lubricants and fertilizers, which collectively represented 24%26% of our total expenditures incurred in the sugar, ethanol and energy business in 2010.for 2013. Further, these supplies represented 24% of our total production cost in 2010.for 2013. 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%56% of our total expenditures for supplies in 2010.2013. 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.January. 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 notpartially employ the contractor model.

74model only for specific tasks such as grain harvesting, land leveling, and aerial spraying among others.

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 design of the most efficient and productive land use strategies, 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 intrough implementing advanced techniques such as variable 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.

By implementing all these education programs and development activities, the TAG provides to the company a network that focuses on the fine-tuning and optimization of the efficiencies throughout all the production processes of each business line.

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%95% mechanized, which has significantly improved productivity while simultaneouslyoperating efficiency, therefore 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”

“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 approximately 25 years ago to grow crops from year to year without disturbing the soil through tillage, and arose as an opposition to conventional 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”

“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 decreaseswhile decreasing water loss from evaporation. FewerAbsence of 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 thus its value. From an operational standpoint, “no-till” reducesfacilitates the period required for land preparationconditions to perform most of the operations on time such as planting, spraying and planting,harvesting, which enhances the development of large-scale operations and specially 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,Argentina’s Humid Pampas, 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-yearsix-year crop

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rotation cycle whereby we plant the following crop sequence: corn, cotton, soybeans, during the first year, corn in the second year,cotton, soybeans and cotton during the third and fourth years.
cotton.

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 growing 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.way to control the pests. 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.plague in sugarcane. 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 rice 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 and, 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 in 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)programs).

Additionally, in some regions where biodiversity is a concern,matters are relevant, 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 potential 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 andFundación Habitat y Desarrollo.

Conservancy.

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 receivingIn that regard, we received a grant from Sustainable Energy and Climate Change Initiative from Inter-American Development Bank (SECCI). in order to carry out a pre-feasibility assessment. This project is currently under development and it 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 wherein which we have operations,operate, creating new jobs, preserving the environment, providing traineetraining 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,and give special attention to 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 threetwo times by Adecoagro.

Education

Our sugarcane and rice operations have a very important economic impact in the communities where theywe are located, and our management and employeeswe 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 2233 educational programs in 41 urban and rural areasschools located close to our rice operations. Additionally, in the Santa Fe province in Argentina, where our dairy operations are located, we are carrying outthis programs benefit to 4000 students. Cimientos is a partnership with Conciencia to develop a scholarship program. This program targetsnon-profit organization that promotes equal educational opportunities for children of low-incomeand youth from low income families in nearby towns who are being sponsored by our own staff. WeArgentina.

Additionally, 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 improvingto improve 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. In 2013, we donated nearly 16 tons of powdered milk and 1 ton of processed rice. We also work in partnership with the Argentine Food Bank Network, to whom we are currently donating approximately 75 tons of processed rice. This network operates in 1417 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 Caritas Christophersen, San Gregorio Foundation and Mercedes City Soup Kitchen and Manuel Alberti Neighborhood, to whom we donate processed rice and wholemilk powder.

Kitchen.

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 thosethese goals we promote institutional relationships with local and international universities and high schools. Over 235280 interns have participated in our program during the last 812 years, 51 of which 60 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 trustFideicomiso 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%9.56%, 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,October 10, 2013, Angélica entered into a Sugar Sales Agreement with Bunge that was later amended on June 17, 2010. Under this agreement,Louis Dreyfus Commodities Suisse S.A where Angélica would sell Bunge a total amount of 230,000will supply 150,000 metric tons of Brazilian VHP (very high polarization) roughduring 2014/15 harvest year. This amount of sugar towill be delivered throughout 2010 and 2012.from May to November 2014 in Paranaguá port. 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 byin reference to the NY11NY#11 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.

price against specifics month.

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)approximately 46,215 MWh during the harvest periods each yearperiod (May to November of each year) at a rate of R$173.88184.15 per megawatt hour. As of December 31, 2010,this price is adjusted annually according to inflation rate and tariff discounts, in 2013 the energy price hit R$207,58/MWh. During 2013, UMA had received R$89.5 million under this agreement corresponding to the full contractual supply. The above-mentioned rate is adjusted annually to account for inflation and tariff discounts.

agreement.

Angélica entered into an agreement under which Angélicait supplies energy to CCEE. This agreement is a result of a public auction promoted by the Brazilian federal government in August 2008, carries a term of 15 years, and involves Angélica supplying CCEE with 87,600 MWh annually during the harvest periods each year (May(April to November)December), at a rate of R$169.52 per megawatt hour. The agreement180.26/MWh. This price is annually adjusted according to inflation rate, in 2013 the price was R$202,21/MWh which sets forthan 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.
17.7 million.

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.MWh, in 2013 the price was of R$181,25 per megawatt hour as the price is adjusts annually. The delivery period for both agreements starts in MayMarch and ends in November of each year. The rates under both agreements are adjusted annually for inflation by reference to the IPCA

In 2013 Angélica received R$23.8 million of this contract.

Intellectual Property

As of December 31, 2010,2013, our corporate group owned 4049 trademarks registered with the Argentine National Intellectual Property Institute and had 8 trademarks in registration process.the process of registration. Also, Adeco Brasil and UMA owned 616 trademarks registered with the Brazilian National Industrial Property Institute (“INPI”), and had submitted 189 trademark registration requests, all of which are currently being challenged by third parties or were initially denied by INPI.

In addition, Adeco Agropecuaria Brasil S.A. had submitted one trademark registration request.

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, 20102013 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 (licenç(licença prévia)via) for the Ivinhema mill, and on June 27, 2011, we obtained the installation license (licenç(licença de instalação)o) 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.

On March 23, 2012, we obtained the installation license (licença de instalação) from IMASUL authorizing us to increase the nominal crushing capacity of Ivinhema to up to 4.1 million tons of sugarcane per year

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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Regulation and Control of Agri-Food Production in Argentina

The National Office of Agricultural Commerce Control (Oficina Nacional de Control Comercial Agropecuario, or “ONCCA”) created on November 27, 1996, as a decentralized entity of the Ministry of Agriculture was the agency responsible for controlling the commercialization and manufacturing of agricultural livestock, meat and dairy products in Argentina.

C. ORGANIZATIONAL STRUCTURE
As of February 25th, 2011 the ONCCA was dissolved pursuant to Decree No. 192/2011. The faculties previously held by the ONCCA have been transferred to the Ministry of Agriculture and to a new entity incorporated (Unidad de Coordinacion y Evaluacion de Subsidios al Consumo Interno) by means of Decree No. 193/2011, intended exclusively for the protection and promotion of activities and granting subsidies. As a result, the Ministry of Agriculture is the enforcement authority of the decrees issued by the ONCCA and is in charge of monitoring the agricultural compliance with the commercialization regulations. Furthermore, the new entity integrated by Ministers and officials from the Ministry of Economy, Ministry Agriculture and Industry and the AFIP will be responsible for the administration, allocation and payment of subsidies to wheat, corn and soybean, and will be in charge of the registry for the export of cattle.

Under applicable regulations, all persons involved in the commercialization and manufacturing of grains and dairy products must be registered with the RUO, which provides for registration of any individual or company involved in the trade and industrialization of agri-food products in the markets for grains, livestock and dairy products and their by-products and/or derivatives. This registration must be renewed each year. Grain producers must stock grains at facilities and must keep a record of the grain stock stored at such facilities. Failure to register with the RUO, or cancellation of such registration, will lead to requirements that the operator cease its operating activities and closure its facilities.

On April 1, 2014 the AFIP issued Resolution No. 3,593/14 which established a “Systematic Regristration of Movements and Grains Stocks Regime” (“Régimen de Registración Sistemática de Movimientos y Existencias de Granos”) by which all persons involved in the commercialization and manufacturing of grains and dairy products registered with the RUO must report the stock and stock variations (including locations, transport between the producer´s facilities, etc.) of all grains other agricultural products (other than those to be applied to sowing) held in their own or other third party´s name.

In the event of a violation of any of the applicable regulations, sanctions may be imposed, including fines and suspension or cancellation of the registration, which would result in the immediate cessation of activities and closure of facilities.

C.ORGANIZATIONAL STRUCTURE

Corporate Structure

     We hold approximately 98%

As of December 31, 2013, we held 100% of the interests in IFH which,with a de minimis remaining interest owned by Ona Ltd., our substantially wholly-owned subsidiary. IFH 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 asociété anonymeand 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 MayDecember 31, 2011,2013, our principal shareholders were Pampas HumedasQuantum Partners LP (Soros Fund Management LLC serves as principal investment adviser to Quantum Partners LP), HBK Master Fund LP, Al Gharrafa Investment Company, and Stichting Pensioenfonds Zorg en Welzijn and Ospraie Special Opportunities.Welzijn. See “Item 7. Major Shareholders and Related Party Transactions—A. Major Shareholders.”

     Our current corporate

For a diagrame of our Organizational structure is depicted below:

(GRAPHICS)
as of March 31, 2013, please see “ Item 4. Information of the Company – A. History and Development of the Company – History”

During 2011, Adecoagro contributed the IPO net proceeds in IFH LP, increasing its interest to 98.64%.

During March, 2012, we issued 696,562 shares to certain limited partners of IFH in exchange for their residual interest in IFH, totaling 0.57230%, interest in IFH thereby increasing our interest in IFH to 99.2%.

During September 2012, we issued 958,190 shares which increased our interest in IFH to approximately 100%.

On February 5, 2013, we completed an underwritten secondary offering of 13,900,000 common shares of Adecoagro offered by our shareholder, HBK Master Fund LP at a price per share to the public of $8.00. The shares were offered pursuant to an effective shelf registration statement on Form F-3 filed with the SEC. On February 13, 2013, HBK Master Fund LP sold an additional 2,085,000 common shares of Adecoagro pursuant to the overallotment option it granted to Morgan Stanley & Co. LLC, the sole underwriter in the secondary offering. Adecoagro did not receive any of the proceeds from the sale by the selling shareholder of the common shares in the offering. As of March 31 2013, and after the completion of the offering, public shareholders held approximately 50.2% of our capital stock.

* Existing Shareholders refer to shareholders of record prior to our IPO.
**D.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.PROPERTY, PLANTS AND EQUIPMENT

D. PROPERTY, PLANTS AND EQUIPMENT

See “—B. Business Overview—Land Transformation—Our Farms”; “—Property, Plant and Equipment.”

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Item 4B.Unresolved Staff Comments

Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating and Financial Review and Prospects

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 includeprocesses, and producing raw milk and fattening beef cattle for sale to third parties.milk. 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“Risk Factors-Risks Related to Argentina—Proposed changes inArgentina- 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“Risk Factors-Risks Related to Brazil—Brazil- Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.”

     As further described below, we

We are organized into three main lines of business: farming; land transformation; and sugar, ethanol and energy; and land transformation.energy. 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, ethanolSugar, Ethanol and energyEnergy and land transformationLand 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

 
SegmentAgricultural 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 WholeProcessed milk, powderand dairy products
Coffee Coffee Trading—
Cattle Head or kilograms of cattle Land leasing
Sugar, Ethanol and Energy Sugarcane Sugar,
Ethanol andEthanol
EnergyEnergy

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 IASlAS 41 “Agriculture.” IASlAS 41 requires biological assets to be measured on initial recognition and at each balance sheet date at their fair value less costscost 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“-Critical Accounting Policies and Estimates.” Inln addition, agricultural produce at the point of harvest is measured at fair value less costscost 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“lnitial 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“lnitial 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 IASlAS 18. However, IASlAS 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 IASlAS 41 and based on IASlAS 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

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 duringYields may also be affected by plague, disease or weed infection and operational problems. In the middlefirst half of 2008 and lasting until the middle of 2009,2013, the countries in which we operate suffered one of the worst droughts of the last 50 to 70 years,a severe drought, which resulted in a reduction of approximately 15.0%21% to 40.0%31% in our yields dependingfor the 2012/2013 harvest, on corn and soybean 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 2008/20092012/2013 harvest for crops before the drought were 6.6 tons per hectare for corn and 2.5 tons per hectare for soybean and 7.7 tons per hectare for corn.soybean. The actual yields following the drought were 1.55.3 tons per hectare for soybeancorn and 5.51.8 tons per hectare for corn,soybean, which generated a decrease in initial recognition and changes in fair value of biological assets and agricultural produce in respect of soybeans, corn, soybean and the remaining crops of $13.0$5.9 million,

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$3.1 $16.6 million and $0.3$2.7 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.
2013.

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.

               % Change 
   2012/2013   2011/2012   2010/2011   2012/2013 -  2011/2012 - 
  Harvest Year (2)   Harvest Year   Harvest Year   2011/2012  2010/2011 

Corn (1)

   5.3     5.0     5.4     5.8%   7.9% 

Soybean

   2.2     2.5     2.6     (11.1%)   (3.2%) 

Soybean (second harvest)

   1.3     1.5     1.6     (15.1%)   (5.8%) 

Cotton lint

   0.8     1.0     1.6     (23.6%)   (33.5%) 

Wheat (2)

   1.8     2.6     3.3     (30.0%)   (21.0%) 

Rice

   5.7     5.4     6.2     5.8%   (13.0%) 

Coffee (3)

   N/A     1.9     2.0     N/A    (3.9%) 

Sugarcane (4)

   71.8     75.2     75.13     (4.5%)   0.1% 

(1)Includes sorghum
(2)Includes barley
(3)The “Lagoa de Oeste” and “Mimoso” coffee farms were sold in the second quarter of 2013. In addition, we leased the coffee production rights in respect of the “Rio de Janeiro” farm for an 8-year term in the second quarter of 2013. We do not expect the coffee business to generate sales in future periods”
(4)Does not consider harvested area for planting activities

(ii) Effects of Fluctuations in Production Costs

     During the last three years, we have experienced

We experience fluctuations in our production costs. The primary reason iscosts due to 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 usingthe use of no-till technology (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”))soil), 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, 20101, 2013 to December 31, 2010,2013, wheat prices increaseddecreased by approximately 42.4%21.3%, and soybean prices increaseddecreased 10.1% and corn prices decreased by approximately 32.8%38.4%. Prices in Argentina are highly correlated with CBOT prices. Also, between January 4, 20101, 2013 and May 6, 2010,December 31, 2013, ethanol prices decreased by 2.1%, according to ESALQ data, and sugar prices decreased by 50.5% and between May 6, 2010 and December 31, 2010 increased by 135%15.1%, 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 unharvestednot harvested 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)
  CoffeeCorn in U.S. cents per pound (ICE-NY)bushel (CBOT)
LOGO  LOGO

(GRAPH)(GRAPH)
Sugar in U.S. cents per pound (ICE-NY)  Ethanol in Reais per cubic meter (ESALQ(ESALQ))
LOGO  
(GRAPH)(GRAPH)LOGO

(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 productproduction 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 coffeerice planting on the last farm to finish harvesting that harvest year.

     Product

Production 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 productproduction 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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- “Year ended December 31, 2013 as compared to year ended December 31, 2012”.

(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, theThe production area for sugarcane 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 

   Period ended December 31, 
   2013   2012   2011 
       Hectares     

Crops

   147,895     151,132     127,436  

Rice

   35,249     31,497     27,542  

Coffee (1)

   —       1,632     1,632  

Sugar, Ethanol and Energy

   99,409     85,531     65,308  

(1)“The “Lagoa de Oeste” and “Mimoso” coffee farms were sold in the second quarter of 2013. In addition, we leased the coffee production rights in respect of the “Rio de Janeiro” farm for an 8-year term in the second quarter of 2013. We do not expect the coffee business to generate sales in future periods”.

The increase in rice production area in 2013 was mainly driven by the transformation of undeveloped/undermanaged owned land that was put into production. The decrease in crop production area in 2013 compared to 2012 was mainly driven by a decrease in leased hectares. The increase in sugar, ethanol and energy production area in 2013 is explained by an increase in leased hectares.

(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 statementsConsolidated 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, 2010,2013, the Peso-U.S. dollar exchange rate was Ps.3.97Ps.6.52 per U.S. dollar as compared to Ps.3.8Ps.4.92 and Ps.3.45Ps.4.30 per U.S. dollar as of December 31, 20092012 and 2008,2011, respectively. As of December 31, 2010,2013, the Real-U.S. dollar exchange rate was R$1.652.36 per U.S. dollar as compared to R$1.742.04 and R$2.341.86 per U.S. dollar as of December 31, 20092012 and 2008,2011, respectively.

The Company is exposed to currency risks in Argentina, where currently there is an exchange control regime (see on our annual report on Form 20-F for the year ended December 31, 2013— Item 3 – Risks Factors “- Risks Related to Argentina-Exchange controls could restrict the inflow and outflow of funds in Argentina”). In Argentina there is an official exchange rate set by the Argentine Government and a parallel US dollar market exchange rate. The Company uses the official Argentine Peso-US Dollar exchange rate as the reference exchange rate for all re-measurement purposes, which is consistent with the economic reality that foreign currency transactions entered into or paid out of Argentina are required to be converted at the official exchange rate.

During January 2014, the Argentine peso experienced a 22% devaluation, from a 6.52 ARS/USD to 8.02 ARS/USD. This devaluation is not expected to have a significant impact on the Company’s sales because a substantial portion of Adecoagro’s agricultural production is destined to the export market and as a result a significant portion of the Company’s sales generated in Argentina is denominated in U.S. dollars. However, the devaluation is expected to result in an improvement in our operating costs, with the exception of fertilizers, agrochemicals and seeds, as our production costs are primarily denominated in Argentine pesos. Accordingly, the net effect of the devaluation of the Argentine peso is expected to have a positive effect on our margins.

In Argentina, due to the restrictions on the purchase of foreign currency imposed by the Argentine government there exists an unofficial market where the U.S. dollar is trading at a different market value than reflected in the official Argentine Peso – U.S. dollar exchange rate. Despite this situation, the Company do not have the unofficial rate as reference to its businesses.

The following graph shows the Real-U.S. dollar rate of exchange for the periods indicated:

(GRAPH)

LOGO

Our principal foreign currency fluctuation risk involves changes in the value of the RealBrazilian Reais 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.

Please see also “Risk Factors-Risks Related to Argentina-Argentine law concerning foreign ownership of rural properties may adversely affect our results of operations and future investments in rural properties in Argentina” and “Risk Factors-Risks Related to Brazil- Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.”

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$165.3 million for the year ended December 31, 2008, $138.62011, $301.4 million for the year ended December 31, 20092012 and $130.6$128.7 million for the year ended December 31, 2010.2013. See also “—Capital“-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 20102013 in each of the countries in which we operate:

   Tax Rate (%) 

Argentina

   35  
Brazil(1)

Brazil(1)

   34  

Uruguay

   25  

(1)Including the Social Contribution on Net Profit (CSLL)

Critical Accounting Policies and Estimates

We preparedprepare our consolidated financial statementsConsolidated 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.Consolidated Financial Statements. The preparation of our consolidated financial statementsConsolidated 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 statementsConsolidated 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:

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

    
  Biological Asset

No significant

biological growth

 

Significant

biological growth

 

Agricultural Produce

 No significantSignificant

Manufactured Product

biological growthbiological growthAgricultural ProduceManufactured 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 mealN/A

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 productsN/A

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

94

Biological Asset
No significantSignificant
biological growthbiological growthAgricultural ProduceManufactured Product
VALUATION CRITERIA

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 rough 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 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.

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.

95

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, 2010,2013, 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$72.4 million for sugarcane, $13.1$3.7 million for coffee, $2.6$2.0 million for crops and $3.2$4.5 million for rice. As of December 31, 2010,2013, 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$49.1 million for sugarcane, $8.0$3.0 million for coffee, $1.3$1.6 million for crops and $2.0$3.2 million for rice. As of December 31, 2010,2013, 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$25.7 million for sugarcane and $4.9$1.4 million for coffee. As of December 31, 2010,2013, 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$3.6 million for crops and $6.0$8.2 million for rice. As of December 31, 2010,2013, 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$5.0 million for sugarcane and $1.6$0.2 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 yearyears ended December 31, 2009,2011, December 31, 2012 and December 31, 2013, 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.

models.

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

96

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.”

97

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 finite lived intangible assets of finite life at the date of each statement of financial position to determine whether there is any indication that suchthose assets have suffered an impairment loss. BasedIf any such indication exists, we estimate the recoverable amount of the asset in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, we estimate the recoverable amount of the cash-generating unit to which the asset belongs. Our property, plant and equipment items generally do not generate independent cash flows.

We initially measure goodwill on acquisition at cost being the excess of the cost of the business combination over our interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. As of the acquisition date, we allocate any goodwill acquired to the cash-generating unit (‘CGU’) expected to benefit from the business combination.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. We test goodwill for impairment annually as of September of each year, or more frequently if events or changes in circumstances prevailing in each location, we useindicate that the carrying amount may be impaired. The impairment review requires us to undertake certain judgments, including estimating the recoverable value of the CGU to which the goodwill relates, based on either a fair value less costs-to-sell model or the value-in-use, as appropriate, in order to reach a value-in-use model. Anconclusion on whether it deems the goodwill is impaired or not.

For purposes of the impairment loss, if any exists,testing, each CGU represents the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets.

Farmland businesses may be used for different activities that may generate independent cash flows. When farmland businesses are used for single activities (i.e. crops), these are considered as one CGU. Generally, each separate farmland business within Argentina and Uruguay are treated as single CGUs. Otherwise, when farmland businesses are used for more than one segment activity (i.e. crops and cattle or rental income), the farmland is recognized immediatelyfurther subdivided into two or more CGUs, as appropriate, for purposes of impairment testing. For our properties in Brazil, we identified a farmland together with its related mill as separate CGUs.

We reviewed the statement of income.

     Due to the characteristicscarrying amounts of our investmentsproperty, plant and equipment and finite lived intangible assets as of December 31, 2013 to determine whether there was any indication of potential impairment. We concluded that no impairment testing for property, plant and equipment and finite lived intangible assets was necessary as of year-end. As regards the mandatory impairment testing of goodwill, we tested all CGUs with allocated goodwill in Argentina, Uruguay and Brazil as of September 30, 2013 and determined that none of the CGUs were impaired as of that date. There were no events or changes in circumstances, which would warrant an impairment testing of goodwill as of December 31, 2013.

CGUs tested based on a fair-value-less-costs-to-sell model at September 30, 2013 and 2012:

Based on the criteria described above, we identified a total amount of forty-one CGUs as of September 30, 2013 and forty-three CGUs as of September 30, 2012 for purposes of the impairment testing.

As of September 30, 2013, we identified 10 CGUs in Argentina and Uruguay weto be tested all of our cash generating units (“CGUs”) based on athis model (all CGUs with allocated goodwill). As of September 30, 2012, we identified 10 CGUs in Argentina and Uruguay to be tested based on this model (regardless of any goodwill allocated to them). Estimating the fair value less costs-to-sell model.is based on the best information available, and refers to the amount at which the CGU could be bought or sold in a current transaction between willing parties. In calculating the fair value less costs-to-sell, we may be assisted by the work of external advisors. When using this model, we appliedapply the “sales comparison approach” as theour method of valuing most properties. This method relies on results of sales of similar agricultural properties to estimate the value of the CGU. 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

Fair values are determined by a willing seller to a willing buyer. We base the values of our farmland on the lands’ productive capability (the abilityextensive analysis, which includes current and potential soil productivity of the land (the ability to produce crops and/orand maintain livestock) projected margins derived from soil use, rental value obtained for soil use, if applicable, 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 includeoutbuildings. A farm outbuilding is any improvement or structure that is used for farming operations, andoperations. Outbuildings are valued based on their size, age and design.

Based on the factors described above, we assign each farm property ais assigned different soil classificationclassifications 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

The first step to Note 4 to the consolidated financial statementsestablishing an assessment for a detailed description of amounts tested. farm property is a sales investigation that identifies the valid farm sales in the area where the farm is located.

A price per hectare is assigned for each soil class within each farm property. This price per hectare is determined based on the quantitative and qualitative analysis mainly described above.

The results are then tested against actual sales, if any, and current market conditions to ensure the values produced are accurate, consistent and fair.

Based on the testing performed,above, we determined that none of the CGUs, with allocated goodwill, were impaired at September 30, 2013.

None of the CGUs with or without allocated goodwill were impaired as of December 31, 2010, 2009 and 2008. For our investments in Brazil, weat September 30, 2013.

CGUs tested all CGUs based on a value-in-use model.model at September 30, 2013 and 2012:

Based on the criteria described above, we identified a total amount of forty-one CGUs as of September 30, 2013 and forty-three CGUs as of September 30, 2012 for purposes of the impairment testing.

As of September 30, 2013, we identified 3 CGUs in Brazil to be tested based on this model (all CGUs with allocated goodwill). As of September 30, 2012, we identified 3 CGUs in Brazil to be tested based on this model (regardless of any goodwill allocated to them). In performing the value-in-use calculation, we applied pre-tax rates to discount the future pre-tax cash flows. WeIn each case, we made these key assumptions based on ourwhich reflect past experience and we believe they are consistent with relevant external sources of information, such as appropriate market data. See Note 4In calculating value-in-use, we may also be assisted by the work of external advisors.

The key assumptions used by us in the value-in-use calculations which are considered to our consolidated financial statements for further details.

     Webe most sensitive to the calculation are:

Key Assumptions

  

September 30,

2013

  

September 30,

2012

Financial projections

  

Covers 4 years for UMA
Covers 8 years for AVI

  

Covers 4 years for
UMA Covers 8 years for AVI

Yield average growth rates

  0-3%  0-3%

Future pricing increases

  3% per annum  3% per annum

Future cost increases

  3% per annum  3% per annum

Discount rates

  7.65%  9.16%

Perpetuity growth rate

  4.5%  4.5%

Discount rates are 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 usedThe risk premium adjustment is assessed for Brazil was 8.7%. We refer to Note 4factors specific to the consolidated financial statements for a detailed description of amounts tested. respective CGUs and reflects the countries that the CGUs operate in.

Based on the testing performedabove, we determined that none of the CGUs, with and without allocated goodwill, were impaired at September 30, 2013.

Management views these assumptions as of December 31, 2010, 2009conservative and 2008. A reasonably possibledoes not believe that any reasonable change of 10% in the key assumptions usedwould cause the carrying value of these CGU’s to determineexceed the projections (excluding discount rates) would have had no effect on the goodwillrecoverable amount.

For additional information regarding our impairment testing, results for any of the years presented. The base case was then stress-tested using a zero growth assumption and continuedplease see Note 4(b) 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.

our Consolidated Financial Statements.

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) (public company limited by shares) 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,”Segments” requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of 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 (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM evaluates the business based on the differences in the nature of its operations, products and services. The amount reported for each segment item is the measure reported to the chief operating decision makerCODM for these purposes.

We are organized intooperate in three mainmajor lines of business, which are farming; sugar, ethanolnamely, Farming; Sugar, Ethanol and energy;Energy; and land transformation, comprising seven reportable operating segments, which are organized based upon their similar economic characteristics, the nature of the products they

99Land Transformation.

offer, their production processes, the type and class of their customers and their distribution methods.

Our farming business‘Farming’ is further comprised of five reportable segments:

Our ‘Crops’ Segment consists of planting, harvesting and sale of grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning and handling and drying services to third parties. Each underlying crop in the Crops segment does not represent a separate operating segments as follows:segment. We seek to maximize the use of the land through the cultivation of one or more types of crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some of which are out of our control. We are focused on the long-term performance of the productive land, and to that extent, the performance is assessed considering the aggregated combination, if any, of crops planted in the land. A single manager is responsible for the management of operating activity of all crops rather than for each individual crop.

•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 ‘Rice’ Segment consists of planting, harvesting, processing and marketing of rice;

Our Dairy segment consists of the production and sale of raw milk. Up until the third of 2013, we were also engaged in the processing of raw milk into manufactured products and marketing through our subsidiary La Lácteo S.A, located in Cordoba, Argentina. During the third quarter of 2013, we disposed of our interest in “La Lacteo”, – See Item 4. “Information of the Company – Business Overview – Operations and Principal Activities – Dairy Business – Sale of La Lacteo”.

Our Coffee segment consisted of cultivating coffee and marketing our own coffee production. As of May 2, 2013 we entered into an agreement to sell the Lagoa do Oeste and Mimoso farms in Brazil, which represent all of the farms in our Coffee segment. The farms have a total area of 3,834 hectares of which 904 hectares are planted with coffee trees. In addition, we entered into a lease agreement pursuant to which the lessee will operate and manage 728 hectares of existing coffee trees in the company’s Rio de Janeiro farm during an 8-year period. Once the lease agreement terminates, the coffee trees will still have 8 years of useful life.

Our ‘Cattle’ Segment consists mainly of the lease of cattle grazing land (not suitable for crop production) to third party cattle farmers;

Our‘Sugar, Ethanol and Energy business is its own reporting operating segment andEnergy’ Segment consists of cultivating sugarcane which we processis processed in our ownowned sugar mills, transformtransformed into ethanol, sugar ethanol and electricity and marketmarketed;

Our‘Land Transformation’ Segment comprises the (i) identification and sell.

     Our Land Transformation business is its own reporting operating segmentacquisition of underdeveloped and includes (i) the ultimate cashundermanaged farmland businesses; and (ii) realization through sales to third parties of the increase in value of land which is generated through the transformationstrategic disposition 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.assets (generating profits).

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 

100

   Year ended December 31,     
   2013   2012   2011 

Sales

  ( In thousands of $)     

Farming Business

   327,163     322,368     270,766  

Crops

   185,117     196,206     147,946  

Soybean(1)

   68,850     66,721     61,385  

Corn (2)

   79,423     68,790     42,959  

Wheat (3)

   21,798     34,831     25,060  

Sunflower

   8,030     7,887     7,413  

Cotton Lint

   5,215     15,297     9,101  

Other crops(4)

   1,801     2,680     2,028  

Rice(5)

   107,093     93,904     83,244  

Coffee

   439     8,363     14,170  

Dairy

   30,661     18,868     19,697  

Cattle(6)

   3,853     5,027     5,709  

Sugar, Ethanol and Energy Business

   317,461     282,332     277,318  

Sugar

   133,597     134,766     130,348  

Ethanol

   150,383     121,544     116,599  

Energy

   32,463     25,649     24,393  

Other (7)

   1,018     373     5,978  

Total

   644,624     604,700     548,084  

Land Transformation Business(8)

   28,172     27,513     8,832  

Production

  2013/2014
Harvest
Year		   2012/2013
Harvest
Year (18)		   2011/2012
Harvest
Year		   2010/2011
Harvest
Year		 

Farming Business

        

Crops (tons)(9)

   N/A     496,590     564,800     488,185  

Soybean (tons)

   N/A     175,478     189,014     199,533  

Corn (tons) (2)

   N/A     242,246     237,294     169,711  

Wheat (tons) (3)

   77,168     52,308     113,121     92,908  

Sunflower (tons)

   N/A     24,076     18,667     20,916  

Cotton Lint (tons)

   N/A     2,482     6,704     5,117  

Rice(10) (tons)

   N/A     202,589     171,137     172,034  

Coffee (tons)

   N/A     —       2,873     2,742  

    Year ended December 31,     
    2013   2012   2011 

Processed rice(11) (tons)

   166,363     172,383     148,223  

Dairy(12) (liters)

   72,984     54,954     51,239  

Cattle (tons)(6)(13)

   47     146     118  

Sugar, Ethanol and Energy Business

      

Sugar (tons)

   335,643     281,622     247,805  

Ethanol (cubic meters)

   268,053     183,713     161,385  

Energy (MWh)

   300,208     238,540     245,474  

Land Transformation Business (hectares traded)

   14,175     9,475     2,439  

Planted Area

  2013/2014
Harvest
Year (18)		   2012/2013
Harvest
Year (17)		   2011/2012
Harvest
Year		   2010/2011
Harvest
Year		 
   (Hectares) 

Farming Business(14)

        

Crops

   187,807     184,802     204,097     167,104  

Soybean

   83,153     92,103     92,789     90,126  

Corn (2)

   50,974     45,733     47,409     31,894  

Wheat (3)

   29,411     28,574     43,235     28,058  

Sunflower

   12,880     12,478     9,596     9,943  

Cotton

   6,217     3,098     6,389     3,242  

Forage

   5,172     2,816     4,679     3,841  

Rice

   36,604     35,249     31,497     27,542  

Coffee(15)

   —       —       1,632     1,632  

Total Planted Area

   221,535     222,150     237,226     196,278  

Second Harvest Area

   29,496     34,091     48,286     36,351  

Leased Area

   55,851     54,197     60,009     37,694  

Owned Croppable Area(16)

   136,188     133,862     128,931     122,233  

    Year ended December 31,     
    2013   2012   2011 

Sugar, Ethanol and Energy Business

      

Sugarcane plantation

   99,409     85,531     65,308  

Owned land

   9,145     9,145     9,145  

Leased land

   90,264     76,386     56,163  

             
  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 

101

                 
  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 sorghum.
(3)Includes barley rapeseed and sorghumrapeseed.
(4)Includes cotton seeds and farming services.
(3)(5)Sales of processed rice including rough rice purchased from third parties and processed in our own facilities, rice seeds and services.
(4)(6)In December 2009, we sold 55,543 headOur cattle business primarily consists of leasing land to third party cattle to a third party.farmers. See “Item 4. Information on the Company—B. Business Overview—Cattle Business.”
(5)(7)Includes sales of sugarcane and other miscellaneous items to third parties of $417 thousand and $1,291 thousand during 2009 and 2008, respectively.
(6)(8)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)(9)Crop production does not include 46,74927,528 tons, 52,48262,636 tons, and 52,96046,749 tons of forage produced in the 2010/2011, 2009/20102012/2013, 2011/2012 and 2008/20092010/20011 harvest years, respectively.
(9)(10)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)(11)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)(12)Raw milk produced at our dairy farms.
(12)(13)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)(14)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)ComprisedThe “Lagoa de Oeste” and “Mimoso” coffee farms were sold in the second quarter of land devoted2013. In addition, we leased the coffee production rights of the “Rio de Janeiro” for an 8-year period in the second quarter of 2013. We do not expect the coffee business to raising beef cattle, which is mostly leased to a third party.generate sales in future periods.

102

Year ended December 31, 20102013 as compared to year ended December 31, 2009
2012

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)
       

   2013  2012 
   (In thousands of $) 

Sales of manufactured products and services rendered

   425,307   379,526  

Cost of manufactured products sold and services rendered

   (272,261)  (263,978) 
  

 

 

  

 

 

 

Gross Profit from Manufacturing Activities

   153,046   115,548  
  

 

 

  

 

 

 

Sales of agricultural produce and biological assets

   219,317   225,174  

Cost of agricultural produce sold and direct agricultural selling expenses

   (219,317)  (225,174) 

Initial recognition and changes in fair value of biological assets and agricultural produce

   (39,123)  16,643  

Changes in net realizable value of agricultural produce after harvest

   12,875   16,004  
  

 

 

  

 

 

 

(Loss) / Gross Profit from Agricultural Activities

   (26,248)  32,647  
  

 

 

  

 

 

 

Margin on Manufacturing and Agricultural Activities Before Operating Expenses

   126,798   148,195  
  

 

 

  

 

 

 

General and administrative expenses

   (53,352)  (57,691) 

Selling expenses

   (68,069)  (58,602) 

Other operating income, net

   49,650   31,097  

Share of loss of joint ventures

   (219)  —    
  

 

 

  

 

 

 

Profit from Operations Before Financing and Taxation

   54,808   62,999  
  

 

 

  

 

 

 

Finance income

   7,234   11,538  

Finance costs

   (98,916)  (66,654) 
  

 

 

  

 

 

 

Financial results, net

   (91,682)  (55,116) 
  

 

 

  

 

 

 

(Loss) / Profit Before Income Tax

   (36,874)  7,883  
  

 

 

  

 

 

 

Income tax benefit / (expense)

   9,277   5,436  
  

 

 

  

 

 

 

(Loss) / Profit for the Year from Continuing Operations

   (27,597)  13,319  
  

 

 

  

 

 

 

Profit / (Loss) for the Year from Discontinued Operations

   1,767    (4,040) 
  

 

 

  

 

 

 

(Loss) / Profit for the Year

   (25,830)   9,279  
  

 

 

  

 

 

 

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 

   Crops   Rice   Dairy   Coffee   Cattle   Sugar, Ethanol
and Energy		   Total 
   (In thousands of $) 

2013

   510    104,576    —       —       3,237    316,984    425,307  

2012

   589    92,438    —       —       4,390    282,109    379,526  

Sales of manufactured products and services rendered increased 60.6%12.1%, from $183.4$379.5 million in 2009,2012 to $294.5$425.3 million in 2010,2013, primarily as a result of:

•

A $34.9 million increase in our Sugar, Ethanol and Energy segment mainly due to (i) a 26.4% increase in the volume of sugar and ethanol sold, measured in TRS(1), from 592,561 tons in 2012 to 748,766 tons in 2013. The increase in volume was due to (a) a 35.3% increase in harvested area, from 57,236 hectares in 2012 to 77,442 hectares in 2013; and (b) 363.8% increase in sugarcane purchased from third parties, from 184,897 tons in 2012 to 857,599 tons in 2013. This was partially offset by (i) a 5.4% decrease in TRS content in sugarcane, from 133.8 kgs/ton in 2012 to 126.5 kgs/ton in 2013 and a 4.5% decrease in yields, from 75.2 tons/hectare in 2012 to 71.8 tons/hectare in 2013, mainly as a result of a frost that occurred in July 2013 in Mato Grosso do Sul and above-average rains in Center-South Brazil during June 2013; (ii) a 9.5% decrease

in the average sales price of ethanol, from $683.0 per m3 in 2012 to $617.8 per m3 in 2013; and (iii) a $131.016.8% decrease in the average sales price of sugar, from $493.8 per ton in 2012 to $411.0 per ton in 2013. The following figure sets forth the variables that determine our Sugar, Ethanol and Energy sales:

LOGO

(1)On average, one metric ton of sugarcane contains 140 kilograms of TRS (Total Recoverable Sugar). While a mill can produce either sugar or ethanol, the TRS input requirements differ between these two products. On average, 1.045 kilograms of TRS equivalent are required to produce 1.0 kilogram of sugar, while the amount of TRS required to produce 1 liter of ethanol is 1.691 kilograms

The following table sets forth the breakdown of sales of manufactured products for the periods indicated.

  Period Ended December 31,  Period Ended December 31,  Period Ended December 31, 
  2013  2012  Chg %  2013  2012  Chg %  2013  2012  Chg % 
  (in million of $)     (in thousand units)     (in dollars per unit)    

Ethanol (M3)

  150.4    121.5    23.7%   243.4    178.0    36.8%   617.8    683.0    (9.5%) 

Sugar (tons)

  133.6    134.8    (0.9%)   325.1    272.9    19.1%   411.0    493.8    (16.8%) 

Energy (MWh)

  32.5    25.6    26.6%   354.0    317.2    11.6%   91.7    80.9    13.4% 

Others

  1.0    0.4    173.2%      
 

 

 

  

 

 

  

 

 

       

TOTAL

  317.5    282.3    12.4%       
 

 

 

  

 

 

  

 

 

       

a $12.1 million increase in our Rice segment, mainly due to: (i) a 3.4% increase in the average sales price, from $407.6 per ton of rough rice equivalent in 2012 to $421.4 per ton of rough rice equivalent in 2013; and (ii) a 10.3% increase in the volume of white and brown rice sold measured in tons of rough rice, from 230,378 tons in 2012 to 254,134 tons in 2013, mainly explained by: (a) a 5.8% increase in average yields, from 5.4 tons per hectare in 2012 to 5.7 tons per hectare in 2013; (b) a 11.9% increase in planted hectares, from 31,497 hectares in 2012 to 35,249 hectares in 2013; partially offset by (c) a 46.9% decrease in the volume of rough rice purchased from third parties, from 86,481 tons in 2012 to 45,921 tons in 2013

partially offset by:

a $1.2 million decrease in our Cattle segment mainly due to (i) a 12.5% decrease in meat prices as compared to 2012; and (ii) a 14.2% decrease in leased area resulting from the sale of farms during the year and the conversion of cattle land into rice land.

Cost of Manufactured Products Sold and Services Rendered

   Crops   Rice  Dairy   Coffee   Cattle  Sugar, Ethanol
and Energy		  Total 
   (In thousands of $) 

2013

   —       (84,654)  —       —       (89)  (187,518)  (272,261) 

2012

   —       (78,617)  —       —       (230)  (185,131)  (263,978) 

Cost of manufactured products sold and services rendered increased 3.1%, from $264.0 million in 2012, to $272.3 million in 2013. This increase was primarily due to:

a $6.0 million increase in our Rice segment mainly due to: (i) a 10.3% increase in sales measured in rough rice equivalent, (ii) a 2.1% increase in unitary costs, mainly due to (a) higher price of the rough rice used as raw material; and (b) higher proportion of white rice in the production mix, from 69.4% in 2012 to 97.7% in 2013. White rice is more costly than brown rice due to higher processing costs and higher raw material consumption.

a $2.4 million increase in our Sugar, Ethanol and Energy segment mainly due to:to (i) a 73.5%26.4% increase in the volume of sugar and ethanol sold measured in TRS,TRS; partially offset by (ii) a 20.2% decrease in transfer price of our sugarcane production, which is transferred 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 duefarms to the expansion of the crushing capacitymill at our Angélica mill; (ii) a 41.1% increase in the average market price of ethanol,fair value, 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$34.8 per ton in 20092012 to $421.1$27.7 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%                        
                               

103

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, mainly2013, as a result of an increase in thelower sugar and ethanol 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.
prices.

104

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 

   Crops   Rice   Dairy   Coffee   Cattle   Sugar, Ethanol
and Energy		   Total 
   (In thousands of $) 

2013

   184,607    2,517    30,661    439    616    477    219,317  

2012

   195,617    1,466    18,868    8,363    637    223    225,174  

Sales of agricultural produce and biological assets increased 1.1%decreased 2.6%, from $130.2$225.2 million in 2009,2012 to $131.7$219.3 million in 2010,2013, primarily as a result of:

A $25.5

a $11.0 million increasedecrease in our Crops segment mainly due to:driven by (i) lower wheat inventory sell-off, from 51,253 tons in 2012 to 750 tons in 2013; and (ii) a 28.2% increase11.1% decrease in soybean first harvest yields from 2.5 tons per hectare in the production area, from 104,986 hectares2011/2012 harvest to 2.2 tons per hectare in 2009the 2012/2013 harvest, mainly due to 134,562 hectares in 2010, and (ii)the drought experienced throughout January to April 2013, that affected the crop development during its critical period. This was partially offset by (iii) an increase in the averagevolume of cornsold mainly due to a 5.8% increase in corn yields, obtainedfrom 5.0 tons per hectare in the 2009/20102011/2012 harvest to 5.3 tons per hectare in the 2012/2013 harvest, as corn yields in the 2011/2012 season were affected by a result of better weather conditions. drought suffered in November 2011 through January 2012; and (iv) higher soybean, corn, wheat and sunflower selling prices.

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%            
                         

   Period ended December 31,  Period ended December 31,  Period ended December 31, 
   2013   2012   % Chg  2013   2012   % Chg  2013   2012   % Chg 
   (In millions of $)      (In thousands of tons)      (In $ per ton)     

Soybean

   68.9     66.7     3.2%  190.7     191.6     (0.5%)  361.0     348.2     3.7% 

Corn (1)

   79.4     68.8     15.5%  353.3     313.5     12.7%  224.8     219.4     2.4% 

Cotton lint

   5.2     15.3     (65.9%)  2.5     8.7     (70.8%)  2,049.0     1,757.3     16.6% 

Wheat (2)

   21.8     34.8     (37.4%)  75.3     150.3     (49.9%)  289.3     231.8     24.8% 

Sunflower

   8.0     7.9     1.8%  19.6     19.7     (0.8%)  410.3     399.7     2.7% 

Others

   1.8     2.7     (32.8%)  —       —       —  %      
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

      

Total

   185.1     196.2     (5.7%)  641.5     683.8     (6.2%)     
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

      

(1)•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;Includes sorghum
(2)Includes barley

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

a $11.8 million increase in our Dairy segment from $18.9 million in 2012 to $30.7 million in 2013, mainly due to: (i) a 34.9% increase in liters sold, from 53.3 million liters in 2012 to 71.9 million liters in 2013, primarily as a result of (a) a 21.2% increase in the number of milking cows, from 5,025 heads in 2012 to 6,092 heads in 2013; and (b) a 9.5% increase in productivity, from 30.0 liters/milking cow in 2012 to 32.8 liters/milking cow in 2013.

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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

                             
                      Sugar,    
                      Ethanol and    
  Crops  Rice  Dairy  Coffee  Cattle  Energy  Total 
  (In thousands of $) 
2010
  38,879   9,360   9,129   (2,630)  737   (86,003)  (30,528)
2009
  6,563   12,170   3,374   (16,207)  4,704   61,064   71,668 

   Crops   Rice   Dairy   Coffee  Cattle  Sugar, Ethanol
and Energy		  Total 
   (In thousands of $) 

2013

   24,356    8,339    7,761    (8,332)  (267)  (70,980)  (39,123) 

2012

   35,471    6,463    2,060    (4,196)  (131)  (23,024)  16,643  

Initial recognition and changes in fair value of biological assets and agricultural produce generateddecreased in from a gain of $16.6 million in 2012 to a loss of $30.5$39.1 million in 2010, as compared to2013, primarily due to:

a $48.0 million decrease in our Sugar, Ethanol and Energy segment due to:

a $25.4 million decrease, from a gain of $71.6$1.8 million in 2009, primarily2012 to a loss of $23.7 million in 2013, generated by the recognition at fair value less cost to sell of sugarcane at the point of harvest mainly due to: (i) a 4.5% decrease in yields obtained; (ii) a 20.2% decrease in the price of our sugarcane production, which was partially offset by: (iii) a 35.3% increase in harvested area.

a $22.6 million decrease, from a loss of $24.8 million in 2012 to a loss of $47.3 million in 2013, mainly generated by a decrease in price estimates used in the 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 NY11 futures contract. Sugar price estimates as of December 31,

 •a $147.1 million decrease in our Sugar, Ethanol and Energy segment due to:
-a $154.3 million decrease, from a gain of $57.3 million in 2009 to a loss of $96.8 million in 2010 generated by a decrease in price estimates used in the 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 NY11 futures contract. Sugar price estimates decreased as a result of an adjustment to this valuation model for sugarcane,

2013, which increased the loss by $59.9 million at December 31, 2010. Sugar price estimates as of December 31, 2010 are calculated based on the average of daily prices for sugar future contracts for the period JuneJuly 1 to December 31 2010 (i.e. 6-month moving average) rather than the single price for future contracts as of year end. The change is expected to mitigate the impact of volatility and seasonality that arises with a single pricing date; and

-a $7.2 million increase, from a gain of $3.7 million in 2009 to a gain of $10.9 million in 2010, generated by the recognition at fair value less cost to sell of sugarcane at the point of harvest due to: (i) a 81.2% increase in harvested area from 22,222 hectares in 2009 to 40,263 hectares in 2010, (ii) a 2.9% increase in yields obtained, from 93.4 tons per hectare in 2009 to 96.1 tons per hectare in 2010, and (iii) a 34.1% increase in the price of sugarcane from $22.6 per ton in 2009 to $30.3 per ton in 2010, as a result of higher sugar and ethanol market prices and higher TRS content in sugarcane, which was partially offset by (iv) a 35.9% increase in actual production costs, from $1,944.0 per hectare in 2009 to $2,642.6 per hectare in 2010, mainly as a result of an increase in transportation costs generated by the new sugarcane plots in the Ivinhema region, which increased the average distance from our total sugarcane plots to the Angélica mill.
•Of the $86.0 million loss (which results from the $96.8 million loss plus $10.9 million gain) of initial recognition and changes in fair value of biological assets and agricultural produce for 2010, $96.4 million represents the unrealized portion, as, decreased 15.1% compared to the $58.7 million gain unrealized portion of the $61.1 million gain of initial recognition and changes in fair value of biological assets and agricultural produce in 2009;
•a $2.8 million decrease in our Rice segment as a result of (i) an 9.1% decrease in yields from 83.3 tons in 2009 to 75.8 tons in 2010, and (ii) favorable weather conditions during the end of 2009, which resulted in the recognition at fair value less cost to sell of non-harvested rice of a larger proportion of the planted rice at the end of 2009, reduced the recognition at fair value less cost to sell of rice at the point of harvest by $63 million. These effects were partially offset by a 5.1% increase in the production area and a 2.1%

106

decrease in actual production costs (i.e. agrochemical and fertilizer expenses).
•Of the $9.4 million of initial recognition and changes in fair value of biological assets and agricultural produce for 2010, $6.3 million represents the unrealized portion, as compared to the $6.8 million unrealized portion of the $12.2 million of initial recognition and changes in fair value of biological assets and agricultural produce in 2009;
•a $4.0 million decrease in our Cattle segment as a result of the reduced herd size following the sale of most of our beef cattle herd in December 2009
     partially offset by:
•a $32.3 million increase in our Crops segment mainly due to:
–a $28.0 million increase in the recognition at fair value less cost to sell of crops at the point of harvest, from $2.1 million in 2009 to $30.2 million in 2010, mainly due to: (i) higher crop yields (see “Trends and Factors Affecting Our Results of Operations—Effects of Yield Fluctuations”), (ii) a 28.2% increase in the production area, from 104,986 hectares in 2009 to 134,562 hectares in 2010 and (iii) a decrease in agrochemical and fertilizer prices, which was partially offset by the favorable weather conditions by the end of 2009, resulting in the recognition at fair value less cost to sell of non-harvested crops of a larger proportion of the planted crops at the end of 2009, which reduced the recognition at fair value less cost to sell of crops at the point of harvest for 2010 by $4.4 million compared to a reduction of $0.3 million for 2009. The resulting actual average margin per hectare for our summer crops (i.e. soybean, corn, sunflower and cotton) increased from $10.9 per hectare in 2009 (which is reflective of the impact of the drought) to $198.9 per hectare in 2010; and
–a $4.3 million increase in the recognition at fair value less cost to sell for non-harvested crops as of year-end, from $4.4 million in 2009 to $8.7 million in 2010, primarily due to higher commodity prices, which resulted in an increase on average margin per hectare from $193.0 per hectare in 2009 to $265.9 per hectare in 2010
–The following table sets forth actual production costs by crop for the periods indicated:
             
  Year Ended December 31, 
  2010  2009    
  (In $ per hectare)  %Change
   
Corn
  337.9   363.9   (7.1%)
Soybean
  374.6   295.6   26.7%
Soybean (second harvest)
  219.7   202.7   8.4%
Cotton
  1,628.5   1,768.1   (7.9%)
Wheat
  219.1   254.8   (14.0%)
•a $13.6 million improvement in our Coffee segment due to:
•a $3.4 million increase in the recognition at fair value less cost to sell of coffee at the point of harvest, from a loss of $3.5 million in 2009 to a loss of $0.2 million in 2010, due to a 70.0% increase in the actualsugar price of coffee at the point of harvest; and
•a $10.2 million increase in the recognition at fair value less cost to sell of non-harvested coffee, from a loss of $12.7 million in 2009 to a loss of $2.4 million in 2010. The $12.7 million loss of 2009 was mainly generated by a reduction of the area to be harvested in the next five years as a result of the adoption of a pruning plan to correct the growth pattern of our coffee trees, which impacted the

107

production estimates used in the DCF model used to determine the fair value of our coffee plantations as of December 31, 2009.
•Of2012, for the $16.2 million loss in initial recognition and changes in fair value of biological assets and agricultural produce for 2009, $15.7 million represents the unrealized portion of the loss, as compared to the $2.5 million unrealized portion of the loss of $2.6 million of initial recognition and changes in fair value of biological assets and agricultural produce in 2010;
•a $5.7 million increase in our Dairy segment mainly due to:
•a $2.8 million increase in the recognition at fair value less cost to sell of raw milk, from $3.1 million in 2009 to $5.9 million in 2010 due to a 46.4% increase in raw milk market price partially offset by a 12.4% decrease in the volume of liters produced; and
•a $2.9 million increase in the recognition at fair value less cost to sell of the dairy herd, from $0.3 million in 2009 to $3.2 million 2010 as a result of a 78% increase in the market prices of dairy cows.
•Of the $9.1 million in initial recognition and changes in fair value of biological assets and agricultural produce for 2010, $3.6 million gain represents the unrealized portion, as compared to the $0.03 million unrealized portion of the $3.4 million in initial recognition and changes in fair value of biological assets and agricultural produce in 2009.same period.

Of the $71.0 million loss of initial recognition and changes in fair value of biological assets and agricultural produce in 2013, $47.3 million loss represents the unrealized portion, as compared to the $24.8 million gain unrealized portion of the $23.0 million gain of initial recognition and changes in fair value of biological assets and agricultural produce in 2012.

a $11.1 million decrease in our Crops segment mainly due to:

a $5.8 million decrease in the recognition at fair value less cost to sell of crops at the point of harvest, from a gain of $29.3 million in 2012 to a gain of $23.5 million in 2013, mainly due to: (i) lower soybean yields as a result of the dry weather conditions between January and April 2013; partially offset by (ii) higher corn yields as yields in the 2011/2012 season were affected by a drought suffered in November 2011 through January 2012; and (iii) higher market prices (see “Trends and Factors Affecting Our Results of Operations—Effects of Fluctuations in Commodities Prices”).

a $5.3 million decrease in the recognition at fair value less cost to sell for non-harvested crops as of yearend, from a gain of $6.2 million in 2012 to a gain of $0.9 million in 2013, mainly due (i) to lower expected yields for corn and soybean due to the low level of rains in Argentina during December of 2013, which resulted in lower yields potential measured as of December 31; (ii) and lower corn and soybean prices.

The following table sets forth actual production costs by crop for the periods indicated:

   Harvest   Harvest   % Change 
   2012/2013   2011/2012     
   (In $ per hectare)     

Corn

   541.4     535.7     1.1% 

Soybean

   497.0     470.8     5.6% 

Soybean Second harvest

   301.1     278.6     8.1% 

Cotton

   2,028.8     1765.2     14.9% 

Wheat

   304.9     324.3     -6.0% 

a $4.1 million decrease in our Coffee segment mainly due to:

a $5.5 million decrease in the recognition at fair value less cost to sell of non-harvested coffee, from a loss of $2.6 million in 2012 to a loss of $8.1 million in 2013, mainly due to a decrease in the coffee price (ICE-NY) estimates used in the DCF model to determine the fair value of our coffee plantations. As of May 2, 2013 we entered into an agreement to sell the Lagoa do Oeste and Mimoso farms in Brazil, including 904 hectares planted with coffee trees, which represent all of our farms in our Coffee segment. In addition, we entered into a lease agreement pursuant to which the lessee will operate and manage 728 hectares of existing coffee trees in the company’s Rio de Janeiro farm during an 8-year period. The loss in 2013 was mostly generated before entering into the selling and leasing agreements.

a 1.4 million increase in the recognition at fair value less cost to sell of coffee at the point of harvest, from a loss of $1.6 million in 2012 to a loss of $0.2 million in 2013. The loss in 2012 is related to the downward trend in coffee prices following the harvest.

Of the $8.3 million loss of initial recognition and changes in fair value of biological assets and agricultural produce in 2013, $8.1 million loss represents the unrealized portion, as compared to the $2.6 million loss unrealized portion of the $4.2 million loss of initial recognition and changes in fair value of biological assets and agricultural produce in 2012;

partially offset by

a $1.9 million increase in our Rice segment, as a result of:

a $4.0 million increase in the recognition at fair value less cost to sell of rice at the point of harvest, mainly due to (i) a 5.8% increase in average yields and; (ii) a 11.9% increase in planted area; partially offset by (iii) higher harvest and tillage expenses.

a $2.1 million decrease in the recognition at fair value less cost to sell of non-harvested rice, from $4.4 million in 2012 to $2.2 million in 2013, as a result of lower estimated prices for the 2013/2014 harvest relative to the 2012/2013 harvest measured as of December 31.

Of the $8.3 million gain of initial recognition and changes in fair value of biological assets and agricultural produce for 2013, $2.2 million gain represents the unrealized portion, as compared to the $4.4 million gain unrealized portion of the $6.5 million gain of initial recognition and changes in fair value of biological assets and agricultural produce in 2012;

a $5.7 million increase in our Dairy segment mainly due to:

a $6.1 million increase in the recognition at fair value less cost to sell of raw milk, from a gain of $1.9 million in 2012 to a gain of $8.0 million in 2013, mainly due to (i) a 21.2% increase in the number of milking cows, from 5,025 heads in 2012 to 6,092 heads in 2013; (ii) a 20.5% increase in milk sales average prices, from 35.4 cents per liter in 2011 to 42.7 cents per liter in 2013; and (iii) a 9.5% increase in the average productivity of milking cows, from 30.0 liters per cow per day in 2012 to 32.8 liters per cow per day in 2013;

a $0.3 million decrease in the revaluation of the dairy herd, from a $0.1 million increase in value in 2012 to a $0.2 million decrease in value in 2013, as a result of a decrease in the market price of dairy cows.

Of the $7.8 million gain in initial recognition and changes in fair value of biological assets and agricultural produce for 2013, $0.2 million loss represents the unrealized portion, as compared to the $0.1 million unrealized gain portion of the $2.1 million gain in initial recognition and changes in fair value of biological assets and agricultural produce in 2012.

Changes in Net Realizable Value of Agricultural Produce after Harvest

               
            Sugar,
Ethanol and		  
  Crops Rice Dairy Coffee Cattle Energy Total
        (In thousands of $)    
   
2010
 7,482 N/A N/A 517 N/A N/A 7,999
2009
 11,362 191 N/A 1,234 N/A N/A 12,787

   Crops   Rice   Dairy   Coffee   Cattle   Sugar, Ethanol
and Energy		   Corporate   Total 
   (In thousands of $) 

2013

   12,607     N/A     N/A     121     N/A     147     N/A     12,875  

2012

   15,850     N/A     N/A     154     N/A     N/A     N/A     16,004  

Changes in net realizable value of agricultural produce after harvest areis mainly generated bycomposed by: (i) profit or loss from commodity price fluctuations during the period of time the agricultural produce is in inventory.inventory which impacts its fair value, (ii) profit or loss from the valuation of forward contracts related to agricultural produce in inventory and (iii) profit from direct exports. Changes in net realizable value of agricultural produce after harvest decreased 37.4%19.6% from $12.8$16.0 million in 20092012 to $8.0$12.9 million in 2010. The change in net realizable value2013. This decrease is primarily explained by a lower profit from direct exports of $8.0 million in 2010 was mainly generated by increases of crop prices (i.e. soybean, corn and sunflower) of between 2.9% to 57.5%, depending on the crop, and a 69.5% increase in coffee price during the period.

     The $12.8 million of changes in net realizable value of agricultural produce after harvest generated in 2009 was mainly generated by an increase in crop prices of between 13.7% to 54.2%, depending on the crop, and an increase in coffee prices of 21.3% during the period.
     Of the $8.0 million of changes in net realizable value of agricultural produce after harvest for 2010, $1.5 million represents the unrealized portion, as compared to the $0.1 million unrealized portion of the $12.8 million of changes in net realizable value of agricultural produce after harvest in 2009.
corn.

General and Administrative Expenses

                   
            Sugar,
Ethanol and		     
  Crops Rice Dairy Coffee Cattle Energy Corporate Total 
        (In thousands of $)      
    
2010
 (7,087) (3,773) (2,910) (983) (350) (19,080) (22,379)  (56,562)
2009
 (6,280) (2,883) (2,221) (2,126) (2,909) (13,922) (22,052)  (52,393)

   Crops  Rice  Dairy  Coffee  Cattle  Sugar, Ethanol
and Energy		  Corporate  Total 
   (In thousands of $) 

2013

   (4,101)  (4,424)  (1,087)  (1,119)  (0)  (19,434)  (23,187)  (53,352) 

2012

   (4,436)  (4,072)  (906)  (1,082)  (23)  (22,239)  (24,933)  (57,691) 

Our general and administrative expenses increased 8%decreased 7.5%, from $52.4$57.7 million in 20092012 to $56.6$53.4 million in 2010. General and administrative expenses for our Crops, Rice, Dairy and Sugar, Ethanol and Energy segments increased due to an increase in technical management expenses

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as a result of (i) hiring additional personnel and paying higher salaries and (ii) the higher related fuel and maintenance expenses resulting from the increase in the number of hectares planted and the larger scale of operations. This increase was partially offset by (i) a decrease in our Cattle segment,2013, mainly due to a reduction of overhead and administrative expenses following the sale of most of our cattle herd during 2009, and (ii) a decrease in our Coffee segment,variable compensation, mainly as a result of a reduction of overhead and administrative expenses in relation to the cessation of coffee trading activities in May 2010.
bonuses.

Selling Expenses

                             
                      Sugar,
Ethanol and		  
  Crops Rice Dairy Coffee Cattle Energy Total
              (In thousands of $)        
   
2010
  (1,522)  (8,154)  (333)  (655)  (175)  (41,689)  (52,528)
2009
  (1,587)  (7,485)  (777)  (1,353)  (1,045)  (18,922)  (31,169)

   Crops  Rice  Dairy  Coffee  Cattle  Sugar, Ethanol
and Energy		  Corporate  Total 
   (In thousands of $) 

2013

   (6,236)  (16,104)  (454)  (422)  (75)  (44,571)  (207)  (68,069) 

2012

   (5,904)  (16,157)  (319)  (304)  (60)  (35,690)  (168)  (58,602) 

Selling expenses increased 68.5%16.2%, from $31.2$58.6 million in 20092012 to $52.5$68.1 million in 2010, due to an2013, mainly driven by a $8.9 million increase in commercial taxes, trade commissions and freight expenses relating to our Sugar, Ethanol and Energy segment, from $35.7 million in 2012 to $44.6 million in 2013, primarily due to increasedan increase in sales volumes, and the higher proportion of sugarvolume measured in our sales mix (freight expenses are higher for sugar sales as sugar is generally delivered to the port for exporting while ethanol is delivered at the mill). This increase was partially offset by a decrease in taxes, commissions and freight expenses relating to our Cattle and Coffee segments due to lower volumes sold. TRS equivalent.

Selling expenses of our Crops, Rice, Dairy, Coffee and RiceCattle segments remained essentially unchanged.

Other Operating Income, Net

                                     
                      Sugar,
Ethanol and		 Land    
  Crops Rice Dairy Coffee Cattle Energy Transformation Corporate Total
                  (In thousands of $)            
   
2010
  (6,194)  345   —   (2,165)  70   5,305   20,837   26   18,224 
2009
  4,776   (942)  (108)  806   377   (10,467)  18,839   (210)  13,071 

   Crops  Rice   Dairy   Coffee  Cattle  Sugar, Ethanol
and Energy		   Land
Transformation		   Corporate  Total 
   (In thousands of $) 

2013

   7,632   438    494    (291)  (1)  13,290    28,172    (84)  49,650  

2012

   (9,330)  1,065    22    2,387   (16)  9,797    27,513    (341)  31,097  

Other operating income, net increased 39.4%60.0%, from $13.0$31.1 million in 20092012 to $18.2$49.7 million in 2010,2013, primarily due to:

a $17.0 million increase in our Crops segment due to the mark-to-market effect of outstanding hedge positions, which had a negative impact during 2012 and a positive impact in 2013

•a $15.6 million increase in our Sugar, Ethanol and Energy segment due to the mark-to-market effect of future sales contracts for sugar; and
•a $2.0 million increase in our Land Transformation segment due to the sale of a farmland in December 2010, which resulted in a $20.8 million gain, compared to the sale of a farmland in December 2009, which generated a $18.8 million gain;

a $3.5 million increase in our Sugar, Ethanol & Energy segment due to the mark-to-market effect of future sales contracts for sugar;

partially offset by:

partially offset by:

a $2.7 million decrease in our Coffee segment due to the mark-to-market effect of outstanding hedge positions, which had a positive impact during 2012.

•a $11.0 million decrease in our Crops segment due to the mark-to-market effect of outstanding hedge positions, which had a positive impact during 2009; and
•a $2.9 million decrease in our Coffee segment due to the mark-to-market effect of outstanding coffee derivative positions.

Other operating income, net of our Rice, Dairy, Cattle, Land Transformation and Corporate segments remained essentially unchanged.

Share of Loss of Joint VenturesProfit / (Loss) for the Year from Discontinued Operations

     Share of loss of joint ventures remained essentially unchanged,

Our profit from discounted operations increased from a loss of $0.3$4.0 million in 20092012 to a gain of $1.8 million in 2013, primarily explained by the gain recognized in connection with the disposal of our interest in “La Lacteo”, a milk processing facility in Cordoba, Argentina.

Financial Results, Net

Our net financial results decreased from a loss of $55.1 million in 2012 to a loss of $0.05$91.7 million in 2010,2013, primarily due to: (i) higher interests expenses driven by a higher level of debt mainly as a result of our capital expenditures commitments related to the negative resultsconstruction of Grupo La Lácteo S.A.

109

Financial Results, Net
     Financial results (net) decreased by $0.3our Ivinhema mill; (ii) a $19.0 million from a loss of $22,7 million in 20092013, compared to a $5.8 million loss in 2012, primarily resulting from the mark to market of $22.9 million in 2010, primarilyour currency derivatives used to hedge the future US dollar inflows generated by our forward sugar sales; (iii) lower interest income mainly due to the lower cash balance as a 22.0% increaseresult of our capital expenditures program; and (iv) a $21.1 million non-cash loss in interest expense, from $28.22013, compared to a $26.1 million non-cash loss in 2009 to $34.4 million in 2010, resulting from larger amounts of debt outstanding during the year. This increase in finance costs was partially offset by a 43.3% increase in finance income, mainly2012, mostly generated by the impact of foreign exchange derivativefluctuation on our dollar denominated debt. As of July 1, 2013, Adecoagro implemented Cash Flow Hedge Accounting. Since July 1, 2013 to December 31, 2013, a 24.1 million loss was recognized from the “Financial Result, net” line item to Equity and will remain in Equity until the associated debt is amortized. Additionally, a $2.6 million loss was recognized from Equity to the “Financial Result, net” line item. Please see “—Hedge Accounting—Cash Flow Hedge” described on Note 3 to our Consolidated Financial Statements.

The following table sets forth the breakdown of financial instruments.

results for the periods indicated.

   Year ended December 31,    
   2013  2012    
   (In $ thousand)  % Change 

Interest income

   6,882    11,249    (38.8%) 

Interest expense

   (49,249)   (27,672)   78.0% 

Foreign exchange losses, net

   (21,087)   (26,080)   (19.1%) 

Cash flow hedge – transfer from equity

   (2,560)   —     

Loss from interest rate /foreign exchange rate derivative financial instruments

   (19,028)   (5,823)   226.8% 

Taxes

   (3,815)   (4,265)   (10.6%) 

Other Income/(Expenses)

   (2,825)   (2,525)   11.9% 

Total Financial Results

   (91,682)   (55,116)   66.3% 

Income Tax Benefitbenefit / (expense)

Our consolidated income tax benefit for 2009 totaled $5.4USD 9.3 million which equatesin 2013, compared to USD 5.4 million in 2012.

For the year ended December 31, 2013, we recognized a consolidated effective tax rate of 23.4%. Our consolidated income tax benefit for 2010 totaled $16.3of $9.3 million which equates toon loss before income taxes of $36.9 million. For the comparable 2012 period, we recognized a consolidated effectiveincome tax ratebenefit of 26.6%.

$5.4 million on income before income taxes of $7.9 million. On a consolidated basis, the change in our annual effectiveincome tax rate from 23.4%benefit for the year ended December 31, 20092013 has been mitigated by the derecognition of previously recognized tax losses, mainly related the sale of Mimoso Farm, which impacted the expected profits of our coffee business. The income tax benefit in 2012 was mainly due to 26.6% for the year ended December 31, 2010, reflects, among other items, a changerecognition of previously unrecognized tax losses in Brazil and the gain from the sale of Santa Regina Agropecuaria S.A. which did not result in income tax expense. In 2011, our mix of pretax income from our various jurisdictions. On a disaggregated basis, ourconsolidated effective tax rate in Brazil for 2009 was a benefit of 17.1% as compared to a benefit of 24.6% in 2010. The primary reason for the higher effectiveapproximated 20.5% (which differed from our statutory income tax rate for the year ended December 31, 2010, as comparedrates) mainly due to the same periodrecognition of previously unrecognized tax losses in 2009, is attributable to updated business projections mainly driven by higher estimated prices which enabled us to recognize a higher proportion of tax loss carry-forwards in 2010 as compared to 2009. Our effective tax rate in Argentina for 2009 was a loss of 31.8% as compared to a loss of 36.0% for 2010. Our effective tax rate in 2010 was higher due to higher non-deductible items and other charges as compared to those amounts in 2009. Our income taxes in Uruguay are not significant to our consolidated taxes.
Brazil.

Loss(Loss) / Profit for the Year

As a result of the foregoing, our lossnet result for the year increaseddecreased from $0.3a gain of $9.3 million in 20092012 to $44.8a loss of $25.8 million in 2010.

2013.

Year ended December 31, 20092012 as compared to year ended December 31, 2008

2011

The following table sets forth certain financial information with respect to our consolidated results of operations for the periods indicated.

         
  Year Ended December 31, 
  2009  2008 
  (In thousands of $) 
Sales of manufactured products and services rendered  183,386   117,173 
Cost of manufactured products sold and services rendered  (180,083)  (105,583)
       
Gross Profit from Manufacturing Activities
  3,303   11,590 
       
Sales of agricultural produce and biological assets  130,217   127,036 
Cost of agricultural produce sold and direct agricultural selling expenses  (130,217)  (127,036)
Initial recognition and changes in fair value of biological assets and agricultural produce  71,668   61,000 
Changes in net realizable value of agricultural produce after harvest  12,787   1,261 
       
Gross Profit from Agricultural Activities
  84,455   62,261 
       

110

   2012  2011 
   (In thousands of $) 

Sales of manufactured products and services rendered

   379,526   365,857  

Cost of manufactured products sold and services rendered

   (263,978)  (237,404) 
  

 

 

  

 

 

 

Gross Profit from Manufacturing Activities

   115,548   128,453  
  

 

 

  

 

 

 

Sales of agricultural produce and biological assets

   225,174   182,227  

Cost of agricultural produce sold and direct agricultural selling expenses

   (225,174)  (182,227) 

Initial recognition and changes in fair value of biological assets and agricultural produce

   16,643   86,811  

Changes in net realizable value of agricultural produce after harvest

   16,004   10,523  
  

 

 

  

 

 

 

Gross Profit from Agricultural Activities

   32,647   97,334  
  

 

 

  

 

 

 

Margin on Manufacturing and Agricultural Activities Before Operating Expenses

   148,195   225,787  
  

 

 

  

 

 

 

General and administrative expenses

   (57,691)  (65,142) 

Selling expenses

   (58,602)  (59,404) 

Other operating income, net

   31,097   24,581  
  

 

 

  

 

 

 

Profit from Operations Before Financing and Taxation

   62,999   125,822  
  

 

 

  

 

 

 

Finance income

   11,538   9,132  

Finance costs

   (66,654)  (62,341) 
  

 

 

  

 

 

 

Financial results, net

   (55,116)  (53,209) 
  

 

 

  

 

 

 

Profit Before Income Tax

   7,883   72,613  
  

 

 

  

 

 

 

Income Tax benefit / (charge)

   5,436   (14,662) 
  

 

 

  

 

 

 

Profit for the year from continuing operations

   13,319   57,951  
  

 

 

  

 

 

 

Loss for the year from continued operations

   (4,040)   (1,034) 
  

 

 

  

 

 

 

Profit for the year

   9,279    56,917  
  

 

 

  

 

 

 

         
  Year Ended December 31, 
  2009  2008 
  (In thousands of $) 
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
  87,758   73,851 
       
General and administrative expenses  (52,393)  (45,633)
Selling expenses  (31,169)  (24,496)
Other operating income, net  13,071   17,323 
Excess of fair value of net assets acquired over cost  —   1,227 
Share of loss of joint ventures  (294)  (838)
       
Profit from Operations Before Financing and Taxation
  16,973   21,434 
       
Finance income  11,553   2,552 
Finance costs  (34,216)  (50,860)
       
Financial results, net  (22,663)  (48,308)
       
(Loss) Before Income Tax
  (5,690)  (26,874)
       
Income tax benefit  5,415   10,449 
       
(Loss) for the Year
  (275)  (16,425)
       
Sales of Manufactured Products and Services Rendered
                           
                      Sugar,
Ethanol and		  
  Crops Rice Dairy Coffee Cattle Energy Total
  (In thousands of $) 
2009
  9,667   67,317   752   7,984   172   97,494  183,386
2008
  3,134   53,280   2,171   8,544   164   49,880  117,173

   Crops   Rice   Dairy   Coffee   Cattle   Sugar, Ethanol
and Energy		   Total 
   (In thousands of $) 

2012

   589    92,438    —       —       4,390    282,109    379,526  

2011

   557    82,523    —       713    4,746    277,318    365,857  

Sales of manufactured products and services rendered increased 56.5%3.7%, from $117.2$365.9 million in 20082011 to $183.4$379.5 million in 2009,2012, primarily as a result of:

a $47.6$9.9 million increase in our Rice segment, mainly due to: (i) a 5.8% increase in the average sales price, from $385.1 per ton of rough rice equivalent in 2011 to $407.6 per ton of rough rice equivalent in 2012; and (ii) a 6.6% increase in the volume of white and brown rice sold measured in tons of rough rice, from 216,148

tons in 2011 to 230,378 tons in 2012, mainly explained by: (a) a 44.5% increase in the volume of rough rice purchased from third parties, from 59,842 tons in 2011 to 86,481 tons in 2012; (b) a 14.4% increase in planted hectares, from 27,542 hectares in 2011 to 31,497 hectares in 2012; partially offset by (c) a 13.0% decrease in average yields, from 6.2 tons per hectare in 2011 to 5.4 tons per hectare in 2012, due to the lower than average temperatures during the initial growth stage and flowering periods of the crop, which affected its normal development;

a $4.8 million increase in our Sugar, Ethanol and Energy segment mainly due toto: (i) a 99.4%28.0% increase in the volume of sugar and ethanol sold, measured in TRS, from 163 thousand462,940 tons in 2011 to 592,561 tons in 2012; partially offset by (ii) a 25.8% decrease in the average sales price of ethanol, from $920.0 per cubic meter in 2011 to $682.9 per cubic meter in 2012; (iii) a 10.8% decrease in the average sales price of sugar, from $553.6 per ton in 2011 to $493.8 per ton in 2012; and (iv) a 3.9% decrease in the volume of energy sold, from 245.0 MWh in 2011 to 235.5 MWh in 2012, mainly as a result of a 68.6% increase in the production of anhydrous ethanol in 2012, which requires an additional process (dehydration) compared to producing hydrous ethanol, therefore reducing the amount of energy available for sale.

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 these two products. On average, 1.045 kilograms of TRS equivalent in 2008are required to 325 thousand tonsproduce 1.0 kilogram of sugar, while the amount of TRS equivalent in 2009. required to produce 1 liter of ethanol is 1.691 kilograms

The increase in the volume of TRS equivalent sold in 20092012 mentioned above was dueprimarily the result of: (i) a lower ethanol inventory build-up, which stands at 12,491 m3 in 2012 compared to an33,608 m3 in 2011; and (ii) a 14.3% increase of 57.1% in the volume of sugarcane crushedproduction measured in our mills,TRS, from 1.4 million535,080 tons in 20082011 to 2.2 million611,653 tons in 2009, and to a lower level of sugar and ethanol inventories, which had decreased by 44 thousand tons of TRS equivalent as of the end of 2009.2012. The increase in production measured in TRS was the volumeresult of sugarcane crushed was mainly due to the expansion at our Angélica mill, which commenced operations in 2008. The(a) a 4.6% increase in sales was also duethe TRS content of the milled cane, from 128.0 kg/ton in 2011 to new sales133.8 kg/ton in 2012, mainly explained by the low level of electricityTRS content in 2009 for a total amount of 128.3 thousand MWh,2011 as a result of the connection of our Angélica millfrost in Mato Grosso do Sul on the first semester; and (b) a 7.7% increase in milled cane, from 4,169 thousand tons in 2011 to the electricity network4,489 thousand tons in 2012, mainly due to a 21.8% increase in harvested area, from 51,500 hectares in 2011 to 62,717 hectares in 2012, and the start up of the new boiler and turbo generator at our UMA mill. This was partially offset by a 12.7%9.2% decrease in average yields, from 75.6 tons per hectare in 2011 to 68.6 tons per hectare in 2012. The decrease in yields is attributable to the average market priceeffects of ethanol, from $493.0 per cubic meterthe drought that occurred in 2008 to $430.5 per cubic meter in 2009. the main productive regions of Brazil on the first quarter of 2012. The following figure sets forth the variables that determine our Sugar, Ethanol and Energy sales:

The following table sets forth the breakdown of sales by productof manufactured products for the periods indicated.

   Period Ended December 31,  Period Ended December 31,  Period Ended December 31, 
   2012   2011   Chg %  2012   2011   Chg %  2012   2011   Chg % 
   (in million of $)      (in thousand units)      (in dollars per unit)     

Ethanol (M3)

   121.5    116.6    4.2%  178.0    126.7    40.4%  683.0    920.0    (25.8%) 

Sugar (tons)

   134.8    130.3    3.4%  272.9    235.5    15.9%  493.8    553.6    (10.8%) 

Energy (MWh)

   25.6    24.4    5,1%  317.2    245.0    29.5%  91.7    99.6    (8.0%) 

Others

   0.4    6.0    (93.8%)          
  

 

 

   

 

 

   

 

 

           

TOTAL

   282.3    277.3    1.8%          
  

 

 

   

 

 

   

 

 

           

During 2012, the production mix measured remained essentially unchanged compared to 2011, with sugar and ethanol accounting for 48% and 52% of the production measured in TRS respectively.

Partially offset by:

                                     
  Year Ended December 31,      Year Ended December 31,      Year Ended December 31,    
  2009  2008     2009  2008     2009  2008    
  (In millions of $)  %Change  (In thousands units)  %Change  (In dollars per unit)  %Change
Ethanol(M3)  62.8   29.4   113.8%  145.9   59.6   144.8%  430.5   493.0   (12.7)%
Sugar(Tons)  26.1   20.5   27.6%  75.1   59.6   25.9%  348.1   343.9   1.2%
Energy(MWh)  8.2   —   0%  128.3   —   0%  64.0   —   0%
Others  0.4   —   0%                        
                                  
Total
  97.5   49.9   95.5%                        
                                  

111a $0.7 million decrease in our Coffee segment resulting from the complete cessation of coffee trading activities related to third-party production. We continue to commercialize our own coffee production, which is reflected in the “Sales and Cost of Agricultural Produce and Biological Assets” line item.

During 2009, our Angélica mill produced only ethanol. The high share of ethanol in our production mix prevented us from capturing the increase in sugar prices during the second semester of 2009. Angélica started producing sugar in 2010 after completing the construction of its sugar facility;
•a $14.0 million increase in our Rice segment due to an increase in the volume of white and brown rice sold as a result of an increase in the volume of rough rice processed in our mills, from 119.2 thousand tons of rough rice in 2008 to 157.1 thousand tons of rough rice in 2009. The higher volume of rough rice processed was the result of higher volume of rough rice purchased from third parties. The increase in sales was also due to an increase in sales of processed rice purchased from third parties, from 2.6 thousand tons of rough rice equivalent in 2008 to 25.9 thousand tons of rough rice equivalent in 2009. The increase in volume was partially offset by a 18.5% decrease in price, from $426.7 per ton of rough rice equivalent in 2008 to $347.9 per ton of rough rice equivalent in 2009; and
•a $6.5 million increase 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;
partially offset by:
•a $1.4 million decrease in our Dairy segment. Sales in 2009 correspond to the sale of remaining inventory of whole milk powder produced in previous periods. After the formation of the joint venture, Grupo La Lácteo, we ceased production of whole milk powder;
•sales of manufactured products and services rendered for our Coffee segment remained essentially unchanged from $8.5 million in 2008 to $8.0 million in 2009. These sales reflect the sales of our coffee trader subsidiary Adeco Comerica, Exotica Importance Ltda., which traded coffee between producers from the east-center region of Brazil and roasters in Japan, the E.U. and the U.S. Since May 2010, we are no longer engaged in coffee trading; and
•sales of manufactured products and services rendered for our Cattle segment remained unchanged, from $0.2 million in 2008 to $0.2 million in 2009, and reflect land leased to third parties for beef cattle grazing.
Cost of Manufactured Products Sold and Services Rendered
               
            Sugar,Ethanol and  
  Crops Rice Dairy Coffee Cattle Energy Total
        (In thousands of $)    
2009
 (5,447) (56,576)   (613) (7,120) — (110,327) (180,083)
2008
 (2,807) (39,862) (1,849) (6,978) — (54,087) (105,583)

   Crops   Rice  Dairy   Coffee  Cattle  Sugar, Ethanol
and Energy		  Total 
   (In thousands of $) 

2012

   —       (78,617)  —       —      (230)  (185,131)  (263,978) 

2011

   —       (68,721)  —       (629)  (408)  (167,646)  (237,404) 

Cost of manufactured products sold and services rendered increased 70.6%11.2%, from $105.6$237.4 million in 20082011, to $180.1$264.0 million in 2009.2012. This increase was primarily due to:

a $56.2$17.5 million increase in our Sugar, Ethanol and Energy segment asmainly due to (i) a result of a 99.4%28.0% increase in the volume of sugar and ethanol sold further enhancedmeasured in TRS; partially offset by greater operating costs, primarily at our Angélica mill, associated mainly with (i) increased costs due to the expansion of operations as they reach full productive potential, (ii) the unusual, sporadic rainfall pattern observed during the 2009 harvest, resulting in interruptions in harvesting activities, disruptions to milling operations and less stable productions rates, and (iii) a 7.7%14.5% decrease in the TRS contentprice of theour sugarcane production, from 135 kilograms$40.6 per ton of sugarcane in 20082011 to 124 kilograms$34.8 per ton in 2012, as a result of sugarcanelower sugar and ethanol market prices.

a $9.9 million increase in 2009,our Rice segment mainly due toto: (i) a 6.6% increase in the rainy weather during the harvest, which increasedvolume of white and brown rice sold, and (ii) a 7.3% increase in the cost per unit of sugar and ethanol produced in 2009 as compared to 2008. As the TRS content of the harvested sugarcane decreases, more units of raw input material (sugarcane) and milling is required to produce each unit of output (sugar and ethanol);

sold.

112

Partially offset by:

•a $16.7 million increase in our Rice segment due to a 55.0% increase in the volume of white and brown rice sold which was partially offset by an 8.4% decrease in the cost per unit sold, as a result of a decrease in the market price of rough rice, which is the main component of the cost;
•a $2.6 million increase in our Crops segment mainly due to cost of raw materials (soybeans) associated with the increase in sales volume of soybean meal and oil; and
•our Coffee segment remained essentially unchanged, from $7.0 million in 2008 to $7.1 million in 2009;
partially offset by:
a $1.2$0.6 million decrease in our DairyCoffee segment dueas a result of the complete cessation of coffee trading activities related to the cost of raw materials (raw milk) associated with the decrease in sales volume of whole milk powder.third party production.

Sales and Cost of Agricultural Produce and Biological Assets

                             
                      Sugar, Ethanol and  
  Crops Rice Dairy Coffee Cattle Energy Total
              (In thousands of $)        
2009
  82,362   2,033   11,142   6,281   28,306   93   130,217 
2008
  92,853   3,645   12,650   7,404   9,193   1,291   127,036 

   Crops   Rice   Dairy   Coffee   Cattle   Sugar, Ethanol
and Energy		   Total 
   (In thousands of $) 

2012

   195,617    1,466    18,868    8,363    637    223    225,174  

2011

   147,389    721    19,697    13,457    963    —       182,227  

Sales of agricultural produce and biological assets increased 2.5%23.6%, from $127.0$182.2 million in 20082011 to $130.2$225.2 million in 2009,2012, primarily as a result of:

a $19.1$48.2 million increase in our Cattle segment due to the sale of 107.5 thousand head of beef cattle during 2009, including the one-time sale of 55.5 thousand head of beef cattle to a third party in December 2009;

partially offset by:
a $10.5 million decrease in our Crops segment mainly due toto: (i) an increase in soybean and corn average sales prices, partially offset by lower wheat average sales prices, and (ii) an increase in the volume of crops sold mainly as a decreaseresult of 15% to 40%, depending onan increase in leased area coupled with an increase in double crops area; partially offset by the crop,general decrease in the average yields obtained as a result offor the 2011/2012 harvest compared to the 2010/2011 harvest. Crops suffered a severe drought affecting mostduring the summer period, which affected its normal development. Corn yields decreased from an average of 5.4 tons per hectare in the regions2010/2011 harvest to 5.0 tons per hectare in which we operate, which commenced during mid-2008the 2011/2012 harvest and lasted untilfirst soybean yields decreased from an average of 2.6 tons per hectare in the 2010/2011 harvest to mid-2009. See “—Trends2.5 tons per hectare in the 2011/2012 harvest. For a full list of crops yield fluctuations, please see “Trends and Factors Affecting Our Results of Operations—EffectsEffect of Yield Fluctuations.” The reduction in yields was partially offset by a 36.0% increase in the production area, from 77,221 hectares in 2008 to 104,986 hectares in 2009. See “—Trends and Factors Affecting Our Results of Operations—Effects of YieldYields Fluctuations” for a breakdown of yields obtained by crop. .

The following table sets forth the breakdown of sales by product for the periods indicated.

                                     
  Year Ended December 31,  Year Ended December 31,  Year Ended December 31, 
          %          %          % 
  2009  2008  Change  2009  2008  Change  2009  2008  Change 
  (In millions of $)  (In thousands of tons)  (In $ per ton) 
Soybean  35.7   37.3   (4.4)%  120.3   129.6   (7.2)%  296.7   288.1   3.0%
Corn  14.7   22.5                             
   (35.0)%  100.5   153.3   (34.4)%  145.8   147.1   (0.9)%        
Cotton  11.9   5.8   104.8%  14.9   7.6   96.1%  799.0   764.9   4.5%
Wheat  10.2   15.4   (33.7)%  62.7   84.0   (25.4)%  163.0   183.4   (11.1)%
Sunflower  5.5   5.6   (1.7)%  27.8   15.3   81.7%  198.5   367.0   (45.9)%
Barley  3.1   2.8   10.3%  21.4   14.5   47.6%  145.1   194.2   (25.3)%
Others  1.3   3.5   (62.9)%  —   —                 
                               
Total
  82.4   92.9   (11.3)%  347.6   404.3   (14.0)%            
                               

113

   Period ended December 31,  Period ended December 31,  Period ended December 31, 
   2012   2011   % Chg  2012   2011   % Chg  2012   2011   % Chg 
   (In millions of $)      (In thousands of tons)      (In $ per ton)     

Soybean

   66.7     61.4     8.7%   191.6     208.1     (7.9%)   348.2     295.0     18.0% 

Corn (1)

   68.8     43.0     60.1%   313.5     201.2     55.8%   219.4     213.5     2.8% 

Cotton lint

   15.3     9.1     68.1%   8.7     6.7     29.3%   1,757.3     1,351.7     30.0% 

Wheat (2)

   34.8     25.1     39.0%   150.3     101.3     48.4%   231.8     247.4     (6.3%) 

Sunflower

   7.9     7.4     6.4%   19.7     23.1     (14.4%)   399.7     321.5     24.3% 

Others

   2.7     2.0     32.1%           
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

      

Total

   196.2     147.9     32.6%   683.8     540.4     26.5%      
  

 

 

   

 

 

   

 

 

  

 

 

   

 

 

   

 

 

      

(1)•a $1.6 million decrease in our Rice segment mainly attributable to lower sales of rice seeds to third parties as a result of a reduction of the planting area in Argentina, due primarily to the drought;
•a $1.5 million decrease in our Dairy segment due to a 20.0% decrease in the market price of raw milk, from 29.3 cents per liter in 2008 to 23.5 cents per liter in 2009. This was partially offset by a 10.1% increase in the volume of liters produced, from 43.1 million liters in 2008 to 47.5 million liters in 2009;
•a $1.2 million decrease in our Sugar, Ethanol and Energy segment due to a decrease in the sale of raw sugarcane as a result of the increase in crushing capacity at our Angélica mill, which eliminated the need to sell the excess raw sugarcane produced in our agricultural operations to third party mills; and
•a $1.1 million decrease in our Coffee segment due primarily to a 14.9% decrease in the market price of harvested coffee, from $2,628 per ton in 2008 to $2,237 per ton in 2009, and to a lesser extent to a 0.3% decrease in the volume sold, from 2,817 tons in 2008 to 2,808 tons in 2009, as a result of a 22.5% decrease in yields due to unusually heavy rains at harvest time.Includes sorghum
(2)Includes barley

Partially offset by:

a $5.1 million decrease in our Coffee segment, mainly as a result of (i) a 23.8% decrease in coffee sales price, from $3,967 per ton in 2011 to $3,025 per ton in 2012; and (ii) a 22.6% decrease in the volume sold, from 3,572 tons in 2011 to 2,765 tons in 2012, as a result of: (a) a 768 ton inventory reduction in 2011 compared to a 75 ton inventory build-up in 2012; partially offset by (b) a 11.7% increase in harvested area, from 1,405 hectares in 2011 to 1,570 hectares in 2012.

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

                             
                      Sugar,Ethanol    
  Crops  Rice  Dairy  Coffee  Cattle  and Energy  Total 
  (In thousands of $) 
2009
  6,563   12,170   3,374   (16,207)  4,704   61,064   71,668 
2008
  28,005   7,854   2,633   4,485   3,788   14,235   61,000 

   Crops   Rice   Dairy   Coffee  Cattle  Sugar, Ethanol
and Energy		  Total 
   (In thousands of $) 

2012

   35,471     6,463     2,060     (4,196)   (131)   (23,024)   16,643  

2011

   38,014     10,139     6,939     (697)   468    31,948    86,811  

Initial recognition and changes in fair value of biological assets and agricultural produce increased 17.5%decreased 80.8%, from $61.0a gain of $86.8 million in 20082011 to $71.7a gain of $16.6 million in 2009,2012, primarily due to:

a $55.0 million decrease in our Sugar, Ethanol and Energy segment due to:

a $33.6 million decrease, from a gain of $8.8 million in 2011 to a loss of $24.8 million in 2012, mainly generated by a decrease in price estimates used in the 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 NY11 futures contract. Sugar price estimates as of December 31, 2012, which are calculated based on the average of daily prices for sugar future contracts for the period July 1 to December 31 (i.e. 6-month moving average), decreased 17.7% compared to sugar price estimates as of December 31, 2011, for the same period.

a $21.4 million decrease, from a gain of $23.2 million in 2011 to a gain of $1.8 million in 2012, generated by the recognition at fair value less cost to sell of sugarcane at the point of harvest mainly due to: (i) a 9.2%

 •a $46.8 million increase

decrease in our Sugar, Ethanol and Energy segment due to:

•a $2.9 million increase, from $0.8 million in 2008 to $3.7 million in 2009, generated by the recognition at fair value less cost to sell of sugarcane at the point of harvest due to (i) a 44.3% increase in the area harvested from 15,400 hectares in 2008 to 22,222 hectares in 2009, in connection with the expansion of the crushing capacity at our Angélica mill,yields obtained; (ii) a 4.5% increase in yields obtained, from 89.4 tons per hectare in 2008 to 93.4 tons per hectare in 2009, as a result of a higher percentage of new plantations in the total plantation area, and (iii) a 3.9% increase14.5% decrease in the price of our sugarcane from $21.8 per ton in 2008 to $22.6 per ton in 2009, as a result of higher sugar and ethanol market prices,production, which werewas partially offset byby: (iii) a lower21.8% increase in harvested area; and (iv) a 4.6% increase in TRS content in sugarcane. Actual production costs remained essentially unchanged, from $1,894.2 per hectare in 2008 to $1,944.0 per hectare in 2009; and
•a $43.9 million increase, from $13.4 million in 2008 to $57.3 million in 2009, mainly generated by increases in price and yield estimates used in the DCF model to determine the fair value of our sugarcane plantations. Sugar price estimates were increased as a result of the increase in the market prices for sugar from $11.8 cents per pound as of December 31, 2008 to $27.0 cents per pound as of December 31, 2009 due to negative weather conditions in Brazil and India during 2009 generating a reduction in worldwide inventory. Yield estimates were increased as a result of a higher percentage of new plantations in the total plantation area. A sugarcane plant can be harvested between 5 to 6 times, once per year. The first cut can yield, on average, 120.0 tons per hectare. The yield decreases over time. The last cut can yield, on average, 60.0 tons per hectare. As a result, new plantations generate greater yields and are more valuable. The change in price and yield estimates resulted in an increase in the fair value of our sugarcane plantations from $1,476.8 per hectare in 2008 to $3,329.3 per hectare in 2009.

Of the $23.0 million loss of initial recognition and changes in fair value of biological assets and agricultural produce in 2012, $24.8 million loss represents the unrealized portion, as compared to the $8.8 million gain unrealized portion of the $31.9 million gain of initial recognition and changes in fair value of biological assets and agricultural produce in 2011.

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a $4.9 million decrease in our Dairy segment mainly due to:

a $3.5 million decrease in the recognition at fair value less cost to sell of raw milk, from a gain of $5.4 million in 2011 to a gain of $1.9 million in 2012, mainly due to (i) a 19.9% increase in direct expenses due to higher nutrition expenses (mainly as a result of higher corn prices) and labor costs; and (ii) a 10.7% decrease in milk sales average prices, from 38.4 cents per liter in 2011 to 34.3 cents per liter in 2012; partially offset by (iii) a 9.2% increase in the number of milking cows, from 4,603 heads in 2011 to 5,025 heads in 2012;

a $1.4 million decrease in the revaluation of the dairy herd, from a $1.5 million increase in value in 2011 to a $0.1 million increase in value in 2012, as a result of a slight increase in the market price of dairy cows in 2012 compared to a significant increase in market prices in 2011.

Of the $2.1 million gain in initial recognition and changes in fair value of biological assets and agricultural produce for 2012, $0.1 million gain represents the unrealized portion, as compared to the $1.5 million unrealized gain portion of the $6.9 million gain in initial recognition and changes in fair value of biological assets and agricultural produce in 2011.

a $3.7 million decrease in our Rice segment, as a result of:

a $6.2 million decrease in the recognition at fair value less cost to sell of rice at the point of harvest, mainly due to (i) a 13.0% decrease in average yields; (ii) a 5.8% increase in production costs, from $879 per hectare in 2011 to $930 per hectare in 2012, (i.e. fuel, agrochemical and fertilizers costs); partially offset by (iii) a 14.4% increase in harvested area, from 27,542 hectares in 2011 to 31,497 hectares in 2012.

a $2.6 million increase in the recognition at fair value less cost to sell of non-harvested rice, from $1.8 million gain in 2011 to $4.4 million gain in 2012, as a result of higher rough rice price estimate for the 2012/2013 harvest.

Of the $6.5 million gain of initial recognition and changes in fair value of biological assets and agricultural produce for 2012, $4.4 million gain represents the unrealized portion, as compared to the $1.8 million gain unrealized portion of the $10.1 million gain of initial recognition and changes in fair value of biological assets and agricultural produce in 2011;

a $3.5 million decrease in our Coffee segment mainly due to:

a $2.3 million decrease in the recognition at fair value less cost to sell of coffee at the point of harvest, from a gain of $0.7 million in 2011 to a loss of $1.6 million in 2012, mainly due to: (i) a 34.3% decrease in the average price of coffee at the point of harvest, based on Intercontinental Exchange of New York (“ICE-NY”) data; and (ii) a 13.1% increase in production costs per hectare mainly due to higher fertilizer expenses; partially offset by (iii) a 11.7% increase in harvested area;

a $1.2 million decrease in the recognition at fair value less cost to sell of non-harvested coffee, from a loss of $1.4 million in 2011 to a loss of $2.6 million in 2012, mainly due to a 30.2% decrease in the coffee price estimates used in the DCF model to determine the fair value of our coffee plantations as of December 31, 2012;

Of the $4.2 million loss of initial recognition and changes in fair value of biological assets and agricultural produce in 2012, $2.6 million loss represents the unrealized portion, as compared to the $1.4 million loss unrealized portion of the $0.7 million loss of initial recognition and changes in fair value of biological assets and agricultural produce in 2011;

•Of the $61.1 million of initial recognition and changes in fair value of biological assets and agricultural produce for 2009, $58.7 million represents the unrealized portion, as compared to the $13.7 million unrealized portion of the $14.3 million of initial recognition and changes in fair value of biological assets and agricultural produce in 2008;
•a $4.3 million increase in our Rice segment as a result of:
•a $2.5 million decrease in gains generated by the recognition at fair value less cost to sell of rice at the point of harvest, from $7.9 million in 2008 to $5.4 million in 2009, due to (i) a 17.3% decrease in yields obtained, from 6.6 tons per hectare in 2008 to 5.5 tons per hectare in 2009, due to the drought (see “—Trends and Factors Affecting Our Results of Operations—Effects of Yield Fluctuations”), and (ii) a 25.8% increase in actual production costs, from $576.5 per hectare in 2008 to $725.1 per hectare in 2009, as a result of higher herbicide, fertilizer and seed prices, which was partially offset by a 16.5% increase in the production area, from 14,820 hectares in 2008 to 17,258 hectares in 2009. The resulting actual margin per hectare decreased from $530.0 in 2008 to $313.5 in 2009; and
•a $6.8 million increase in the gains generated by the recognition at fair value less cost to sell of non- harvested rice as of the year-end, from zero in 2008 to $6.8 million in 2009, due to better weather conditions by the end of 2009, which resulted in an increase in the area of non-harvested rice attaining significant biological transformation as of the end of the period, from zero hectares in 2008 to 11,185 hectares in 2009.
•Of the $7.9 million of initial recognition and changes in fair value of biological assets and agricultural produce for 2008, there was zero unrealized portion, as compared to the $6.8 million unrealized portion of the $12.2 million of initial recognition and changes in fair value of biological assets and agricultural produce in 2009;
•a $0.9 increase in our Cattle segment mainly due to a 12.0% increase in the average market price of cattle; and
•a $0.7 million increase in our Dairy segment mainly due to a 26.5% decrease in actual production costs, from $23.0 cents per liter in 2008 to $16.9 cents per liter in 2009, primarily as a result of a decrease in feeding expenses;
partially offset by:
a $21.4 million decrease in our Crops segment mainly due to:
•a $25.6 million decrease in the recognition at fair value less cost to sell of crops at the point of harvest, from $27.7 million to $2.1 million, mainly due to (i) lower crop yields, which were impacted by the drought, and (ii) higher actual production costs, primarily due to higher fertilizer and agrochemical prices, partially offset by a 36.0% increase in the production area, from 77,221 hectares in 2008 to 104,986 hectares in 2009. The resulting actual margin per hectare for our summer crops (i.e., soybean, corn, sunflower and cotton) decreased from $364.5 per hectare in 2008 to $10.9 per hectare in 2009; and
•a $4.1 million increase in the recognition at fair value less cost to sell for non-harvested crops as of year-end, from $0.3 million in 2008 to $4.4 million in 2009, due to better weather conditions by the end of 2009, which resulted in an increase in the area of non-harvested crops attaining significant biological transformation as of the end of the period, from 8,899 hectares in 2008 to 22,967 hectares in 2009.

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a $10.3 million decrease in the recognition at fair value less cost to sell of crops at the point of harvest, from a gain of $39.6 million in 2011 to a gain of $29.3 million in 2012, mainly due to: (i) lower yields as a result of the dry weather conditions during the summer period; and (ii) higher production costs (i.e. fuel, agrochemical and fertilizers costs); partially offset by (iii) higher market prices (see “Trends and Factors Affecting Our Results of Operations—Effects of Fluctuations in Commodities Prices”). The resulting actual average margin per hectare for our summer crops (i.e. soybean, corn, sunflower and cotton) decreased from $300.6 per hectare in 2011 to $231.3 per hectare in 2012.

a $7.8 million increase in the recognition at fair value less cost to sell for non-harvested crops as of year end, from a loss of $1.6 million in 2011 to a gain of $6.2 million in 2012, primarily due to the lack of rains during November and December 2011, which affected expected yields for the 2011/2012 season, mainly in the Humid Pampas region. In 2012, in contrast, the high level of rains in Argentina during the fourth quarter of 2012 derived in higher yields potential measured as of December 31.

The following table sets forth actual production costs by crop for the periods indicated:
             
  Year Ended December 31, 
  2009  2008  % Change 
  (In $ per hectare) 
Corn  363.9   357.1   18.2%
Soybean  295.6   266.1   11.1%
Soybean (second harvest)  202.7   158.5   27.9%
Cotton  1,768.1   1,151.2   53.6%
Wheat  254.8   217.7   36.7%
•Of the $28.0 million of initial recognition and changes in fair value of biological assets and agricultural produce for 2008, $0.3 million represents the unrealized portion, as compared to the $4.4 million unrealized portion of the $6.6 million of initial recognition and changes in fair value of biological assets and agricultural produce in 2009;
•a $20.7 million decrease in our Coffee segment due to:
•a $4.7 million decrease in the recognition at fair value less cost to sell of coffee at the point of harvest, from a gain of $1.1 million in 2008 to a loss of $3.6 million in 2009, due to (i) a 22.5%
•decrease in yields obtained, from 2.3 tons per hectare in 2008 to 1.8 tons per hectare in 2009, due to unusually heavy rains at the moment of harvest, which spoil the unharvested beans, and (ii) a 37.4% decrease in the actual price of coffee at the point of harvest, from $2,419 per ton in 2008 to $1,515 per ton in 2009, as result of lower market prices and lower quality of harvested coffee beans, which were affected by the rains; and
•a $16.0 million decrease in the recognition at fair value less cost to sell of non-harvested coffee, from a gain of $3.3 million in 2008 to a loss of $12.7 million in 2009, mainly generated by a reduction of the area to be harvested in the short term as a result of the adoption of a more extensive pruning plan necessary to correct the growth pattern of our coffee trees, which impacted the production estimates used in the DCF model used to determine the fair value of our coffee plantations. The change in the production estimates resulted in a decrease in the fair value of our coffee plantations, from $15,938 per hectare in 2008 to $13,256 per hectare in 2009.
•Of the $4.5 million loss in initial recognition and changes in fair value of biological assets and agricultural produce for 2008, $3.3 million represents the unrealized portion of the loss, as compared to the $15.7 million unrealized portion of the $16.2 million of initial recognition and changes in fair value of biological assets and agricultural produce in 2009.

   Harvest
2011/2012		   Harvest
2010/2011		     
   (In $ per hectare)   % Change 

Corn

   535.7     423.6     26.5% 

Soybean

   470.8     379.9     23.9% 

Soybean (second harvest)

   278.6     210.4     32.4% 

Cotton

   1,765.2     2,377.8     (25.8%) 

Wheat

   324.3     331.5     (2.2%) 

Changes in Net Realizable Value of Agricultural Produce after Harvest

                             
                      Sugar,Ethanol    
  Crops  Rice  Dairy  Coffee  Cattle  and Energy  Total 
  (In thousands of $) 
2009
  11,362   191   N/A   1,234   N/A   N/A   12,787 
2008
  2,211   N/A   N/A   (950)  N/A   N/A   1,261 

   Crops   Rice   Dairy   Coffee  Cattle   Sugar, Ethanol
and Energy		   Corporate   Total 
   (In thousands of $) 

2012

   15,850     N/A     N/A     154    N/A     N/A     N/A     16,004  

2011

   10,953     N/A     N/A     (430)   N/A     N/A     N/A     10,523  

Changes in net realizable value of agricultural produce after harvest areis mainly generated bycomposed by: (i) profit or loss from commodity price fluctuations during the period of time the agricultural produce is in inventory.inventory which impacts its fair value, (ii) profit or loss from the valuation of forward contracts related to agricultural produce in inventory and (iii) profit from direct exports. Changes in net realizable value of agricultural produce after harvest increased 914.0%52.1% from $1.3$10.5 million in 20082011 to $12.8$16.0 million in 2009. 2012.

The $12.8 million of changeschange in net realizable value of agricultural produce after harvest generated$15.9 million gain in 2009our Crops segment in 2012 was mainly generated by an increase(i) gains from inventory valuation as a result of fluctuations in crop prices (i.e.market prices. Based on Chicago Board of Trade (“CBOT”) data, from January 1, 2012 to December 31, 2012, wheat, soybean and corn increased 18.4%, soybean, corn16.5% and cotton) of between 13.7% to 54.2%, depending on the crop,6.0% respectively; and by an increase in coffee prices of 21.3% during the period. The $1.3 million of changes in 2008 was mainly generated by an upward trend in crop

116

prices(ii) profit from harvest until August, which wasdirect exports; partially offset by a 17.7% decrease(iii) losses from the valuation of forward contracts related to agricultural produce in coffee prices during the period. See “—Trends and Factors Affecting Our Results of Operations—Effects of Fluctuations in Commodities Prices” for more details regarding price fluctuations.
     Of the $12.8 million of changesinventory.

The change in net realizable value of agricultural produce after harvest for 2009, $0.1$11.0 million representsgain in our Crops segment in 2011 was mainly generated by (i) profits from the unrealized portion,valuation of forward contracts, mainly due to a decrease of soybean and wheat market prices

during this year. Based on Chicago Board of Trade (“CBOT”) data, from January 1, 2011 to December 31, 2011, soybean and wheat prices decreased 12.5% and 19.0% respectively; and (ii) profit from direct exports; partially offset by (iii) losses from inventory valuation as compared to the $0.1 million loss unrealized portiona result of the $1.3 million of changesfluctuations in net realizable value of agricultural produce after harvest in 2008.

market prices.

General and Administrative Expenses

                                 
                      Sugar,Ethanol       
  Crops  Rice  Dairy  Coffee  Cattle  and Energy  Corporate  Total 
  (In thousands of $) 
2009
  6,280   2,883   2,221   2,126   2,909   13,922   22,052   52,393 
2008
  3,885   398   1,835   3,308   2,206   12,646   21,355   45,633 

   Crops  Rice  Dairy  Coffee  Cattle  Sugar, Ethanol
and Energy		  Corporate  Total 
   (In thousands of $) 

2012

   (4,436)   (4,072)   (906)   (1,082)   (23)   (22,239)   (24,933)   (57,691) 

2011

   (8,003)   (6,278)   (1,173)   (1,153)   (269)   (21,082)   (27,184)   (65,142) 

Our general and administrative expenses increased 14.8%decreased 11.4%, from $45.6$65.1 million in 20082011 to $52.4$57.7 million in 2009,2012, mainly due to an $8.0 million increasethe stabilization of operations following a period of significant growth, in technical management expenses as a resultterms of (i) our hiring additional personnel and paying higher salaries and (ii) the higher related fuel and maintenance expenses resulting from the increasescale but also in the numberterms of hectares planted and the larger scale of our operations in our Crops, Rice, Diary and Sugar, Ethanol and Energy segments and the increase in our corporate headquarter offices in Buenos Aires and São Paulo. This increase was partially offset by a $1.2 million decrease in our Coffee segment, mainly as a result of a reduction of overhead and administrative expenses in relationstandards (migrating to the merger of our coffee trading unit into our coffee affiliate, Usina Monte Alegre.

IFRS, implementing Oracle ERP, complying with Sarbanes-Oxley, among other things).

Selling Expenses

                             
                      Sugar,Ethanol    
  Crops  Rice  Dairy  Coffee  Cattle  and Energy  Total 
  (In thousand of $) 
2009
  1,587   7,485   777   1,353   1,045   18,922   31,169 
2008
  3,959   7,647   967   902   473   10,548   24,496 

   Crops  Rice  Dairy  Coffee  Cattle  Sugar, Ethanol
and Energy		  Corporate  Total 
   (In thousands of $) 

2012

   (5,904)   (16,157)   (319)   (304)   (60)   (35,690)   (168)   (58,602) 

2011

   (2,270)   (14,488)   (401)   (463)   (74)   (41,708)   —      (59,404) 

Selling expenses increased 27.2%decreased 1.4%, from $24.5$59.4 million in 20082011 to $31.2$58.6 million in 2009, due to an increase in export and other commercial taxes, trade commissions and freight expenses as2012, mainly driven by: (i) a result of an increase in the volume of sales$6.0 million decrease in our Sugar, Ethanol and Energy and Rice segments and of an increasesegment, from $41.7 million in domestic sales of coffee2011 to $35.7 million in Brazil. In Brazil, domestic sales result in higher taxes than export sales. This increase was partially offset2012, mainly explained by a decrease in taxessugar and commissions asethanol sales prices; partially offset by (ii) a result of the lower volumes sold$3.6 million increase in our Crops segment, from $2.3 million in 2011 to $5.9 million in 2012, mainly due to the higher volume of direct exports that implied higher commissions and expenses; and (iii) a $1.7 million increase in our Rice segment, from $14.5 million in 2011 to $16.2 million in 2012, mainly due to an increase in sales volume.

Selling expenses of our Dairy, segments.

Coffee and Cattle segments remained essentially unchanged.

Other Operating Income, Net

                                     
                      Sugar,          
                      Ethanol          
                      and  Land       
  Crops  Rice  Dairy  Coffee  Cattle  Energy  Transformation  Corporate  Total 
  (In thousands of $) 
2009
  4,776   (942)  (108)  806   377   (10,467)  18,839   (210)  13,071 
2008
  4,824   29   18   (27)  16   211   13,974   (1,722)  17,323 

   Crops  Rice   Dairy  Coffee   Cattle  Sugar, Ethanol
and Energy		   Land
Transformation		   Corporate  Total 
   (In thousands of $) 

2012

   (9,330)   1,065     22    2,387     (16)   9,797     27,513     (341)   31,097  

2011

   1,843    372     (2)   2,020     (3)   11,220     8,832     299    24,581  

Other operating income, net decreased 24.3%increased 21.3%, from $17.3$24.6 million in 20082011 to $13.1$31.1 million in 2009,2012, primarily due to:

a $10.7$18.7 million increase in our Land Transformation segment due to the sale of two farms in 2012, resulting in capital gains of $27.5 million, compared to the sale of one farm in 2011 that generated a $8.8 million capital gain.

partially offset by:

a $11.2 million decrease in our Crops segment due to the mark-to-market effect of outstanding hedge positions, which had a negative impact during 2012; and

a $1.4 million decrease in our Sugar, Ethanol and Energy segment due to the mark-to-market effect of future sales contracts for sugar. For further detail, see Critical Accounting Policiessugar;

Other operating income, net of our Rice, Coffee, Cattle and Estimates — Biological Assets and Agricultural Produce to our consolidated financial statements;

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Corporate segments remained essentially unchanged.

Loss for the year from discontinued operations

Our loss from discontinued operations varied from from a loss of $1.0 million decrease in our Rice segment mainly due2011 to the recognitiona loss of a one-time loss on the sale of old equipment in 2009;
partially offset by:
•a $4.9 million increase in our Land Transformation segment due to the sale of a farmland in December 2009, which resulted in a $18.8 million gain, compared to the sale of a farmland in May 2008, which generated a $14.0 million gain;
•a $0.8 million increase in our Coffee segment due to the mark-to-market effect of outstanding hedging positions that resulted in a gain in 2009; and
•a $0.4 million increase in our Cattle segment due to the collection of government production subsidies in 2009.
Excess of Fair Value of Net Assets Acquired over Cost
     Excess of fair value of net assets acquired over cost decreased from $1.2$4.0 million in 2008 to zero in 2009. During the 2008 fiscal year we completed the acquisition of a 50.0% non-controlling interest in a Brazilian company in which we had previously purchased the other 50.0% during the 2007 fiscal year. During the 2009 fiscal year, we did not complete any acquisitions. The cost of the non-controlling interest was lower than the fair value of the net assets acquired by $1.2 million, and, accordingly, we recognized a one-time gain in our statement of income.
Share of Loss of Joint Ventures
     Share of loss of joint ventures decreased 62.5%, from $0.8 million in 2008 to $0.3 million in 2009,2012, driven by the negative results of Grupo La Lácteo S.A.
The lower result is mainly explained by a combination of: (i) lower international powdered milk prices which generated a downward pressure on prices of processed dairy products in the domestic market; and (ii) an increase in production costs. Industrial capacity of Grupo La Lácteo S.A. was only suitable for products for the domestic market. In addition, 2012 results include the impairment loss recognized in respect of La Lacteo as a result of its operating losses.

Financial Results, Net

     Financial

Our net financial results net decreased by $25.7 million,varied from a loss of $48.3$53.2 million in 20082011 to a loss of $22.6$55.1 million in 2009,2012, primarily due to: a $26.1 million non-cash loss in 2012, compared to a 143.7% increase$12.7 million non-cash loss in net foreign exchange results due to the appreciation2011, caused by a depreciation of the Brazilian Real againstand Argentine Peso in both years, since a portion of our net liability position in Brazil and Argentina is nominated in foreign currency. In 2012 we increased the U.S. dollaramount of debt nominated in 2009. Foreign exchange gains and losses result from the settlement of foreign currency transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in a currency other than the functional currency. This decreaseUS dollars, which mainly explains this higher non-cash loss, which was partially offset by a 21.0% increase(i) lower interest expenses nominated in interest expense, from $23.3 million in 2008 to $28.2 million in 2009, primarilyUS dollar terms mainly due to the depreciation of the Brazilian Real and the Argentine Peso; and (ii) higher interests income as a result of a higher indebtedness positionamount of excess cash invested in 2009 as compared to 2008.

fixed term deposits.

The following table sets forth the breakdown of financial results for the periods indicated.

   Year Ended December 31, 
   2012  2011    
   (In $thousand)  % Change 

Interest income

   11,249    8,019    40.3% 

Interest expense

   (27,672)   (34,017)   (18.7%) 

Foreign exchange loss, net

   (26,080)   (12,683)   105.6% 

Loss from interest rate/foreign exchange rate derivative financial instruments

   (5,823)   (2,247)   159.1% 

Taxes

   (4,265)   (5,273)   (19.1%) 

Other expenses, net

   (2,525)   (7,008)   (64.0%) 

Total Financial Results

   (55,116)   (53,209)   3.6% 

Income Tax Benefitbenefit / (expense)

     Our

For the year ended December 31, 2012, we recognized a consolidated income tax benefit for 2008 totaled $10.4of $5.4 million which equates toon income before income taxes of $7.9 million. For the comparable 2011 period, we recognized a consolidated effective tax rate of 28.2%. Our consolidated income tax benefit for 2009 totaled $5.4expense of $14.6 million which equates to a consolidated effective tax rateon income before income taxes of 23.4%.

$72.6 million. On a consolidated basis, for the years ended December 31, 2008 and 2009, the principal foreign jurisdictionschange from an income tax expense in which we operate generated pretax losses resulting2011 to an income tax benefit in blended effective tax rates of 28.2% and 23.4%, respectively. The change in our annual effective tax rate from 28.2% in 2008 to 23.4% in 20092012 reflects, among other items, a change in our mix of pretaxpre-tax income from our various jurisdictions. Onjurisdictions, each of them responsible for paying their own income taxes. We do not pay a disaggregated basis,consolidated income tax return. The income tax benefit in 2012 was mainly due to the recognition of previously unrecognized tax losses in Brazil and the gain from the sale of Santa Regina Agropecuaria S.A. which did not result income tax expense. In 2011, our consolidated effective tax rate in Brazil for 2008 was a benefit of 29.5% as compared to a benefit of 17.1% in 2009. The primary reason for the lower effectiveapproximated 20.5% (which differed from our statutory income tax rate for the year ended December 31, 2009, as comparedrates) mainly due to the same periodrecognition of previously unrecognized tax losses in 2008, is attributable to higher non-deductible items in 2009 as compared to that amount for 2008. Our effective tax rate in Argentina for 2008 was a benefit of 15.6% as compared to a benefit of 31.8% for 2009. Our effective tax rate in 2009 was higher due to lower non-deductible items and other charges as compared to those amounts in 2008. Our income taxes in Uruguay are not significant to our consolidated taxes.
Brazil.

(Loss)/Profit for the Year

As a result of the foregoing, our lossnet income for the year decreased 98.3%, from $16.4a gain of $56.9 million in 20082011 to $0.3a gain of $9.3 million in 2009.

1182012.

B.LIQUIDITY AND CAPITAL RESOURCES

B. LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are and will be influenced by a variety of factors, including:

our ability to generate cash flows from our operations;

•our ability to generate cash flows from our operations;
•the level of our outstanding indebtedness and the interest that we are obligated to pay on such outstanding indebtedness;
•our capital expenditure requirements, which consist primarily of investments in new farmland, in our operations, in equipment and plant facilities and maintenance costs; and
•our working capital requirements.

the level of our outstanding indebtedness and the interest that we are obligated to pay on such outstanding indebtedness;

our capital expenditure requirements, which consist primarily of investments in new farmland, in our operations, in equipment and plant facilities and maintenance costs; and

our working capital requirements.

Our principal sources of liquidity have traditionally consisted of shareholders’ contributions, short and long term borrowings and proceeds received from the disposition of transformed farmland or subsidiaries.

We believe that our working capital will be sufficient during the next 12 months to meet our liquidity requirements.

Years ended December 31, 2013, 2012 and 2011,2010, 2009 and 2008

The table below reflects our statements of Cash Flow for the fiscal years ended December 31, 2010, 20092013, 2012 and 2008.

             
  Year ended December 31, 
  2010  2009  2008 
   
Cash and cash equivalent at the beginning of the year  74,806   93,360   70,686 
Cash generated from (used in) operating activities  26,938   (45,807)  (21,427)
Net cash used in investing activities  (111,725)  (114,386)  (188,515)
Cash generated by Financial activities  79,828   156,047   213,200 
Effect of exchange rate changes on cash  423   (14,408)  19,416 
Cash and cash equivalent at the end of the year  70,269   74,806   93,360 
2011.

   Year ended December 31, 
   2013  2012  2011 

Cash and cash equivalent at the beginning of the year

   218,809    330,546    70,269  

Cash and cash equivalent at the end of the year

   232,147    218,809    330,546  

Net cash generated from operating activities

   102,080    67,823    56,586  

Effect of exchange rate changes on cash and cash equivalents

   (31,877)   (12,853)   (16,608) 

Net cash used in investing activities

   (161,536)   (300,215)   (140,493) 

Net cash generated from financing activities

   104,671    133,508    360,792  

Operating Activities

Year ended December 31, 20102013

Net cash generated by operating activities was $26.9$102.1 million infor the year ended December 31, 2010.2013. During 2010,this year, we generated a net loss of $44.8$25.8 million that included non-cash charges relating primarily to depreciation and amortization of $37.6$69.4 million, (reflecting the impact in depreciationinterest and other financial expenses, net of a higher asset base due to the development of our operations in Brazil), interest expense of $33.0$45.2 million, (due to the higher indebtedness incurred to fund operations and capital investment), $72.3$53.5 million of unrealized portion of the “Initial recognition and changes in fair value of biological assets and agricultural produce,” $21.1 million of foreign exchange losses All these effects were partially offset in part by a non-cash gain from the disposal of $20.8 million related to the sale of farmland,subsidiaries , farmlands and other non-cash gains, netassets of $19.1 million.

$28.4 million and $9.3 million of income tax benefit.

In addition, other changes in operating asset and liability balances resulted in a net increasedecrease in cash of $11.0$27.6 million, primarily due to a reductionan increase of $7.1 million in biological assets; $3.6$35.5 million in trade and other receivables, $2.2 million in inventoriesdue to the buildup of working capital related to the expansion of our Sugar and Ethanol operations (mainly advances to suppliers and long term tax credits related to the lvinhema project development), and an increase in ethanol inventories, as a consequence of $5.4 in payroll and social security liabilities,the decision to capture better prices. These effects were partially offset in part by an decreaseincrease of $3.5$35.3 million in liabilities related to derivative financial instruments and $4.2 million in trade and other payables.

119liabilities.

     Our operating cash was affected by the payment of $33.2 million in interest due on our indebtedness and $7.8 million in taxes related to our subsidiaries.
Year ended December 31, 2012,2009

Net cash used ingenerated by operating activities was $45.8$67.8 million infor the year ended December 31, 2009.2012. During 2009,this year, we generated a net lossprofit of $0.3$9.3 million that included non-cash charges relating primarily to depreciation and amortization of $30.3$54.5 million, (reflecting the impact in depreciation of a higher asset base due to the development of our operations in Brazil as a result of acquisitions in previous years), interest expense, net of $27.8$18.9 million, (due to the higher indebtedness incurred to fund operations and capital investment), foreign exchange gains of $10.9 million (due to the appreciation of the Brazilian Real against the U.S. dollar), the gain from the sale of farmland businesses of $18.8 million (representing the gain from the sale of La Paz Agropecuaria S.R.L. in December 2009 for an aggregate sale price of $21.9 million), the $55.8$13.3 million of unrealized portion of the “Initial recognition and changes in fair value of biological assets and agricultural produce”produce,” $24.8 million of foreign exchange losses and other non-cash charges.

     In 2009, our results of operations continued to be significantly affected by increased costs associated with the expansion of the operations of our main subsidiaries in Brazil as they expand to reach full productive potential, which contributed net losses of $9.0$6.3 million to our consolidated net loss for the year. Also, our operationsfrom derivative financial instruments and forward. All these effects were affected by unusual climatic conditions, in our main areas of operations in Argentina and Brazil, which significantly affected our yields and production levels. Our net loss for the year ended December 31, 2009 was partially offset by a significant foreign exchange gain of $10.9 million during 2009 arising from the appreciationdisposal of the Brazilian Real against the U.S. dollar, our presentation currency.
     Partially compensating these effects,subsidiaries of $27.5 million and $5.4 million of income tax benefit.

In addition, other changes in operating asset and liability balances resulted in a net increasedecrease in cash of $12.3$29.0 million, during 2009 primarily due to (i) decreasesan increase of $39.2 million in short term biological assets of $20.3 million mainlytrade and other receivables, due to the salebuildup of a major portionworking capital of our livestock assets;the Sugar and (ii) an increase in trade payables of $11.5 millionEthanol operations (mainly advances to suppliers and payroll and social security liabilities of $4.3 million, reflecting our growing operations. These effects werelong term tax credits related to the lvinhema project development), partially offset by an increase of $30.4$21.1 million in trade receivables mainly related to higher sales, mostly in Brazil, and the sale of a major portion of our livestock assets near the end of the year. In addition, our operating cash was affected by the payment of $25.8 million in interest due on our indebtedness and $13.3 million in taxes.

liabilities.

Year ended December 31, 2011,2008

Net cash used ingenerated by operating activities was $21.4$56.6 million in the year ended December 31, 2008. The cash flows for the year ended December 31, 2008 were also affected by the full year2011. During 2011, we generated a net profit of operations of subsidiaries acquired in mid 2007 or on the very last day of 2007, which, in aggregate, contributed to an expansion of our business, including but not limited to an increase in our net asset base and revenue and expenses. Although we posted a loss of $16.4$56.9 million in 2008, this lossthat included non-cash charges relating primarily to depreciation and amortization of $28.3$34.1 million, (representing the impact on depreciation of an increasing asset base due to the business combinations that occurred in 2007 and other individual asset acquisitions), interest expense, net of $21.8$33.0 million (representing the higher indebtedness incurred to fund operations and capital investments), foreign exchange lossesincome tax expense of $24.9$14.7 million, (representing the devaluation of the Brazilian Real against the U.S. dollar in 2008 and, to a lesser extent, the devaluation of the Argentine Peso), the gain from the sale of farmland businesses of $14.0 million (representing the sale of La Agraria S.A. in May 2008 for an aggregate sale price of $26.7 million), $26.3partially offset by $17.1 million of the unrealized portion of the “Initial recognition and changes in fair value of biological assets and agricultural produce”produce,” and other non-cash charges. However, our operating results and cash flows were significantly affected duringby a gain of $8.8 million related to the year by our main subsidiary operations in Brazil, namely Angélica and UMA, which were not working at their installed capacity and required significant amountssale of investment. These subsidiaries combined contributed a significant net loss of $3.9 million to our consolidated results of operations for the year ended December 31, 2008.

120

farmland.

In addition, other changes in operating asset and liability balances reduced the net income position, resultingresulted in a net decrease in cash of $8.6$39.5 million, during 2008, primarily due to an increase of $28.4$49.8 million in inventories (mainly due to an increase of Sugar and Ethanol stocks as a result of a commercial strategic decision to sell most of these inventories at the end of 2010) and $15.9 million in trade and other receivables due to higher sales volumes, an(in line with increase of $3.2 million in inventoriesoperations), partially offset to a lesser extentcompensated by an increase in trade and other payables of $13.0 million. Overall, changes$19.9 million (also in operating assetsline with increase of operations), and liabilitiesa decrease of $6.7 million in 2008 were affected by having accounted for twelve months of operations in 2008 for the subsidiaries acquired in 2007, particularly Bañado del Salado S.A. and Agro Invest S.A., which were acquired on the last day of December 2007. In addition, ourbiological assets.

Our operating cash was affected by the payment of $16.3 million in interest due on our indebtedness and $5.8$16.7 million in taxes related to our subsidiaries.

Investing Activities

Year ended December 31, 2013,2010

Net cash used in investing activities was $111.7totaled $161.5 million in the year ended December 31, 2010,2013, primarily due to the purchases of property, plant and equipment (mainly acquisitions of machinery, buildings and facilities for the construction of the second phase of Ivinhema mill), totaling $128.7 million; $96.5 million in biological assets related mainly to the expansion of our sugarcane plantation area in Mato Grosso do Sul. Net inflows from investing activities were primarily related to proceeds of $43.4 million from the sale of farmlands and subsidiaries and $6.9 million in interest income.

Year ended December 31, 2012

Net cash used in investing activities totaled $300.2 million in the year ended December 31, 2012, primarily due to the purchases of property, plant and equipment (mainly acquisitions of machinery, buildings and facilities for our Brazilian operations for the lvinhema project, the second free stall facility and Franck rice mill) totaling $218.8 million; $82.6 million in biological assets related mainly to the expansion of our sugarcane plantation area in Mato Grosso do Sul and the payment of the balance of the acquisitions of Dinaluca, Agroforestal and Simoneta, wholly owned subsidiaries for $33.5 million. Net inflows from investing activities were primarily related to proceeds of an aggregate of $25.9 million from the sale of farmlands and subsidiaries and $11.2 million of interest received.

Year ended December 31, 2011

Net cash used in investing activities totaled $140.5 million in the year ended December 31, 2011, primarily due to the purchases of property, plant and equipment (mainly acquisitions of machinery, buildings and facilities for our Brazilian operations) totaling $87.7$90.4 million and 35.1$63.1 million in biological assets related to the expansion of our sugarcane plantation area in Mato Grosso do Sul. Net inflows from investing activities were primarily related to proceeds of $12.1$23.1 million from the sale of Macarenafarmlands and $5.5$8.0 million received for the disposal of La Paz Agropecuaria in December 2009, a farmland business in Argentina.

interest received.

Financing Activities

Year ended December 31, 2013,2009

Net cash used in investingprovided by financing activities was $114.4$104.7 million in the year ended December 31, 2009,2013, primarily due toderived from the purchasesincurrence of property, plant and equipment (mainly acquisitions of machinery, buildings and facilities primarily focused onnew long term loans, mainly for our Brazilian operations) totaling $97.8 million and $40.5 million in biological assetsoperations related to the expansionSugar and Ethanol cluster development for $322.8 million, partially offset by payments of $113.7 million of our sugarcane plantation arealong term borrowings, $53.4 of net decrease of our short term borrowings. During this period, interest paid totaled $46.0 million. We also used $5.1 million in Mato Grosso do Sul. Net inflows from investing activities were primarily relatedthe repurchase of our own shares. (Please see Note 17 to proceeds of $7.3 million from the sale of ancillary property and $16.4 million received for the disposal of La Paz Agropecuaria in December 2009, a farmland business in Argentina.

our consolidated financial expenses)

Year ended December 31, 2012,2008

Net cash used in investingprovided by financing activities was $188.5$133.5 million in the year ended December 31, 2008,2012, primarily due toderived from borrowings under long term credit facilities in the purchasesnet amount of property, plant$150.8 million (See “Indebtedness and equipment (mainly acquisitionsFinancial Instruments”). During 2012, the payment of machinery, buildings and facilities primarily focused on our Brazilian operations) totaling $186.3 million and $31.0 million related to the increase of newly planted hectares of sugarcane in Brazil. Net inflows from investing activities were primarily related to proceeds of $3.5 million from the sale of ancillary property and $25.1 million received for the disposal of La Agraria in May 2008, a farmland business in Argentina.

Financing Activities
interest totaled $34.6 million.

Year ended December 31, 2011,2010

Net cash provided by financing activities was $80.0$360.8 million in the year ended December 31, 2010,2011, primarily derived from additionalthe IPO net proceeds, which total 421.8 million, partially compensated by a reduction of our long term indebtedness from Banco do Brasil S.A. andborrowings, as a consequence of the advanced payment of the Loan Facility with Deutsche Bank AG London Branch.

Year ended December 31,2009
     Net cash provided by financing activities was $156.0 million inbank totaling $47 million. During 2011, the year ended December 31, 2009, primarily derived from $86.9 million in net proceeds from short-term and long-term indebtedness and $69.1 million in net cash proceeds from capital contributions received from new and existing members. In 2009, we incurred additional long-term indebtednesspayment of $80.0interest totaled $33.5 million.

121

Year ended December 31,2008
     Net cash provided by financing activities was $213.2 million in the year ended December 31, 2008, primarily derived from $175.5 million in net proceeds from capital contributions received from new investors and existing investors. We also incurred additional net indebtedness of $37.7 million.
Cash and Cash Equivalents

Historically since our cash flows from operations were insufficient to fund our working capital needs and investment plans, we funded our operations with proceeds from short-term and long-term indebtedness and capital contributions from existing and new private investors. In 2011 we obtained $421.8 million from an Initial Public Offering (“IPO”) and simultaneous private placement. As of December 31, 2010,2013, our cash and cash equivalents amounted to $70.2$232.1 million. Between January and February 2011, we issued 40,042,237 ordinary shares, receiving net proceeds of $430.4 million. See “Item 4. Information on the Company—A. History and Development of the Company.” We believe that our current levels of cash and cash equivalents and cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.

However, we may need additional cash resources in the future to continue our investment plans. Also, we may need additional cash if we experience a change in business conditions or other developments. We also might need additional cash resources in the future if we find and wish to pursue opportunities for investment, acquisitions, strategic alliances or other similar investments. If we ever determine that our cash requirements exceed our amounts of cash and cash equivalents on hand, we might seek to issue debt or additional equity securities or obtain additional credit facilities or realize the disposition of transformed farmland and/or subsidiaries. Any issuance of equity securities could cause dilution for our shareholders. Any incurrence of additional indebtedness could increase our debt service obligations and cause us to become subject to additional restrictive operating and financial covenants, and could require that we pledge collateral to secure those borrowings, if permitted to do so. It is possible that, when we need additional cash resources, financing will not be available to us in amounts or on terms that would be acceptable to us or at all.

Projected Sources and Uses of Cash

We anticipate that we will generate cash from the following sources:

operating cash flow;

•operating cash flow;
•

debt financing;

•the dispositions of transformed farmland and/or subsidiaries; and
•debt or equity offerings.
We anticipate that we will use our cash:
•for other working capital purposes;
•to meet our budgeted capital expenditures;
•to make investment in new projects related to our business; and
•to refinance our current debts.

122

the dispositions of transformed farmland and/or subsidiaries; and

debt or equity offerings.

We anticipate that we will use our cash:

for other working capital purposes;

to meet our budgeted capital expenditures;

to make investment in new projects related to our business; and

to refinance our current debts.

Indebtedness and Financial Instruments

The table below illustrates the maturity of our indebtedness (excluding obligations under finance leases) and our exposure to fixed and variable interest rates:

                 
  As of December 31, 
  2010  2009  2008  2007 
  (In thousands is of $) 
Fixed rate:
                
Less than 1 year(l)  52,326   30,579   95,209   59,880 
Between 1 and 2 years  22,425   5,724   678   2,359 
Between 2 and 3 years  7,661   5,173   191   311 
Between 3 and 4 years  7,394   5,167   127   269 
Between 4 and 5 years  5,920   5,167   —   184 
More than 5 years  22,555   5,167   —   — 
Total fixed rate:
  118,281   56,977   96,205   63,003 
Variable rate:
                
Less than 1 year(l)  86,107   72,391   128,378   36,536 
Between 1 and 2 years  70,905   68,667   703   12,886 
Between 2 and 3 years  54,436   55,907   703   11,569 
Between 3 and 4 years  17,506   49,511   249   11,569 
Between 4 and 5 years  15,619   787   41   10,918 
More than 5 years  26,170   1,621   1,152   10,963 
             
Total variable rate:
  270,743   248,884   131,226   94,441 
             
Total:
  389,024   305,861   227,431   157,744 
             

   As of December 31, 
   2013   2012 

Fixed rate:

    

Less than 1 year(l)

   56,932     60,049  

Between 1 and 2 years

   38,393     19,066  

Between 2 and 3 years

   37,762     24,364  

Between 3 and 4 years

   29,467     21,760  

Between 4 and 5 years

   27,803     20,870  

More than 5 years

   75,745     62,036  
  

 

 

   

 

 

 

Total fixed rate:

   266,102     208,145  
  

 

 

   

 

 

 

Variable rate:

    

Less than 1 year(l)

   90,707     124,423  

Between 1 and 2 years

   107,392     71,978  

Between 2 and 3 years

   100,949     73,684  

Between 3 and 4 years

   54,212     45,969  

Between 4 and 5 years

   12,586     11,100  

More than 5 years

   27,444     2,713  
  

 

 

   

 

 

 

Total variable rate:

   393,290     329,867  
  

 

 

   

 

 

 

Total:

   659,392     538,012  
  

 

 

   

 

 

 

(1)The Company plans to partially rollover its short term debt using new available lines of credit, or on using operating cash flow to cancel such debt.
     On a consolidated basis, we were leveraged for all of

Borrowings incurred by the years presented. As of December 31, 2010, we had $389 million of debt outstanding on a consolidated basis (all of which was non-recourse to us) primarilyCompany’s subsidiaries in the form of bank loans, of which $351 million were collateralized by certain property, plant and equipment and shares of certain of our subsidiaries. In Brazil our subsidiaries have incurred loans that mature onare repayable at various dates between January 20112014 and July 2020, while in Argentina our subsidiaries have incurred loans that mature on various dates between January 2011September 2023 and November 2015. In Uruguay, our subsidiaries do not have significant indebtedness. Interest rates also vary on a country by country basis. In Brazil, our loans bear either fixed interest rates ranging from 4.00%2.50% to 16.58%13.47% per annum or variable interest rates based on the London Interbank Offered Rate (“LIBOR”) or other specific base-rates plus spreads ranging from 2.65% to 18.99% per annum. In Argentina, our loans bear either fixed interest rates ranging from 2.60% to 6.00% per annum or variable interest rates based on LIBOR or other specific base-rates plus a spread of upspreads ranging from 4.72% to 5.25%14.11% per annum.

     As of At December 31, 2010, our total outstanding borrowings under our principal credit facilities include: (i) a U.S. dollar-denominated $30.2 million loan (principal amount outstanding plus accrued interest) with a syndicate of banks, led2013 LIBOR (six months) was 0.28% (2012: 0. 51%).

Borrowings incurred by Rabobank International Brasil S.A. duethe Company’s subsidiaries in 2013 (the “Syndicated Loan”); (ii) a Reais-denominated 135.9 million loan (equivalent to $81.6 million principal amount outstanding plus accrued interest) with BNDES-FINEM (the “BNDES Loan Facility”) due in 2018; (iii) a U.S. dollar-denominated $60.3 million loan (principal amount outstanding plus accrued interest) with the Interamerican Development Bank (“IDB”) (the “IDB Facility”); (iv) a Reais-denominated 71.6 million facility (equivalent to $42.0 million, principal amount outstanding plus accruedArgentina are repayable at various dates between January 2014 and November 2019 and bear either fixed interest) rates ranging from Banco do Brasil S.A. (“BDB”) (the “BDB Facility”) due between 20125.70% and 2020; and (v) a U.S. dollar-denominated $50.0 million loan (principal amount outstanding plus accrued interest) with the Deutsche Bank AG London Branch (the “DB Facility”) due in 2013.

1237.00% per annum.

Brazilian Subsidiaries

•Syndicated Loan and BNDES Loan Facility
The Syndicated Loan bears interest at LIBOR plus 2.65% per annum and the BNDES Loan Facility bears interest at a country-specific variable rate (“TJLP rate”) plus 4.05% per annum (TJLP rate at December 31, 2010 was 6.00%). The Syndicated Loan and the BNDES Loan Facility contain certain customary financial covenants, events of default and restrictions which require us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends, except as would not result in a breachmain loans of the Company’s Brazilian Subsidiaries identified below are:

Adecoagro Vale do Ivinhema: (“AVI”)

Bank

  Date  Nominal
amount		   Amount Outstanding as
of December 31 2013		   

Maturity date

  

Annual Interest Rate

  

Use of proceeds

      (In millions)   Millions of
Reais		   Millions of
equivalent
Dollars		          

Rabobank / Itaú BBA / Santander / Itaú Unibanco / Bradesco / HSBC (Finem ANG) (1)

  March
2008		  R$151     81.4     34.7    April 2018  Partially Long-Term Interest Rate (TJLP), as by the Brazilian Central Bank + 4.05% and partially Interest Rate Resolution 635/87 (average BNDES external funding rate) + 3.67%  Investments on Angélica Mill

Banco Do Brasil

  July 2010  R$70     57.6     24.6    July 2020  10% with 15% of bonus performance  Investments on Angélica Mill

BTG Pactual / HSBC / Votorantim / Rabobank (2)

  May 2012  R$.230     153.3     65.4    May 2015  CDI + 3.6%  Working Capital

Banco Do Brasil (3)

  October
2012		  R$130     130.0     55.5    October 2022  2.94% per annum with 15% of bonus performance  Investments on Ivinhema Mill

Itau BBA

  December
2012		  R$45.9     44.4     19.0    December 2022  2.50%  Working Capital

Itau BBA (4)

  March
2013		  R$75     75.0     32.0    March 2019  CDI + 3.2%  Working Capital

ING / ABN /Bladex Loan (5)

  July 2013  US$70     —       70.0    October 2016  LIBOR 6M plus 4.5%  Working Capital

Rabobank / Bradesco / HSBC / PGGM / Hinduja Bank (6)

  September
2013		  US$90     —       90.0    September 2017  LIBOR 3M plus 4.75%  Working Capital

Banco do Brasil / Itaul BBA Finem Loan (7) (9)

  September
2013		  R$273     138.1     58.9    January 23  5.69  Investments on Ivinhema Mill

BNDES Finem Loan (8) (10)

  November
2013		  R$215     60.0     25.6    January 23  3.34%  Investments on Ivinhema Mill
Usina Monte Alegre              

Bradesco

  May 2012  US$11.7     —       11.7    May 2016  7.20%  Working Capital

(1)Collateralized by (i) a first degree mortgage of the Takuare farm; (ii) a pledge on the capital stock (“quotas”) of Adecoagro Brasil Participações S/A; and (iii) liens over the Angélica mill and equipment, all of which are property of Adecoagro Vale do Ivinhema.
(2)Collateralized by (i) a first-degree mortgage of the Conquista, Alto Alegre, Dom Fabrício, Nossa Senhora Aparecida, Água Branca farms, (ii) pledge of sugarcane and (iii) sales contracts.
(3)Collateralized by (i) a second degree mortgage of the Sapalio farm and (ii) liens over the Ivinhema mill and equipment, all of which are property of Adecoagro Vale do Ivinhema.
(4)Collateralized by power sales contract
(5)Collateralized by (i) pledge of sugarcane and (ii) sales contracts.
(6)Collateralized by (i) pledge of sugarcane and (ii) sales contracts.
(7)Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm, (ii) a second degree mortgage of the Takuare farm, (iii) liens over the Ivinhema mill and equipment.

(8)Collateralized by (i) liens over the Ivinhema mill and equipment, all of which are property of Adecoagro Vale do Ivinhema and (ii) power sales contracts.
(9)As of the date of this report, AVI has an outstanding amount of Reais 135 million to receive
(10)As of the date of this report, AVI has an outstanding amount of Reais 115 million to receive

The abovementioned loans have to comply with financial covenants. TheseThe financial covenants are measured in accordance with generally accepted accounting principles in Brazil and measured on an annual basis asconsidering the statutory financial statements of the endBrazilian Subsidiaries. The covenants to comply with are defined as follows and detailed in the table below:

Bank

  

Ratio

  2014  2015  2016  2017
and on		 

Rabobank / Itaú BBA / Santander / Itaú Unibanco / Bradesco / HSBC (Finem ANG)

  

Interest Coverage

   [³] 2    [³] 2    [³] 2    [³] 2  
  

Solvency

   [³] 40%   [³] 40%   [³] 40%   [³] 40% 
  

Net Bank Debt / EBITDA

   [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5  

Banco Do Brasil

  

Debt service coverage

   [³] 1.2    [³] 1.2    [³] 1.2    [³] 1.2  

BTG Pactual / HSBC / Votorantim / Rabobank

  

Interest Coverage

   [³] 2     
  

Solvency

   [³] 40%    
  

Net Bank Debt / EBITDA

   [£] 6     

Banco Do Brasil

  

Debt service coverage

   [³] 1.2    [³] 1.2    [³] 1.2    [³] 1.2  

Itau BBA

  

Net Bank Debt / EBITDA

   [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

Itau BBA

  

Net Bank Debt / EBITDA

   [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

ING / ABN /Bladex

  

Interest Coverage

   [³] 2    [³] 2    
  

Solvency

   [³] 40%   [³] 40%   
  

Net Bank Debt / EBITDA

   [£] 5.0    [£] 4.0    

Rabobank / Bradesco / HSBC / PGGM / Hinduja Bank

  

Interest Coverage

   [³] 2    [³] 2    [³] 2   
  

Solvency

   [³] 40%   [³] 40%   [³] 40%  
  

Net Bank Debt / EBITDA

   [£] 5.0    [£] 4.5    [£] 4.5   

Banco do Brasil / Itau BBA Finem Loan

  

Debt Service Coverage

   [³] 1.2    [³] 1.2    [³] 1.2    [³] 1.2  
  

Net Bank Debt / EBITDA

   [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

BNDES Finem Loan

  

Solvency

   [³] 40%   [³] 40%   [³] 40%   [³] 40% 
  

Net Bank Debt / EBITDA

   [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

Bradesco

  

Net Debt / Sugarcane Milled Tons

   [£] 80    [£] 80    
  

Net Debt/Equity

   [£] 80%   [£] 80%   

Interest Coverage = (Adjusted EBITDA)/(Net Financial Expenses)

Solvency = Equity/(Total Assets)

Net Bank Debt/Adjusted EBITDA = (Bank Debt-Cash)/(Adjusted EBITDA)

Debt Service Coverage= (Adjusted EBITDA)/(Payment of each fiscal year. Certain covenants are measured on a combined basis aggregatinglong term debt-Net Financial Expenses- dividends)

During 2013 and 2012 the borrowing subsidiaries and others are measured on an individual basis. Under the Syndicated Loan, defaults by either Angélica, UMA, Adeco Agropecuária Brasil S.A. or Adeco Brasil Participações S.A. on any indebtedness with an aggregate principal amount over US$500,000 can result in acceleration of the full outstanding loan amount due to the syndicate of banks. The obligations under this facility are secured by (i) a first mortgage of the Takuarê farm; (ii) a pledge on the capital stock (“quotas”) of Angélica; and (iii) liens over the Angélica mill and equipment, all of which are property of Angélica.

          During 2008 and 2009, we entered into amendments to the Syndicated Loan and the BNDES Loan Facility to modify the terms of the financial ratios covenants. Pursuant to the amendment, we are required to meet redefined certain financial ratios on an annual basis as of the end of each of the fiscal years commencing as of December 31, 2009. We wereCompany was in compliance with these redefined covenants asall financial covenants.

Argentinian Subsidiaries

The principal loan of December 31, 2010Adeco Agropecuaria S.A. and December 31, 2009.

Pilaga S.A., our Argentinian Subsidiaries is:

          The redefined financial covenants were as follows:
         
  2010 2011 2012 to 2013 2014 to 2018
Financial ratios:
        
Debt Service Coverage Ratio (individual) > 0.65 > 1.00 > 1.00 > 1.30
Liquidity Ratio (individual) > 1.00 > 1.00 > 1.00 > 1.00
Liquidity Ratio (aggregate) > 0.65 > 1.00 > 1.20 > 1.20
Interest Coverage Ratio (aggregate) > 2.00 > 2.00 > 4.00 > 4.00
Net Bank Debt / EBITDA (aggregate) < 5.50 < 3.00 < 3.00 < 3.00
     •

IDB Facility

          The IDB Facility is divided into a seven-year US$31 million tranche (“Tranche A”) and a five-year US$49 million tranche (“Tranche B”). Tranche A originally bore interest at 180-day LIBOR plus 5% per annum although subsequently revised to a fixed rate of 7.52% per annum. Tranche B bears interest at 180-day LIBOR plus 4.75% per annum. Payment of principal plus interest of both tranches are made on a bi-annual basis. The proceeds of this loan were used to make capital investments and refinance short-term debt. The IDB

Bank

  Date  Nominal
amount		   Amount
Outstanding as of
December 31 2013		   Maturity date  

Annual Interest Rate

  Use of proceeds
      (In millions)   (In millions)          

IDB Tranche A

  Nov 2011  US$31    US$15.4    November 2018  6.11% per annum.  Capital Expenditures

IDB Tranche B

  Nov 2011  US$49    US$40.0    November 2016  180-day LIBOR plus 4.45% per annum (1)  Capital Expenditures

(1)The Company entered into a floating to fix interest rate forward swap, fixing LIBOR at 1.25%, effective May 2012.

This Facility is collateralized by property, plant and equipment with a net book value of US$40.7approximately $24.8 million, by a mortgage over (i) Carmen and La Rosa farms which are property of Adeco Agropecuaria S.A.; and (ii) El Meridiano farm which is the property of Pilagá S.A.

          Under the IDB Facility, defaults

Defaults by either Adeco Agropecuaria S.A. or Pilagá S.A. on any indebtedness with an aggregate principal amount over US$$ 3.0 million can result in acceleration of the full outstanding loan amount due to the IDB. The IDB Facility also contains certain customary financial covenants and restrictions which requiresrequire us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. The financial covenants are measured in accordance with generally accepted accounting principles in Argentina and measured both on quarterly or annually basis.

          The subsidiariesArgentina. Adeco Agropecuaria S.A. and Pilagá S.A. are required under the original terms of the IDB Facility to meet every quarter: (i) a debt to EBITDA ratio on an individual basis of less than 3.75; (ii) a debt to EBITDA ratio on an aggregate basis of less than 4.0; (iii) a total liabilities to total equity ratio on an individual basis of less than 1.40; (iv) a total liabilities to total equity ratio on an aggregate basis of less than 1.20; (v) a current asset to current liabilities ratio on an aggregate basis of more than 1.30; (vi) an interest coverage ratio on an

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aggregate basis of more than of more than 2.0; and (vii) a loan coverage ratio of more than 1.5 on an aggregate basis.
          During 2009, Adeco Agropecuaria S.A. and Pilagá S.A. were in compliance with the loan coverage ratio on an aggregate basis for all quarters, in compliance with the total liabilities to total equity ratio on for Adeco Agropecuaria S.A. for three quarters, in compliance with the current asset to current liabilities ratio on an aggregate basis for one quarter, but Adeco Agropecuaria S.A. and Pilagá S.A. were not in compliance of the remaining financial ratio covenants. During 2009, the total liabilities to total equity ratio for Adeco Agropecuaria S.A. was 1.46 for its quarter of noncompliance and the aggregate current asset to current liabilities ratio ranged from 0.68 to 0.85 during the three quarters of noncompliance. For the remaining ratios, the debt to EBITDA ratio for Adeco Agropecuaria S.A. ranged from less than zero (negative EBITDA) to 13.13, the debt to EBITDA ratio for Pilagá S.A. ranged from less than zero (negative EBITDA) to 49.3, the total liabilities to total equity ratio for Pilagá S.A. ranged from 1.81 to 2.71, the aggregate debt to EBITDA ratio ranged from 8.02 to 36.6, the aggregate total liabilities to total equity ratio ranged from 1.27 to 1.54 and the aggregate interest coverage ratio ranged from 0.23 to 1.43. The IDB granted waivers for each breach of the financial ratio covenants.
          On May 14, 2010, Adeco Agropecuaria S.A. and Pilagá S.A. entered into an amendment to the IDB Facility to modify the terms of the existing financial ratio covenants. Since the date of the loan amendment, we have been in compliance with all of the amended financial ratio covenants. In addition on March 24, 2011, the parties entered into a second amendment to the IDB Facility that modified the Debt to Equity ratio and other terms of the financial covenants, as more fully described below. Pursuant to the amended financial ratios, Adeco Agropecuaria S.A. and Pilagá S.A. are now required to meet the following financial ratios:
             
  2011  2012  2013 
Financial ratios:
            
 
Total Debt (aggregate) (in millions of $)(i)  <115,000/120,000   <115,000/120,000   <115,000/120,000 
Capital Expenditures (aggregate) (in millions of $)(ii)  <20,000   <15,000   <15,000 
Debt to EBITDA (aggregate)  <4.75   <4.25   <3.75 
Total Liabilities to Total Equity (aggregate)  <1.50   <1.30   <1.30 
Current Asset to Current Liabilities (aggregate)(iii)  >1.10/1.30   >1.10/1.30   >1.10/1.30 
Interest Coverage (aggregate)  >2.10   >2.35   >2.60 
Debt to Equity (aggregate)  <1.20   <1.20   <1.20 
Short-Term Debt to Total Debt (aggregate)(iv)  <0.50   <0.50   <0.50 
Debt to Equity (individual)  <1.5(v)  <1.20   <1.20 
ratios (measured on a combined basis):

   2013   2014   2015   2016   2017   2018 

Total Debt (>; in million) (i)

   160,000     160,000     160,000     160,000     160,000     160,000  

Current Ratio (>) (ii)

   1.15x     1.20x     1.20x     1.20x     1.20x     1.20x  

Interest Coverage Ratio (>) (ii)

   2.20x     2.25x     2.30x     2.40x     2.50x     2.60x  

Liabilities to Equity (<) (ii)

   1.40x     1.40x     1.40x     1.40x     1.40x     1.40x  

(i)From 2011 onwards, for the first, second and third financial quarters Total Debt must not exceed 115,000. For the fourth financial quarter Total Debt must not exceed 120,000. Total debt may exceed these amounts in any financial quarter provided that our Debt to EBITDA ratio does not exceed 3.5:1.0.Measured on a quarterly basis.
(ii)The $15 million Debt limit may be exceeded to the extent that the additional purchases or capital expenditures are financed with equity contributions received during the same twelve month period.
(iii)From 2011 onwards, for the first, second and third financial quarters the ratio is >1.10, and for the fourth quarter the ratio is >1.30.
(iv)Measured annually.
(v)Covenant redefined according to the March 24, 2011 amendment.on yearly basis

In addition, the IDB Facility contains a change of control provision requiring acceleration of amounts due under the facility.

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•   BDB Facility
          In July 2010, Angélica, a Brazilian subsidiary, entered into a Reais-denominated 70.0 million loan (equivalent to US$42.0 million as of December 31, 2010) with Banco do Brasil S.A. due in 2020. The BDB Facility bears a fixed interest rate of 10% per annum and is repayable on a monthly basis starting in August 2012 and ending in July 2020 (until August 2012, interest will be pay be quarterly). Under the BDB Facility, defaults by either Angélica or any of the Brazilian subsidiaries on any indebtedness can result in acceleration of the full outstanding loan amount due to BDB. The BDB Facility contains customary covenants and restrictions. Angélica’s obligations under the BDB Facility is secured by (i) a second mortgage of the Sapálio farm, which is owned by the subsidiary Ivinhema Agroenergia Ltda. and (ii) a first pledge on the equipment acquired or to be acquired by Angélica with the proceeds of such facility. Angélica is currently not, and has not been, in violation of any of the financial ratio covenants for the BDB Facility. The following table lists the financial ratios covenants Angélica subsidiary is currently required to meet under the BDB Facility:
Financial Ratios2010 to 20132014 to 2020
Debt Service Coverage Ratio (individual)>1.00>1.30
Liquidity Ratio (individual)>1.00>1.00
•   DB Facility
          On July 28, 2010, Angélica also entered into a U.S. dollar-denominated 50.0 million facility with Deutsche Bank AG London Branch, due in 2013. Borrowings under this facility are repayable on various dates between July 2011 and JulyDuring 2013 and bear an annual interest at a variable rate equal to LIBOR (three months) plus 8.5%. Angélica pledged and granted to Deutsche Bank AG London Branch a continuing first priority security interest on its debt service reserve account and2012 the Company was in compliance with all investment property, financial assets or other property credited thereto, deposited or carried therein. Under the DB Facility, defaults by Angélica on any indebtedness with an aggregate principal amount over US$5.0 million or by Adecoagro LLC on any indebtedness with an aggregate principal amount over US$10.0 million can result in acceleration of the full outstanding loan amount due to Deutsche Bank AG London Branch. The DB Facility contains customary covenants and restrictions, including restrictions on the payment of dividends until the balance on the loan are less than US$14 million and restrictions on the incurrence of debt except for a US$50 million working capital allowance provided certain other restrictions are met. In addition to the pledge, Angélica’s obligations under the DB Facility are also secured by a second mortgage of its Takuarê farm. Angélica is currently not, and has not been, in violation of any of the financial ratio covenants for the DB Facility. The following table lists the financial ratios covenants Angélica is currently required to meet under the DB Facility:
             
Financial Ratios 2010  2011  2012 
Interest Coverage Ratio (individual)  >1.65   >3.10   >3.50 
Leverage Ratio (individual)  <8.50   <3.40   <2.50 
Capital Expenditures (individual) (in millions of R$)  <154.00   <50.00   <50.00 
          We estimate that the carrying amount of short-term loans approximates fair value due to their short-term nature. We estimate that the fair values of the long-term bank loans are estimated based on the current rates offered to us for debt of similar terms and maturities. Our fair value of long-term bank loans was not significantly different from the carrying value at December 31, 2010, 2009 and 2008.
covenants.

Short-term Debt.

As of December 31,2010,31,2013, our short term debt totaled $138.8 million, which includes $0.4 million of finance leases.

$147.7 million.

We maintain lines of credit with several banks in order to finance our working capital requirements. We believe that we will continue to be able to obtain additional credit to finance our working capital needs in the future based on our past track record and current market conditions.

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Capital Expenditure Commitments
     Capital expenditures totaled $130.6 million, $138.6 million and $217.3 million for the years ended December 31, 2010, 2009 and 2008, respectively. See “Item 4. Information on the Company—A. History and Development of the Company—Principal Capital Expenditures.”
     We expect continuous capital expenditures for the foreseeable future as we expand and consolidate each of our business segments.
     The following table summarizes our accumulated capital expenditures projections for the next three years:
 C.
2011 to 2013
(In thousands of $)
Farming
240,536
Sugar, Ethanol and Energy
596,899
Total
837,435RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.
     It is likely that our actual capital expenditures may vary significantly from our current projections based on timing of investments and changes in market opportunities. While our business strategy currently contemplates the potential acquisition of farmland, we cannot predict the timing for any acquisition and the amount of consideration that will be paid. In addition, expenditures in connection with the construction of our Ivinhema mill may vary from our current plan as a result of (i) engineering, construction and regulatory risks, such as obtaining necessary permits and licenses as well as other significant challenges that can suspend the construction or hinder or delay the project’s completion date and (ii) fluctuations in the Brazilian Real exchange rate, higher than expected inflation and the development of new technology resulting in changes or adjustments in the design of the mill, and other unforeseen factors that may generate significant cost overruns. 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” and “Item 4. Information on the Company—B. Business Overview—Sugar, Ethanol and Energy—Our Mills.” We may also decide to reallocate our planned capital expenditures among our lines of business and from time to time based on market opportunities available to us.
     We expect to finance our future capital expenditures with (i) the net proceeds of our IPO and the sale of common shares to Al Gharrafa, (ii) future indebtedness in the form of bank loans and/or offerings of debt, and (iii) operating cash flow as a supplemental source of funding. We expect our operating cash flow to be positive in the foreseeable future as we reach full production capacity for our sugar operations in Brazil. There can be no assurance that completion of the Angélica mill will generate positive operating cash flow.
C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

With regards to our 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 INTA in Argentina, FLAR in Colombia, EPAGRI in Brazil and Basf in Germany. In addition, our own technical team is continuously testing and developing new rice varieties. Our firstSince 2008 we have developed and released three new own varieties of rice seed variety was released to the market, in 2008,, and we are currently in the final stages of releasing three newthe fourth We have registered our own rice seed varieties with the corresponding Argentine authorities; the National Institute of Seeds (Instituto Nacional de Semillas) (INASE) and National Registry of Property of Seed Varieties (Registro Nacional de la Propiedad de Cultivares) (RNPC). In February 2014 On february 7, was released to the market. market, the new rice variety named ITÁ CAABÓ 107

We both use these seeds at our farms and sell them to rice farmers in Argentina, Brazil, Uruguay and Paraguay. We are also developing, in collaboration with Basf,BASF, a herbicide-tolerant rice variety to assist in the control of harmful weeds.

     Also, we have registered two rice seed varieties with the corresponding Argentine authorities; the National Institute of Seeds (Instituto Nacional de Semillas) (INASE) and National Registry of Property of Seed Varieties (Registro Nacional de la Propiedad de Cultivares) (RNPC).

127

With regards to our dairy business in Argentina, we have invested in technology to improve the genetics, health and feeding techniques of our cows 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 connection with our Sugar, Ethanol and Energy business in Brazil, we have entered into an agreement with Syngenta Proteção de Cultivos Ltda. (“Syngenta”) for the supply and development of a new sugarcane plant, known as Plene. Syngenta has developed a new innovative technology based on a novel approach for growing sugarcane from smaller cane segments using proprietary treatments that aims to reduce planting costs. This technology, which was launched in 2010, has never been commercially tested and will be applied by us in 2012.

We do not own any registered patents, industrial models or designs.

D. TREND INFORMATION

D.TREND INFORMATION

See “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Trends and Factors Affecting Our Results of Operations.”

E. OFF-BALANCE SHEET ARRANGEMENTS

E.OFF-BALANCE SHEET ARRANGEMENTS

For any of the periods presented, we did not have any off-balance sheet transactions, arrangements or obligations with unconsolidated entities or otherwise that are reasonably likely to have a material effect on our financial condition, results of operations or liquidity.

F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

F.TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

The following table summarizes our significant contractual obligations and commitments as of December 31, 2010:

                     
  Less Than  One to  Three to       
  One Year  Three Years  Five Years  Thereafter  Total 
  (In millions of $) 
Bank loans(l)(2)  168.4   189.7   60.3   57.0   475.3 
                
Leases  21.3   9.4   26.2   19.8   76.7 
                
Acquisition of subsidiaries  5.8   5.8   —   —   — 
                
Total
  189.7   199.0   86.5   76.8   552.0 
                
2013:

   Less than
1 year		   Between
1 and 2  years		   Between 2
and 5 years		   Over
5 Years		   Total 
   (in million of $) 

Bank loans (1)

   208,6     118,6     227,9     53,9     608,9  

Leases

   19,7     8,7     12,4     3,5     44,3  

Total

   228,3     127,3     240,3     57,4     653,2  

(1)Includes interest.

 
(2)G.As of December 31, 2010, we entered into two new loans facilities with Banco do Brasil S.A. and Deutsche Bank AG London Branch.
SAFE HARBOR
G. SAFE HARBOR

See section entitled “Forward-Looking Statements” appearing on page iv in this annual report for forward-looking statement safe harbor provisions.

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report.

Item 6.Directors, Senior Management and Employees

A.DIRECTORS AND SENIOR MANAGEMENT

Item 6. Directors, Senior Management and Employees
A. DIRECTORS AND SENIOR MANAGEMENT
Board of Directors

The following table sets forth information for our directors as of the date of this annual report:

             
    Date of    
Name Position Appointment Age Initial Term
Abbas Farouq Zuaiter Chairman  2011   43  1 year
Alan Leland Boyce Director  2011   51  2 years
Guillaume van der Linden Director  2011   52  1 year
Paulo Albert Weyland Vieira Director  2011   45  2 years
Mariano Bosch Director  2011   41  3 years
Plínio Musetti Director  2011   57  3 years
Mark Schachter Director  2011   32  1 year
Julio Moura Neto Director  2011   59  3 years
Andrés Velasco Brañes Director  2011   50  2 years

Name

  Position  Date of
appointment		  Age   Year term expires

Abbas Farouq Zuaiter

  Chairman  2012   46    2015

Alan Leland Boyce

  Director  2013   54    2016

Guillaume van der Linden

  Director  2012   55    2015

Paulo Albert Weyland Vieira

  Director  2013   47    2016

Mariano Bosch

  Director  2014   44    2017

Plínio Musetti

  Director  2014   61    2017

Mark Schachter

  Director  2012   34    2015

Andrés Velasco Brañes

  Director  2013   53    2016

Daniel González

  Director  2014   44    2017

Dwight Anderson

  Director  2014   47    2017

Walter Marcelo Sanchez

  Director  2014   52    2016

Abbas Farouq Zuaiter, Alan Leland Boyce, Guillaume van der Linden, Plínio Musetti, Mark Schachter, Andrés Velasco Brañes, Daniel González and Dwight Anderson qualify as independent directors, and the other directors are not independent in accordance with the SEC rules.

A description of the main tasks currently performed by each director as well as a description of each director’s employment history and education follows:

Abbas (“Eddy”) Farouq Zuaiter.Mr. Zuaiter has been a member of the Company’s board of directors since 2003. Mr. Zuaiter iswas formerly the Chief Operating Officer and member of the Management committee of Soros Fund Management LLC.LLC (SFM) and since April 1, 2013, has served as a consultant to SFM. Prior to his joining Soros Fund Management LLC in October 2002, Mr. Zuaiter was an Assurance and Business Advisory Partner at PricewaterhouseCoopers LLP where he was employed from April 1994 to September 2002, and Chief Financial

Officer and Head of Fixed Income, Currency and Commodity Trading at AFN Associates, Inc in David, California from September 1991 until March 1994. Mr. Zuaiter currently serves on the boards of Gavilon Holdings LLC, an Omaha, Nebraska based private company providing physical distribution, merchandising and trading across grains, feed ingredients, fertilizers and energy products, and Ophedge Investment Services LLC.products. He is also currently a member of the board of directors of several charitable organizations or non-profit entities. Mr. Zuaiter received his BSBA in Accounting and Finance from Georgetown University in May 1989. Mr. Zuaiter is an American citizen.

Alan Leland Boyce.Mr. Boyce is a co-founder of Adecoagro and has been a member of IFH’s the Company’s board of directors since 2002. Since 2005, Mr. Boyce has been the Chief Executive Officer of Absalon, a joint venture between Soros and the financial system of Denmark that assists in organizing a standardized mortgage-backed securities market in Mexico. Mr. Boyce is co-founder and Chairman of Materra LLC, a California based farming company with a focus on growing and exporting animal forages. Since 2007, he has also been a consultant for Soros, where he works to implement the Danish mortgage system in the United States. Since 1985, Mr. Boyce has served as the Chief Financial Officer of Boyce Land Co. Inc., a farmland management company that runs 10 farmland limited partnerships in the U.S. Mr. Boyce formerly served as the director of special situations at Soros from 1999 to 2007, where he managed an asset portfolio of the Quantum Fund and had principal operational responsibilities for the bulk of the fund’s investments in South America. Mr. Boyce also served as managing director in charge of fixed-income arbitrage at Bankers Trust from 1986 to 1999, as senior managing director for investment strategy at Countrywide Financial from 2007 to 2008, and worked at the U.S. Federal Reserve Board from 1982 to 1984. He graduated with a degree in Economics from Pomona College, and has a Masters in Business Administration from Stanford University. Mr. Boyce is an American citizen.

Guillaume van der Linden.LindenMr. van der Linden has been a member of the Company’s board of directors since 2009. Since 2007, Mr. van der Linden has been Head of Investment Management at PGGM Vermogensbeheer B.V., responsible for investments in emerging markets credit. From 1993 to 2007, Mr. van der Linden worked for ING Bank in various roles, including in risk management and derivatives trading. From 1988 to 1993, Mr. van der Linden was employed as a management consultant for KPMG and from 1985 to 1988 as a corporate finance analyst for Bank Mees & Hope. Mr. van der Linden graduated with Masters degrees in Economics from Erasmus University Rotterdam and Business Administration from the University of Rochester. Mr. van der Linden is a Dutch citizen.

Paulo Albert Weyland Vieira.Mr. Vieira has been a member of the Company’s board of directors since 2005. Since 1995, Mr. Vieira has been the founding partner of Vieira, Rezende, Barbosa e Guerreiro Advogados, a law firm in Brazil. Mr. Vieira’s family has been in the sugar and

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ethanol business for over 50 years, and Mr. Vieira served as a Director of UMA, a sugar and ethanol mill in Brazil, from 1990 to 2006, when UMA was acquired by IFH.us. From 1995 to 2006, Mr. Vieira served as a professor of banking and commercial law at the Faculdade de Direito da Pontificia Universidade Católica do Rio de Janeiro. He graduated with a degree in law from the Faculdade de Direito da Pontificia Universidade Católica do Rio de Janeiro and has a Masters in Law from Cambridge University Law School. Mr. Vieira is a Brazilian citizen.

Mariano Bosch.Mr. Bosch is a co-founder of Adecoagro and has been the Chief Executive Officer for all operations in Argentina, Brazil and Uruguay since inception and a member of the Company’s board of directors since 2011.inception. From 1995 to 2002, Mr. Bosch served as the founder and Chief Executive Officer of BLS Agribusiness, an agricultural consulting, technical management and administration company. Mr. Bosch is also currently a member of the advisory board of Teays River Investments LLC, a farmland investment management firm in North America. Mr. Bosch has over 1820 years of experience in agribusiness development and agricultural production. He actively participates in organizations focused on promoting the use of best practices in the sector, such as the Argentine Association of Regional Consortiums for Agricultural Experimentation (AACREA) and the Conservational Production Foundation (Producir Conservando). He graduated with a degree in Agricultural Engineering from the University of Buenos Aires. Mr. Bosch is an Argentine citizen.

Plínio Musetti.Mr. Musetti has been a member of the Company’s board of directors since 2011 and an observer since 2010. Mr. Musetti is a partnerManaging Partner of Janos Holding responsible for the privatelong term equity investments atfor Family offices in Brazil, following his role as Partner of Pragma Patrimonio, a Brazilian family office, since June 2010. From 2008 to 2009, Mr. Musetti served as the Chief Executive Officer of Satipel Industrial S.A., leading the company’s initial public offering process and aiding its expansion plan and merger with Duratex S.A. From 1992 to 2002, Mr.

Musetti served as the Chief Executive Officer of Elevadores Atlas, during which time he led the company’s operational restructuring, initial public offering process and the sale to the Schindler Group. From 2002 to 2008, Mr. Musetti served as a partner at JP Morgan Partners and Chief Executive Officer of Vitopel S.A. (JP Morgan Partners’ portfolio company), where he led its private equity investments in Latin America. Mr. Musetti has also served as a Director of Portobello S.A. since 2006 and Elevadores Atlas Schindler S.A. since 1999 and served as a Director of Diagnósticos de America S.A. from 2002 to 2009. In addition, Mr. Musetti is currently serving as Chairmana Board member of the board of directors of RaiaElevadores Atlas S.A., a leading drugstore chain in Brazil.Portobello S.A. and RaiaDrogasil S.A. Mr. Musetti graduated with degrees in Civil Engineering and Business Administration from Mackenzie University and attended the Program for Management Development at Harvard Business School in 1989. Mr. Musetti is a Brazilian citizen.

Mark Schachter.Mr. Schachter has been a member of the Company’s board of directors since 2009. Mr. Schachter has been a Managing Partner of Elm Park Capital Management since 2010. From 2004 to 2010, he was a Portfolio Manager with HBK Capital Management where he was responsible for the firm’s North American private credit activities. His responsibilities included corporate credit investments with a primary focus on middle-market lending and other special situation investment opportunities. From 2003 to 2004, Mr. Schachter worked for American Capital, a middle-market private equity and mezzanine firm and worked in the investment banking division of Credit Suisse Group from 2001 to 2003. Mr. Schachter received a degree in Business Administration from the Ivey Business School at the University of Western Ontario and completed the Program for Leadership Development at Harvard Business School. Mr. Schachter is a Canadian citizen and has permanent American residence.

Julio Moura Neto.Mr. Moura has been a member of the Company’s board of directors since 2011. Mr. Moura has been a board member and chairman of the strategy committee of Natura Cosméticos, a leading public Brazilian cosmetics company with a market cap of approximately $12 billion, since 2007, and also a member of the Executive Committee of the World Business Council for Sustainable Development (WBCSD) in Geneva from 2006 to 2010. From 1997 to 2007, he was Chairman of the board of directors and CEO of Nueva Group, a Swiss holding company with leading positions in planted, certified forests, agricultural products and building materials sectors. From 2002 to 2007, Mr. Moura served as chairman of the board of Terranova, a public Chilean forestry company and as chairman of the board of Masisa S.A., a public Chilean forestry and wooden boards company. He also served as chairman and CEO of Amanco, the leading Latin American plastic pipes producer, from 1997 to 2007; as a member of the executive board and head of the European Division of Schindler, the Swiss Elevator

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Company from 1992 to 1997; as a member of the executive board and head of the Latin American Division of Sika, a Swiss specialty chemicals company, from 1984 to 1992; and as a member of the board of directors of Swiss companies Messerli AG and of Aliva AG from 1988 to 1992. From 1980 to 1983, Mr. Moura worked for Booz, Allen & Hamilton, participating and leading several assignments in Europe in strategy and supply chain management. Mr. Moura graduated with a degree in Mechanical and Nuclear Engineering from the Swiss Federal Institute of Technology (ETH) in Zurich, Switzerland and holds a Masters degree in Management from MIT Sloan School of Management. Mr. Moura is dual Brazilian and Swiss citizen.
Andres Velasco Brañes.Mr. Velasco has been a member of the Company’s board of directors since 2011. Mr. Velasco was the Minister of Finance of Chile between March 2006 and March 2010, and was also the president of the Latin American and Caribbean Economic Association from 2005 to 2007. Prior to entering the government sector, Mr. Velasco was Sumitomo-FASID Professor of Development and International Finance at Harvard University’s John F. Kennedy School of Government, an appointment he had held since 2000. From 1993 to 2000, he was Assistant and then Associate Professor of Economics and the director of the Center for Latin American and Caribbean Studies at New York University. During 1988 to 1989, he was Assistant Professor at Columbia University. Currently Mr. Velasco serves as Adjunct Professor of Public Policy at Harvard University, and a Tinker Visiting Professor at Columbia University. He also performs consulting services on various economic matters rendering economic advice to an array of clients, including certain of our shareholders. Mr. Velasco holds a Ph.D. in economics from Columbia University and was a postdoctoral fellow in political economy at Harvard University and the Massachusetts Institute of Technology. He received an B.A. in economics and philosophy and an M.A. in international relations from Yale University. Mr. Velasco is a Chilean citizen.

Daniel C. Gonzalez.Mr. Gonzalez has been a member of the Company’s board of directions since April -, 2014. Mr. Gonzalez holds a degree in Business Administration from the Argentine Catholic University. He served for 14 years in the investment bank Merrill Lynch & Co in Buenos Aires and New York, holding the positions of Head of Mergers and Acquisitions for Latin America and President for the Southern Cone (Argentina, Chile, Peru and Uruguay), among others. While at Merrill Lynch, Mr. Gonzalez played a leading role in several of the most important investment banking transactions in the region and was an active member of the firm’s global fairness opinion committee. He remained as a consultant to Bank of America Merrill Lynch after his departure from the bank. Previously, he was Head of Financial Planning and Investor Relations in Transportadora de Gas del Sur SA. Mr. Gonzalez is currently the Chief Financial Officer of YPF Sociedad Anónima, and also a member of the Board of Directors of Hidroneuquén S.A. and Hidroeléctrica Piedra del Aguila S.A. Mr. González is an Argentine citizen.

Dwight Anderson.Mr. Anderson has been a member of the Company’s board of directions since April -, 2014. Mr. Anderson is the Managing Partner of Ospraie Management LLC, which actively invests commodity markets and basic industries worldwide based on fundamental, bottom-up research. Mr. Anderson currently serves as Portfolio Manager of two absolute return hedge funds at Ospraie and Co-Portfolio Manager of the Firm’s Private Equity fund. Mr. Anderson has been focused on investing in basic industry companies and commodity markets for nearly 20 years. He launched Ospraie in 1999 in partnership with Tudor Investment Corporation, where he served as Head of the Basic Industries Group, before establishing Ospraie Management, LLC as an independent firm in 2004. Prior to joining Tudor, Mr. Anderson was a Managing Director in charge of Basic Industries and Commodities Group at Tiger Management. Mr. Anderson holds an MBA from the University of North Carolina and an AB in History from Princeton University. The University of North Carolina awarded Mr. Anderson with its Kenan-Flagler Young Alumni Award 2000 and its MBA Alumni Merit Award in 2007. In 2008, Mr. Anderson was inducted by NYU into Sir Harold Acton Society. Mr. Anderson is certified in production and inventory management by the APICS. Mr. Anderson serves on the Board of Trustees of NYU Langone Medical Center and UNC Kenan Flagler Business School. Mr. Anderson is an American citizen.

Walter Marcelo Sanchez.Mr. Sanchez has been a member of the Company’s board of directions since April -, 2014. Mr. Sanchez is a co-founder of Adecoagro and our Chief Commercial Officer for all operations in Argentina, Brazil and Uruguay and a member of Adecoagro’s Senior Management since 2002. He coordinates the Commercial Committee and is responsible for the trading of all commodities produced by Adecoagro. Mr. Sanchez has over 25 years of experience in agricultural business trading and market development. Before joining us, he was the head of the business development department at Agroexpress.com S.A., an agriculture e-business marketplace. He has extensive international commercial expertise including marketing beef products for companies such as SAMPCO Inc. (Chicago, Illinois) and MAREDO restaurant chain in Germany. Mr. Sanchez also worked as commercial director at Distribuidora Chinquihue S.A. (Chilean fish and shellfish trading company), Frigolomas S.A. (beef processing company) and Fleimar S.A. (beef trading) . Mr. Sanchez also had commercial responsibilities at Nutryte S.A. and Estancias y Cabana Las Lilas S.A. (formerly COMEGA S.A.), an Argentine farmland agribusiness company. Mr. Sanchez graduated from Universidad Nacional de Mar del Plata with a degree in Agricultural Engineering. Mr. Sánchez is an Argentine citizen.

Executive Officers

The following table shows certain information with respect to our senior management as of the date of this annual report:

           
    Year  
Name Position Designated Age
Mariano Bosch Chief Executive Officer  2002   41 
Carlos A. Boero Hughes Chief Financial Officer  2008   45 
Emilio F. Gnecco Chief Legal Officer  2005   35 
Walter Marcelo Sanchez Chief Commercial Officer  2002   48 
Mario José Ramón Imbrosciano Director of Business Development  2003   42 
Leonardo Berridi Country Manager for Brazil  2004   51 
Marcelo Vieira Director of Sugar and Ethanol Operations  2005   59 
Ezequiel Garbers Country Manager for Argentina and Uruguay  2003   45 

Name

  

Position

  Year
Designated		  Age 

Mariano Bosch

  

Chief Executive Officer

  2002   44  

Carlos A. Boero Hughes

  

Chief Financial Officer

  2008   48  

Emilio F. Gnecco

  

Chief Legal Officer

  2005   38  

Walter Marcelo Sanchez

  

Chief Commercial Officer

  2002   52  

Mario José Ramón Imbrosciano

  

Director of Business Development

  2003   44  

Leonardo Berridi

  

Country Manager for Brazil

  2004   53  

Marcelo Vieira

  

Director of Sugar and Ethanol Operations

  2005   61  

Ezequiel Garbers

  

Country Manager for Argentina and Uruguay

  2003   48  

Mariano Bosch.See “—Board of Directors.”

Carlos A. Boero Hughes.Mr. Boero Hughes is our Chief Financial Officer, covering the company’s operations in Argentina, Brazil and Uruguay, and a member of Adecoagro’s Senior Management since 2008. He began working at Adecoagro in August 2008 overseeing our finance and administrative departments. Mr. Boero Hughes has over 20 years of experience in agricultural business and financial markets. Prior to joining us, he was Chief Financial Officer for South America and Co-Chief Executive Officer for Noble Group LTD operations in Argentina, Uruguay and Paraguay from October 2006 to July 2008. From 2003 to 2006, he worked at Noble Group LTD as Financial Director for Argentina and Structure Finance Manager for South America. He worked at Citibank N.A. from 1997 to 2003 as Relationship and Product Manager, focused in the agribusinessagrobusiness industry, and at Banco Privado de Inversiones S.A. as Relationship Manager. He also worked for six years at Carlos Romano Boero S.A.I.C., a flour and dairy cow feed mill family company, as Commercial Manager, Local Grain Elevator and

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Nursery Manager and finally as General Manager. Mr. Boero Hughes holds a degree in Business Administration from the University of Buenos Aires and a Masters in Business Administration from the Argentine Catholic University. He also graduated from INSEAD’s Executive Program in 2007.

Emilio Federico Gnecco.Mr. Gnecco is our Chief Legal Officer for all operations in Argentina, Brazil and Uruguay and a member of Adecoagro’s Senior Management since 2005. He is responsible for all legal and corporate matters. Before joining us, he was a corporate law associate at the law firm of Marval, O’Farrell & Mairal for more than 8 years, where he was in charge of Adecoagro’s corporate matters and mergers and acquisitions since our inception in 2002. Prior to that, he worked at the National Civil Court of Appeals of the City of Buenos Aires for four years. Mr. Gnecco has a law degree from the University of Buenos Aires, where he graduated with honors.

Walter Marcelo Sanchez.Mr. Sanchez is a co-founderSee “—Board of Adecoagro and our Chief Commercial Officer for all operations in Argentina, Brazil and Uruguay and a member of Adecoagro’s Senior Management since 2002. He coordinates the Commercial Committee and is responsible for the trading of all commodities produced by Adecoagro. Mr. Sanchez has over 22 years of experience in agricultural business trading and market development. Before joining us, he was the head of the business development department at Agroexpress.com S.A., an agriculture e-business marketplace. He has extensive international commercial expertise. He worked with South American Meat Products Company (SAMPCO) in Chicago, Illinois and traveled through Western Europe marketing beef products to restaurant chains such as MAREDO. Mr. Sanchez also worked as the commercial director of various agricultural companies, such as Distribuidora Chinquihue S.A. (a Chilean fish and shellfish trading company), Frigolomas S.A. (a beef processing company) and Fleimar S.A. (a marketer of meat products). Mr. Sanchez also had commercial responsibilities at Nutryte S.A. and Estancias y Cabana Las Lilas S.A. (formerly COMEGA S.A.), an Argentine farmland agribusiness company. Mr. Sanchez graduated from Universidad Nacional de Mar del Plata with a degree in Agricultural Engineering.

Directors.”

Mario José Ramón Imbrosciano.Mr. Imbrosciano is the head of our Business Development Department for all operations in Argentina, Brazil and Uruguay where he oversees all new business initiatives, and a member of

Adecoagro’s Senior Management since 2003. He has over 17 years of experience in farm management and agriculture production. Prior to joining Adecoagro, Mr. Imbrosciano was the Chief Operating Officer of Beraza Hnos. S.C., a farming company that owns farms in the humid pampas region of Argentina. He was in charge of production, commercialization and logistics for a 60,000 hectare operation. Mr. Imbrosciano has also worked as a private consultant for various clients. Mr. Imbrosciano received a degree in Agricultural Production Engineering from the Argentine Catholic University and holds a Masters in Business Administration from the Instituto de Altos Estudios of the Austral University.

Leonardo Raúl Berridi.Mr. Berridi is our Country Manager for Brazil and, prior to the Reorganization, had been Adecoagro’s Country Manager for Brazil since the beginning of its operations in Brazil and a member of Adecoagro’s Senior Management since 2004. He coordinates all of our operations and human resources development activities in Brazil. Mr. Berridi has over 27 years of international experience in agricultural business. Prior to joining us, Mr. Berridi was Vice President of Pago Viejo S.A., a company dedicated to agriculture production and dairy farming in the western part of the province of Buenos Aires, Argentina. He also worked for Trans-Continental Tobacco Corporation as Chief Operating Officer of Epasa (Exportadora de Productos Agrarios S.A.), a company dedicated to producing, processing and exporting tobacco in the north east and north west of Argentina, and Production Manager of World Wide Tobacco España S.A. in the Caceres and Zamora provinces in Spain. Mr. Berridi holds a degree in Forestry Engineering from the Universidad Nacional de La Plata.

Marcelo Vieira.Mr. Vieira is the head of Adecoagro’s sugar, ethanol and energy operations and a member of Adecoagro’s Senior Management since 2005. He was the Chief Executive Officer and owner of Usina Monte Alegre Ltda. at the time of our purchase of the company. He is currently a member of the audit committeeBoard of Directors ofUniäo da Industria de Cana-de-Acucar(ÚNICA). He has managed agricultural and agribusiness companies for over 34 years, including at Usina Monte Alegre Ltda., AlienasAlfenas Agrícola Ltda., AlienasAlfenas Café Ltda. and Fazenda Mimoso S.A., and has been President or Director of various industry associations, such as the Brazil Specialty Coffee Association, the

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Specialty Coffee Association of Europe,Sociedade Rural Brasileiraand theSindicato do Acucar de Minas Gerais.Mr. Vieira holds a degree in Mechanical Engineering from PUC University in Rio de Janeiro and graduate degree in Food Industry Management and Marketing from the University of London’s Imperial College.

Ezequiel Garbers.Mr. Garbers is the Country Manager for Argentina and Uruguay and a member of Adecoagro’s Senior Management and the Country Manager since 2003. He coordinates all of our production and human resources development activities in Argentina and Uruguay. Mr. Garbers has over 20 years of experience in agriculture production. Prior to joining Adecoagro, he was the Chief Operating Officer of an agricultural consulting and investment company he co-founded, developing projects both within and outside of Argentina, related to crop production and the cattle and dairy business. Mr. Garbers holds a degree in Agronomic Engineering from the University of Buenos Aires and a Masters in Business Administration from the Instituto de Altos Estudios of the Austral University.

Our managers supervise our day-to-day transactions so as to ensure that all of our general strategic objectives are carried out, and they report to our board of directors.

B. COMPENSATION

B.COMPENSATION

Compensation of Directors and Executive Officers

The compensation of the Company’s directors is approved annually at the ordinary general shareholders’ meeting. The aggregate compensation earned by our directors amounted to a grant of up to a total of 70,851 restricted stock units for the year 2014 and $630 thousand in cash for year 2014. These figures do not include Mr. Mariano Bosch’s and Mr. Walter Marcelo Sanchez´s compensation since they declined their fees in cash and in restricted units.

The aggregate compensation package of our executive officers during 2010for year 2013 amounted to approximately $5 million. In addition,$1,659,000 in 2011, 308,810cash and 244,875 restricted shares werestock units granted to our officers and directors.senior management. These grants were made under the 2010 Adecoagro Amended and Restated Restricted Share and Restricted Stock Unit Plan. See “—E. Share Ownership—Share Options and Restricted Share and Restricted Stock Unit Plan.”

Annual cash bonuses are designed to incentivize our named executive officers at a variable level of compensation based on such individual’s performance. Annual executive cash bonuses and option awards are impacted by seniority and individual executive performance based on the achievement of individual objectives and by evaluating each executive’s level of proficiency in the following competencies: general characteristics, teamwork, professional competencies, problem solving and thinking skills and managerial skills. In the past, actual bonus amounts have been determined shortly after fiscal year end. Our Chief Executive Officer presents the final calculation of the annual cash bonuses for our named executives to the Compensation Committee of the board of directors. The Compensation Committee then reviews actual Company and individual performance, and determines the amount payable consistent with the attainment of such individual’s performance based on the above criteria.

We do not pay or set aside any amounts for pension, retirement or other similar benefits for our officers and directors.

C. BOARD PRACTICES

C.BOARD PRACTICES

Pursuant to our articles of incorporation, the board of directors must be composed of between three and eleven members. The number of directors is determined and the directors are appointed at the general meeting of shareholders (except in case of a vacancy in the office of a director because of death, retirement, resignation, dismissal, removal or otherwise, the remaining directors may fill such vacancy and appoint a successor in accordance with applicable Luxembourg law).

Currently, the board of directors has nineeleven members. The directors are appointed by the general meeting of shareholders for a period of up to three years; provided, however, the directors shall be elected on a staggered basis, with one-third of the directors being elected each year and provided further that such three year term may be exceeded by a period up to the annual general meeting held following the third anniversary of the appointment. Directors may be removed with or without cause (ad nutum) by the general meeting of shareholders by a simple majority of votes cast at a general meeting of shareholders. The directors are eligible for re-election indefinitely.

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There are no agreements with majority shareholders, customers, suppliers or others governing the selection of any of the directors or members of senior management. None of our non-executive directors has a service contract with us that provides for benefits upon termination of employment.

The board of directors is empowered to manage Adecoagro and carry out our operations. The board of directors is vested with the broadest powers to manage the business of the Company and to authorize and/or perform all acts of disposal, management and administration falling within the purposes of Adecoagro and all powers not expressly reserved by Luxembourg law or by our articles of incorporation to the general meeting of shareholders is within the competence of the board of directors.

Accordingly, within the limitations established by Luxembourg law and in particular the Luxembourg law of August 10, 1915 on commercial companies (as amended) and our articles of incorporation, the board of directors can take any action (by resolution or otherwise) it deems necessary, appropriate, convenient or fit to implement the purpose of the Company, including without limitation:

 a.execute any acts or contracts on our behalf aimed at fulfilling our corporate purpose, including those for which a special power of attorney is required;

 b.carry out any transactions;

 c.agree, establish, authorize and regulate our operations, services and expenses;

 d.delegate special tasks to directors, regulate the formation and operation of committees and fix the remuneration and compensation of expenses of advisors and/or staff with special duties, with a charge to overhead;

 e.appoint, suspend or remove agents or employees, establish their duties, remuneration, and bonuses and grant them the powers that it deems advisable;

 f.grant signature authorization to directors and officers, grant general or special powers of attorney, including those to prosecute;

 g.call regular and special shareholders’ meetings and establish agendas, submit for the shareholders’ approval our inventory, annual report, balance sheet, statement of income and exhibits, propose depreciation, amortization and reserves that it deems advisable, establish the amount of gains and losses, propose the distribution of earnings and submit all this to the shareholders’ meeting for consideration and resolution;

 h.fix the date for the payment of dividends established by the shareholders’ meeting and make their payment; and

 i.make decisions relating to the issuance, subscription or payment of shares pursuant to our articles of incorporation and decision of the regular or special shareholders’ meetings.

As of the date of this annual report, the board of directors has the following four committees: Audit Committee, Compensation Committee, Risk and Commercial Committee and Strategy Committee. On May 13, 2011, the former Risk and Strategy Committee split into the current Risk and Commercial Committee and the Strategy Committee.

Audit Committee

The Company’s articles of incorporation provide that the board of directors may set up an audit committee. The board of directors has set up an Audit Committee composed by independent directors and has appointed, pursuant to board resolutions dated January 10, 2011,April 16, 2014, Mr. Plínio Musetti (Chairman), Mr. Mark Schachter, Mr. Daniel González and Mr. Julio Moura Neto,Andrés Velasco Brañes, as members of its audit committee.

The Company’s articles of incorporation provide that the audit committee shall (a) assist the board of directors in fulfilling its oversight responsibilities relating to the integrity of the Company’s financial statements, including periodically reporting to the board of directors on its activity and the adequacy of the Company’s systems of internal controls over financial reporting; (b) make recommendations for the

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appointment, compensation, retention and oversight of, and consider the independence of, the Company’s external auditors; (c) review material transactions (as defined in the articles) between the Company or its subsidiaries with related parties (other than transactions that were reviewed and approved by the independent members of the board of directors (as defined in the articles of the Company) or other governing body of any subsidiary of the Company or through any other procedures as the board of directors may deem substantially equivalent to the foregoing) to determine whether their terms are consistent with market conditions or are otherwise fair to the Company and its subsidiaries; and (d) perform such other duties imposed on it by the laws and regulations of the regulated market(s) on which the shares of the Company are listed, applicable to the Company, as well as any other duties entrusted to it by the board of directors.

In addition, the charter of the audit committee sets forth, among other things, the audit committee’s purpose and responsibilities.

Compensation Committee

The Company has a Compensation Committee that reviews and approves the compensation and benefits of the executive officers and other key employees, and makes recommendations to the board of directors regarding principles for compensation, performance evaluation, and retention strategies. It is responsible for administering our share option plans and our restricted share and restricted stock unit plan for executive officers and other key employees. See “—E. Share Ownership—Share Options and Restricted Share and Restricted Stock Unit Plan.” The committee has the discretion to interpret and amend the Plan, and delegate to the Chief Executive Officer the right to award equity-based compensation to executive officers and other key employees. The committee meets at least once a year and as needed on the initiative of the Chief Executive Officer or at the request of one of its members. The members of the Compensation Committee, appointed pursuant to board resolutions dated January 10, 2011,April 16, 2014, are Mr. Guillaume van der Linden (Chairman), Mr. Abbas Farouq Zuaiter Mr. Plínio Musetti and Mr. Julio Moura Neto.

Daniel González.

Risk and Commercial Committee

The Company has a Risk and Commercial Committee that has the duty to (i) make such inquiries as are necessary or advisable to understand and evaluate material business risks and risk management processes as they evolve from time to time; (ii) review with the board of directors and management the guidelines and policies to govern the process for assessing and managing risks; (iii) discuss and review with the board of directors management’s efforts to evaluate and manage the Company’s business from a risk perspective; (iv) request input from the board of directors, management and operating staff, as well as from outside resources, as it may deem necessary; (v) discuss with the board of directors and management which elements of enterprise risk are most significant, the prioritization of business risks, and make recommendations as to resource allocation for risk management and risk mitigation strategies and activities; and (vi) oversee the development of plans for risk mitigation in any area which it deems to be a material risk to the Company; and monitor management’s implementation of such plans, and the effectiveness generally of its risk mitigation strategies and activities

activities.

The committee meets at least four times a year and as often as deemed necessary or appropriate in its judgment. The members of the Risk and Commercial Committee appointed by the board meeting held on May 13, 2011 April 16, 2014 are Mr. Alan Leland Boyce (Chairman), Mr. Abbas Farouq Zuaiter, Mr. Dwight Anderson and Mr. Andrés Velasco Brañes.

Strategy Committee

The Company’s Strategy Committee has the duty to: (i) discuss and review with the board management’s identification and setting of strategic goals; including potential acquisitions, joint ventures and strategic alliances and dispositions; (ii) make recommendations to the board of directors as to the means of pursuing strategic goals; and (iii) review with the board management’s progress in implementing its strategic decisions and suggest appropriate modifications to reflect changes in market and business conditions.

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The committee meets at least four times a year and as often as deemed necessary or appropriate in its judgment. The members of Strategy Committee appointed by the board meetings held on May 13, 2011 and November 11, 2011 are Mr. Abbas Farouq Zuaiter (Chairman), Guillaume van der Linden Mr. Abbas Farouq Zuaiter and Mr. Paulo Albert Weyland Vieira.
D. EMPLOYEES
Plínio Musetti.

D.EMPLOYEES

Employees

On December 31, 2010,2013, we had 5,2637,494 employees, of whom 95% were unionized. Approximately 9%4% of our workforce is comprised of temporary workers. We comply with all labor laws. Historically, we have had a positive relationship with the trade unions.

The following table sets forth our number of employees by each of our business segments:

                 
  As of December 31, 
  2010  2009  2008  2007 
Farming and Land Transformation  1,425   1,231   1,235   1,065 
Sugar and Ethanol  3,276   3,567   2,848   2,015 
Administrative  562   492   461   427 
             
Total  5,263   5,290   4,544   3,507 

   As of December 31, 
   2013   2012   2011   2010 

Farming and Land Transformation

   1,224     1,472     1,534     1,425  

Sugar , Ethanol and Energy

   5,504     4,832     3,383     3,276  

Administrative

   766     747     643     562  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   7,494     7,051     5,560     5,263  

We do not have any severance agreements with our senior executive directors and managers.

Benefits

The benefits granted to our employees follow the market standard, including meals, health plans, Spanish and English language lessons, financial aid for junior employees who are still in college, transportation and parking. For senior management, we also provide vehicles.

E. SHARE OWNERSHIP

E.SHARE OWNERSHIP

Share Ownership

The total number of shares of the Company beneficially owned by our directors and executive officers, as of the date of this annual report, was 5,079,230,6,153,091 which represents 4.11%4.90% of the total shares of the company. See table in “Item 7. Major Shareholders and Related Party Transactions” for information regarding share ownership by our directors and executive officers.

Share Options and Restricted Share and Restricted Stock Unit Plan

Adecoagro/IFH 2004 Stock Incentive Option Plan and Adecoagro/IFH 2007/2008 Equity Incentive Plan

The Company maintains the Adecoagro/IFH 2004 Incentive Option Plan (formerly, the International Farmland Holdings, LLC 2004 Incentive Option Plan, and referred to herein as the “2004 Plan”) and the Adecoagro/IFH 2007/2008 Equity Incentive Plan (formerly, the International Farmland Holdings, LLC 2007/2008 Equity Incentive Plan, and referred to herein as the “2007/2008 Plan”). The 2004 Plan and the 2007/2008 Plan are collectively referred to herein as the “Option Plans.” Initially, the Option Plans provided for the grant of options to purchase ordinary units of IFH. In connection with the Reorganization, the Option Plans were amended and restated to provide for the grant of options to purchase ordinary shares of the Company, and all then-outstanding options to purchase IFH ordinary units were converted into options to purchase the Company’s ordinary shares.

136

The number of ordinary shares reserved and available for issuance under the 2004 Plan and the 2007/2008 Plan are 2,401,2281,600,747 and 2,355,743,1,396,224, respectively. Shares subject to awards that become forfeited, cancelled, expired, withheld upon exercise, reacquired by the Company prior to vesting or otherwise terminated will again be available for future awards under the Option Plans.

Administration and Eligibility

The Option Plans are administered by the Compensation Committee of the Company’s board of directors (the “Committee”). The Committee has general authority to, among other things, select individuals for participation, determine the time and amount of grants, and interpret the plans and awards. The Committee determines the vesting requirements of the awards. The Option Plans require that the exercise price of any future grants shall be no less than the greater of the fair market value of our ordinary shares on the date of grant and the par value per ordinary share.

Individuals eligible to receive options under the 2004 Plan include officers and employees, and under the 2007/2008 Plan include officers, employees, directors, prospective employees and consultants.

Amendment and Termination

The board of directors may amend or terminate the Option Plans in its discretion, and the Committee may amend any outstanding options in its discretion, except participant consent will be needed if a participant’s rights are adversely affected. If not previously terminated by the board of directors, the Option Plans will terminate on the 10th anniversary of its adoption.

Granted Options

Under the 2004 Plan, as of the date of this annual report,December 31, 2013, options to purchase 2,175,8702,061,027 ordinary shares were granted and the weighted average exercise price of all granted options was $6.67. Under the 2007/2008 Plan, as of the same date, options to purchase 2,066,8601,751,153 ordinary shares were granted, and the weighted average exercise price of all granted options was $13.06.

$13.07.

Outstanding options under the 2004 Plan generally vest in three equal installments on the first three anniversaries of the date of grant, and options under the 2007/2008 Plan generally vest in four equal installments on the first four anniversaries of the date of grant. Vesting under each of the Option Plans is generally subject to the participant’s continued service as of each applicable vesting date, and all options terminate 10 years from the date of grant.

Adecoagro S.A. Amended and Restated Restricted Share and Restricted Stock Unit Plan

     The

On November 11, 2011, the Board of Directors of the Company maintainsapproved the amendment and restatement of the Adecoagro S.A. Restricted Share Plan, now known as the Amended and Restated Restricted Share and Restricted Stock Unit Plan (the “Plan”), which“Plan).

The Plan provides for awards of restricted shares or restricted stock units to employees, officers, members of the board of directors and other service providers of the Company. The purpose of the Plan is to further align the interests of participants with those of the shareholders by providing participants with long-term incentive compensation opportunities tied to the performance of the Company’s ordinary shares.

The maximum number of ordinary shares with respect to which awards may be made under the Plan is 1,801,038 ordinary1.5% of the issued and outstanding shares. The Committee anticipates that such number of shares will be sufficient for grants of awardsTo the extent any award under the Plan for a period of five years. Shares subject to awards that becomeis canceled, expired, forfeited, expired,surrendered settled in cash, or otherwise terminated without delivery of such shares the shares retained by or returned to the Company will again be available for future awards under the Plan. The shares available for issuance as well as outstanding awards under the Plan are subject to adjustment in the event of a reorganization, stock split, merger or similar change. Under the Plan, as of the date of this annual report, 427,293only 1,762,576 restricted shares were granted to employees, directors, senior management and executive officers.

137

employees.

Administration and Eligibility

The Plan is administered by the Committee. The Committee has general authority to grant awards, determine the recipients of awards and prescribe the terms of awards, as well as authority to interpret and apply the terms of the Plan and individual awards. The Committee determines the amount and the vesting requirements of the awards.

Terms of Awards

A grant of restricted shares represents ordinary shares that are issued subject to vesting requirements and transfer restrictions, as determined by the Committee in its discretion. The vesting requirements may be based on the continued employment or service of the participant for a specified time period or on the attainment of specified business performance goals established by the Committee. Subject to the transfer restrictions and vesting requirements of the award, the participant will have the rights of a stockholder of the Company, including voting rights and the right to receive dividends.

The number of restricted shares or restricted stock units awarded to individuals each year will be based on Company performance. Once awarded, the restricted shares or restricted stock units are subject to a service-based vesting schedule and vest in three equal annual installments on the first three anniversaries of the date of grant, subject only to the participant’s continued service to the Company as of each applicable vesting date.

Restricted stock units are payable following the vesting of an award in shares.

Amendment and Termination

The board of directors may amend, modify, suspend or terminate the Plan in its discretion, except participant consent will be needed if participants’ rights are adversely affected. If not previously terminated by the board of directors, the Plan will terminate on the 10th anniversary of its adoption.

Share Options and Restricted Shares

The following table setstables set forth the total number of ordinary and restricted shares to be issued upon exercise of the options to directors and executives officers, the exercise price of the options awarded, the date of grant and the date of expiration, as of the date of this annual report.

                         
          Number of          
  Plan under      ordinary          
  which  Number of  shares to be  Exercise       
  awards  restricted  issued upon  price per       
  were  shares  exercise of  ordinary  Date of  Expiration 
  granted  granted  options  share ($)  Grant  date 
Directors and Executive Officers
                        
Abbas Farouq Zuaiter  2010   *   —   —   5/13/2011   5/13/2021 
Alan Leland Boyce  2010   4,937   —   —   5/13/2011   5/13/2021 
Guillaume van der Linden  2010   *   —   —   5/13/2011   5/13/2021 
Paulo Albert Weyland Vieira  2010   *   —   —   5/13/2011   5/13/2021 
Plínio Musetti  2010   *   —   —   5/13/2011   5/13/2021 
Mark Schachter  2010   *   —   —   5/13/2011   5/13/2021 
Julio Moura Neto  2010   *   —   —   5/13/2011   5/13/2021 
Andrés Velasco Brañes  2010   *   —   —   5/13/2011   5/13/2021 
Mariano Bosch  2004   —   173,236 $5.82674   1/05/2004   1/05/2014 
   2004   —   135,314 $5.82674   1/08/2005   1/08/2015 
   2004   —   28,038 $5.82674   1/06/2006   1/06/2016 
   2004   —   29,504 $7.10862   1/06/2006   1/06/2016 
   2004   —   112,740 $8.62358   1/07/2006   1/07/2016 
   2007   —   112,833 $12.81883   11/13/2007   11/13/2017 
   2007   —   86,306 $13.40150   1/30/2009   1/30/2019 
   2010   47,512  —   —   4/01/2011   4/01/2021 
   2010   4,937           5/13/2011   5/13/2021 

138

Stock Option Plans

 Plan under
which awards
were granted		 Number of
ordinary shares to
be issued upon
exercise of options		  Range of Exercise prices
per ordinary share ($)		 Range of Dates of Grant (1)

Directors and Executive Officers

    

Mariano Bosch

 2004    *  $  5.83 to $  8.62 05/01/2004 to 07/01/2006
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Carlos A. Boero Hughes

 2004    *  $  5.83 to $  7.11 08/25/2008
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Emilio F. Gnecco

 2004    *  $  5.83 to $  8.62 01/06/2007
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Walter Marcelo Sanchez

 2004    *  $  5.83 to $  8.62 05/01/2004 to 07/01/2006
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Mario José Ramón Imbrosciano

 2004    *  $  5.83 to $  8.62 05/01/2004 to 07/01/2006
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Leonardo Berridi

 2004    *  $  5.83 to $  8.62 05/01/2004 to 07/01/2006
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Marcelo Vieira

 2004  107.857   $  5.83 to $  8.62 02/01/2006 to 06/01/2006
 2007  165.394   $12.82 to $13.40 11/13/2006 to 01/30/2009

Ezequiel Garbers

 2004    *  $  5.83 to $  8.62 05/01/2004 to 07/01/2006
 2007    *  $12.82 to $13.40 11/13/2007 to 01/30/2009

Directors and Executive Officers as a group

   2.996.971(2)   

                         
          Number of          
  Plan under      ordinary          
  which  Number of  shares to be  Exercise       
  awards  restricted  issued upon  price per       
  were  shares  exercise of  ordinary  Date of  Expiration 
  granted  granted  options  share ($)  Grant  date 
Carlos A. Boero Hughes  2004   —   *  $5.82674   8/25/2008   8/25/2018 
   2004   —   *  $7.10862   8/25/2008   8/25/2018 
   2007   —   *  $12.81883   8/25/2008   8/25/2018 
   2007   —   *  $13.40150   1/30/2009   1/30/2019 
   2010   *   —   —   4/01/2011   4/01/2021 
Emilio F. Gnecco  2004   —   *  $5.82674   1/6/2007   1/6/2017 
   2004   —   *  $8.62358   1/6/2007   1/6/2017 
   2007   —   *  $12.81883   11/13/2007   11/13/2017 
   2007   —   *  $13.40150   1/30/2009   1/30/2019 
   2010   *   —   —   4/01/2011   4/01/2021 
Walter Marcelo Sanchez  2004   —   *  $5.82674   1/5/2004   1/5/2014 
   2004   —   *  $5.82674   1/8/2005   1/8/2015 
   2004   —   *  $5.82674   1/6/2006   1/6/2016 
   2004   —   *  $7.10862   1/6/2006   1/6/2016 
   2004   —   *  $8.62358   1/7/2006   1/7/2016 
   2007   —   *  $12.81883   11/13/2007   11/13/2017 
   2007   —   *  $13.40150   1/30/2009   1/30/2019 
   2010   *   —   —   4/01/2011   4/01/2021 
Mario José Ramón Imbrosciano  2004   —   *  $5.82674   1/5/2004   1/5/2014 
   2004   —   *  $5.82674   1/8/2005   1/8/2015 
   2004   —   *  $5.82674   1/6/2006   1/6/2016 
   2004   —   *  $7.10862   1/6/2006   1/6/2016 
   2004   —   *  $8.62358   1/7/2006   1/7/2016 
   2007   —   *  $12.81883   11/13/2007   11/13/2017 
   2007   —   *  $13.40150   1/30/2009   1/30/2019 
   2010   *   —   —   4/01/2011   4/01/2021 
Leonardo Berridi  2004   —   *  $5.82674   1/5/2004   1/5/2014 
   2004   —   *  $5.82674   1/8/2005   1/8/2015 
   2004   —   *  $5.82674   1/6/2006   1/6/2016 
   2004   —   *  $7.10862   1/6/2006   1/6/2016 
   2004   —   *  $8.62358   1/7/2006   1/7/2016 
   2007   —   *  $12.81883   11/13/2007   11/13/2017 
   2007   —   *  $13.40150   1/30/2009   1/30/2019 
   2010   *   —   —   4/01/2011   4/01/2021 
Marcelo Vieira  2004   —   51,487  $5.82674   1/2/2006   1/2/2016 
   2004   —   56,370  $8.62358   1/7/2007   1/7/2017 
   2007   —   102,576  $12.81883   11/13/2007   11/13/2017 
   2007   —   62,818  $13.40150   1/30/2009   1/30/2019 
   2010   23,223   —   —   4/01/2011   4/01/2021 
Ezequiel Garbers  2004   —   *  $5.82674   1/5/2004   1/5/2014 
   2004   —   *  $5.82674   1/8/2005   1/8/2015 
   2004   —   *  $5.82674   1/6/2006   1/6/2016 
   2004   —   *  $7.10862   1/6/2006   1/6/2016 
   2004   —   *  $8.62358   1/7/2006   1/7/2016 
   2007   —   *  $12.81883   11/13/2007   11/13/2017 
   2007   —   *  $13.40150   1/30/2009   1/30/2019 
   2010   *   —   —   4/01/2011   4/01/2021 
Directors and Executive Officers as a group
      308,810(1)  2,996,971(2)            
*Upon the exercise of all options, would beneficially own less than 1% of total number of outstanding shares.
(1)All share options have an expiration date 10 years after date of grant.
(2)ConsistsIt includes 1,600,747 options with a range of 40,285exercise prices per ordinary share from $5.83 to $8.62 and 1,396,224 options with a range of exercise prices per ordinary share from $12.82 and 13.40.

Restricted Share and Restricted Stock Unit Plan Number of
restricted shares		  Number of
restricted stock units		  Range of Dates of Grant 

Directors and Executive Directors

   

Abbas Farouq Zuaiter

    *     *   05/13/2011 to 05/15/2012  

Alan Leland Boyce

  4,937    11,599    05/13/2011 to 05/15/2012  

Guillaume van der Linden

    *     *   05/13/2011 to 05/15/2012  

Paulo Albert Weyland Vieira

    *     *   05/13/2011 to 05/15/2012  

Plínio Musetti

    *     *   05/13/2011 to 05/15/2012  

Mark Schachter

    *     *   05/13/2011 to 05/15/2012  

André Velasco Brañes

    *     *   05/13/2011 to 05/15/2012  

Mariano Bosch

    *     *   04/01/2011 to 04/01/2013  

Carlos A. Boero Hughes

    *     *   04/01/2011 to 04/01/2013  

Emilio F. Gnecco

    *     *   04/01/2011 to 04/01/2013  

Walter Marcelo Sanchez

    *     *   04/01/2011 to 04/01/2013  

Mario José Ramón Imbrosciano

    *     *   04/01/2011 to 04/01/2013  

Leonardo Berridi

    *     *   04/01/2011 to 04/01/2013  

Marcelo Vieira

  44,538    76,906    04/01/2011 to 04/01/2013  

Ezequiel Garbers

    *     *   04/01/2011 to 04/01/2013  

Directors and Executive Officers as a group

  308,810(1)   842,637(2)  

*Upon receipt of common shares pursuant to plan, would beneficially own less than 1% of total outstanding shares.
(1)Consist of 296,972 vested restricted shares within 60 daysas of the date of this annual reportApril 28, 2014 and 268,52511,838 unvested restricted shares.shares
(2)ConsistsConsist of 2,506,574 options exercisable within 60 days285,637 vested restricted stock units as of the date of this annual reportApril 28, 2014 (already converted to shares) and 490,397557,000 unvested options.restricted stock units

139

Item 7.Major Shareholders and Related Party Transactions

A.MAJOR SHAREHOLDERS

Item 7. Major Shareholders and Related Party Transactions
A. MAJOR SHAREHOLDERS
The following table sets forth the beneficial ownership of our shares for (1) each person known to us to own beneficially at least 5% of our common shares and (2) our directors and executive officers, based on the information most recently available to the Company, as of MarchDecember 31, 2011.
2013.

As of March 31, 2011,April 28, 2014, we had 120,069,222 ordinary shares outstanding.120,403,337 outstanding shares. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days from MarchDecember 31, 2011,2013, including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

         
  Number  Percent 
Principal Shareholders:
        
Pampas Humedas LLC(l)  27,158,693   22.62 
HBK Master Fund LP(2)  20,471,770   17.05 
Stichting Pensioenfonds Zorg en Welzijn(3)  15,307,824   12.75 
Al Gharrafa Investment Company(4)  12,562,906   10.46 
Ospraie Special Opportunities Master Holdings Ltd.(5)  10,818,025   9.01 
Directors and Executive Officers
        
Abbas Farouq Zuaiter  *   * 
Alan Leland Boyce  1,030,310   0.86 
Guillaume van der Linden  —   — 
Paulo Albert Weyland Vieira  *   * 
Mariano Bosch(6)  737,555   0.61 
Plínio Musetti  *   * 
Mark Schachter  —   — 
Julio Moura Neto  —   — 
Andrés Velasco Brañes  —   — 
Carlos A. Boero Hughes  *   * 
Emilio F. Gnecco  *   * 
Walter Marcelo Sanchez  *   * 
Mario José Ramón Imbrosciano  *   * 
Leonardo Berridi  *   * 
Marcelo Vieira(7)  1,040,760   0.87 
Ezequiel Garbers  *   * 
Directors and Executive Officers as a group
  5,079,230   4.11 

140

   Number  Percent 

Principal Shareholders:

   

Soros Fund Management LLC and affiliates (l)

   25,910,004    21.6% 

Al Gharrafa Investment Company (2)

   15,983,265    13.3% 

Stichting Pensioenfonds Zorg en Welzijn (3)

   15,531,385    12.9% 

Directors and Executive Officers

   

Abbas Farouq Zuaiter

     *     * 

Alan Leland Boyce

   1,231,308    1.02% 

Guillaume van der Linden

     *     * 

Paulo Albert Weyland Vieira

     *     * 

Mariano Bosch

     *     * 

Plínio Musetti

     *     * 

Mark Schachter

     *     * 

Andrés Velasco Brañes

     *     * 

Carlos A. Boero Hughes

     *     * 

Emilio F. Gnecco

     *     * 

Walter Marcelo Sanchez

     *     * 

Mario José Ramón Imbrosciano

     *     * 

Leonardo Berridi

     *     * 

Marcelo Vieira

   1,144,032    0.95% 

Ezequiel Garbers

     *     * 

Total Directors and Executve Officers

   6,153,091    4.90% 

*Beneficially owns less than 1% based on the total number of outstanding shares.
(1)The address of Pampas Húmedas LLC is c/o Soros Fund Management LLC is 888 Seventh Avenue, 33rd Floor, New York, NYNew York 10106.
(2)The address of HBK Master Fund LP is Maples Corporate Services Ltd.: PO BOX 309, Ugland House, George Town, Grand Cayman KY1-1104, Cayman Islands / Notice Address: HBK Master Fund L.P. %HBK Services LLC, Attn: Legal department, 2101 Cedar Spring Road, Suite 700, Dallas TX 75201, USA. Includes 7,377,598 common shares we issued and sold to Al Gharrafa at a purchase price of $10.65 per share, pursuant to an agreement entered into on January 6, 2011. See exhibit 4.28.
(3)Includes the purchase of 4,500,000 shares by Stichting, Pensioenfonds Zorg en Welzijn in our IPO. The address of Stichting Pensioenfonds Zorg en Welzijn is P.O. BOX 4001 NL-3700 KA Zeist The Netherlands.
(4)The address of Al Gharrafa Investment Company is Walker House, 87 Main Street, George Town, Grand Cayman, KY1-9005, Cayman Islands.
(5)(3)Reflects beneficial ownership of Ospraie Special Opportunities Master Holdings Ltd. as of February 3, 2011, including the purchase of 1,450,000 shares by Ospraie Special Opportunities Master Holdings Ltd. and its affiliates in our IPO. The address of Ospraie Special Opportunities Master Holdings Ltd.Stichting Pensioenfonds Zorg en Welzijn is Ospraie Advisors L.P.: 320 Park Avenue, 27th floor, New York, NY 10022, USA.
(6)Includes 606,609 shares issuable upon exercise of options held by Mr. Bosch that are exercisable within 60 days of March 31, 2011. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Share Options and Restricted Share Plan.”
(7)Includes 216,198 shares issuable upon exercise of options held by Mr. Vieira that are exercisable within 60 days of March 31, 2011. Mr. Vieira is the owner of Liuede Holdings Ltd. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership—Share Options and Restricted Share Plan.”P.O. BOX 4001 NL-3700 KA Zeist The Netherlands.

As of the date of this annual report 87,414,830April 28, 2014, 94,539,950 shares, representing 72.8%78.5% of our outstanding common shares arewere held by United States record holders.

B. RELATED PARTY TRANSACTIONS

B.RELATED PARTY TRANSACTIONS

Share Purchase and Sale Agreement and UMA Right of First Offer Agreement

     On February 16, 2006, IFH and Adeco Brasil Participaçoes Ltda. (together, the “IFH Parties”) and the prior shareholders of UMA entered into (1) a Share Purchase and Sale Agreement in connection with the sale and purchase of 40% of the equity interest in UMA by the IFH Parties for a total cash consideration of $10.3 million, which consisted of a cash payment of $9.2 million on February 16, 2006, the closing date, and a holdback payment of $1.1 million due on February 16, 2011, and (2) a Unit Issuance Agreement in connection with the purchase of the remaining 60% of the equity interest in UMA by the IFH Parties in exchange for 12,079,991 units of IFH.

In connection with the Share Purchase and Sale Agreement, the IFH Parties also entered into a Right of First Offer Agreement with Marcelo Weyland Barbosa Vieira, Paulo Albert Weyland Vieira, Mario Jorge de Lemos Vieira, and Corina de Almeida Leite, each of which is a current indirect shareholder in IFH, (together the “UMA Members”), dated February 16, 2006, whereby the IFH Parties agreed to grant the UMA Members a right of first offer to acquire the shares of UMA, or all or substantially all of the assets of UMA, or the real property or plot of land where the commercial offices of UMA is currently located and which is currently subject to a right-of-way and easement agreement granted to Mario Corina, AlienasAlFenas Agrícola Ltda. The rights granted to each of the UMA Members, their permitted affiliates, assignees, successors or heirs under such agreement are only in effect for as long as such entities hold such an equity interest in IFH or any of its affiliates.

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Milk Supply Agreement
     In November 2007, Adeco Agropecuaria S.A. entered into a milk supply offer agreement with La Lácteo S.A., which 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 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. If Adeco Agropecuaria S.A. receives a proposal from a third party to purchase 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 on Adeco Agropecuaria S.A.’s receipt of such third-party offer to purchase milk from Adeco Agropecuaria S.A. at the specified higher price. For the years ended December 31, 2010, 2009, 2008 and 2007, we recognized sales of goods net of related expenses, amounting to $13.4 million, $10.1 million and $4.1 million respectively, in connection with this agreement.
Agriculture Partnership Agreements

Some of our agriculture partnership agreements are entered into with certain minority shareholders of the Company, for a total of 8,4528,231.58 hectares. For the years ended December 31, 2010, 20092013, 2012 and 2008,2011, we recorded other net amount (payables) or receivables for payments in advance amounting to $0.3$(0.5) million, $0.7($0.5) million and $0.2$(0.3) million, respectively, and recognized expenses amounting to $3.3$4.2 million, $2.2$3.1 million and $1.8$3.3 million, respectively, in connection with these agreements.

Registration Rights Agreement

In connection with the Reorganization, we entered into a registration rights agreement providing holders of our issued and outstanding common shares on January 28, 2011 (such holders being hereinafter referred to as the “Existing Investors” and such common shares subject to the agreement being hereinafter referred to as the “Registrable Securities”) with certain rights to require us to register their shares for resale under the Securities Act of 1933, as amended (“Securities Act”). Pursuant to the agreement, if holders of a majority of the Registrable Securities notify us, no earlier than 180 days after the effective date of the registration statement previously filed by us on Form F-1, we are required, subject to certain limitations, to file a registration statement under the Securities Act in order to register the resale of the amount of ordinary shares requested by such holders. The underwriters in such an offering will have the right, subject to certain limitations, to limit the number of shares included in such registration. The Existing Investors have the right to require us to file one such registration. In addition, if we propose to register any of our securities under the Securities Act, Existing Investors are entitled to notice of such registration and are entitled to certain “piggyback” registration rights allowing such holders to include their common shares in such registration, subject to certain restrictions. Furthermore, Existing Investors may require us to register the resale of all or a portion of their shares on a registration statement on Form F-3 once we are eligible to use Form F-3. In an underwritten offering, the underwriters have the right, subject to certain restrictions, to limit the number of Registrable Securities Existing Investors may include.

Ospraie Consent Agreement
          On

Shelf Registration Statement on Form F-3

The Company filed a shelf registration statement on Form F-3 with the U.S. Securities and Exchange Commission (SEC) on September 23, 2013, which was declared effective by the SEC on December 14, 2010, we entered into a consent agreement with Ospraie Special Opportunities Master Holdings Ltd (“Ospraie”),23, 2013. Pursuant to the Shelf Registration Statement, certain shareholders may offer and sell from time to time, in one or more offerings, up to 55,821,281 common shares. The registration of ourthe common shares for disposition by the principal shareholders pursuant to which we paid Ospraie an aggregatedoes not mean that the principal shareholders will actually offer or sell any of the shares. The specifics of future offerings, if any, including the names of participating shareholders, the amount of $3.0 millionshares to be offered and the offering price, will be determined at the time of any such offerings and will be described in February 2011 promptly followinga prospectus supplement filed at the completiontime of the IPO in consideration for their agreement to waive certain of their rights under our shareholders agreement, which terminated upon the IPO.

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any such offerings.

C.INTERESTS OF EXPERTS AND COUNSEL

C. INTERESTS OF EXPERTS AND COUNSEL
Not applicable.
Item 8. Financial Information
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

Item 8.Financial Information

A.CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION.

See Item 18. Financial Statements and page F-1 through F-90 for our consolidated financial statements.

Consolidated Financial Statements.

Legal and Administrative Proceedings

We are subject to several laws, regulations and business practices of the countries in which we operate. 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. Currently, we are not engaged in any material litigation or arbitration and no material litigation or claims are known to us to be pending or threatened against us which, either alone or on a combined basis, may result in an adverse effect on our business, results of operations, or operations.

cash flows.

As of MarchDecember 31, 2011,2013, the total amounts accrued in respect of legal and administrative proceedings was $5.8$2.3 million in Brazil, and $0.5 in Argentina.

In Argentina and Brazil we are engaged in several legal proceedings, including tax, social security, labor, civil, environmental, administrative and other proceedings, for which we have established provisions in an aggregate amount of $2.7 million.

In addition, there are currently certain legal proceedings pending in which we are involved for which we have not established provisions. In the opinion of our management, the ultimate disposition of any threatened or pending matters, either individually or on a combined basis, will not have a material adverse effect on our combined financial condition, liquidity, or results of operations other than as described below.

The Brazilian Federal Government filed a tax enforcement action against UMA to demand excise taxes (Imposto sobre Produtos Industrializados, or “IPI”), or a federal value-added tax on industrial products, in the amount of approximately $ 7.4 million. We have obtained a favorable initial decision from the lower court, which accepted our argument on procedural grounds based on the Brazilian federal government’s loss of its procedural right to demand the IPI debts. Currently, the case is under review by an appellate court following the appeal filed by the Brazilian federal government. We have not made any provision for this claim based on legal counsel’s view that the risk of an unfavorable decision in this matter is remote. If this proceeding is decided adversely to us, our results of operations and financial condition may be materially adversely affected.

José Valter Laurindo de Castilhos, Companhia Rio de Janeiro Agropecuária Ltda. and other former owners of the Rio de Janeiro and Conquista Farms have filed suit against us for the payment of a supplementary amount of approximately $25.2 million, as well as indemnity for moral and material damages, as a result of the alleged breach of the purchase agreement entered into by the parties. The lower court ruled in our favor, allowing us to keep possession of the Rio de Janeiro Farm. This decision has been appealed by Mr. Castilhos to the Superior Court of Justice (“Superior Tribunal de Justiça”). The Brazilian Superior Court of Justice has determined that the case is without merit but this decision can be appealed by Mr. Castilhos. We have not made any provision for this claim based on legal counsel’s view that the risk of an unfavorable decision in this matter is remote. If this proceeding is decided adversely to us, our results of operations and financial condition may be materially adversely affected.

The INCRA is currently conducting an investigation to determine the falsehood of the CCIR delivered to us by the former owner of Rio de Janeiro Farm back in January 2005 when we acquired this farm. The INCRA is also conducting an investigation related to thecadeia dominialof the farm to determine the correct chain of ownership through the successive transfers of ownership, in order to confirm that thedestaque público occurred or that the State does not have interest in claiming ownership. If the INCRA determines the falsehood of the CCIR and subsequently the acquisition deed is declared null and void, and/or the INCRA cannot confirm a regular and licit chain of ownership of the farm, and the Company cannot obtain a favorable judicial resolution to revert such decisions, it could result in materially adverse effect on our business, financial condition and operating results.

Dividend Policy

We currently intend to retain any future earnings to finance operations and the expansion of our business and do not intend to declare or pay any cash dividends on our common shares in the foreseeable future. The amount and payment of dividends will be determined by a simple majority vote at a general shareholders’ meeting, typically but not necessarily, based on the recommendation of our board of directors. All shares of our capital stock rankpari passuwith respect to the payment of dividends. Pursuant to our articles of incorporation, the board of directors has the power to distribute interim dividends in accordance with applicable Luxembourg law. Dividends may be lawfully declared and paid if our net profits and distributable reserves are sufficient under Luxembourg law.

Under Luxembourg law, at least 5% of our net profits per year must be allocated to the creation of a legal reserve until such reserve has reached an amount equal to 10% of our issued share capital. If the legal reserve subsequently falls below the 10% threshold, at least 5% of the annual net profits again must be allocated toward the reserve. The legal reserve is not available for distribution.

Adecoagro is a holding company and has no material assets other than its ownership of partnership interests in IFH. IFH, in turn, is a holding entity with no material assets other than its indirect ownership of shares in operating

subsidiaries in foreign countries. If we were to distribute a dividend at some point in the future, we would cause the operating subsidiaries to make distributions to IFH, which in turn would make distributions to Adecoagro in an amount sufficient to cover any such dividends.

Our subsidiaries are subject to certain restrictions on their ability to declare or pay dividends. For example, the loan agreement with the Inter-American Development Bank prohibits Adeco Agropecuaria S.A. and Pilagá S.R.L.S.A. from paying dividends or other restricted payments if such payments would cause these two subsidiaries to exceed certain financial ratios or in the case of an event of default. The AngélicaAdecoagro Vale do Ivinhema Prepayment Export Facility also imposes similar limitations on the ability of our Brazilian subsidiaries to pay dividends. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Indebtedness and Financial Instruments.”

B. SIGNIFICANT CHANGES
Instruments”, and also see “—Risks Related to Argentina—Certain of our subsidiaries have substantial indebtedness which could impair their financial condition and decrease the amount of dividends we receive.

B.SIGNIFICANT CHANGES

Except as otherwise disclosed in this annual report, there has been no undisclosed significant change since the date of the annual Consolidated financial statements.

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Financial Statements.

Item 9.The Offer and Listing

A.OFFER AND LISTING DETAILS

Item 9. The Offer and Listing
A. OFFER AND LISTING DETAILS
Our common shares have been listed on the NYSE under the symbol “AGRO” since January 28, 2011. OurAs of the date of this report, our issued share capital amounts to $180,103,833,$183,572,723, represented by 120,069,222122,381,815 (of which 1,978,478 were treasury shares) shares with a nominal value of $1.50 each. All issued shares are fully paid up.

The table below sets forth, for the period indicated, the reported high and low closing prices for our common shares listed on the NYSE.

         
  Price per Share 
Full financial Quarters Since Listing High  Low 
First quarter  13.50   11.99 
         
  Price per Share
Last Six Months High Low
January 2011  12.60   12.00 
February 2011  13.50   11.99 
March 2011  13.48   12.36 
April 2011  13.47   12.34 
May 2011  12.62   10.27 
June 1 to June 27  12.70   11.49 
B. PLAN OF DISTRIBUTION

Full Financial Quarters Since Listing

  High   Low 

January 28, 2011 to March 31, 2011

  $13.50    $11.99  

Second Quarter 2011

   13.47     10.27  

Third Quarter 2011

   11.97     8.62  

Fourth Quarter 2011

   9.72     7.42  

Fiscal Year Ended December 31, 2011

   13.50     7.42  

First Quarter 2012

   11.05     8.03  

Second Quarter 2012

   10.81     8.51  

Third Quarter 2012

   10.80     9.33  

Fourth Quarter 2012

   9.91     8.05  

Fiscal Year Ended December 31, 2012

   11.05     8.03  

First Quarter 2013

   9.56     7.69  

Second Quarter 2013

   7.94     6.05  

Third Quarter 2013

   7.65     6.22  

Fourth Quarter 2013

   8.37     7.46  

Fiscal Year Ended December 31, 2013

   9.56     7.69  

First Quarter 2014

   8.16     7.01  

Last 6 Months

  High   Low 

November 2013

   8.63     7.62  

December 2013

   8.22     7.72  

January 2014

   7.98     7.23  

February 2014

   8.00     7.01  

March 2014

   8.16     7.68  

April 2014 (to April 28, 2014)

   9.28     8.13  

B.PLAN OF DISTRIBUTION

Not applicable.

C. MARKETS

C.MARKETS

Our common shares have been listed on the NYSE under the symbol “AGRO” since January 28, 2011. See "—“—A. Offer and Listing Details.”

D. SELLING SHAREHOLDERS

D.SELLING SHAREHOLDERS

Not applicable.

E. DILUTION

E.DILUTION

Not applicable.

F. EXPENSES OF THE ISSUE

F.EXPENSES OF THE ISSUE

Not applicable.

Item 10. Additional Information
A. SHARE CAPITAL

A.SHARE CAPITAL

Not applicable.

B. MEMORANDUM AND ARTICLES OF ASSOCIATION

B.MEMORANDUM AND ARTICLES OF ASSOCIATION

The following is a summary of some of the terms of our common shares, based in particular on our articles of incorporation and the Luxembourg law of August 10, 1915 on commercial companies.

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Adecoagro’s shares are governed by Luxembourg law and its articles of incorporation. More information concerning shareholders’ rights can be found in the Luxembourg law on commercial companies dated August 10, 1915, as amended from time to time, and the articles of incorporation.

The following is a summary of the rights of the holders of our shares that are material to an investment in our common shares. These rights are set out in our articles of association or are provided by applicable Luxembourg law, and may differ from those typically provided to shareholders of U.S. companies under the corporation laws of some states of the United States. This summary does not contain all information that may be important to you. For more complete information, you should read our updated articles of association, which are attached as an exhibit to this annual report.

General

Adecoagro is a Luxembourgsociété anonyme(a (a joint stock corporation)company). 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.

In a series of transactions during 2012, we transferred shares of Adecoagro to certain limited partners of IFH in exchange for their residual interest in IFH, increasing our interest in IFH to approximately 100%.

On January 28, 2011, Adecoagro completed the IPO of its shares on the 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.

The corporate purpose of Adecoagro, as stated in Article 4 of our articles of incorporation (Corporate Purpose)(Purpose Object), is the following: The object of Adecoagro is the holding of participations, in any form whatsoever, in Luxembourg and foreign companies, or other entities or enterprises, the acquisition by purchase, subscription, or in any other manner as well as the transfer by sale, exchange or otherwise of stock, bonds, debentures, notes and other securities or rights of any kind including interests in partnerships, and the holding, acquisition, disposal, investment in any manner (in), development, licensing or sub licensing of, any patents or other intellectual property rights of any nature or origin as well as the ownership, administration, development and management of its portfolio. Adecoagro may carry out its business through branches in Luxembourg or abroad.

Adecoagro may borrow in any form and proceed to the issuance by private or public means of bonds, convertible bonds and debentures or any other securities or instruments it deems fit.

In a general fashion it may grant assistance (by way of loans, advances, guarantees or securities or otherwise) to companies or other enterprises in which Adecoagro has an interest or which form part of the group of companies to which Adecoagro S.A.. belongs or any entity as Adecoagro may deem fit (including up stream or cross stream), take any controlling, management, administrative and/or supervisory measures and carry out any operation which it may deem useful in the accomplishment and development of its purposes.

Finally, Adecoagro can perform all commercial, technical and financial or other operations, connected directly or indirectly in all areas in order to facilitate the accomplishment of its purpose.

Share Capital

     Our

As of December 31, 2013 our issued share capital amountsamounted to $180,103,833,$183,572,722.50, represented by 120,069,222122,381,815 shares in issue (of which 639,691 were treasury shares) with a nominal value of $1.50 each. All issued shares are fully paid up.

There are 120,069,222were 121,742,124 common shares outstanding.

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We have an authorized unissued share capital of $3,000,000,000, including the currently issued share capital as of $$180,103,833,December 31, 2013 of $183,572,722.50 and are authorized to issue up to 2,000,000,000 shares of a nominal value of $1.50 each (taking into account the 120,069,222 shares already issued)issued as of December 31, 2013) out of such authorized share capital. Our authorized unissued share capital as of December 31, 2013 is $2,819,896,167.
$2,816,427,277.50.

Our articles of incorporation authorize the board of directors to issue shares within the limits of the authorized un-issued share capital at such times and on such terms as the board or its delegates may decide for a period commencing on January 10, 2011 and ending on the date five years after the date that the minutes of the shareholders’ meeting approving such authorization have been published in the Luxembourg official gazette (unless it is extended, amended or renewed and we currently intend to seek renewals and/or extensions as required from time to time). Such publication occurred on April 22, 2011. Accordingly, the board may issue shares up to 1,879,930,778the number of authorized un-issued shares pursuant to the above until the latter date against contributions in cash, contributions in kind or by way of incorporation of available reserves at such times and on such terms and conditions, including the issue price, as the board of directors or its delegate(s) may in its or their discretion resolve and the general meeting of shareholders dated January 10, 2011 has waived and has authorized the board of directors to waive, suppress or limit, any pre-emptive subscription rights of shareholders provided for by law to the extent it deems such waiver, suppression or limitation advisable for any issue or issues of shares within the authorized share capital.

Our authorized share capital is determined (and may be increased, reduced or extended) by our articles of incorporation, as amended from time to time, by the decision of our shareholders at an extraordinary general shareholders’ meeting with the necessary quorum and majority provided for the amendment of our articles of incorporation. See “—Amendment to the Articles of Incorporation” and "—“—General Meeting of Shareholders”.

Under Luxembourg law, existing shareholders benefit from a preemptive subscription right on the issuance of shares for cash consideration. However, our shareholders have, in accordance with Luxembourg law, authorized the board to suppress, waive or limit any preemptive subscription rights of shareholders provided by law to the extent the board deems such suppression, waiver or limitation advisable for any issuance or issuances of shares within the scope of our authorized unissued share capital. Such shares may be issued above, at or below market value (down to zero) as well as by way of incorporation of available reserves and premium for a period ending on the fifth anniversary of the date of the publication of the notarial deed recording the minutes of the extraordinary general shareholders’ meeting of January 10, 2011 in the Luxembourg official gazette.

gazette (which occurred on April 22, 2011).

Form and Transfer of shares

Our shares are issued in registered form only and are freely transferable. Luxembourg law does not impose any limitations on the rights of Luxembourg or non-Luxembourg residents to hold or vote our shares.

Under Luxembourg law, the ownership of registered shares is evidenced by the inscription of the name of the shareholder, the number of shares held by him or her in the register of shares held at the registered office of the Company. Each transfer of shares in the share register shall be effected by written declaration of transfer to be recorded in the register of shares, such declaration to be dated and signed by the transferor and the transferee, or by their duly appointed agents. We may accept and enter into its share register any transfer effected pursuant to an agreement or agreements between the transferor and the transferee, true and complete copies of which have been delivered to us.

We may appoint registrars in different jurisdictions, each of whom may maintain a separate register for the shares entered in such register. We have appointed Bank of New York Mellon (operating with the service name BNY Mellon Shareowner Services) as our New York registrar and transfer agent, and all shares and shareholders have been transferred from the register held at our registered office to the register held on our behalf by Bank of New York Mellon (operating with the service name BNY Mellon Shareowner Services) as our registrar and transfer agent. The holders of our shares may elect to be entered in one of the registers and to be transferred from time to time from one register to another register provided that our board of directors may however impose transfer restrictions for shares that are registered, listed,

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quoted, dealt in, or have been placed in certain jurisdictions in compliance with the requirements applicable therein. The transfer to the register kept at the Company’s registered office may always be requested by a shareholder.

In addition, our articles of incorporation provide that our shares may be held through a securities settlement system or a professional depository of securities. Shares held in such manner have the same rights and obligations as shares recorded in our shareholder register(s) (subject to complying with certain formalities). Shares held through a securities settlement system or a professional depository of securities may be transferred in accordance with customary procedures for the transfer of securities in book-entry form.

Issuance of Shares

Pursuant to Luxembourg law of August 10, 1915 on commercial companies, the issuance of shares in Adecoagro requires the approval by the general meeting of shareholders at the quorum and majority provided for the amendment of our articles of incorporation. See “—Amendment to the Articles of Incorporation” and “—General Meeting of Shareholders”. The general meeting of shareholders may however approve an authorized unissued share capital and authorize the board of directors to issue shares up to the maximum amount of such authorized unissued share capital for a maximum period of five years from the date of publication in the Luxembourg official gazette of the minutes of the relevant general meeting. The general meeting may amend, renew or extend such authorized share capital and authorization to the board of directors to issue shares.

We have currently an authorized share capital of $3,000,000,000, including the currently issued share capital as of $180,103,833,December 31, 2013 of $183,572,722.50 and are authorized to issue up to 2,000,000,000 shares of a nominal value of $1.50 each (taking into account the 210,069,222 shares already issued) out of such authorized share capital. TheAs of December 31, 2013 the authorized un-issued share capital will be $2,819,896,167.was $2,816,427,277.50. Our board has been authorized to issue shares within the limits of the authorized un-issued share capital at such times and on such terms as the board or its delegates may decide for a period commencing on January 10, 2011 and ending on the date five years after the date that the minutes of the shareholders’ meeting approving such authorization have been published in the Luxembourg

official gazette (unless it is extended, amended or renewed). The publication occurred on April 22, 2011. Accordingly, the board may issue shares up to 1,879,930,778the total number of authorized un-issued shares until the latter date against contributions in cash, contributions in kind or by way of incorporation of available reserves at such times and on such terms and conditions, including the issue price, as the board of directors or its delegate(s) may in its or their discretion resolve while waiving, suppressing or limiting, any pre-emptive subscription rights of shareholders provided for by law to the extent it deems such waiver, suppression or limitation advisable for any issue or issues of shares within the authorized share capital.

Our articles provide that no fractional shares may be issued.

Our shares have no conversion rights and there are no redemption or sinking fund provisions applicable to our common shares

shares.

Preemptive Rights

Unless limited or cancelled by the board of directors as described above, holders of our shares have a pro rata preemptive right to subscribe for any new shares issued for cash consideration. Our articles, effective on January 10, 2011, provide that preemptive rights can be waived, suppressed or limited by the board of directors for a period ending on the fifth anniversary of the date of publication of the notarial deed recording the minutes of the extraordinary general shareholders’ meeting of January 10, 2011 in the Luxembourg official gazette,April 22, 2016, in the event of an increase of the issued share capital by the board of directors within the limits of the authorized un-issued share capital.

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capital

Repurchase of Shares

We cannot subscribe for our own shares.

We may, however, repurchase issued shares or have another person repurchase issued shares for our account, subject to the following conditions:

the prior authorization of the general meeting of shareholders (at the quorum and majority for ordinary resolutions), which authorization sets forth the terms and conditions of the proposed repurchase and in particular the maximum number of shares to be repurchased, the duration of the period for which the authorization is given (which may not exceed five years) and, in the case of repurchase for consideration, the minimum and maximum consideration per share, must have been obtained;

•the prior authorization of the general meeting of shareholders (at the quorum and majority for ordinary resolutions), which authorization sets forth the terms and conditions of the proposed repurchase and in particular the maximum number of shares to be repurchased, the duration of the period for which the authorization is given (which may not exceed five years) and, in the case of repurchase for consideration, the minimum and maximum consideration per share, must have been obtained;
•the repurchase may not reduce our net assets on a non-consolidated basis to a level below the aggregate of the issued share capital and the reserves that we must maintain pursuant to Luxembourg law or its articles of incorporation; and
•only fully paid up shares may be repurchased.

the repurchase may not reduce our net assets on a non-consolidated basis to a level below the aggregate of the issued share capital and the reserves that we must maintain pursuant to Luxembourg law or its articles of incorporation; and

only fully paid up shares may be repurchased.

The general meeting of shareholders has authorized that the Company, and/or any wholly-owned subsidiary (and/or any person acting on their behalf), may purchase, acquire, receive or hold shares in the Company under article 49-2 of the Luxembourg law of August 10, 1915, from time to time up to 20% of the issued share capital, on the following terms and on such terms as referred to below and as shall further be determined by the board of directors of the Company, such authorization to bebeing valid (subject to renewal) for a period of five years from January 10, 2011.

Acquisitions may be made in any manner including without limitation, by tender or other offer(s), buy back program(s), over the stock exchange or in privately negotiated transactions or in any other manner as determined by the board of directors (including derivative transactions or transactions having the same or similar economic effect than an acquisition).

In the case of acquisitions for value:

(i) in the case of acquisitions other than in the circumstances set forth under (ii), for a net purchase price being (x) no less than fifty per cent of the lowest stock price and (y) no more than fifty per cent above the highest stock price, in each case being the closing price, as reported by the New York City edition of the Wall Street

Journal, or, if not reported therein, any other authoritative source to be selected by the board of directors of the Company (hereafter, the closing price), over the ten (10) trading days preceding the date of the purchase (or as the case may be the date of the commitment to the transaction);

(ii) in case of a tender offer (or if deemed appropriate by the board of directors, a buy back program),

a. in case of a formal offer being published, for a set net purchase price or a purchase price range, each time within the following parameters: no less than fifty per cent of the lowest stock price and (y) no more than fifty per cent above the highest stock price, in each case being the closing price over the ten (10) trading days preceding the publication date, provided however that if the stock exchange price during the offer period fluctuates by more than 10%, the board of directors may adjust the offer price or range to such fluctuations;

b. in case a public request for sell offers is made, a price range may be set (and revised by the board of directors as deemed appropriate) provided that acquisitions may be made at a price which is no less than fifty per cent of the lowest stock price and (y) no more than fifty per cent above the highest stock price, in each case being the closing price over a period determined by the board of directors provided that such period may not start more than five (5) trading days before the sell offer start date of the relevant offer and may not end after the last day of the relevant sell offer period.

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In addition, pursuant to Luxembourg law the board of directors may repurchase shares without the prior approval of the general meeting of shareholders if necessary to prevent serious and imminent harm to us or if the acquisition of shares has been made in view of the distribution thereof to the employees.

A share buy-back program was approved by the board of directors of the Company on September 12, 2013 to acquire up to 5% of the total outstanding share capital of the Company to be held as treasury shares (the “Buy-Back Program”). The Buy-Back Program was implemented in compliance with the authorization granted by the general meeting of the Company, any applicable law, rules or regulations described above and the following limits approved by the board of directors of the Company. The Buy Back Program was approved for a period of 12 months from September 23, 2014 (the date of its announcement) or until reaching the maximum number of shares authorized under the Buy Back Program, whatever occurs first. The Buy Back Program is conducted under Open Market Transactions, in reliance on the “safe harbour” from liability for manipulation provided by Rule 10b-18 of the Securities Exchange Act.

Capital Reduction

The articles of incorporation provide that the issued share capital may be reduced, subject to the approval by the general meeting of shareholders at the quorum and majority provided for the amendment of our articles of incorporation. See “—Amendment to the Articles of Incorporation” and “—General Meeting of Shareholders”.

General Meeting of Shareholders

In accordance with Luxembourg law and our articles of incorporation, any regularly constituted general meeting of shareholders of Adecoagro represents the entire body of shareholders of the Company. It shall have the broadest powers to order, carry out or ratify acts relating to the operations of the Company.

The annual general meeting of shareholders of Adecoagro is held at 4:00pm (Luxembourg time) on the third Wednesday of April of each year in Luxembourg. If that day is a legal or banking holiday, the meeting will be held on the immediately preceding bankingnext following business day. Other general meetings of shareholders may be convened at any time.

Each of our shares entitles the holder thereof to attend our general meeting of shareholders, either in person or by proxy, to address the general meeting of shareholders, and to exercise voting rights, subject to the provisions of our articles of incorporation. Each share entitles the holder to one vote at a general meeting of shareholders. There is no minimum shareholding required to be able to attend or vote at a general meeting of shareholders.

A shareholder may act at any general meeting of shareholders by appointing another person (who need not be a shareholder) as his proxy, which proxy shall be in writing and comply with such requirements as determined by

our board with respect to the attendance to the general meeting, and proxy forms in order to enable shareholders to exercise their right to vote. All proxies must be received by us (or our agents) no later than the day preceding the fifth (5th) working day before the date of the general meeting except if our board of directors decides to change such time frame.

Our articles of incorporation provide that in the case of shares held through the operator of a securities settlement system or depository, a holder of such shares wishing to attend a general meeting of shareholders must receive from such operator or depository a certificate certifying the number of shares recorded in the relevant account on the blocking date and certifying that the shares in the account shall be blocked until the close of the general meeting. Such certificates should be submitted to us no later than the day preceding the fifth working day before the date of the general meeting unless our board fixes a different period.

Our board of directors may determine a date preceding a general meeting as the record date for admission to such general meeting. When convening a general meeting of shareholders, we will publish two notices (which must be published at least eight days apart and in the case of the second notice, eight days before the meeting) in the Mémorial, Recueil des Sociétés et Association, and in a Luxembourg newspaper and in the case the shares of the Company are listed on a regulated market, in accordance with the publicity requirements of such regulated market applicable to the Company. If all of the shareholders are present or represented at a general meeting of shareholders, the general meeting may be held without prior notice or publication. These convening notices must contain the agenda of the meeting and set out the conditions for attendance and representation at the meeting.

All materials relating to a general meeting of shareholders (including the notice) will be available at the website of Adecoagro at www.adecoagro.com and will be filed with the SEC on Form 6-K. The information on our website is not incorporated by reference in, and does

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not constitute a part of, this annual report.

Luxembourg law provides that the board of directors is obliged to convene a general meeting of shareholders if shareholders representing, in the aggregate, 10% of the issued share capital so require in writing with an indication of the agenda. In such case, the general meeting of shareholders must be held within one month of the request. If the requested general meeting of shareholders is not held within one month, shareholders representing, in the aggregate, 10% of the issued share capital, may petition the competent president of the district court in Luxembourg to have a court appointee convene the meeting. Luxembourg law provides that shareholders representing, in the aggregate, 10% of the issued share capital may request that additional items be added to the agenda of a general meeting of shareholders. That request must be made by registered mail sent to the registered office at least five days before the holding of the general meeting of shareholders.

Voting Rights

Each share of our shares entitles the holder thereof to one vote at a general meeting of shareholders.

Luxembourg law distinguishes between “ordinary” general meetings of shareholders and “extraordinary” general meetings of shareholders.

Extraordinary general meetings of shareholders are convened to resolve in particular upon an amendment to the articles of incorporation and certain other limited matters described below and are subject to the quorum and majority requirements described below. All other general meetings of shareholders are ordinary general meetings of shareholders.

Ordinary General Meetings of Shareholders. At an ordinary general meeting of shareholders there is no quorum requirement, and resolutions are adopted by a simple majority of the votes validly cast, irrespective of the number of shares present or represented. Abstentions are not considered “votes”.

Extraordinary General Meetings of Shareholders. An extraordinary general meeting of shareholders convened for the purpose of in particular (a) an increase or decrease of the authorized or issued share capital, (b) a limitation or exclusion of preemptive rights, (c) approving a legal merger or de-merger of Adecoagro, (d) dissolution of the Company or (e) except as described immediately below, an amendment of the articles of incorporation must generally have a quorum of at least 50% of our issued share capital except in limited circumstances provided for by Luxembourg law. If such quorum is not reached, the extraordinary general meeting of shareholders may be reconvened, pursuant to appropriate notification procedures, at a later date with no quorum requirement applying.

applying

Irrespective of whether the proposed actions described in the preceding paragraph will be subject to a vote at the first or a subsequent extraordinary general meeting of shareholders, such actions are subject to the approval of at least two-thirds of the votes validly cast at such extraordinary general meeting of shareholders (except in limited circumstances provided for by Luxembourg law). Abstentions are not considered “votes”.

Appointment and Removal of Directors. Members of the board of directors may be elected by simple majority of the votes validly cast at any general meeting of shareholders. Under the articles of incorporation, all directors are elected for a period of up to three years with such possible extension as provided therein provided however the directors shall be elected on a staggered basis, with one third (1/3) of the directors being elected each year and provided further that such three year term may be exceeded by a period up to the annual general meeting held following the third anniversary of the appointment. Any director may be removed with or without cause by a simple majority vote at any general meeting of shareholders. The articles of incorporation provide that in case of a vacancy the board of directors may co-opt a director.

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Neither Luxembourg law nor our articles of incorporation contain any restrictions as to the voting of our shares by non-Luxembourg residents.

Amendment to the Articles of Incorporation

Luxembourg law requires an extraordinary general meeting of shareholders to resolve upon an amendment to the articles of incorporation. The agenda of the extraordinary general meeting of shareholders must indicate the proposed amendments to the articles of incorporation.

An extraordinary general meeting of shareholders convened for the purpose of amending the articles of incorporation must generally have a quorum of at least 50% of our issued share capital. If such quorum is not reached, the extraordinary general meeting of shareholders may be reconvened at a later date with no quorum according to the appropriate notification procedures. Irrespective of whether the proposed amendment will be subject to a vote at the first or a subsequent extraordinary general meeting of shareholders, the amendment is generally subject to the approval of at least two-thirds of the votes cast at such extraordinary general meeting of shareholders.

Any resolutions to amend the articles of incorporation must be taken before a Luxembourg notary and such amendments must be published in accordance with Luxembourg law.

Merger and Division

A merger by absorption whereby a Luxembourg company, after its dissolution without liquidation transfers to another company all of its assets and liabilities in exchange for the issuance to the shareholders of the company being acquired of shares in the acquiring company, or a merger effected by transfer of assets to a newly incorporated company, must, in principle, be approved by an extraordinary general meeting of shareholders of the Luxembourg company to be held before a notary. Similarly the de-merger of a Luxembourg company is generally subject to the approval by an extraordinary general meeting of shareholders.

Liquidation

In the event of the liquidation, dissolution or winding-up of Adecoagro, the assets remaining after allowing for the payment of all liabilities will be paid out to the shareholders pro rata to their respective shareholdings. The decision to voluntarily liquidate, dissolve or wind-up require the approval by an extraordinary general meeting of shareholders of the Company to be held before a notary.

No Appraisal Rights

Neither Luxembourg law nor our articles of incorporation provide for any appraisal rights of dissenting shareholders.

Distributions

Subject to Luxembourg law, each share is entitled to participate equally in distributions if and when if declared by the general meeting of shareholders out of funds legally available for such purposes. Pursuant to the articles of incorporation, the general meeting of shareholders may approve distributions and the board of directors may declare interim distribution, to the extent permitted by Luxembourg law.

Declared and unpaid distributions held by us for the account of the shareholders shall not bear interest. Under Luxembourg law, claims for unpaid distributions will lapse in our favor five years after the date such distribution has been declared.

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Annual Accounts

Each year the board of directors must prepare annual accounts, that is, an inventory of the assets and liabilities of Adecoagro together with a balance sheet and a profit and loss account. The board of directors must also prepare, each year, consolidated accounts and management reports on the annual accounts and consolidated accounts. The annual accounts, the consolidated accounts, the management report and the auditor’s reports must be available for inspection by shareholders at the registered office of Adecoagro at least 15 calendar days prior to the date of the annual general meeting of shareholders.

The annual accounts and the consolidated accounts, after approval by the annual general meeting of shareholders, will need to be filed with the Luxembourg registry of trade and companies within one month after the approval and no more than seven months ofafter the close of the financial year.

Information Rights

Luxembourg law gives shareholders limited rights to inspect certain corporate records 15 calendar days prior to the date of the annual general meeting of shareholders, including the annual accounts with the list of directors and auditors, the consolidated accounts, the notes to the annual accounts and the consolidated accounts, a list of shareholders whose shares are not fully paid-up, the management reports and the auditor’s report.

The annual accounts, the consolidated accounts, the auditor’s reports and the management reports are made available to registered shareholders at the same time as the convening notice for the annual general meeting of shareholders is sent. In addition, any registered shareholder is entitled to receive a copy of these documents free of charge 15 calendar days prior to the date of the annual general meeting of shareholders upon request.

Under Luxembourg law, it is generally accepted that a shareholder has the right to receive responses to questions concerning items on the agenda for a general meeting of shareholders, if such responses are necessary or useful for a shareholder to make an informed decision concerning such agenda item, unless a response to such questions could be detrimental to our interests.

Board of Directors

The management of Adecoagro is vested in a board of directors. Our articles of incorporation provide that the board must comprise at least three members and no more than eleven members. The number of directors is determined and the directors are appointed at the general meeting of shareholders (except in case of a vacancy in the office of a director because of death, retirement, resignation, dismissal, removal or otherwise, the remaining directors may fill such vacancy and appoint a successor in accordance with applicable Luxembourg law).

The directors are appointed for a period of up to three years; provided however the directors shall be elected on a staggered basis, with one-third of the directors being elected each year and provided further that such three year term may be exceeded by a period up to the annual general meeting held following the third anniversary of the appointment. Directors may be removed with or without cause (ad nutum) by the general meeting of shareholders by a simple majority of votes cast at a general meeting of shareholders. The directors shall be eligible for re-election indefinitely. The general shareholders’ meeting may dismiss one or more directors at any time, with or without cause by a resolution passed by simple majority vote, irrespective of the number of shares present at such general shareholders’ meeting.

Currently our board has 911 members (see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Board of Directors”). The board meets as often as required by our interests.

A majority of the members of the board in office (and able to vote) present or represented at a board meeting constitutes a quorum, and resolutions are adopted by the simple majority vote of the board members present or represented (and able to vote). The board may also take decisions by means of resolutions in writing signed by all directors.

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Our board may delegate the daily management of the business of Adecoagro, as well as the power to represent Adecoagro in its day to day business, to individual directors or other officers or agents of the Company (with power to sub-delegate). In addition the board of directors may delegate the daily management of the business of Adecoagro, as well as the power to represent Adecoagro in its day to day business to an executive or other committee as it deems fit. The board of directors shall determine the conditions of appointment and dismissal as well as the remuneration and powers of any person or persons so appointed.

Currently the board of directors has appointed the officers listed under “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”

The board of directors may (but shall not be obliged to unless required by law) establish one or more committees (including without limitation an audit committee, a risk and commercial committee, a strategy committee and a compensation committee) and for which it shall, if one or more of such committees are set up, appoint the members (who may be but do not need to be board members), determine the purpose, powers and authorities as well as the procedures and such other rules as may be applicable thereto (subject as to the audit committee as set forth therein).

Currently our board has set up an audit committee. See “Item 6. Directors, Senior Management and Employees—C. Board Practices.” Our board has set up a compensation committee. See “Item 6. Directors, Senior Management and Employees—C. Board Practices.” Our board has set up a risk and commercial committee. See “Item 6. Directors, Senior Management and Employees—C. Board Practices.” Our board has set up a strategy committee. See “Item 6. Directors, Senior Management and Employees—C. Board Practices.”

No director shall, solely as a result of being a director, be prevented from contracting with us, either with regard to his tenure of any office or place of profit or as vendor, purchaser or in any other manner whatsoever, nor shall any contract in which any director is in any way interested be liable to be avoided, in account of his position as director nor shall any director who is so interested be liable to account for us or the shareholders for any remuneration, profit or other benefit realized by the contract by reason of the director holding that office or of the fiduciary relationship thereby established.

Any director having an interest in a transaction submitted for approval to the board conflicting with our interest shall be obliged to advise the board thereof and to cause a record of his statement to be included in the minutes of the meeting. He may not take part in these deliberations nor in the vote of the resolution. At the next following general meeting, before any other resolution is put to vote, a special report shall be made on any transactions in which any of the directors may have had an interest conflicting with our interest.

No shareholding qualification for directors is required.

Directors and other officers, past and present, are entitled to indemnification from us to the fullest extent permitted by law against liability and all expenses reasonably incurred by him in connection with any claim, action, suit or proceeding in which he is involved by virtue of his being or having been a director. We may purchase and maintain for any director or other officer insurance against any such liability.

No indemnification shall be provided against any liability to us or our shareholders by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office. No indemnification will be provided in the event of a settlement (unless approved by a court of competent jurisdiction or the board), nor will indemnification be provided in defending proceedings (criminal) in which that director or officer is convictedhas been finally adjudicated to have acted in bad faith and not in the interest of an offense.

153the Company.

Transfer Agent and Registrar

The transfer agent and registrar for our common shares is Bank of New York Mellon (operating with the service name BNY Mellon Shareowner Services)Computershare and all shares and shareholders have been transferred from the register held at our registered officein Luxembourg to the register held on our behalf by Bank of New York Mellon (operating with the service name BNY Mellon Shareowner Services)Computershare as our registrar and transfer agent. The holders of our shares may elect to be entered in one of the registers and to be transferred from time to time from one register to another register provided that our board of directors may however impose transfer restrictions for shares that are registered, listed, quoted, dealt in, or have been placed in certain jurisdictions in compliance with the requirements applicable therein. The transfer to the register kept at the Company’s registered officein Luxembourg may always be requested by a shareholder.

C. MATERIAL CONTRACTS

C.MATERIAL CONTRACTS

See “Item 4. Information on the Company—B. Business Overview.”

D. EXCHANGE CONTROLS

D.EXCHANGE CONTROLS

Foreign Exchange Controls

In 1991, the Argentine Convertibility Law established a fixed exchange rate according to which the Argentine Central Bank was statutorily obliged to sell U.S. dollars to any individual at a fixed exchange rate of Ps.1.00 per $1.00. In 2001 Argentina experienced a period of severe political, economic and social crisis, and on January 6, 2002, the Argentine congress enacted the Public Emergency Law abandoning more than ten years of fixed Peso-U.S. dollar parity. After devaluing the Peso and setting the official exchange rate at Ps.1.40 per $1.00, on February 11, 2002, the Argentine government allowed the Peso to float. The shortage of U.S. dollars and their heightened demand caused the Peso to further devaluate significantly in the first half of 2002. The Argentine Central Bank may indirectly affect this market through its active participation. Due to the deterioration of the economic and financial situation in Argentina during 2001 and 2002, in addition to the abandonment of the Peso-U.S. dollar parity, the Argentine government established a number of monetary and currency exchange control measures, including a partial freeze on bank deposits, the suspension on payments of its sovereign foreign debt, restrictions on the transfer of funds out of, or into, Argentina, and the creation of the Single Free Foreign Exchange Market (“Mercado Único y Libre de Cambios”Cambios”, or the “FX Market”) through which all purchases and sales of foreign currency must be made. Since 2003, these restrictions have been progressively eased to some extent yetuntil 2011. However due to the increase of the capital flow out of Argentina, the Argentine government recently imposed some additional restrictions on the transfer of funds from Argentina. Accordingly, the following restrictions that could affect our Argentine operations still remainare in effect:

(1) Argentine entities have access to the FX Market for the purchase of foreign currency and its transfer abroad for, among other things:

(a) Making portfolio investments (“atesoramiento”) of up to $2.0 million per calendar month, provided that the Argentine entity is in compliance with the foreign debt information regime set forth in Communication “A” 3,602 of the Argentine Central Bank (the “Foreign Debt Information Regime”), an information regime where by debtors must inform the Argentine Central Bank of any foreign indebtedness incurred. Recent regulations, however, have restricted the possibility of certain financial trusts, among others, to access the FX Market without prior authorization from the Argentine Central Bank;

     (b) Making payments of principal on foreign financial indebtedness at maturity or less than 3010 days in advance of the stated maturity to the extent that the proceeds of the foreign indebtedness have remained in Argentina at least during the Waiting Period (as defined below) or to make partial or full payments more than 3010 days in advance of the stated maturity, provided that, among other cases, (i) if the payment is not made with funds received from abroad as part of a debt restructuring process,capital contributions or (ii) the amount in foreign currency to be prepaid shall not exceed the present value of the portion of the debt being prepaid or the prepayment shall be fully offset with new external financing, the present value of which shall not exceed the value of the debt being prepaid, and (ii) if the prepaymentpayment is made as part of a restructuring process with foreign creditors, the termsfunds obtained from new indebtedness granted by international Organizations and conditions of the new financing and the corresponding prepayment must not result in an increase in the present value of the debt so

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Official Export Credit Agencies provided that certain requirements are met;

refinanced. In all cases, the foreign debt to be repaid must have been disclosed under the Foreign Debt Information Regime;
     (c)(b) Making payments of interest on foreign indebtedness on the stated interest payment date or less than 155 days prior to such stated interest payment date, provided that the foreign debt has been disclosed under the Foreign Debt Information Regime and that the interest to be paid accrued starting either (i) on the date the proceeds received from foreign indebtedness were sold in the FX Market or (ii) on the date of disbursement of funds, provided that the foreign debt has been disclosed under the Foreign Debt Information Regime and that those funds were credited in accounts of correspondent banks that are authorized to sell foreign exchange proceeds in the FX Market within 2 days of disbursement thereof;
     (d)

(c) Making payments for services rendered by foreign residents;

     (e)residents provided that certain requirements are met;

(d) Making payments for imported goods, on demand or in advance, provided that certain requirements are met (e.g., nationalization of the imported goods within certain specific terms and filing of the import documentation with the financial entity); and

     (f)

(e) Making payments of corporate profits and dividends to non-Argentine-resident shareholders, provided that the distribution of dividends is approved on the basis of audited financial statements issued by the Argentine entity and certified by external auditors;

auditors.

(2) Argentine entities are required to transfer into Argentina and sell for Pesos through the FX Market, among others, the proceeds from foreign financial indebtedness and from foreign indebtedness qualifying as pre-export financing under the rules of the Argentine Central Bank (the “Pre-Export Financings”);

within the following 30 days and 10 business days after disbursement respectively;

(3) Argentine entities are required to transfer into Argentina and sell for Pesos in the FX Market all foreign currency proceeds from exports of goods (except those that are applied to the repayment of Pre-Export Financings) and services within the certain times established by the Ministry of Economy and the Argentine Central Bank;

(4) No payments on new foreign financial indebtedness (other than debt securities issued under a primary public offering and listed in self-regulated markets, Pre-Export Financings, and indebtedness with multilateral and bilateral credit institutions and official credit agencies granted to Argentine residents directly through related agencies) or their renewals or extensions can be made by any means before a 365-day term has elapsed from the date on which the proceeds of the new foreign indebtedness have been transferred into Argentina and converted into Pesos through the FX Market, or from the date of their renewal or extension (the “Waiting Period”) unless the transaction qualifies for an exemption;

(5) Upon their transfer into Argentina and sale for Pesos through the FX Market, the proceeds of foreign financial indebtedness are subject to the placement of a mandatory, non-interest bearing and non- transferrable bank deposit in U.S. dollars with an Argentine financial entity in an amount equal to 30% of the aggregate amount of such proceeds so transferred for a term of 365 days (the “Mandatory Deposit”). The Mandatory Deposit shall be applicable to the following transactions, among others: (i) incurrence of foreign indebtedness; (ii) offerings involving primary or secondary offerings of capital stock or debt securities issued by companies domiciled in Argentina which are not listed on self-regulated markets, to the extent they do not constitute direct investments (i.e., less than 10% of capital stock); (iii) non- residents’ portfolio investments made for the purpose of holding Argentine currency and assets and liabilities in the financial and non-financial private sector in excess of $5,000 per calendar month, to the extent that such investments are not the result of primary subscriptions of debt securities issued pursuant to a public offering and listed in self-regulated markets and/or primary subscriptions of capital stock of companies domiciled in Argentina issued pursuant to a public offering and listed in self regulated markets; (iv) non-residents’ portfolio investments made for the purpose of purchasing any right in securities in the secondary market issued by the public sector; (v) non-residents’ portfolio

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investments made for the purpose of purchasing primary offers of Central Bank securities issued in primary offerings; (vi) inflows of funds to the Argentine foreign exchange market derived from the sale of foreign portfolio investments of Argentine residents within the private sector in an amount in excess of $2.0 million per calendar month; and (vii) any inflow of funds to the Argentine foreign exchange market made for the purpose of primary offers of bonds and other securities issued by a trust, whether or not issued pursuant to a public offering and whether or not they are listed in self-regulated markets, to the extent that the funds to be used for the purchase of any of the underlying assets would be subject to the non-interest bearing deposit requirement.

The following transactions are exempted from the application of the Mandatory Deposit, among others: (i) primary or secondary offerings of debt securities or stock issued pursuant to a public offering and listed on a self-regulated market; (ii) foreign currency denominated loans granted by a local financial entity under certain conditions; (iii) indebtedness with multilateral and bilateral credit institutions and official credit agencies; (iv) the proceeds of foreign financial indebtedness; provided that (a) the proceeds from the exchange settlement, net

of taxes and expenses, are used to purchase foreign currency in order to pay principal on foreign debt and/or to invest in long term foreign assets; or (b) the loan has a minimum average life of not less than two years, including payments of principal and interest, and to the extent the proceeds of such loan are applied to make investments which are then registered among other capitalized cost categories as “property, plant and equipment” (bienes de uso), “research/exploration costs” (gastos de investigation,prospección y exploration) or “intangible assets” (activos intangibles) as part of the relevant debtor’s balance sheet or “inventory” (bienes de cambio); and (v) foreign trade financings; and

(6) Transfer into Argentina and sale for Pesos through the FX Market of foreign investments of Argentine entities is subject to the Mandatory Deposit on the amounts exceeding $2.0 million per calendar month.]

E. TAXATION

(7) Non-Argentine residents require prior Argentine Central Bank approval to purchase foreign currency in the FX Market, unless the transaction qualifies for an exemption. The Argentine Central Bank has established the following exemptions: (a) without limitation on the amount: for the total amounts collected in Argentina under the sale and liquidation of a “direct investment” in Argentina (i.e. sale of real property, sale of equity holdings, capital reduction and reimbursement of capital contributions in an Argentine company where the investor holds more than 10% of the aggregate equity); and (b) up to the amount of US$ 500,000 per calendar month: for the amounts collected under portfolio investments (including interest) and/or resulting from the sale of such portfolio investments (i.e. stock portfolio and stockholdings in local companies, investment in mutual investment funds and local trusts, purchases of bank credit portfolios, investments in local bonds issued in Argentine Pesos and purchases of other local credits).

The above exemptions are subject to compliance with certain requirements, including: (a) in the case of sale of portfolio investment, the non-Argentine resident must file a certificate issued by a financial entity or exchange agency stating the amount of the investment and the date in which the funds paid for such investment were transferred to Argentina and, if applicable, sold in the FX Market; and (b) in the case of the re-patriation of “direct investments”, among other requirements, the non-Argentine investor was not obliged to demonstrate that the funds paid for its investment or disbursement for its capital contribution were transferred and sold in the FX Market (i.e. brought to Argentina and sold for Argentine pesos) in order to be allowed to repatriate (i.e. have access to the FX Market to purchase foreign currency with Argentine pesos and transfer it abroad) the funds collected in Argentina as a consequence of a subsequent sale or liquidation of such investment, or capital reduction or reimbursement.

In both cases, 365 days period shall be elapsed since the investment has been made.

On October 28, 2011, the Argentine Central Bank issued the Communication “A” 5237 that added new requirements for non-Argentine investors to repatriate funds collected in Argentina as a consequence of a sale or liquidation of a “direct investment”.

Pursuant to this Communication, in order for a non-Argentine investor to be allowed to have access to the FX Market to purchase foreign currency with Argentine pesos collected in Argentina and transfer it abroad as a result of a subsequent sale or liquidation of a “direct investment”, the non-Argentine investor must evidence that the funds originally paid for such investment, were transferred into Argentina and sold for pesos in the FX Market (the “Transfer Requirement”). All “direct investments” made before October 28, 2011 are exempted from the Transfer Requirement. The Communication sets a “burden” to be met by any non-Argentine resident who eventually needs to purchase foreign currency in the FX Market to repatriate Argentine-Peso denominated funds collected as a result of the sale or liquidation of an investment. Conversely, if the foreign investor believes that it will not need to repatriate, it is not required to comply with the Transfer Requirement, and therefore, the purchase price of such investment and any capital contribution may be kept abroad. The Communication does not restrict the purchase of foreign currency to pay dividends to non-Argentine residents.

The Communication additionally sets forth that in case of a transfer of rights of a foreign direct investment between non-Argentine residents, the Transfer Requirement will be deemed complied with by the transferor if the investor (the “Prior Investor”) who sold the investment to the transferor complied with the Transfer Requirement, as long as the Transfer Requirement were complied with by the Prior Investor because its investment had been made as from the Effective Date. Therefore, the Communication allows repatriation to the selling investor if the investor who originally sold the investment had already complied with the Transfer Requirement.

E.TAXATION

Material Luxembourg Tax Considerations for Holders of Shares

The following is a summary discussion of certain Luxembourg tax considerations of the acquisition, ownership and disposition of your shares that may be applicable to you if you acquire our shares. This does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any of the Company’s common shares, and does not purport to include tax considerations that arise from rules of general application or that are generally assumed to be known to holders. This discussion is not a complete analysis or listing of all of the possible tax consequences of such transactions and does not address all tax considerations that might be relevant to particular holders in light of their personal circumstances or to persons that are subject to special tax rules.

It is not intended to be, nor should it be construed to be, legal or tax advice. This discussion is based on Luxembourg laws and regulations as they stand on the date of this annual report and is subject to any change in law or regulations or changes in interpretation or application thereof (and which may possibly have a retroactive effect). Prospective investors should therefore consult their own professional advisers as to the effects of state, local or foreign laws and regulations, including Luxembourg tax law and regulations, to which they may be subject.

As used herein, a “Luxembourg individual” means an individual resident in Luxembourg who is subject to personal income tax (impôt sur le revenu) on his or her worldwide income from Luxembourg or foreign sources, and a “Luxembourg corporate holder” means a company (that is, a fully taxable entity within the meaning of Article 159 of the Luxembourg Income Tax Law) resident in Luxembourg subject to corporate income tax (impôt sur le revenu des collectivités) on its worldwide income from Luxembourg or foreign sources. For purposes of this summary, Luxembourg individuals and Luxembourg corporate holders are collectively referred to as “Luxembourg Holders”. A “non-Luxembourg Holder” means any investor in shares of Adecoagro other than a Luxembourg Holder.

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Tax regime applicable to realized capital gains

Luxembourg Holders

Luxembourg resident individual holders

Capital gains realized by Luxembourg resident individuals who do not hold their shares as part of a commercial or industrial business and who hold no more than 10% of the share capital of the Company will only be taxable if they are realized on a sale of shares that takes place before their acquisition or within the first six months following their acquisition.

If such shares are held as part of a commercial or industrial business, capital gains would be taxable in the same manner as income from such business.

For Luxembourg resident individuals holding (together with his/her spouse or civil partner and underage children) directly or indirectly more than 10% of the capital of Adecoagro, capital gains will be taxable, regardless of the holding period. In case of a sale of shares after six months following their acquisition, a more favorable tax rate will apply.

Luxembourg resident corporate holders

Capital gains realized upon the disposal of shares by a fully taxable resident corporate holder will in principle be subject to corporate income tax and municipal business tax. The combined applicable rate (including an unemployment fund contribution) is 28.59%29.22% for the fiscal year ending 20102013 for a corporate holder established in Luxembourg-City. An exemption from such taxes may be available to the holder pursuant to article 166 of the Luxembourg Income Tax Law subject to the fulfillment of the conditions set forth therein. The scope of the capital gains exemption can be limited in the cases provided by the Grand Ducal Decree of December 21,2001.

Non-Luxembourg Holders

An individual who is a non-Luxembourg Holder of shares (and who does not have a permanent establishment, a permanent representative or a fixed place of business in Luxembourg) will only be subject to Luxembourg taxation on capital gains arising upon disposal of such shares if such holder has (together with his or her spouse and underage children) directly or indirectly held more than 10% of the capital of Adecoagro at any time during the past five years, and either (i) such holder has been a resident of Luxembourg for tax purposes for at least 15 years and has become a non-resident within the last five years preceding the realization of the gain, subject to any applicable tax treaty, or (ii) the disposal of shares occurs within six months from their acquisition (or prior to their actual acquisition), subject to any applicable tax treaty.

A corporate non-Luxembourg Holder (that is, an entity within the meaning of Article 159 of the Luxembourg Income Tax Law), which has a permanent establishment, a permanent representative or a fixed place of business in Luxembourg to which shares are attributable, will bear corporate income tax and municipal business tax on a gain realized on a disposal of such shares as set forth above for a Luxembourg corporate holder. However, gains realized on the sale of the shares may benefit from the full exemption provided for by Article 166 of the Luxembourg Income Tax Law and by the Grand Ducal Decree of December 21, 2001 subject in each case to fulfillment of the conditions set out therein.

A corporate non-Luxembourg Holder, which has no permanent establishment in Luxembourg to which the shares are attributable, will bear corporate income tax on a gain realized on a disposal of such shares under the same conditions applicable to an individual non-Luxembourg Holder, as set out above.

157

Tax regime applicable to distributions

Withholding tax

Distributions imputed for tax purposes on newly accumulated profits are subject to a withholding tax of 15%. The rate of the withholding tax may be reduced pursuant to double tax avoidance treaty existing between Luxembourg and the country of residence of the relevant holder, subject to the fulfillment of the conditions set forth therein.

No withholding tax applies if the distribution is made to (i) a Luxembourg resident corporate holder (that is, a fully taxable entity within the meaning of Article 159 of the Luxembourg Income Tax Law), (ii) an undertaking of collective character which is resident of a Member State of the European Union and is referred to by article 2 of the Council Directive of 23rd July, 19902011/96 concerning the common fiscal regime applicable to parent and subsidiary companies of different member states (90/435/EEC),of November 20, 2011, (iii) a corporation or a cooperative company resident in Norway, Iceland or Liechtenstein and subject to a tax comparable to corporate income tax as provided by the Luxembourg Income Tax Law, (iv) an undertaking with a collective character subject to a tax comparable to corporate income tax as provided by the Luxembourg Income Tax Law which is resident in a country that has concluded a tax treaty with Luxembourg, (v) a Luxembourg permanent establishment of one of the afore-mentioned categories and (vi) a corporation company resident in Switzerland which is subject to corporate income tax in Switzerland without benefiting from an exemption, provided that at the date of payment, the holder holds or commits to hold directly or through a tax transparent vehicle, during an uninterrupted period of at least twelve months, shares representing at least 10% of the share capital of Adecoagro or acquired for an acquisition price of at least EUR 1,200,000.

Luxembourg Holders

With the exception of a Luxembourg corporate holders benefitting from the exemption referred to above, Luxembourg individual holders, and Luxembourg corporate holders subject to Luxembourg corporation taxes, must include the distributions paid on the shares in their taxable income, 50% of the amount of such dividends being exempted from tax. The applicable withholding tax can, under certain conditions, entitle the relevant Luxembourg Holder to a tax credit.

Net wealth tax

Luxembourg Holders

Luxembourg net wealth tax will not be levied on a Luxembourg Holder with respect to the shares held unless (i) the Luxembourg Holder is a legal entity subject to net wealth tax in Luxembourg; or (ii) the shares are attributable to an enterprise or part thereof which is carried on through a permanent establishment, a fixed place of business or a permanent representative in Luxembourg.

Net wealth tax is levied annually at the rate of 0.5% on the net wealth of enterprises resident in Luxembourg, as determined for net wealth tax purposes. The shares may be exempt from net wealth tax subject to the conditions set forth by Paragraph 60 of the Law of October 16, 1934 on the valuation of assets (Bewertungsgesetz), as amended.

Non-Luxembourg Holders

Luxembourg net wealth tax will not be levied on a non-Luxembourg Holder with respect to the shares held unless the shares are attributable to an enterprise or part thereof which is carried on through a permanent establishment or a permanent representative in Luxembourg.

Stamp and registration taxes

No registration tax or stamp duty will be payable by a holder of shares in Luxembourg solely upon the disposal of shares by sale or exchange.

158

Estate and gift taxes

No estate or inheritance tax is levied on the transfer of shares upon the death of a holder of shares in cases where the deceased was not a resident of Luxembourg for inheritance tax purposes and no gift tax is levied upon a gift of shares if the gift is not passed before a Luxembourg notary or recorded in a deed registered in Luxembourg. Where a holder of shares is a resident of Luxembourg for tax purposes at the time of his death, the shares are included in its taxable estate for inheritance tax or estate tax purposes.

United States Federal Income Taxation of the Company

Our business assets and properties are located, and all of our employees and executives are based outside the United States. Our business is directly conducted through operating companies organized under the laws of countries other than the United States. These non-U.S. operating companies are indirectly owned by IFH, a holding company which is a partnership for U.S. federal income tax purposes organized under the laws of Delaware. As a partnership that is not engaged in a trade or business within the United States within the meaning of section 864 of the Internal Revenue Code, IFH is not itself subject to U.S. federal net income taxes. We acquired approximately 98 percent of IFH prior to undertaking the IPO in exchange for our stock.

Under rules to prevent expatriation of and by U.S. corporations and certain U.S. partnerships under Code section 7874(b), we would be treated as a U.S. domestic corporation if for this purpose (i) we were deemed to have acquired substantially all of the assets constituting the trade or business of a U.S. domestic partnership and (ii) 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 the IPO for purposes of the 80% threshold) and (iii) we were found not to conduct substantial business activities in Luxembourg. In that event, we would be subject to U.S. federal net income tax on our worldwide income and dividends we pay would be subject to U.S. federal withholding tax at a 30% rate (subject to reduction, to the extent the beneficial owner of the dividend is entitled to claim a reduced rate of withholding under an applicable income tax treaty).

We believe that, and we obtained an opinion from our U.S. tax counsel in connection with the IPO to the effect that the restructuring transactions executed prior to or in connection with the IPO should not be subject to section 7874(b). Accordingly, we do not believe that we will be subject to U.S. taxation on a net income basis nor do we anticipate paying dividends subject to U.S. federal withholding tax. However, the relevant rules are unclear in certain respects and there is limited guidance on the application of the rules to acquisitions of partnerships or partnership assets constituting a trade or business. Accordingly, we cannot assure you that the 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. Prospective holders who are non-United States persons should also note that, in that event, we would be required to withhold tax from any dividends we pay to non-U.S. Holders (subject to any applicable income tax treaties applicable to those non-U.S. Holders).

Shareholders are urged to consult their own tax advisors about the possible application of section 7874. The remainder of this discussion assumes that we are not treated as a U.S. corporation for U.S. federal income tax purposes.

Material U.S. Federal Income Tax Considerations for U.S. Holders

The following is a discussion of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our common shares. This discussion applies only to beneficial owners of common shares that are “U.S. Holders” (as defined below) and that hold our common shares as “capital assets” (generally, property held for investment). This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, (the “Code”), final, temporary and proposed Treasury regulations, administrative pronouncements and judicial decisions, all as currently in effect and all of which are subject to change (possibly with retroactive effect) and to differing interpretations.

159

This discussion does not address all U.S. federal income tax considerations that may be relevant to a particular holder based on its particular circumstances, and you are urged to consult your own independent tax advisor regarding your specific tax situation. For example, the discussion does not address the tax considerations that may be relevant to U.S. Holders in special tax situations, such as:

insurance companies;

tax-exempt organizations;

brokers or dealers in securities or currencies and traders in securities that elect to mark to market;

certain financial institutions;

partnerships or other pass-through entities;

holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

U.S. expatriates;

holders that hold our common shares as part of a hedge, straddle or conversion or other integrated transaction; or

holders that own, directly, indirectly, or constructively, 10% or more of the total combined voting power of our common shares.

This discussion does not address the alternative minimum tax consequences of holding common shares or the indirect consequences to holders of equity interests in partnerships or other entities that own our common shares. Moreover, this discussion does not address the state, local and foreign tax consequences of holding our common shares, or any aspect of U.S. federal tax law (such as the estate and gift tax or the Medicare tax on net investment income) other than U.S. federal income taxation.

You are a “U.S. Holder” if you are a beneficial owner of our common shares and you are, for U.S. federal income tax purposes:

an individual who is a citizen or resident of the United States;

a corporation, or any other entity taxable as a corporation, created or organized in or under the laws of the United States or any State thereof, including the District of Columbia;

an estate, the income of which is subject to U.S. federal income taxation regardless of its source;

a trust (a) if a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (b) that has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.

If a partnership (or an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common shares, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner of a partnership considering the purchase of our common shares should consult its own independent tax advisor.

160

You should consult your own independent tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of purchasing, owning and disposing of our common shares in your particular circumstances.

Passive Foreign Investment Company (“PFIC”) Rules

U.S. Holders generally will be subject to a special, adverse tax regime that would differ in certain respects from the tax treatment described below if we are, or were to become, a PFIC for U.S. federal income tax purposes.

In general, we will be a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder held our common shares, either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, royalties, rents, annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.

Although the determination of whether a corporation is a PFIC is made annually, and thus may be subject to change, we do not believe that we were a PFIC for U.S. federal income tax purposes for our most recently completed taxable year, nor that we will be one for our current taxable year and we do not currently expect to become one in the foreseeable future. The remainder of this discussion assumes that we are not a PFIC for U.S. federal income tax purposes.

Dividends

Distributions with respect to our common shares will, to the extent made from our current or accumulated earnings and profits as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. To the extent that any distribution exceeds the amount of our earnings and profits, it will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s adjusted tax basis in the common shares, and thereafter as capital gain.

We do not currently maintain calculations of our earnings and profits under U.S. federal income tax principles. Unless and until these calculations are made, distributions should be presumed to be taxable dividends for U.S. federal income tax purposes. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.

Cash dividends (including amounts withheld on account of foreign taxes) paid with respect to our common shares generally will be includible in the gross income of a U.S. Holder as ordinary income on the day on which the dividends are received by the U.S. Holder. Dividends with respect to our common shares will not be eligible for the dividends received deduction allowed to corporations.

Certain non-corporate U.S. Holders, including individuals, may be entitled to preferential rates of taxation with respect to dividends received in taxable years beginning before January 1, 2013.dividends. Such preferential rates of taxation are available for dividends paid by qualified foreign corporations. A foreign corporation will be treated as a qualified foreign corporation with respect to dividends

received from that corporation on common shares that are readily tradable on an established securities market in the United States. As our shares will be listed on the New York Stock Exchange, we believe dividends paid by us will be eligible for these preferential rates. There can, however, be no assurance that our common shares will be considered readily tradable on an established securities market in the future. A qualified foreign corporation also includes foreign corporations eligible for the benefits of certain income tax treaties with the United States. If, as we anticipate, we are eligible for the benefits of the income tax treaty between Luxembourg and the United States, dividends paid on our common shares would be eligible for preferential rates of taxation without regard to the trading status of our common shares.

161

The amount of any cash dividend paid in foreign currency will equal the U.S. dollar value of the distribution, calculated by reference to the exchange rate in effect on the date the distribution is received, regardless of whether the payment is in fact converted to U.S. dollars at that time. A U.S. Holder should not recognize any foreign currency gain or loss in respect of such distribution if such foreign currency is converted into U.S. dollars on the date received. If the foreign currency is not converted into U.S. dollars on the date received, however, gain or loss may be recognized upon a subsequent sale or other disposition of the foreign currency. Such foreign currency gain or loss, if any, will be U.S.-source ordinary income or loss.

Dividends received by most U.S. Holders will constitute foreign-source “passive category” income (“general category income” for certain U.S. Holders) for U.S. foreign tax credit purposes. Subject to limitations under U.S. federal income tax law concerning credits or deductions for foreign taxes and certain exceptions for short-term and hedged positions, a Luxembourg withholding tax imposed on dividends described above under “Material Luxembourg Tax Considerations for Holders of Shares—Tax regime applicable to distributions—Withholding tax” would be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or at a U.S. Holder’s election, may be deducted in computing taxable income if the U.S. Holder has elected to deduct all foreign income taxes for the taxable year). Special limitations on foreign tax credits apply to dividends subject to the preferential rate of taxation for qualified dividends. The rules with respect to foreign tax credits are complex and U.S. Holders are urged to consult their independent tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Taxation of Capital Gains

Gain or loss realized by a U.S. Holder on the sale, exchange or other taxable disposition of common shares will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized (including the gross amount of the proceeds before the deduction of any foreign tax) on the sale or other taxable disposition and such U.S. Holder’s adjusted tax basis in the common shares. Capital gains of certain non-corporate U.S. Holders, including individuals, derived with respect to capital assets held for more than one year generally are eligible for various reduced rates of taxation. The deductibility of capital losses is subject to limitations under the Code.

Capital gain or loss, if any, realized by a U.S. Holder on the sale, exchange or other taxable disposition of a common share generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes. Consequently, in the case of a disposition of a share that is subject to Luxembourg or other foreign income tax imposed on the gain, the U.S. Holder may not be able to benefit from the foreign tax credit for that foreign income tax (i.e., because the income or loss on the disposition would be U.S. source). Alternatively, the U.S. Holder may take a deduction for the foreign income tax if such holder does not take a credit for any foreign income tax during the taxable year.

Backup Withholding and Information Reporting

In general, dividends on common shares, and payments of the proceeds of a sale, exchange or other taxable disposition of common shares, paid within the U.S. or through certain U.S. related financial intermediaries to a U.S. Holder are subject to information reporting and may be subject to backup withholding unless the holder is an exempt recipient or, in the case of backup withholding, provides an accurate taxpayer identification number and certifies under penalty of perjury that the holder is a U.S. person and is not subject to backup withholding.

Backup withholding is not an additional tax. Generally, you may obtain a refund of any amounts withheld under the backup withholding rules that exceed your U.S. federal income tax liability by timely filing a refund claim with the IRS. The amount of any backup withholding withheld from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

162

Recently enacted legislation requires certain U.S. Holders to report to the IRS information with respect to their investment in certain “foreign financial assets,” including our common shares, not held through a custodial account with a U.S. financial institution. Investors who fail to report this required information could become subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this new legislation on their investment in our common shares.
F. DIVIDENDS AND PAYING AGENTS

F.DIVIDENDS AND PAYING AGENTS

Not applicable.

G. STATEMENT BY EXPERTS

G.STATEMENT BY EXPERTS

Not applicable.

H. DOCUMENTS ON DISPLAY

H.DOCUMENTS ON DISPLAY

We are required to file annual and special reports and other information with the SEC. You may read and copy any documents filed by the Company at the SEC’s public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. The SEC also maintains a website at http://www.sec.gov which contains reports and other information regarding registrants that file electronically with the SEC.

I. SUBSIDIARY INFORMATION

I.SUBSIDIARY INFORMATION

Not applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk

In the normal course of business, we are exposed to commodity price and interest rate risks, primarily related to our crop production activities and changes in exchange rates and interest rates. We manage our exposure to these risks through the use of various financial instruments, none of which are entered into for trading purposes. We have established policies and procedures governing the use of financial instruments, specifically as they relate to the type and volume of such financial instruments. Our use of financial derivative instruments is associated with our core business and is regulated by internal control policies. For further information on our market risks, please see Note 3 to our consolidated financial statements.

Consolidated Financial Statements.

Item 12. Description of Securities Other than Equity Securities
A. DEBT SECURITIES

A.DEBT SECURITIES

Not applicable.

B. WARRANTS AND RIGHTS

B.WARRANTS AND RIGHTS

Not applicable.

C. OTHER SECURITIES

C.OTHER SECURITIES

Not applicable.

D. AMERICAN DEPOSITORY SHARES

D.AMERICAN DEPOSITORY SHARES

Not applicable.

163

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Not applicable.

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Not applicable.

Item 15. Controls and Procedures

a) Disclosure Controls and Procedures

Our company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation pursuant to Rule 13a-15 promulgated under the Securities Exchange Act of 1934, of the effectiveness of our disclosure controls and procedures as of December 31, 2010.2013. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on this evaluation, our company’s Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of December 31, 2010.

2013.

b) Management’s Annual Report on Internal Control over Financial Reporting

The Company’s Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer that: (i) pertains to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provides reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements for external reporting in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorization of the Company’s management and directors; and (iii) provides reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedure may deteriorate. The Company, with the participation of its Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013.

We assessed the effectiveness of the Company’s internal controls over financial reporting as of December 31, 2013. In making this assessment, management used the criteria established in “Internal Control — Integrated Framework (1992)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). As a result of this assessment, the Company’s management has determined that the Company’s internal control over financial reporting was effective as of December 31, 2013.

c) Attestation Report of the Registered Public Accounting Firm

     This annual

Price Waterhouse & Co S.R.L, an independent registered public accounting firm, our independent auditor, issued an attestation report does not include aon Internal Control Over Financing Reporting on April 30, 2014. The report of management’s assessment regardingPrice Waterhouse & Co S.R.L, our independent auditor,on our internal control over financial reporting or an attestation reportis included herein at page F-2 of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

our Consolidated Financial Statements.

d) Changes in internal control over financial reporting

     During

As required by Rule 13a-15(d), under the period covered by this report, there has been no change inExchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting to determine whether any change occurred during the period covered since the last report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Based on this evaluation, it has been determined that there has been no change during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 16A. Audit Committee Financial Expert16.

Item 16A.Audit Committee Financial Expert

Our audit committee consists of four independent directors: Mr. Plínio Musetti, Mr. Mark Schachter, Mr. Daniel González and Mr. Julio Moura Neto.Andrés Velasco Brañes. Our board of directors has determined that Mr. Mark Schachter has the attributes of an “audit committee financial expert” and is independent within the meaning of this Item 16A and satisfies the financial literacy requirements of the NYSE.

Item 16B. Code of Ethics

Item 16B.Code of Ethics

We have adopted a code of ethics and business conduct that applies to our directors, executive officers and all employees. The text of our code of ethics is posted on our web site at:www.adecoagro.com.

Item 16C. Principal Accountant Fees and Services
www.adecoagro.com.

Item 16C.Principal Accountant Fees and Services

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by PriceWaterhousePrice Waterhouse & Co. S.R.L. (“PwC”), Buenos Aires, Argentina, a member firm of PricewaterhouseCoopers,Price WaterhouseCoopers International Limited Network, an independent registered accounting public firm and our principal external auditors, for the periods indicated. Except as set forth below, we did not pay any other fees to our auditors during the periods indicated below.

         
  For the year ended 
  December 31, 
  (in thousands of $) 
  2009  2010 
Audit Fees (1)  619   705 
Audit- Related Fees (2)  304   1,444 
Total
  923   2,149 

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   For the year  ended
December 31,		 
   (in thousands of $) 
   2013   2012 

Audit Fees (1)

   1,719     1,983  

Audit- Related Fees (2)

   62     56  
  

 

 

   

 

 

 

Total

   1,781     2,039  

(1)“Audit fees” means the aggregate fees billed for professional services rendered by our principal auditors for the audit of our annual financial statements.
(2)“Audit-related fees” represents aggregate fees billed for professional services rendered by our principal auditors for the assurance and related services, as well as in connection with audit related services for SEC or other regulatory filings, including the IPO.filings.

Audit Committee Approval Policies and Procedures

The Audit Committee has adopted pre-approval policies and procedures requiring that all audit and non-audit services performed by our independent auditors must be pre-approved by the Audit Committee. The Audit Committee annually reviews and pre-approves the services that may be provided by the independent auditors without obtaining specific pre-approval from the Audit Committee. Any service proposals submitted by external auditors that are not pre-approved services need to be discussed and approved by the Audit Committee during its meetings. Once the proposed service is approved, we or our subsidiaries formalize the engagement of services.

The Audit Committee or its Chairman, or any member of the Audit Committee to whom such authority is delegated, may approve in advance any permitted audit or permited non-audit services and fees up to a predetermined amount. The Audit Committee is authorized to establish other policies and procedures for the pre-approval of such services and fees. The Audit Committee approved all of the non-audit services described above and determined that the provision of such services is compatible with maintaining the independence of PwC.

Item 16D. Price Waterhouse & Co. S.R.L.

Item 16D.Exemptions from the Listing Standards for Audit Committees

Not applicable.

Item 16E.Purchases of Equity Securities by the Issuer and Affiliated Purchasers

   (a) Total Number of
Shares (Units)
Purchased		   (b) Average Price
Paid per Share		   (c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs		   (d) Maximum
Number of Shares
that may yet be
Purchased Under the
Plans or Programs		 

09/01/2013 - 09/30/2013

   55,899     7.52     55,899     6,063,192  

10/01/2013 - 10/31/2013

   74,676     7.61     74,676     5,988,516  

11/01/2013 - 11/30/2013

   59,273     7.88     59,273     5,929,243  

12/01/2013 -12/31/2013

   464,606     7.84     464,606     5,464,637  

01/01/2014/ - 01/31/2014

   785,517     7.71     785,517     4,679,120  

02/01/2014 - 02/28/2014

   903,875     7.71     903,875     3,775,245  

03/01/2014 - 03/31/2014

   74,992     7.84     74,992     3,700,253  
  

 

 

   

 

 

   

 

 

   

Total

   2,418,838     7.73     2,418,838    
  

 

 

   

 

 

   

 

 

   

The total number of shares purchased set forth above were purchased pursuant to the Listing Standards for Audit Committees

Company’s Repurchase Program adopted on September 12, 2013. See “Item 10 – Additional Information – Repurchase of Shares”.

Item 16F.Change in Registrant’s Certifying Accountant

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
Item 16F. Change in Registrant’s Certifying Accountant
     During the years ended December 31, 2009 and 2010 and through the date of this annual report, the principal independent accountant engaged to audit our financial statements, PwC, has not resigned, indicated that it has declined to stand for re-election after the completion of its current audit or been dismissed. For each of the years ended December 31, 2009 and 2010, PwC has not expressed reliance on another accountant or accounting firm in its report on our audited annual financial statements for such periods.
     During the years ended December 31, 2009 and 2010 and through the date of this annual report, we have not engaged a new independent accountant as either the principal accountant to audit the our financial statements, or as an independent accountant to audit a significant subsidiary and on whom the principal accountant is expected to express reliance in its report.
Item 16G. Corporate Governance

Item 16G.Corporate Governance

Our corporate governance practices are governed by Luxembourg law (particularly the law of August 10th, 1915 on commercial companies) and our Articlesarticles of Association.association. As a Luxembourg company listed on the NYSE, we are not required to comply with all of the corporate governance listing standards of the NYSE. We, however, believe that our corporate governance practices meet or exceed, in all material respects, the corporate governance standards

that are generally required for controlled companies by the NYSE. The following is a summary of the significant ways that our corporate governance practices differ from the corporate governance standards required for controlledlisted U.S. companies by the NYSE (provided that our corporate governance practices may differ in non-material ways from the standards required by the NYSE that are not detailed here):

Majority of Independent Directors

Under NYSE standards, U.S. listed companies must have a majority of independent directors. There is no legal obligation under Luxembourg law to have a majority of independent directors on the board of directors.

Non-management Directors’ Meetings

Under NYSE standards, non-management directors must meet at regularly scheduled executive sessions without management present and, if such group includes directors who are not independent, a meeting should be scheduled once per year including only independent directors. Luxembourg law does not require holding of such meetings. For additional information, see “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management.”

Communication with Non-Management Directors

NYSE-listed companies are required to provide a method for interested parties to communicate directly with the non-management directors as a group. Shareholders may send communications to the Company’s non-management directors by writing to Mr. Plínio Musetti at Rua Amauri, 255 - 17th17th Floor, Jardim Europa, São Paulo, SP 01448-000, Brazil, telephone: (5511) 3035-1588. Communications will be referred to the Presiding Director for appropriate action. The status of all outstanding concerns addressed to the Presiding Director will be reported to the board of directors as appropriate.

165

Audit Committee

Under NYSE standards, listed U.S. companies are required to have an audit committee composed of independent directors that satisfies the requirements of Rule 10A-3 promulgated under the Exchange Act of 1934. Our Articles of Association provide that the board of directors may set up an audit committee. The board of directors has set up an Audit Committee and has appointed Mr. Plínio Musetti, Mr. Mark Schachter, Mr. Daniel Gonzalez and Mr. Julio Moura NetoAndres Velasco Brañes as members of its audit committee. In accordance with NYSE standards, we have an audit committee entirely composed of independent directors. For additional information, see “Item 6. Directors, Senior Management and Employees—C. Board Practices”.

Under NYSE standards, all audit committee members of listed U.S. companies are required to be financially literate or must acquire such financial knowledge within a reasonable period and at least one of its members shall have experience in accounting or financial administration. In addition, if a member of the audit committee is simultaneously a member of the audit committee of more than three public companies, and the listed company does not limit the number of audit committees on which its members may serve, then in each case the board must determine whether the simultaneous service would prevent such member from effectively serving on the listed company’s audit committee and shall publicly disclose its decision. No comparable provisions on audit committee membership exist under Luxembourg law or our articles of association.

Standards for Evaluating Director Independence

Under NYSE standards, the board is required, on a case by case basis, to express an opinion with regard to the independence or lack of independence of each individual director. Neither Luxembourg law nor our Articles of Association require the board to express such an opinion. In addition, the definition of “independent” under the rules of the NYSE differs in some non-material respects from the definition contained in our Articles of Association.

Audit Committee Responsibilities

Pursuant to our Articles of Association, the audit committee shall assist the board of directors in fulfilling its oversight responsibilities relating to the integrity of the Company’s financial statements, including periodically

reporting to the board of directors on its activity and the adequacy of the Company’s system of internal controls over financial reporting. As per the audit committee charter, as amended, the audit committee shall make recommendations for the appointment, compensation, retention and oversight of, and consider the independence of, the company’s external auditors. The audit committee is required to review material transactions (as defined by the Articles of Association) between us or our subsidiaries with related parties, perform such other duties imposed to it by laws and regulations of the regulated market(s) on which the shares of the Company are listed, and also perform the other duties entrusted to it by the board.

The NYSE requires certain matters to be set forth in the audit committee charter of U.S. listed companies. Our audit committee charter provides for many of the responsibilities that are expected from such bodies under the NYSE standard; however, due to our equity structure and holding company nature, the charter does not contain all such responsibilities, including provisions related to setting hiring policies for employees or former employees of independent auditors.

Nominating/Corporate Governance Committee.

The NYSE requires that a listed U.S. company have a nominating/corporate governance committee of independent directors and a committee charter specifying the purpose, duties and evaluation procedures of the committee. As permitted under Luxembourg law and our Articles of Association, we do not currently have a nominating or corporate governance committee.

Shareholder Voting on Equity Compensation Plans

Under NYSE standards, shareholders of U.S. listed companies must be given the opportunity to vote on equity compensation plans and material revisions thereto, except for employment inducement awards, certain grants, plans and amendments in the context of mergers and acquisitions, and certain specific types of plans. Neither Luxembourg corporate law nor our articles of incorporation require shareholder approval of equity based compensation plans. Luxembourg law only requires approval of the board of directors for the adoption of equity based compensation plans.

166

Disclosure of Corporate Governance Guidelines

NYSE-listed companies must adopt and disclose corporate governance guidelines. Neither Luxembourg law nor our Articles of Association require the adoption or disclosure of corporate governance guidelines. Our board of directors follows corporate governance guidelines consistent with our equity structure and holding company nature, but we have not codified them and therefore do not disclose them on our website.

Code of Business Conduct and Ethics

Under NYSE standards, listed companies must adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Neither Luxembourg law nor our Articles of Association require the adoption or disclosure of such a code of conduct.

We have adopted a code of ethics and business conduct that applies to our directors, executive officers and all employees. The text of our code of ethics is posted on our web site at: www.adecoagro.com.

Chief Executive Officer Certification

A chief executive officer of a U.S. company listed on NYSE must annually certify that he or she is not aware of any violation by the company of NYSE corporate governance standards. In accordance with NYSE rules applicable to foreign private issuers, our chief executive officer is not required to provide NYSE with this annual compliance certification. However, in accordance with NYSE rules applicable to all listed companies, our chief executive officer must promptly notify NYSE in writing after any of our executive officers becomes aware of any noncompliance with any applicable provision of NYSE’s corporate governance standards. In addition, we must submit an executed written affirmation annually and an interim written affirmation each time a change occurs to the board or the audit committee.

167

Item 16H.Mine Safety Disclosure

Not applicable.

PART III

Item 17. Financial Statements

We have responded to Item 18 in lieu of responding to this item.

Item 18. Financial Statements.

See pages F-1 through F-90 of this annual report.

Item 19. Exhibits

Exhibit
Number

  

Description

Exhibit NumberDescription
1.1
  Amended and Restated Articles of Association of Adecoagro S.A. dated February 24, 2011.May 22, 2013.
4.1
  Loan Agreement, dated December 19, 2008, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.1 to the Company’s registration statement on Form F-1 (File No. 333-171683) filed with the Securities and Exchange Commission on January 13, 2011 (“Form F-1”) and incorporated by reference herein.
4.2
  First Amendment Offer to Loan Agreement, dated February 20, 2009, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.2 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.3
Second Amendment Offer to Loan Agreement, dated March 24, 2011, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank.
4.4
  Second Amendment Offer to Loan Agreement, dated December 29, 2009, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.3 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.5
  4.4		  Third Waiver Request to Loan Agreement, dated March 30, 2010, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.4 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.6
  4.5		  Fourth Amendment Offer to Loan Agreement, dated May 14, 2010, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.5 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
  4.6  Fifth Amendment Offer to Loan Agreement, dated November 8, 2010, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.37 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.7Amendment Offer to Loan Agreement, dated March 24, 2011, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as Exhibit 4.7 to the Company’s annual report on Form 20-F for the year ended December 31, 2011 and incorporated herein by reference.
  4.8Amendment Offer 02/2011 to Loan Agreement, dated November 9, 2011, between Adeco Agropecuaria S.A., Pilagá S.A. and Inter-American Development Bank, previously filed as Exhibit 4.8 to the Company’s annual report on Form 20-F for the year ended December 31, 2011 and incorporated herein by reference.
  4.9  Senior Secured Loan Facility, dated July 28, 2010, between Angélica Agroenergia Ltda. and Deutsche Bank AG, London Branch, previously filed as exhibit 10.6 to the Company’s registration statement on Form F-1 and incorporated by reference herein.

4.8
  4.10  Export Prepayment Financing Agreement, dated July 13, 2007, between Angélica Agroenergia Ltda. and a syndicate of banks, previously filed as exhibit 10.7 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.9
  4.11		  First Amendment to Export Prepayment Financing Agreement, dated March 4, 2010, between Angélica Agroenergia Ltda. and a syndicate of banks, previously filed as exhibit 10.8 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.10
  4.12		  English translation of Financing Agreement through BNDES Repasse, dated February 1, 2008, between Adeco Brasil Participações S.A. and a syndicate of banks, previously filed as exhibit 10.9 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.11
  4.13		  English translation of First Amendment to Financing Agreement BNDES Repasse, dated July 1, 2008, between Angélica Agroenergia Ltda. and a syndicate of banks, previously filed as exhibit 10.10 to the Company’s registration statement on Form F-1 and incorporated by reference herein.

168

Exhibit NumberDescription
4.12
  4.14		  English translation of Second Amendment to Financing Agreement BNDES Repasse, dated March 4, 2010, between Angélica Agroenergia Ltda. and a syndicate of banks, previously filed as exhibit 10.11 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.13
  4.15		  English translation of Credit Facility, dated July 30, 2010, between Angélica Agroenergia Ltda. and Banco do Brasil S.A., previously filed as exhibit 10.12 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.14
  4.16		  Unit Issuance Agreement, dated February 16, 2006, between International Farmland Holdings LLC and Usina Monte Alegre S.A., previously filed as exhibit 10.13 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.15
  4.17		  Share Purchase and Sale Agreement, dated February 16, 2006, between International Farmland Holdings LLC and Usina Monte Alegre S.A., previously filed as exhibit 10.14 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.16
  4.18		  Right of First Offer Agreement, dated February 16, 2006, between International Farmland Holdings LLC and Usina Monte Alegre S.A., previously filed as exhibit 10.15 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.17
  4.19		  Supply Offer Letter for milk, dated November 7, 2007, between La Lácteo S.A. and Adeco Agropecuaria S.R.L., previously filed as exhibit 10.16 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.18
  4.20		  Amendment to Supply Offer Letter for milk, dated February 1, 2010, between La Lácteo S.A. and Adeco Agropecuaria S.R.L., previously filed as exhibit 10.17 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.19
  4.21		  Commercial Contract for sugar, dated March 23, 2010, between Angélica Agroenergia Ltda. and Bunge International Commerce Ltd., previously filed as exhibit 10.18 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.20
  4.22		  Amendment to Commercial Contract for sugar, dated June 17, 2010, between Angélica Agroenergia Ltda. and Bunge International Commerce Ltd., previously filed as exhibit 10.19 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.21
  4.23		  English translation of Consignment Contract, dated February 19, 2000, between Molinos Ala S.A. (currently Pilagá S.R.L.) and Establecimiento Las Marías S.A.C.I.F.A., previously filed as exhibit 10.20 to the Company’s registration statement on Form F-1 and incorporated by reference herein.

4.22
  4.24  English translation of Sale Agreement, dated July 8, 2009, between Pilagá S.R.L. and Galicia Warrants S.A., previously filed as exhibit 10.21 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.23
  4.25		  English translation of Mortgage, dated July 8, 2009, between Pilagá S.R.L. and Galicia Warrants S.A., previously filed as exhibit 10.22 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.24
  4.26		  English translation of Reserve Power Agreement, dated February 6, 2009, between Angélica Agroenergia Ltda. and Câmara de Comercialização de Energia Elétrica, previously filed as exhibit 10.23 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.25
  4.27		  English translation of Energy Purchase Contract, dated January 19, 2009, between Usina Monte Alegre Ltda. and Cemig Geração e Transmissão S.A., previously filed as exhibit 10.24 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.26
  4.28		  English translation of Energy Distribution Contract, dated June 3, 2008 between Angélica Agroenergia Ltda. and Empresa Energética do Mato Grosso do Sul., previously filed as exhibit 10.25 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.27
  4.29		  English translation of First Amendment to Energy Distribution Contract, dated April 6, 2009 between Angélica Agroenergia Ltda. and Empresa Energética do Mato Grosso do Sul., previously filed as exhibit 10.26 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.28
  4.30		  English translation of Second Amendment to Energy Distribution Contract, dated May 1, 2010 between Angélica Agroenergia Ltda. and Empresa Energética do Mato Grosso do Sul.,

169

Exhibit NumberDescription
previously filed as exhibit 10.27 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.29
English translation of Joint Venture Contract, dated December 22, 2009 between Pilagá S.R.L. and COPRA S.A., previously filed as exhibit 10.28 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.30
  4.31		  English translation of Sale Agreement for cattle, dated December 14, 2009, between Adeco Agropecuaria S.A. and Quickfood S.A., previously filed as exhibit 10.29 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.31
  4.32		  English translation of First Amendment to Sale Agreement for cattle, dated December 16, 2009, between Adeco Agropecuaria S.A. and Quickfood S.A., previously filed as exhibit 10.30 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.32
  4.33		  English translation of Second Amendment to Sale Agreement for cattle, dated December 17, 2009, between Adeco Agropecuaria S.A. and Quickfood S.A., previously filed as exhibit 10.31 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.33
  4.34		  English translation of Stock Purchase Agreement, dated August 23, 2010, between Kadesh Hispania, S.L., Leterton España, S.L. and Dinaluca S.A., previously filed as exhibit 10.32 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.34
  4.35		  Form of Registration Rights Agreement between Adecoagro S.A. and certain shareholders, previously filed as exhibit 10.33 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.35
Fifth Amendment Offer to Loan Agreement, dated November 8, 2010, between Adeco Agropecuaria S.A., Pilagá S.R.L. and Inter-American Development Bank, previously filed as exhibit 10.37 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.36
  Second Amendment to Export Prepayment Financing Agreement, dated December 14, 2010, between Angélica Agroenergia Ltda. and a syndicate of banks, previously filed as exhibit 10.38 to the Company’s registration statement on Form F-1 and incorporated by reference herein.

4.37  English translation of Third Amendment to Financing Agreement BNDES Repasse, dated December 14, 2010, between Angélica Agroenergia Ltda. and a syndicate of banks, previously filed as exhibit 10.39 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.38
  English translation of First Amendment to Credit Facility, dated December 18, 2010, between Angélica Agroenergia Ltda. and Banco do Brasil S.A., previously filed as exhibit 10.40 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.39
  Stock Subscription Agreement, dated January 6, 2011, between Adecoagro S.A. and Al Gharrafa Investment Company, previously filed as exhibit 10.41 to the Company’s registration statement on Form F-1 and incorporated by reference herein.
4.40
  English translation of Promise to Sell, dated December 21, 2010, between Kelizer S.C.A. and Las Mesetas S.A., previously filed as exhibit 4.40 to the Company’s Annual Report on Form 20- for fiscal year-end 2010 and incorporated by reference herein.
  4.41  English translation of Stock Purchase Agreement, dated August 18, 2011, between Kadesh Hispania, S.L., Leterton España, S.L. and Compañía Agroforestal de Servicios y Mandatos S.A., previously filed as Exhibit 4.41 to the Company’s annual report on Form 20-F for the year ended December 31, 2011 and incorporated herein by reference.
  4.42English translation of Stock Purchase Agreement, dated August 19, 2011, between Kadesh Hispania, S.L., Leterton España, S.L. and Simoneta S.A., previously filed as Exhibit 4.42 to the Company’s annual report on Form 20-F for the year ended December 31, 2011 and incorporated herein by reference.
8.1  Subsidiaries of Adecoagro S.A. as of March 31, 2013.
12.1
  Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2
  Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1
  Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2
  Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1
  Consent of Cushman & Wakefield Argentina S.A.
15.2Consent of Price Waterhouse & Co. S.R.L.

170

SIGNATURES

SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Adecoagro S.A.
By 
  Adecoagro S.A.

/s/ Mariano Bosch

Name: Name:  Mariano Bosch
Title:Title: Chief Executive Officer

Date: June 29, 2011

171April 30, 2014

Adecoagro S.A.

Consolidated Financial Statements as of December 31, 2013 and 2012 and for the years ended December 31, 2010, 20092013, 2012 and 2008

2011

 

F - 1

Report of Independent Registered Public Accounting Firm

To the Shareholders of

Adecoagro S.A.

We have audited

In our opinion, the accompanying consolidated statement of financial position and the related consolidated statements of income, comprehensive income, changes in shareholders’s equity and cash flows present fairly, in all material respects, the financial position of Adecoagro S.A. and its subsidiaries as ofat December 31, 2010, 20092013 and 2008,2012, and the related consolidated statementsresults of incometheir operations and comprehensive income, of changes in shareholders’ equity and oftheir cash flows for each of the three years in the period ended December 31, 2010. These2013 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, are the responsibilityfor maintaining effective internal control over financial reporting and for its assessment of the Company’s management.effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinionopinions on these financial statements and on the Company’s internal control over financial reporting based on our audits.

integrated audits (which were integrated audits in 2013 and 2012). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the auditaudits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesmisstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesstatements, assessing the accounting principles used and significant estimates made by management, as well asand evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.
In our opinion,opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the consolidatedreliability of financial reporting and the preparation of financial statements referredfor external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to above presentthe maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in allaccordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material respects,effect on the financial positionstatements.

F - 2

Because of Adecoagro S.A. and its subsidiaries at December 31, 2010, 2009 and 2008, andinherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the resultsrisk that controls may become inadequate because of their operations and their cash flows for eachchanges in conditions, or that the degree of compliance with the three years in the period ended December 31, 2010, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

policies or procedures may deteriorate.

Buenos Aires, Argentina
March

April 30, 2011

PRICE WATERHOUSE & CO. S.R.L.
by /s/ Mariano C. Tomatis
Mariano C. Tomatis (Partner)
2014

 

PRICE WATERHOUSE & CO. S.R.L.
by/s/ Marcelo de Nicola(Partner)

Marcelo de Nicola

F - 3

Legal information

Denomination:Adecoagro S.A.

Legal address:13-15 Avenue de la Liberté, L-1931, Luxembourg

RCS Luxembourg: B153681

Company activity:Agricultural and agro-industrial

Date of registration:June 11, 2010

Expiration of company charter:No term defined

Number of register:register (RCS Luxembourg):B153.681

Capital stock:119,999,997122,381,815 common shares (See Note 1)

(of which 639,691 are treasury shares)

MajorityLargest shareholder:Pampas Húmedas LLC, a Delaware limited liability company
Quantum Partners LP

Legal address:888 Seventh Avenue, New York, New York 10106, 1300 Thames St. 5th FL, Baltimore MD 21231-3495, United States of America

Parent company activity:Investing

Capital stock:40,738,04025,910,004 common shares

F - 3

4

Adecoagro S.A.

Consolidated Statements of Financial Position

as of December 31, 2010, 20092013 and 2008
2012

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

                 
  Note  2010  2009  2008 
ASSETS
                
Non-Current Assets
                
Property, plant and equipment, net  6   751,992   682,878   571,419 
Investment property  7   21,417   21,246   — 
Intangible assets, net  8   28,653   21,859   18,108 
Biological assets  9   104,216   170,347   75,701 
Investments in joint ventures  10   6,271   6,506   7,508 
Deferred income tax assets  21   67,463   45,113   18,713 
Trade and other receivables, net  11,12   30,752   22,065   8,612 
Other assets      26   34   87 
              
Total Non-Current Assets
      1,010,790   970,048   700,148 
              
Current Assets
                
Biological assets  9   82,541   60,107   50,247 
Inventories  13   57,170   57,902   61,221 
Trade and other receivables, net  11,12   119,205   106,212   75,928 
Derivative financial instruments  11   876   99   2,019 
Cash and cash equivalents  11,14   70,269   74,806   93,360 
              
Total Current Assets
      330,061   299,126 �� 282,775 
              
Spin-off assets  15   —   —   45,311 
              
TOTAL ASSETS
      1,340,851   1,269,174   1,028,234 
              
                 
SHAREHOLDERS EQUITY
                
Capital and reserves attributable to equity holders of the parent
                
Share capital  16   120,000   120,000   108,108 
Share premium      563,343   563,343   507,516 
Cumulative translation adjustment.      11,273   2,516   (87,978)
Equity-settled compensation      13,659   11,914   9,092 
Retained earnings      257   44,161   44,421 
              
Equity attributable to equity holders of the parent
      708,532   741,934   581,159 
              
Non controlling interest      14,570   15,222   57,269 
              
TOTAL SHAREHOLDERS EQUITY
      723,102   757,156   638,428 
              
                 
LIABILITIES
                
Non-Current Liabilities
                
Trade and other payables  11,19   11,785   6,822   6,090 
Borrowings  11,20   250,672   203,134   4,099 
Derivative financial instruments  11   —   280   — 
Deferred income tax liabilities  21   111,495   107,045   94,627 
Payroll and social liabilities  22   1,178   1,106   834 
Provisions for other liabilities  23   4,606   3,326   777 
              
Total Non-Current Liabilities
      379,736   321,713   106,427 
              
Current Liabilities
                
Trade and other payables  11,19   69,236   62,098   46,670 
Current income tax liabilities      978   222   1,487 
Payroll and social liabilities  22   15,478   10,079   6,025 
Borrowings  11,20   138,800   103,647   224,214 
Derivative financial instruments  11   8,920   12,607   4,159 
Provisions for other liabilities  23   4,601   1,652   824 
              
Total Current Liabilities
      238,013   190,305   283,379 
              
TOTAL LIABILITIES
      617,749   512,018   389,806 
              
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
      1,340,851   1,269,174   1,028,234 
              

   Note   2013  2012 

ASSETS

     

Non-Current Assets

     

Property, plant and equipment, net

   6     790,520    880,897  

Investment property

   7     10,147    15,542  

Intangible assets, net

   8     27,341    32,880  

Biological assets

   9     225,203    224,966  

Investments in joint ventures

   10     3,179    2,613  

Financial assets

   16     —      11,878  

Deferred income tax assets

   22     48,368    35,391  

Trade and other receivables, net

   13     53,252    44,030  

Other assets

     707    1,398  
    

 

 

  

 

 

 

Total Non-Current Assets

     1,158,717    1,249,595  
    

 

 

  

 

 

 

Current Assets

     

Biological assets

   9     66,941    73,170  

Inventories

   14     108,389    95,321  

Trade and other receivables, net

   13     141,180    135,848  

Derivative financial instruments

   12     4,102    5,212  

Cash and cash equivalents

   15     232,147    218,809  
    

 

 

  

 

 

 

Total Current Assets

     552,759    528,360  
    

 

 

  

 

 

 

TOTAL ASSETS

     1,711,476    1,777,955  
    

 

 

  

 

 

 

SHAREHOLDERS EQUITY

     

Capital and reserves attributable to equity holders of the parent

     

Share capital

   17     183,573    183,331  

Share premium

   17     939,072    940,332  

Cumulative translation adjustment

     (311,807)   (182,929) 

Equity-settled compensation

     17,352    17,952  

Cash flow hedge

     (15,782)   —    

Other reserves

     (161)   (349) 

Treasury shares

     (961)   (6) 

Retained earnings

     43,018    67,647  
    

 

 

  

 

 

 

Equity attributable to equity holders of the parent

     854,304    1,025,978  
    

 

 

  

 

 

 

Non controlling interest

   17     45    65  
    

 

 

  

 

 

 

TOTAL SHAREHOLDERS EQUITY

     854,349    1,026,043  
    

 

 

  

 

 

 

LIABILITIES

     

Non-Current Liabilities

     

Trade and other payables

   20     2,951    4,575  

Borrowings

   21     512,164    354,249  

Deferred income tax liabilities

   22     57,623    75,389  

Payroll and social liabilities

   23     1,458    1,512  

Provisions for other liabilities

   24     2,293    1,892  
    

 

 

  

 

 

 

Total Non-Current Liabilities

     576,489    437,617  
    

 

 

  

 

 

 

Current Liabilities

     

Trade and other payables

   20     92,965    99,685  

Current income tax liabilities

     310    187  

Payroll and social liabilities

   23     26,139    22,948  

Borrowings

   21     147,967    184,884  

Derivative financial instruments

   12     12,600    5,751  

Provisions for other liabilities

   24     657    840  
    

 

 

  

 

 

 

Total Current Liabilities

     280,638    314,295  
    

 

 

  

 

 

 

TOTAL LIABILITIES

     857,127    751,912  
    

 

 

  

 

 

 

TOTAL SHAREHOLDERS EQUITY AND LIABILITIES

     1,711,476    1,777,955  
    

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 4

5

Adecoagro S.A.

Consolidated Statements of Income

for the years ended December 31, 2010, 20092013, 2012 and 2008
2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

                 
  Note  2010  2009  2008 
Sales of manufactured products and services rendered  24   294,529   183,386   117,173 
Cost of manufactured products sold and services rendered  25   (219,201)  (180,083)  (105,583)
              
Gross Profit from Manufacturing Activities
      75,328   3,303   11,590 
              
Sales of agricultural produce and biological assets  24   131,738   130,217   127,036 
Cost of agricultural produce sold and direct agricultural selling expenses  25   (131,738)  (130,217)  (127,036)
Initial recognition and changes in fair value of biological assets and agricultural produce      (30,528)  71,668   61,000 
Changes in net realizable value of agricultural produce after harvest      7,999   12,787   1,261 
              
Gross (Loss) / Profit from Agricultural Activities
      (22,529)  84,455   62,261 
              
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
      52,799   87,758   73,851 
              
General and administrative expenses  25   (56,562)  (52,393)  (45,633)
Selling expenses  25   (52,528)  (31,169)  (24,496)
Other operating income, net  27   18,224   13,071   17,323 
Excess of fair value of net assets acquired over cost  31   —   —   1,227 
Share of loss of joint ventures  10   (50)  (294)  (838)
              
(Loss) / Profit from Operations Before Financing and Taxation
      (38,117)  16,973   21,434 
              
Finance income  28   16,559   11,553   2,552 
Finance costs  28   (39,496)  (34,216)  (50,860)
                
              
Financial results, net  28   (22,937)  (22,663)  (48,308)
              
Loss Before Income Tax
      (61,054)  (5,690)  (26,874)
              
Income tax benefit  21   16,263   5,415   10,449 
              
Loss for the Year
      (44,791)  (275)  (16,425)
              
                 
Attributable to:
                
Equity holders of the parent      (43,904)  (260)  (18,947)
Non controlling interest      (887)  (15)  2,522 
                 
Loss per share attributable to the equity holders of the parent during the year:
                
Basic  29   (0.361)  (0.002)  (0.168)
Diluted  29   n/a   n/a   n/a 

   Note   2013  2012  2011 

Sales of manufactured products and services rendered

   25     425,307    379,526    365,857  

Cost of manufactured products sold and services rendered

   26     (272,261)   (263,978)   (237,404) 
    

 

 

  

 

 

  

 

 

 

Gross Profit from Manufacturing Activities

     153,046    115,548    128,453  
    

 

 

  

 

 

  

 

 

 

Sales of agricultural produce and biological assets

   25     219,317    225,174    182,227  

Cost of agricultural produce sold and direct agricultural selling expenses

   26     (219,317)   (225,174)   (182,227) 

Initial recognition and changes in fair value of biological assets and agricultural produce

     (39,123)   16,643    86,811  

Changes in net realizable value of agricultural produce after harvest

     12,875    16,004    10,523  
    

 

 

  

 

 

  

 

 

 

(Loss) / Gross Profit from Agricultural Activities

     (26,248)   32,647    97,334  
    

 

 

  

 

 

  

 

 

 

Margin on Manufacturing and Agricultural Activities Before Operating Expenses

     126,798    148,195    225,787  
    

 

 

  

 

 

  

 

 

 

General and administrative expenses

   26     (53,352)   (57,691)   (65,142) 

Selling expenses

   26     (68,069)   (58,602)   (59,404) 

Other operating income, net

   28     49,650    31,097    24,581  

Share of loss of joint venture

   11     (219)   —      —    
    

 

 

  

 

 

  

 

 

 

Profit from Operations Before Financing and Taxation

     54,808    62,999    125,822  
    

 

 

  

 

 

  

 

 

 

Finance income

   29     7,234    11,538    9,132  

Finance costs

   29     (98,916)   (66,654)   (62,341) 
    

 

 

  

 

 

  

 

 

 

Financial results, net

   29     (91,682)   (55,116)   (53,209) 
    

 

 

  

 

 

  

 

 

 

(Loss) / Profit Before Income Tax

     (36,874)   7,883    72,613  
    

 

 

  

 

 

  

 

 

 

Income tax benefit / (expense)

   22     9,277    5,436    (14,662) 
    

 

 

  

 

 

  

 

 

 

(Loss) / Profit for the Year from Continuing Operations

     (27,597)   13,319    57,951  

Profit / (Loss) for the Year from discontinued operations

     1,767    (4,040)   (1,034) 
    

 

 

  

 

 

  

 

 

 

(Loss) / Profit for the Year

     (25,830)   9,279    56,917  
    

 

 

  

 

 

  

 

 

 

Attributable to:

      

Equity holders of the parent

     (25,828)   9,397    56,018  

Non controlling interest

     (2)   (118)   899  

(Loss) / Earnings per share from continuing and discontinued operations attributable to the equity holders of the parent during the year:

      

Basic earnings per share

   30      

From continuing operations

     (0.226)   0.111    0.488  

From discontinued operations

     0.014    (0.034)   (0.009) 

Diluted earnings per share

   30      

From continuing operations

     (0.226)   0.111    0.484  

From discontinued operations

     0.014    (0.034)   (0.009) 

The accompanying notes are an integral part of these consolidated financial statements.

F - 5

6

Adecoagro S.A.

Consolidated Statements of Comprehensive Income

for the years ended December 31, 2010, 20092013, 2012 and 2008
2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

             
  2010  2009  2008 
Loss for the year  (44,791)  (275)  (16,425)
Other comprehensive income:
            
Exchange differences on translating foreign operations  8,956   91,293   (115,725)
          
Other comprehensive income/ (loss) for the year
  8,956   91,293   (115,725)
          
Total comprehensive (loss) / income for the year
  (35,835)  91,018   (132,150)
          
             
Attributable to:
            
Equity holders of the parent  (35,147)  89,215   (128,277)
Non controlling interest  (688)  1,803   (3,873)

   2013  2012  2011 

(Loss) / Profit for the year

   (25,830)   9,279    56,917  

Other comprehensive income:

    

- Items that may be reclassified subsequently to profit or loss:

    

Exchange differences on translating foreign operations

   (129,575)   (80,755)   (112,071) 

Cash flow hedge

   (15,787)   —      —    
  

 

 

  

 

 

  

 

 

 

Other comprehensive (loss) for the year

   (145,362)   (80,755)   (112,071) 
  

 

 

  

 

 

  

 

 

 

Total comprehensive (loss) for the year

   (171,192)   (71,476)   (55,154) 
  

 

 

  

 

 

  

 

 

 

Attributable to:

    

Equity holders of the parent

   (171,172)   (70,792)   (54,592) 

Non controlling interest

   (20)   (684)   (562) 

Total comprehensive income attributable to owners of the parent arising from:

    

Continuing operations

   (172,939)   (66,701)   (53,574) 

Discontinued operations

   1,767    (4,091)   (1,018) 

The accompanying notes are an integral part of these consolidated financial statements.

F - 6

7

Adecoagro S.A.

Consolidated Statements of Changes in Shareholders’ Equity

for the years ended December 31, 2010, 20092013, 2012 and 2008
2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

                                     
  Attributable to equity holders of the parent       
  Members’          Cumulative              Non  Total 
  Contributed  Share Capital  Share  Translation  Equity-settled  Retained      Controlling  Shareholders’ 
  Capital  (*)  Premium  Adjustment  Compensation  Earnings  Subtotal  Interest  Equity 
   
Balance at January 1, 2008
  476,125   —   —   21,512   5,376   64,661   567,674   49,191   616,865 
Adjustments due to Reorganization (See Note 1)  (476,125)  81,939   384,664   (430)  (108)  (1,293)  (11,353)  11,353   — 
   
Adjusted Balance at January 1, 2008
  —   81,939   384,664   21,082   5,268   63,368   556,321   60,544   616,865 
   
Total comprehensive loss for the year  —   —   —   (109,330)  —   (18,947)  (128,277)  (3,873)  (132,150)
Employee share options granted  —   —   —   —   3,824   —   3,824   78   3,902 
Capital contribution  —   26,169   122,852   —   —   —   149,021   3,041   152,062 
Disposal of subsidiary  —   —   —   270   —   —   270   6   276 
Disposal of non controlling interest in subsidiaries  —   —   —   —   —   —   —   (2,527)  (2,527)
   
Balance at December 31, 2008
  —   108,108   507,516   (87,978)  9,092   44,421   581,159   57,269   638,428 
   
Total comprehensive income for the year  —   —   —   89,475   —   (260)  89,215   1,803   91,018 
Employee share options granted  —   —   —   —   2,822   —   2,822   58   2,880 
Capital contribution  —   11,892   55,827   —   —   —   67,719   1,382   69,101 
Disposal of subsidiary  —   —   —   1,019   —   —   1,019   21   1,040 
Subsidiaries spin-off  —   —   —   —   —   —   —   (45,311)  (45,311)
   
Balance at December 31, 2009
  —   120,000   563,343   2,516   11,914   44,161   741,934   15,222   757,156 
   
Total comprehensive loss for the year  —   —   —   8,757   —   (43,904)  (35,147)  (688)  (35,835)
Employee share options granted  —   —   —   —   1,745   —   1,745   36   1,781 
   
Balance at December 31, 2010
  —   120,000   563,343   11,273   13,659   257   708,532   14,570   723,102 
   
(*)On January 24, 2011 shareholders approved a reverse stock split whereby every three shares of capital stock were converted into two shares, changing the nominal value of common shares from US$ 1 to US$ 1.5. Consequently, share capital as from January 24, 2011 totaled 80 million shares that represent US$ 120 million (see Note 1).

  Attributable to equity holders of the parent       
  Share
Capital
(Note 17)		  Share
Premium
(Note 17)		  Cumulative
Translation
Adjustment		  Equity-settled
Compensation		  Other
reserves		  Treasury
shares
(Note 18)		  Retained
Earnings		  Subtotal  Non
Controlling
Interest		  Total
Shareholders’
Equity		 

Balance at
January 1, 2011

  120,000    563,343    11,273    13,659    —      —      257    708,532    14,570    723,102  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit for the year

  —      —      —      —      —      —      56,018    56,018    899    56,917  

Other comprehensive income:

          

- Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations

  —      —      (110,610)   —      —      —      —      (110,610)   (1,461)   (112,071) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive loss for the year

  —      —      (110,610)   —      —       56,018    (54,592)   (562)   (55,154) 

Net proceeds from IPO and Private placement (Note 17)

  60,104    362,926    —      —      —      —      —      423,030    —      423,030  

Employee share options (Note 18):

          

- Value of employee services

  —      —      —      874    —      —      —      874    14    888  

- Exercised

  55    271    —      (110)   —      —      —      216    (2)   214  

- Forfeited

  —      —      —      (1,122)   —      —      1,122    —      —      —    

Restricted shares
(Note 18):

          

- Issued

  641    —      —      —      (632)   —      —      9    (9)   —    

- Value of employee services

  —      —      —      2,751    —       —      2,751    38    2,789  

- Vested

  —      746    —      (838)   102    —      —      10    (10)   —    

- Forfeited

  —      —      —      —      4    (4)   —      —      —      —    

Acquisition of non controlling interest (Note 17)

  —      (1,281)   135    92    —      —      100    (954)   954    —    
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2011

  180,800    926,005    (99,202)   15,306    (526)   (4)   57,497    1,079,876    14,993    1,094,869  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 7

8

Adecoagro S.A.

Consolidated Statements of Cash Flows
Changes in Shareholders’ Equity

for the years ended December 31, 2010, 20092013, 2012 and 2008
2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

                 
  Note  2010  2009  2008 
Cash flows from operating activities:
                
Loss for the year
      (44,791)  (275)  (16,425)
Adjustments for:
                
Income tax benefit  21   (16,263)  (5,415)  (10,449)
Depreciation  6   37,217   30,059   28,144 
Amortization  8   346   297   170 
Gain from the disposal of other property items  27   (847)  (337)  (479)
Gain from disposal of farmland (Note 15)  27   (20,837)  —   — 
Employee share/options granted  26   1,781   2,880   3,902 
Loss/ (gain) from derivative financial instruments and forwards  27,28   (1,189)  7,486   (1,848)
Interest expense, net  28   33,028   27,750   21,830 
Initial recognition and changes in fair value of non harvested biological assets (unrealized)  5   72,374   (55,841)  (26,322)
Changes in net realizable value of agricultural produce after harvest (unrealized)  5   (1,527)  (127)  99 
Provision and allowances      4,980   4,013   (367)
Share of loss from joint venture  10   50   294   838 
Foreign exchange (gains)/ losses, net  28   (7,324)  (10,903)  24,932 
Gain from the sale of farmland businesses  27   —   (18,839)  (13,974)
Excess of fair value of net assets acquired over cost  31   —   —   (1,227)
Changes in operating assets and liabilities:
                
Decrease/ /(increase) in trade and other receivables      3,584   (30,388)  (28,383)
Decrease/ (increase) in inventories      2,259   3,442   (3,289)
Decrease in biological assets      7,171   20,389   4,213 
Decrease/ /(increase) in other assets      8   (5)  2,198 
(Decrease)/ increase in derivative financial instruments      (3,554)  3,162   3,720 
Decrease in other financial assets at fair value through profit or loss      —   —   1,699 
(Decrease)/ increase in trade and other payables      (4,221)  11,508   13,039 
Increase in payroll and social security liabilities      5,470   4,327   1,247 
Increase/ (decrease) in provisions for other liabilities      319   (165)  (2,599)
              
Net cash generated from/ (used in) operating activities before interest and taxes paid      68,034   (6,688)  669 
Interest paid      (33,283)  (25,797)  (16,312)
Income tax paid      (7,813)  (13,322)  (5,784)
              
Net cash generated from / (used in) operating activities
      26,938   (45,807)  (21,427)
              

  Attributable to equity holders of the parent       
  Share
Capital
(Note 17)		  Share
Premium
(Note 17)		  Cumulative
Translation
Adjustment		  Equity-settled
Compensation		  Other
reserves		  Treasury
shares
(Note 18)		  Retained
Earnings		  Subtotal  Non
Controlling
Interest		  Total
Shareholders’
Equity		 

Balance at December 31, 2011

  180,800    926,005    (99,202)   15,306    (526)   (4)   57,497    1,079,876    14,993    1,094,869  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit for the year

  —      —      —      —      —      —      9,397    9,397    (118)   9,279  

Other comprehensive income:

          

- Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations

  —      —      (80,189)   —      —      —      —      (80,189)   (566)   (80,755) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive loss for the year

  —      —      (80,189)   —      —      —      9,397    (70,792)   (684)   (71,476) 

Employee share options (Note 18):

          

- Value of employee services

  —      —      —      265    —      —      —      265    2    267  

- Exercised

  49    263    —      (93)   —      —      —      219    (2)   217  

- Forfeited

  —      —      —      (82)   —      —      82    —      —      —    

Restricted shares
(Note 18):

          

- Value of employee services

  —      —      —      3,847    —      —      —      3,847    24    3,871  

- Vested

  —      1,347    —      (1,516)   181    —      —      12    (12)   —    

- Forfeited

  —      —      —      —      2    (2)   —      —      —      —    

Acquisition of non controlling interest (Note 17)

  2,482    12,717    (1,845)   225    (6)   —      671    14,244    (14,244)   —    

Disposal of subsidiary (Nota 16)

  —      —      (1,693)   —      —      —      —      (1,693)   (12)   (1,705) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2012

  183,331    940,332    (182,929)   17,952    (349)   (6)   67,647    1,025,978    65    1,026,043  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 8

9

Adecoagro S.A.

Consolidated Statements of Cash Flows (Continued)
Changes in Shareholders’ Equity

for the years ended December 31, 2010, 20092013, 2012 and 2008
2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

                 
  Note  2010  2009  2008 
Cash flows from investing activities:
                
Acquisition of subsidiaries, net of cash acquired  31   (7,872)  —   — 
Purchases of property, plant and equipment  6   (87,679)  (97,817)  (186,296)
Purchases of intangible assets  8   (33)  (315)  — 
Purchase of cattle and non current biological assets planting cost  2.3   (35,060)  (40,492)  (31,026)
Interest received  28   1,341   472   1,494 
Proceeds from sale of property, plant and equipment      12,103   7,341   3,467 
Proceeds from disposal of subsidiaries  15   5,475   16,425   25,146 
Acquisition of non controlling interest in subsidiaries  31   —   —   (1,300)
              
Net cash used in investing activities
      (111,725)  (114,386)  (188,515)
              
                 
Cash flows from financing activities:
                
Capital contributions from shareholders      —   69,101   175,453 
Proceeds from long-term borrowings  20   67,379   80,000   18,605 
Net increase in short-term borrowings  20   12,449   6,946   19,142 
              
Net cash generated from financing activities
      79,828   156,047   213,200 
              
Net (decrease)/ increase in cash and cash equivalents
      (4,960)  (4,146)  3,258 
              
Cash and cash equivalents at beginning of year      74,806   93,360   70,686 
Effect of exchange rate changes on cash      423   (14,408)  19,416 
              
Cash and cash equivalents at end of year
      70,269   74,806   93,360 
              

  Attributable to equity holders of the parent       
  Share
Capital
(Note  17)		  Share
Premium
(Note 17)		  Cumulative
Translation
Adjustment		  Equity-settled
Compensation		  Cash
flow
hedge		  Other
reserves		  Treasury
shares
(Note 18)		  Retained
Earnings		  Subtotal  Non
Controlling
Interest		  Total
Shareholders’
Equity		 

Balance at December 31, 2012

  183,331    940,332    (182,929)   17,952    —      (349)   (6)   67,647    1,025,978    65    1,026,043  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss for the year

  —      —      —      —       —      —      (25,828)   (25,828)   (2)   (25,830) 

Other comprehensive income:

           

- Items that may be reclassified subsequently to profit or loss: Exchange differences on translating foreign operations

  —      —      (129,562)   —      —      —      —      —      (129,562)   (13)   (129,575) 

Cash flow hedge (1)

  —      —      —      —      (15,782)   —      —      —      (15,782)   (5)   (15,787) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total comprehensive loss for the year

  —      —      (129,562)   —      (15,782)   —      —      (25,828)   (171,172)   (20)   (171,192) 

Employee share options
(Note 18):

           

- Value of employee services

  —      —      —      61    —      —      —      —      61    —      61  

- Exercised

  —      126    —      (52)   —      —      26    —      100    —      100  

- Forfeited

  —      —      —      (1,199)   —      —      —      1,199    —      —      —    

Restricted shares (Note 18):

           

- Value of employee services

  —      —      —      3,742    —      —      —      —      3,742    —      3,742  

- Vested

  242    2,721    —      (3,152)   —      179    10    —      —      —      —    

- Forfeited

  —      —      —      —      —      9    (9)   —      —      —      —    

Purchase of own shares
(Note 17)

  —      (4,107)   —      —      —      —      (982)   —      (5,089)   —      (5,089) 

Disposal of interest in joint ventures (Note 11)

  —      —      684    —      —      —      —      —      684    —      684  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance at December 31, 2013

  183,573    939,072    (311,807)   17,352    (15,782)   (161)   (961)   43,018    854,304    45    854,349  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Net of US$ 8,347 of income tax.

The accompanying notes are an integral part of these consolidated financial statements.

F - 9

10

Adecoagro S.A.
Notes to

Consolidated Statements of Cash Flows

for the Consolidated Financial Statements (Continued)
years ended December 31, 2013, 2012 and 2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

1. General information

   Note  2013  2012  2011 

Cash flows from operating activities:

      

(Loss) / Profit for the year

     (25,830)   9,279    56,917  

Adjustments for:

      

Income tax (benefit) / expense

  22   (9,277)   (5,436)   14,662  

Depreciation

  6   68,934    54,117    33,847  

Amortization

  8   468    351    337  

Gain from disposal of farmlands and other assets

  28   (26,434)   —      (8,832) 

Gain from the disposal of other property items

  28   (670)   (882)   (394) 

Gain from the sale of subsidiaries

  28   (1,967)   (27,513)   —    

Equity settled share-based compensation granted

  27   3,803    4,138    3,677  

Loss / gain from derivative financial instruments and forwards

  28,29   (266)   6,304    (12,084) 

Interest and other financial expense, net

  29   45,192    18,948    33,006  

Initial recognition and changes in fair value of non harvested biological assets (unrealized)

  5   53,456    13,335    (17,136) 

Changes in net realizable value of agricultural produce after harvest (unrealized)

  5   292    (2,024)   (1,816) 

Provision and allowances

     768    (2,020)   (3,147) 

Share of loss from joint venture

  10   (219)   —      —    

Foreign exchange losses, net

  29   21,087    24,801    12,683  

Cash flow hedge – transfer from equity

  29   2,560    —      —    

Discontinued operations

  11   (1,767)   4,040    1,034  
    

 

 

  

 

 

  

 

 

 

Subtotal

     130,130    97,438    112,754  

Changes in operating assets and liabilities:

      

Increase in trade and other receivables

     (35,464)   (39,163)   (15,850) 

Increase in inventories

     (27,624)   (3,794)   (49,776) 

(Increase) / decrease in biological assets

     (347)   (5,830)   6,745  

Increase / (Decrease) in other assets

     690    10    (1,382) 

Increase / (Decrease) in derivative financial instruments

     8,123    (1,467)   (248) 

Increase in trade and other payables

     23,718    15,309    19,855  

Increase in payroll and social security liabilities

     3,504    5,784    1,785  

(Decrease) / Increase in provisions for other liabilities

     (233)   132    (641) 
    

 

 

  

 

 

  

 

 

 

Net cash generated from operating activities before interest and taxes paid

     102,497    68,419    73,242  

Income tax paid

     (417)   (596)   (16,656) 
    

 

 

  

 

 

  

 

 

 

Net cash generated from operating activities

     102,080    67,823    56,586  
    

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 11

Adecoagro S.A.

Consolidated Statements of Cash Flows (Continued)

for the years ended December 31, 2013, 2012 and Reorganization

2011

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

   Note   2013  2012  2011 

Cash flows from investing activities:

      

Acquisition of subsidiaries, net of cash acquired

   32     —      —      (11,617) 

Purchases of property, plant and equipment

   6     (128,726)   (218,770)   (90,422) 

Purchases of intangible assets

   8     (1,376)   (359)   (195) 

Purchase of cattle and planting cost of non current biological assets

     (96,487)   (82,612)   (63,074) 

Interest received

   29     6,882    11,249    8,019  

Proceeds from sale of property, plant and equipment

     2,594    851    2,611  

Proceeds from sale of farmland and other assets

   16     31,052    15,703    20,532  

Proceeds from disposal of subsidiaries

   16     12,078    10,208    —    

Investment in joint ventures

   16     (4,164)   —      —    

Payment of seller financing arising on subsidiaries acquired

     (1,555)   (33,485)   (6,347) 

Proceeds from sales of financial assets

   16     13,066    —      —    

Discontinued operations

   11     5,100    (3,000)   —    
    

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

     (161,536)   (300,215)   (140,493) 
    

 

 

  

 

 

  

 

 

 

Cash flows from financing activities:

      

Net proceeds from IPO and Private placement

   17     —      —      421,778  

Proceeds from equity settled shared-based compensation exercised

     99    218    214  

Proceeds from long-term borrowings

   21     322,763    230,601    34,980  

Payments of long-term borrowings

   21     (113,750)   (79,781)   (82,244) 

Interest paid

     (45,972)   (34,587)   (33,481) 

Net (decrease) / increase in short-term borrowings

   21     (53,367)   17,057    19,545  

Purchase of own shares

   17     (5,102)   —      —    

Net cash generated from financing activities

     104,671    133,508    360,792  
    

 

 

  

 

 

  

 

 

 

Net increase / (decrease) in cash and cash equivalents

     45,215    (98,884)   276,885  
    

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at beginning of year

     218,809    330,546    70,269  

Effect of exchange rate changes on cash and cash equivalents

     (31,877)   (12,853)   (16,608) 
    

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of year

     232,147    218,809    330,546  
    

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 12

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

1.General information

Adecoagro S.A. (the “Company” or “Adecoagro”) is the Group’s ultimate parent company and is a société anonyme (stock corporation) organized under the laws of the Grand Duchy of Luxembourg. Adecoagro is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the “Group”. These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy;Energy and Land Transformation. Farming is further comprised of five reportable segments, which are described in detail in Note 5 to these consolidated financial statements.

          The Group was established in 2002 and has subsequently grown significantly both organically and through acquisitions. The Group currently has operations in Argentina, Brazil and Uruguay. See Note 32 for a description of the Group companies.
          The Company is the Group’s ultimate parent company and

Adecoagro is a Societe Anonyme corporation incorporated and domiciledPublic Company listed in the Grand DuchyNew York Stock Exchange as a foreign registered company under the symbol of Luxembourg. The address of its registered office is 13-15 Avenue de la Liberté, L-1931, Luxembourg.

AGRO.

These consolidated financial statements have been approved for issue by the Board of Directors on March 30, 2011.

Reorganization
          On October 30, 2010, in a series of transactions as further described below, the members of International Farmland Holdings LLC (“IFH”) completed the contribution of 98% of their respective interests in IFH on a pro rata basis to a newly formed entity, Adecoagro , in exchange for 100% of the common shares of Adecoagro (the “Reorganization”). This Reorganization was done, among other things, to facilitate the initial public offering of the Group (see Note 34). Adecoagro had no prior assets, holdings or operations.
          In connection with the Reorganization, IFH converted from a limited liability company to a limited partnership and transferred a de minimis amount of its interest in IFH (0.00001%) to a newly formed wholly-owned subsidiary, Ona Ltd. (“Ona”), a Maltese corporation. Following the Reorganization, IFH is owned 98% by Adecoagro and 2% by the members, in each case, as Limited Partners, with the 0.00001% interest owned by Ona, as the General Partner. This 2% ownership directly held by current members of IFH does not carry any preferential treatment.
          As part of the Reorganization, the Group decided to amend and rename its existing incentive option plans, namely IFH’s “2004 Incentive Option Plan” and IFH’s “2007/2008 Equity Incentive Plan” as the “Adecoagro/IFH 2004 Stock Incentive Option Plan” and the “Adecoagro/IFH 2007/2008 Equity Incentive Plan”, respectively. In this connection, all obligations of IFH under these plans (including award agreements issued thereunder) have been transferred to Adecoagro, and options to purchase ordinary units of IFH have been converted into options to purchase ordinary shares of Adecoagro. The conversion was based on a ratio intended to maintain in all material respects the same, and in no event greater, economic benefit to optionees as provided under the plans as in effect prior to the Reorganization.
          In addition, the Extraordinary General Meeting of Adecoagro’s shareholders held on January 24, 2011 approved the reverse split of Adecoagro’s common shares, whereby every three shares of capital stock of Adecoagro were converted into two shares, changing the nominal value of Adecoagro’s common shares from US$ 1 to US$ 1.5. Therefore, Adecoagro reduced total shares outstanding from 119,999,997 shares to 79,999,985 shares. Consequently the Adecoagro/IFH 2004 Stock Incentive Option Plan and the Adecoagro/IFH 2007/2008 Equity Incentive Plan were also amended to reflect such change in the nominal value of the common shares.
          The consolidated financial statements of Adecoagro at December 31, 2010 are presented using the historical values from the consolidated financial statements of IFH. However, the issued share capital reflects that of Adecoagro as of that date. The Reorganization is retroactively reflected in the consolidated financial statements of Adecoagro as of that date, in the period in which the Reorganization occurred. The Reorganization did not qualify as a business combination under common control; rather, it was a simple Reorganization of the capital of IFH, the existing organization. As such, the Reorganization is a non-adjusting event under IAS 10 and therefore it is recognized retroactively in the consolidated financial statements of the period in which the Reorganization occurs.
The accompanying notes are an integral part of these consolidated financial statements.

F - 10

13, 2014.

2.Summary of significant accounting policies

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
2.1. Basis of preparation

2.1.Basis of preparation and presentation

The consolidated financial statements of the Group 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 these consolidated financial statements have been applied.

          The financial year corresponds to the calendar year. The consolidated statements of income, of changes in shareholders ´ equity, of comprehensive income and of cash flows include two comparative years.
      ��   Presentation in the consolidated statement of financial position differentiates between current and non-current assets and liabilities. Assets and liabilities are regarded as current if they mature within one year or are held for sale. The consolidated financial statements are presented in United States Dollars.

The consolidated financial statements have been prepared under the historical cost convention as modified by financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss and biological assets and agricultural produce at the point of harvest measured at fair value.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.

(a) Standards, amendments and interpretations to existing standards effective in 2010 and adopted by the Group in 20102013

The following standards, amendments and interpretations to existing standards have been published and were mandatory for the Group as of January 1, 2010:

          In January 2008, the IASB published the revised standards IFRS 3 “Business Combinations” and IAS 27 “Consolidated and Separate Financial Statements.” These standards are the result of the second phase of the project carried out together with the Financial Accounting Standards Board (FASB) to reform the accounting methodology for business combinations. The main changes revised IFRS 3 provides are as follows:
•The revised standard gives the option of measuring non-controlling interests either at fair value or at the proportionate share of the identifiable net assets. This choice can be exercised for each business combination individually.
•In a business combination achieved in stages (step acquisition), the acquirer shall remeasure its previously held equity interest in the acquiree at the date the acquirer obtains control. Goodwill shall then be determined as the difference between the remeasured carrying amount plus consideration transferred for the acquisition of the new shares and any non-controlling interest, minus net assets acquired.
•Contingent consideration shall be measured at fair value at the acquisition date and classified either as equity, or as asset or liability at the acquisition date. Contingent consideration shall be recognized subsequently in accordance with the classification determined at the acquisition date.
•Acquisition-related costs incurred in connection with business combinations shall be recognized as expenses.
2013:

The accompanying notes are an integral part of these consolidated financial statements.

F - 11

13

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.1. Basis of preparation (continued)

2.1.•For changes in contingent consideration classified as a liability at the acquisition date, goodwill cannot be remeasured subsequently.
•According to the revised IFRS 3, effects from the settlementBasis of relationships existing prior to the business combination shall not be part of the exchange for the acquiree.
•In contrast to the previous version of IFRS 3, the revised standard governs the recognitionpreparation and measurement of rights that were granted to another entity prior to the business combination and which are now reacquired as part of the business combination (reacquired rights).
The main changes that revised IAS 27 makes are as described below:
•Changes in a parent’s ownership interest in a subsidiary that do not result in the loss of control shall only be accounted for within equity.
•If a parent loses control of a subsidiary it shall derecognize the consolidated assets and liabilities. The new requirement is that any investment retained in the former subsidiary shall be recognized at fair value at the date when control is lost; any differences resulting from this shall be recognized in profit or loss.
•When losses attributed to the non-controlling interests exceed the non-controlling interests in the subsidiary’s equity, these losses shall be allocated to the non-controlling interests even if this results in a deficit balance.presentation (continued)
          The revised

In May 2011, the IASB issued IFRS 3 shall be applied prospectively to business combinations for which10 “Consolidated Financial Statements”. It replaces the acquisition date is on or after the beginning of the first annual reporting period beginning on or after July 1, 2009. The provisions of IAS 27 shall be effective for annual reporting periods beginning on or after July 1, 2009. The Group adopted the amendments to IFRS 3consolidation requirements in SIC 12 “Consolidation—Special Purpose Entities” and IAS 27 for business combinations“Consolidated and transactions with subsidiaries beginning on January 1, 2010.

          In June 2009, the IASB issued amendments to IFRS 2 “Share-based Payment”. The amendments relate to the accounting for group-settled share-based payment transactions, stating that an entity that receives goods or services in a share-based payment arrangement must account for those goods or services irrespective of which entity within the group settles the transaction. The amendments to IFRS 2 also incorporate guidance previously included in IFRIC 8 “Scope of IFRS 2”Separate Financial Statements” and IFRIC 11 “Group and Treasury Share Transactions”. As a result, the IASB has withdrawn IFRIC 8 and IFRIC 11. The amendments to IFRS 2 areis effective for annual periods beginning on or after January 1, 2010 and apply retrospectively. The amendments did not have2013. IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an impact onentity should be included within the presentationconsolidated financial statements of the Group’s results of operations, financial position or cash flows.
          In April 2009, the IASB issued 2009 Improvementsparent company. The standard provides additional guidance to IFRSs — a second collection of amendments to twelve International Financial Reporting Standards — as part of its program of annual improvements to its standards. The latest amendments were included in exposure drafts of proposed amendments to IFRSs published in October 2007, August 2008, and January 2009. Two out of the twelve amendments are effective for annual periods beginning on or after January 1, 2010 and were adopted by the Group, including IFRS 8 “Operating segments” and IAS 7 “Statement of cash flows”. None of these amendments result in changes to the Group’s financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

F - 12

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.1 Basis of preparation (continued)
(b) Standards, amendments and interpretations to existing standards that are effective in 2010 but not relevant to the Group’s operations
          In July 2008, the IASB published an amendment to IAS 39 “Financial Instruments: Recognition and Measurement.” The amendment “Eligible Hedged Items” explicitly allows designating only changesassist in the cash flows or fair valuedetermination of a hedged item above or below a specified price or other variable.control where this is difficult to assess. The amendment sets forth the conditions for such a partial designation. The amendment is effective for annual periods beginning on or after July 1, 2009 and applies retrospectively. The amendmentstandard did not have an impact on the presentation of the Group’s results of operations, financial position or cash flows.
          In July 2008, the IFRIC issued IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”, which was applicable for the year ended December 31, 2010. The interpretation clarifies the nature and amount of foreign exchange risk that qualifies as a hedged item under a net investment hedge and where, in a group, hedging instruments can be held. The IFRIC did not result in any changes to the Group’s financial statements.
          In November 2008, the IASB issued the revised standard IFRS 1 “First-time Adoption of International Financial Reporting Standards”. The revised provisions of IFRS 1 are effective for annual periods beginning on or after July 1, 2009. In addition, IFRS 1 has been amended in July 2009 and January 2010 adding additional exceptions for first-time adopters. All amendments to IFRS 1 did not have an impact on the presentation of the Group’s results of operations, financial position or cash flows since all subsidiaries of the Group transitioned to IFRS on January 1, 2006.
          In November 2008, the IFRIC published IFRIC 17 “Distributions of Non-Cash Assets to Owners.” The interpretation relates to the timing of recognition of liabilities in connection with non-cash dividends paid (e.g. property, plant and equipment) and how to measure them. In addition, the interpretation relates to how to account for differences between the carrying amount of the assets distributed and the carrying amount of the dividend payable. The provisions of IFRIC 17 are effective for annual periods beginning on or after July 1, 2009. The adoption of IFRIC 17 did not have an impact on the presentation of the Group’s results of operations, financial position or cash flows.
In January 2009, the IFRIC released IFRIC 18 “Transfers of Assets from Customers”. The interpretation clarifies the requirements of IFRSs for agreements in which an entity receives from a customer an item of property, plant and equipment (or cash to be used explicitly for the acquisition of property, plant and equipment) that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. The Interpretation is effective for transfers of assets from customers received on or after July 1, 2009 and applies prospectively. Earlier application is permitted under certain circumstances. The IFRIC did not result in any changes to the Group’s financial statements.
          In March 2009, the IASB issued amendments to IFRIC 9 “Reassessment of Embedded Derivatives” and IAS 39 “Financial Instruments: Recognition and Measurement”. The amendments clarified the accounting treatment of embedded derivatives in relation to financial instruments that have been reclassified out of the ‘at fair value through profit or loss’ category. The amendment was applicable for the year ended December 31, 2010 but did not result in any changes to the Group’s financial statements.
          In April 2009, the IASB issued 2009 Improvements to IFRSs — a collection of amendments to twelve International Financial Reporting Standards — as part of its program of annual improvements to its standards. With the exception of two amendments discussed previously, the remaining amendments are effective for the year ended December 31, 2010 but are not effective to the Group’s operations. These amendments include IFRS 2 “Share-based payments”, IFRIC 9 “Reassessment of embedded derivatives”, IFRIC 16 “Hedges of a net investment in a foreign operation”, IFRS 5 “Measurement of Non-Current Assets (or disposal groups) Classified as Held-for-Sale”, IAS 1 “Presentation of Financial Statements”, IAS 17 “Leases”, IAS 18 “Revenue”, IAS 36 “Impairment of Assets”, IAS 38 “Intangible Assets” and IAS 39 “Financial Instruments: Recognition and Measurement”. None of these amendments are relevant to the Group’s financial statements.
The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.1. Basis of preparation (continued)
(c) Standards, amendments and interpretations to existing standards that are not yet effective
          The following standards and amendments to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after January 1, 2011 or later periods and the Group has not early adopted them:
          In October 2009, the IASB issued an amendment to IAS 32 “Financial Instruments: Presentation”. The amendment clarifies the classification of rights issues as equity or liabilities in cases where rights issues are denominated in a currency other than the functional currency of the issuer. As hitherto such rights issues were recorded as derivative liabilities. The amendment requires that rights issues offered pro rata to all of an entity’s existing shareholders are classified as equity, irrespective of the currency in which the exercise price is denominated. The amendment to IAS 32 shall be applied for annual periods beginning on or after February 1, 2010. The amendment is not expected to have a material impact on the presentation of the Group’s results of operations, financial position or cash flows.

In May 2011, the IASB issued IFRS 11 “Joint Arrangements” which provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. IFRS 11 is effective for annual periods beginning on or after January 1, 2013. The standard did not have a material impact on the Group given that its joint arrangement would be classified as a joint venture under IFRS 11 and continue to be measured applying equity accounting.

In May 2011, the IASB issued IFRS 12 “Disclosure of Interests in Other Entities”. IFRS 12 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. IFRS 12 is effective for annual periods beginning on or after January 1, 2013. Earlier application is permitted. The standard increased the amount of disclosures required about subsidiaries, associates and joint arrangements (See Note 10).

In June 2012, the IASB issued amendments to IFRS 10, IFRS 11 and IFRS 12. The amendments explain that the ‘date of initial application’ in IFRS 10 means ‘the beginning of the annual reporting period in which IFRS 10 is applied for the first time’. Consequently, an entity is not required to make adjustments to the previous accounting for its involvement with entities if the consolidation conclusion reached at the date of initial application is the same when applying IAS 27 and SIC 12 and when applying IFRS 10. The IASB has also amended IFRS 11 and IFRS 12 to provide similar relief from the presentation or adjustment of comparative information for periods prior to the immediately preceding period. The amendments shall be applied for annual periods beginning on or after January 1, 2013. The amendments did not have a material impact on the Group’s results of operations, financial position or cash flows.

In May 2011, the IASB issued IFRS 13 “Fair Value Measurement” which replaces the fair value measurement guidance currently dispersed across different IFRS standards with a single definition of fair value and extensive application guidance. IFRS 13 provides guidance on how to measure fair value and does not introduce new requirements for when fair value is required or permitted. It also establishes disclosure requirements to provide users of financial statements with more information about fair value measurements. It is effective for annual periods beginning on or after January 1, 2013. The standard increased the amount of disclosures required about fair value measurements.

In June 2011, the IASB issued an amendment to IAS 1 “Presentation of financial statements” which improves the consistency and clarity of the presentation of items of other comprehensive income (“OCI”). The main change is a requirement for entities to group items presented in OCI on the basis of whether they are potentially recyclable to profit or loss subsequently (reclassification adjustments). The amendment to IAS 1 shall be applied for annual periods beginning on or after July 1, 2012. The amendment has impacted the format of the Group’s consolidated statements of comprehensive income.

The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.1.Basis of preparation and presentation (continued)

In May 2012, the IASB issued Improvements to IFRSs – a collection of amendments to five IFRSs – as part of its program of annual improvements to its standards. The amendments are effective for annual periods beginning on or after January 1, 2013. These amendments relate to IFRS 1 “First Time Adoption of IFRS”, IAS 1 “Presentation of Financial Statements”, IAS 16 “Property, Plant and Equipment”, IAS 32 “Financial instruments: Presentation” and IAS 34 “Interim Financial Reporting”. The amendments did not have a material impact on the presentation of the Group’s results of operations, financial position or cash flows.

(b) Standards, amendments and interpretations to existing standards that are not yet effective

Below is a description of the standards, amendments and interpretations issued by the IASB to existing standards that have been issued and are mandatory for the Group’s fiscal periods beginning on or after January 1, 2014 or later and which have not been early adopted by the Group:

In November 2009 and October 2010, the IASB issued IFRS 9 “Financial Instruments”. The standard incorporatesinstruments”, which addresses the first partclassification, measurement and recognition of a three-phase project to replacefinancial assets and financial liabilities. It replaces the parts of IAS 39 “Financial Instruments: Recognition and Measurement”. IFRS 9 prescribes that relate to the classification and measurement of financial assets.instruments. IFRS 9 requires that financial assets are subsequently measured either “at amortized cost” or “at fair value”, depending on whether certain conditions are met. In addition, IFRS 9 permits an entity to designate an instrument, that would otherwise have been classified in the “at amortized cost” category, to be “at fair value” if that designation eliminates or significantly reducesclassified into two measurement or recognition inconsistencies. The prescribed category for equity instruments iscategories: those measured as at fair value through profit or loss, however, an entity may irrevocably optand those measured at amortized cost. The determination is made at initial recognition. The classification depends on the entity’s business model for presenting all fair value changes of equity instruments not held for trading in Other Comprehensive Income. Only dividends received from these investments are reported in profit or loss. In October 2010, the IASB issued further additions to IFRS 9. These bring forth the guidance for derecognizingmanaging its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the requirements for the classification and measurement of financial liabilities currently included within IAS 39. The additions include amortized cost accounting for most financial liabilities, with bifurcation of embedded derivatives.39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, of income, unless this creates an accounting mismatch. The remaining phases of the project, dealing with impairment of financial instruments and hedge accounting, have not yet been finalized. The IASB expects to completely replace IAS 39 by the end of 2010. IFRS 9, as well as its additions, shall be applied retrospectively for annual periods beginning on or after January 1, 2013. Earlier adoption is permitted. The Group is currently analyzing the resulting effects on the presentation of the Group’s results of operations, financial position or cash flows.

The Group will also consider the impact of the remaining phases of IFRS 9 when completed by the IASB.

In November 2009,2012, the IFRICIASB issued IFRIC 19 “Extinguishingamendments to IFRS 10, IFRS 12 and IAS 27 “Separate Financial Liabilities with Equity Instruments”Statements”. The interpretation gives guidance in interpreting IFRS whenamendments define an investment entity renegotiates the terms of a financial liability with its creditor and the creditor agreesintroduce an exception to accept the entity’s shares or other equity instrumentsconsolidating particular subsidiaries for investment entities. These amendments require an investment entity to fully or partially settle the financial liability. IFRIC 19 clarifies that the entity’s equity instruments issued to a creditor are part of the consideration paid to fully or partially extinguish the financial liability. In addition, the equity instruments issued are measuredmeasure those subsidiaries at their fair value. If the fair value cannot be reliably measured, the equity instruments should be measured to reflect the fair value of the financial liability extinguished. Any difference between the carrying amount of the financial liability extinguished and the initial measurement amount of the equity instruments issued is included in the entity’sthrough profit or loss in accordance with IFRS 9 in its consolidated and separate financial statements. They also introduce new disclosure requirements for the period. IFRIC 19investment entities. The amendments shall be applied retrospectively for annual periods beginning on or after JulyJanuary 1, 2010.2014, with earlier application permitted. These amendments will not have an impact on the Group’s presentation of its financial position, results of operations or earnings per share.

In May 2013, the IASB issued an amendment to IAS 36, Impairment of assets, requires additional disclosures about impaired assets, such as information about the recoverable amount if it is based on fair value less costs of disposal, and the discount rates used to measure the fair value less costs of disposal if it is based on a present value technique. The IFRICamendment shall be applied for annual periods beginning on or after January 1, 2014, with earlier application permitted. This amendment is not expected to have a material impact on the presentation ofinformation to be presented in the Group’s results of operations, financial position or cash flows.

statements.

In November 2009,May 21013, the IASB issued IAS 24 (revised) “Related Party Disclosures”.IFRIC 21, Levies, sets out the accounting for an obligation to pay a levy that is not income tax. The revisions provideinterpretation addresses what the obligating event is that gives raise to pay a partial exemption from the disclosure requirementslevy and when should a liability be recognized. The amendment shall be applied for government-related entities and simplify the definition of a related party. The revisions are applicable for accountingannual periods beginning on or after January 1, 2011 and are2014, with earlier application permitted. This amendment is not expected to have a material impact on the Group’sinformation to be presented in the financial statements.

The accompanying notes are an integral part of these consolidated financial statements.

F - 14

15

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.1. Basis of preparation (continued)
          In November 2009, amendments were issued to IFRIC 14 “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, an interpretation of IAS 19 (Employee Benefits). The amendments apply when a company is subject to minimum pension plan funding requirements. They enable prepayments of the respective contributions to be recognized as an asset. The amendments are to be applied for annual periods beginning on or after January 1, 2011. Earlier application is permitted. These amendments are not expected to have a material impact on the presentation of the Group’s financial position or results of operations.
          In October 2010, the IASB issued an amendment to IFRS 7 “Financial Instruments: Disclosures”. The amendment requires additional disclosures in respect of risk exposures arising from transferred financial assets. The amendment includes a requirement to disclose by class of asset the nature, carrying amount and a description of the risks and rewards of financial assets that have been transferred to another party yet remain on the entity’s statement of financial position. Disclosures are also required to enable a user to understand the amount of any associated liabilities, and the relationship between the financial assets and associated liabilities. The amendment to IFRS 7 shall be applied for annual periods beginning on or after July 1, 2011, with earlier application permitted. The amendment is not expected to have a material impact on the presentation of the Group’s results of operations, financial position or cash flows.
          In December 2010, the IASB amended IAS 12 “Income taxes”, to introduce an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. The IASB has added another exception to the principles in IAS 12: the rebuttable presumption that investment property measured at fair value is recovered entirely by sale. This presumption is rebutted if the investment property is depreciable (for example, buildings and land held under a lease) and is held within a business model whose objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale before the end of its economic life. The presumption cannot be rebutted for freehold land that is an investment property, because land can only be recovered through sale. The amendments are effective for annual periods beginning on or after January 1, 2012. The amendment is not expected to result in a change to the Group ´s results to the extent it will not have investment properties measured at fair value.
          In May 2010, the IASB issued 2010 Improvements to IFRSs — a collection of amendments to seven IFRSs — as part of its program of annual improvements to its standards. Most of the amendments are effective for annual periods beginning on or after January 1, 2011, although entities are generally permitted to adopt them earlier. These amendments relate to IFRS 1 “First Time Adoption of IFRS”, IFRS 3 “Business Combinations”, IFRS 7 “Financial Instruments: Disclosures”, IAS 1 “Presentation of Financial Statements”, IAS 27 “Consolidated and Separate Financial Statements”, IAS 34 “Interim Financial Reporting” and IFRIC 13 “Customer Loyalty Programmes”. The Group is in the process of analyzing these amendments although it expects they will not have a material impact on the Group’s results of operations, financial position and cash flows.
2.2. Scope of consolidation

2.2.Scope of consolidation

The consolidated financial statements include the results of the Company and all of its subsidiaries from the date that control commences to the date that control ceases. The consolidated financial statementsThey also include the Group’s share of the after-tax resultsnet income of its jointly-controlled entities on an equity-accounted basis from the point at which joint control commences, to the date that it ceases.

The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.2. Scope of consolidation (continued)
(a) Subsidiaries

Subsidiaries are all entities (including special purposestructured entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights.control. The existence and effect of potential voting rights that are currently exercisable or convertible are consideredGroup controls an entity when assessing whether the Group controls anotheris exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidateddeconsolidated from the date that control ceases.

The Group accounts for acquisitions usinguses the purchaseacquisition method of accounting as prescribed by IFRS 3R. Considerationto account for business combinations. The consideration transferred for the acquisition of a subsidiary is measured as the fair value of the assets given, equity instruments issued andtransferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or assumed at the date of exchange.liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespectivedate.

The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the extentacquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest. The excessinterest in the acquiree and the acquisition-date fair value of considerationany previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognized directly in the income statement as gains on bargain purchases.

Subsidiaries acquired exclusively with a view to resale are accounted for following the short-cut method under IFRS 5. At the acquisition date, the entity being disposed of is valued at fair value less costs to sell, and at each subsequent reporting date, it is remeasured at the lower of the initial carrying amount and the fair value less costs to sell. On the statement of income underfinancial position, the line item “Excess of fair value of netentity’s assets and liabilities are classified as held for sale and presented separately from other assets and liabilities. Subsidiaries acquired over cost” (negative goodwill). (See Note 31 for details).

exclusively with a view to resale are classified as discontinued operations.

Inter-company transactions, balances and unrealized gains on transactions between Groupgroup companies are eliminated. Unrealized losses are also eliminated but considered an impairment indicator of the asset transferred.eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b) Transactions and non controlling interestChanges in ownership interests in subsidiaries without change of control

          Non controlling interest is shown as a component of equity in the statement of financial position and the share of profit attributable to non controlling interest is shown as a component of profit or loss for the year in the consolidated statement of income.
          The Group treats transactions

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with equitythe owners ofin their capacity as owners. The difference between the Group. For purchases from non-controlling interests, the difference betweenfair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

(c) Joint ventures
          An entity is regarded as a joint venture if the Group has joint control over its operating and financial policies. Joint ventures are accounted for under the equity method where the Group’s statement of income includes its share of their profits and losses and the Group’s statement of financial position includes its share of their net assets.
          Where the Group contributes a business, or other non-monetary assets for an interest in a subsidiary, joint venture or associate, such transactions are recorded so that the reduction in ownership of the business being contributed is accounted for as a disposal while the increased interest in the enlarged Group or new interest in the business contributed by other parties to the transaction is accounted for as an acquisition. Fair values are applied to those operations which are subject to the exchange and which have not previously been held within the Group. Any loss or gain resulting from the transaction is recorded in the statement of income.

The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.2.Scope of consolidation (continued)

2.3. Revision(c) Disposal of previously issued financial statementssubsidiaries

          During

When the year ended December 31, 2010,Group ceases to have control any retained interest in the Company changedentity is re-measured to its accounting policyfair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the classificationpurposes of long term biologicalsubsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amount previously recognized in other comprehensive income in respect of that entity is accounted for as if the Group had directly disposed of the related assets planting costsor liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

(d) Joint arrangements

Joint arrangements are arrangements of which the Group and purchaseother party or parties have joint control bound by a contractual arrangement. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations each investor has rather than the legal structure of cattle outflows includedthe joint arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement.

The Group has assessed the nature of its joint arrangements and determined them to be joint ventures.

Under the equity method of accounting, interests in joint ventures are initially recognized in the cash flow statement. Until September 30, 2010 those costs were classified as operating activitiesconsolidated statement of financial position at cost and adjusted thereafter to recognize the Group’s share of the post-acquisition of profits or losses and movements in other comprehensive income, respectively. When the Group’s share of losses in a joint venture equals or exceeds its interests in the cash flow statement. As from December 31, 2010joint ventures (which includes any long-term interests that, in substance, form part of the Company classified long term biological assets planting costsGroup’s net investment in the joint ventures), the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

Unrealized gains on transactions between the Group and purchaseits joint ventures are eliminated to the extent of cattle outflows as investing activities considering that this classification better reflects business activities and it is more comparablethe Group’s interest in the joint ventures. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with other agribusiness companies. Comparative financial statements were revised as a result of such change, reducing cash used in operating activities and increasing cash used in investing activities as of December 31, 2009 and 2008 in US$ 40,492 and US$ 31,026, respectively.

2.4. Segment reporting
the policies adopted by the Group.

2.3.Segment reporting

According to IFRS 8, operating segments are identified based on the ‘management approach’. This approach stipulates external segment reporting based on the Group’s internal organizational and management structure and on internal financial reporting to the chief operating decision maker. The Management Committee of the Group is responsible for measuring and steering the business success of the segments and is considered the chief operating decision maker within the meaning of IFRS 8.

2.5. Foreign currency translation

2.4.Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in US dollars, which is the Group’s presentation currency.

The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.4.Foreign currency translation (continued)

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses 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.

Foreign exchange gains and losses are presented in the statement of income within “Finance income” or “Finance cost”, as appropriate.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

•assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;
•income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and
•all resulting exchange differences are recognized as a separate component of equity.

income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

all resulting exchange differences are recognized as a separate component of equity.

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the statement of income as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

The accompanying notes are an integral part of these consolidated financial statements.

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2.5.Property, plant and equipment

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.6. Property, plant and equipment
Property, plant and equipment is recorded at cost, less accumulated depreciation and impairment losses, if any. Historical cost comprises the purchase price and any costs directly attributable to the acquisition.

Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of income during the period in whichwhen they are incurred.

Farmland is not depreciated. Depreciation on other assets is calculated using the straight-line method, to allocate their cost to their residual values over their estimated useful lives, as follows:

Farmland improvements

  
Farmland improvements 5-25 years

Buildings and facilities

 20 years

Furniture and fittings

 10 years

Computer equipment

 3-5 years

Machinery and equipment

 4-10 years

Vehicles

 4-5 years

The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.5.Property, plant and equipment (continued)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (See(see Note 2.12)2.10).

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within “Other operating income, net” in the statement of income.

2.7. Investment property

2.6.Investment property

Investment property consists of farmland held to earn rentals or for capital appreciation and not used in production or for administrative purposes.purposes or for sale in the ordinary course of business. Investment property is measured at cost less accumulated depreciation and any impairment losses.losses if any. Rental income from investment property “lease act under an operating lease” is recordedrecognized in the Group’s net sales.

2.8. Leases
income statement on a straight line basis over the lease term.

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment at the commencement of owner occupation. An item of owner-occupied property is reclassified to investment property when its use has changed and owner-occupation ceases.

Transfers in and out of the respective categories as described above do not change the carrying amount of the properties transferred, and they do not change the cost of the properties for measurement or disclosure purposes.

2.7.Leases

The Group classifies its leases at the inception as finance or operating leases. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.leases and charged to the statements of income in a straight-line basis over the period of the lease. Finance leases are capitalized at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included as “Borrowings” in the statement of financial position. The interest element of the finance cost is charged to the statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset’s useful life and the lease term.

          Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of income on a straight-line basis over the period of the lease.
The accompanying notes are an integral part of these consolidated financial statements.

F - 18

2.8.Goodwill

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.9. Goodwill
Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognized by the Group on an acquisition. Goodwill is computed as the excess of the consideration over the fair value of the Group’s share of net assets of the acquired subsidiary undertaking at the acquisition date and is allocated to those cash generating units expected to benefit from the acquisition for the purpose of impairment testing. Goodwill arising on the acquisition of subsidiaries is included within “Intangible assets” on the statement of financial position, whilst goodwill arising on the acquisition on joint ventures forms part of the carrying amount of the investments and tested for impairment as part of the overall balance.

Goodwill arising on the acquisition of foreign entities is treated as an asset of the foreign entity denominated in the local currency and translated at the closing rate.

Goodwill is not amortized but tested for impairment on an annual basis, or more frequently if there is an indication of impairment. Gains and losses on the disposal of a Group entity include any goodwill relating to the entity sold (See(see Note 2.12)2.10).

2.10. Negative goodwill
          Negative goodwill represents

The accompanying notes are an integral part of these consolidated financial statements.

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Adecoagro S.A.

Notes to the excess of fair value of the Group’sConsolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share of net asset of the acquired subsidiary over the consideration transferred. Negative goodwill is recognizeddata and as “Excess of fair value of net assets acquired over cost” in the statement of income. Prior to its recognition, the Company reassesses the identification and measurement of the acquiree’s identifiable assets, liabilities and contingent liabilities and the measurement of the consideration.

2.11. Other intangible assets
otherwise indicated)

2.9.Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and impairment losses.losses, if any. These intangible assets comprise trademarks and computer software and are amortized in the statement of income on a straight-line basis over their estimated useful lives estimated to be 10 to 20 years and 3 to 5 years, respectively.

2.12. Impairment of assets

2.10.Impairment of assets

Goodwill

For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. Impairment losses recognized for goodwill can notcannot be reversed in a subsequent period. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Seeadjusted (see Note 4 (b) for details.

details).

Property, plant and equipment and finite lived intangible assets

At each statement of financial position date, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The accompanying notes are an integral part of these consolidated financial statements.

F - 19

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.12. Impairment of assets (continued)
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of income.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in the statement of income.

2.13. Biological assets

2.11.Biological assets

Biological assets comprise growing crops (mainly corn, wheat, soybeans, sunflower and rice), sugarcane, and coffee and livestock (growing herd and cattle for sale)dairy production).

The Group distinguishes between consumable and bearer biological assets, and between mature and immature biological assets. “Consumable” biological assets are those assets that may be harvested as agriculture produce or sold as biological assets, for example livestock intended for the production of meat and/or livestock held for sale.dairy production. “Bearer” biological assets are those assets capable of producing more than one harvest, for example sugarcane or livestock from which raw milk is produced. “Mature” biological assets are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain regular harvests (for bearer biological assets). “Immature” biological assets are those assets other than mature biological assets.

The Group presents long-term biological assets (sugarcane and coffee plantations) as non-current assets based on their nature, as capable of sustaining regular harvests in the long-term.

The accompanying notes are an integral part of these consolidated financial statements.

F - 20

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.11.Biological assets (continued)

Costs are capitalized as biological assets if, and only if, (a) it is probable that future economic benefits will flow to the entity, and (b) the cost can be measured reliably. The Group capitalizes costs such as: planting, harvesting, weeding, seedlings, irrigation, agrochemicals, fertilizers and a systematic allocation of fixed and variable production overheads that are directly attributable to the management of biological assets, among others. Costs that are expensed as incurred include administration and other general overhead and unallocated production overhead, among others.

Biological assets, both at initial recognition and at each subsequent reporting date, are measured at fair value less costs to sell, except where fair value cannot be reliably measured. Cost approximates fair value when little biological transformation has taken place since the costs were originally incurred or the impact of biological transformation on price is not expected to be material.

Gains and losses that arise on measuring biological assets at fair value less costs to sell and measuring agricultural produce at the point of harvest at fair value less costs to sell are recognized in the statement of income in the period in which they arise.

arise in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce”.

Where there is an active market for a biological asset or agricultural produce, quoted market prices in the most relevant market are used as a basis to determine the fair value. Otherwise, when there is no active market or market-determined prices are not available, fair value of biological assets is determined through the use of valuation techniques.

Therefore, the fair value of biological assets is generally derived from the expected discounted cash flows of the related agricultural produce. The fair value of our agricultural produce at the point of harvest is generally derived from market determined prices. A general description of the determination of fair values based on the Company’s business segments follow:

 • 

Growing crops:

Growing crops, for which biological transformation is not significant, are measured at cost, which approximates fair value. Expenditure on growing crops includes land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others.

The accompanying notes are an integral part of these consolidated financial statements.

F - 20

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.13. Biological assets (continued)
Otherwise, biological assets are measured at fair value less estimated point-of-sale costs at initial recognition and at any subsequent period. Point-of-sale costs include all costs that would be necessary to sell the assets. Gains and losses arising from such measurements are included in the statement of income in the period in which they arise under the line item “Initial recognition and changes in fair value of biological assets and agricultural produce”.

The fair value of growing crops excluding sugarcane and coffee is measured based on a formula, which takes into consideration the estimated crop yields, estimated market prices and costs, and discount rates. Yields are determined based on several factors including location of farmland, environmental conditions and other restrictions and growth at the time of measurement. Yields are multiplied by sown hectares to determine the estimated tons of crops to be obtained. The tons are then multiplied by a net cash flow determined asat the actualfuture crop prices less the direct costs to be incurred. This amount is discounted at a discount rate, which reflects current market assessments of the assets involved and the time value of money.

 • 

Growing herd and cattle:

Livestock are measured at fair value less estimated point-of-sale costs, with any changes therein recognized in the statement of income, on initial recognition as well as subsequently at each reporting period. Gains and losses arising from animal growth and changes in livestock numbers are included in the statement of income in the period in which they arise, under the line item “Initial recognition and changes in fair value of biological assets and agricultural produce”. The fair value of livestock is determined based on the actual selling prices less estimated point-of-sale costs onin the markets where the Group operates.

The accompanying notes are an integral part of these consolidated financial statements.

F - 21

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.11.Biological assets (continued)

 • 

Coffee:

The coffee trees are accounted for as plantations and are generally felled after their optimum economic age for use has expired, generally 18 years

years.

Coffee trees, for which biological growth is not significant, are valued at cost, which approximates fair value. Expenditure on coffee trees planting includes land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others.

Coffee trees, which have attained significant biological growth are valued at fair value through a discounted cash flow model. Revenues are based on estimated yearly coffee production volumes and the price is calculated as the average of daily prices for coffee future contracts (Coffee ICE-NY contracts) for a six months period. Projected costs include maintenance, pruning, land leasing, harvesting and coffee treatment.

These projections generate cash flows for each productive year, which, after being adjusted to present valueestimates are discounted at an appropriate discount rate, are the basis to determine the fair value of coffee.
rate.

 • 

Sugarcane:

The fair value of sugarcane depends on the variety, location and maturity of the plantation. The sugarcanes are accounted for as plantations and are felled after their optimum economic age for use has expired, generally five years.

Sugarcane, for which biological growth is not significant, is valued at cost, which approximates fair value. Expenditure on sugarcane consists mainly inof land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others.

The accompanying notes are an integral part of these consolidated financial statements.

F - 21

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.13. Biological assets (continued)
          Sugarcane which When it has attained significant biological growth, it is measured at fair value. The fair value considers estimated revenuesthrough a discounted cash flow model. Revenues are based on estimated yearly production volume (which will be destined to sugar, ethanol, energy and raw cane production) and the price is calculated as the average of daily prices for sugar future contracts (Sugar #11 ICE-NY contracts) for a six months period. Projected costs include maintenance, land leasing, harvesting and transportation.
          The operating cash flows These estimates are discounted at aan appropriate discount rate which reflects current market assessment of the time value of money and risks involved.
2.14. Inventories

2.12.Inventories

Inventories comprise of raw materials, finished goods (including harvested agricultural produce and manufactured goods) and others.

Harvested agricultural produce (except for rice and milk) are perpetually measured at net realizable value until the point of sale because there is an active market in the produce, there is a negligible risk that the produce will not be sold and there is a well-established practice in the industry carrying the inventories at net realizable value. Changes in net realizable value are recognized in the statement of income in the period in which they arise under the line item “Changes in net realizable value of agricultural produce after harvest”.

All other inventories (including rice and milk) are measured at the lower of cost and net realizable value. Cost is determined using the weighted average method.

2.15.

The accompanying notes are an integral part of these consolidated financial statements.

F - 22

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.13.Financial assets

Financial assets

          The Group classifies its financial assets are classified in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as held for trading unless they are designated as hedges. Financial assets are classified as current if realization within 12 months is expected. Otherwise, they are classified as non-current. For all years presented, the Group’s financial assets at fair value through profit or loss comprise mainly derivative financial instruments.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the date of the statement of financial position. The Group’s loansLoans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the statement of financial position.

(c) Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date —– the date on which the Group commits to purchase or sell the asset. Financial assets not carried at fair value through profit or loss are initially recognized at fair value plus transaction costs. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of income. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

The accompanying notes are an integral part of these consolidated financial statements.

F - 22

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.15. Financial assets (continued)
Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the statement of income within “Other operating income, net” in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the statement of income as part of “Other operating income, net” when the Group’s right to receive payments is established.

If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment testing of trade receivables is described in Note 2.17.

2.15.

(d) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously.

2.16. Derivative

The accompanying notes are an integral part of these consolidated financial instrumentsstatements.

F - 23

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and hedging activities

per share data and as otherwise indicated)

2.14.Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.exchanges markets. The fair values of commodity options are calculated using year-end market rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.

The Group manages exposures to financial and commodity risks using hedging instruments that provide the appropriate economic outcome. The principal hedging instruments used may include commodity future contracts, put and call options, foreign exchange forward contracts and interest rate swaps. The Group does not use derivative financial instruments for speculative purposes.

The Group’s policy is to apply hedge accounting to hedging relationships where it is both permissible under IAS 39, practical to do so and its application reduces volatility, but transactions that may be effective hedges in economic terms may not always qualify for hedge accounting under IAS 39. Any derivatives that the Group holds to hedge these exposures are classified as “held for trading” and are shown in a separate line on the face of the statement of financial position. The method of recognizing gains or losses on derivatives depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Gains and losses on commodity derivatives are classified within “Other operating income, net”. Gains and losses on interest rate and foreign exchange rate derivatives are classified within ‘Financial results, net’.

2.17. Trade receivables
The Group designates certain derivatives as hedges of the foreign currency risk associated with highly probable forecast transactions (cash flow hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the instruments that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items.

Cash flow hedge

The effective portion of the gain or loss on the instruments that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of income within “Finance income” or “Finance cost”, as appropriate.

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion is recognized in the statement of income within “Finance income” or “Finance cost”, as appropriate.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income within “Finance income” or “Finance cost”, as appropriate.

The accompanying notes are an integral part of these consolidated financial statements.

F - 24

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.15.Trade receivables

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less allowance for trade receivables. An allowance for trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognized in the statement of income within selling expenses.expense. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against selling expenses in the statement of income.

The accompanying notes are an integral part of these consolidated financial statements.

F - 23

2.16.Cash and cash equivalents

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.18. Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.
2.19. Trade payables
In the statements of cash flows, interest paid is presented within financing cash flows and interest received is presented within investing activities.

2.17.Trade payables

Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.

2.20. Borrowings

2.18.Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the date of the statement of financial position. Borrowing costs are capitalized during the period of time that is required to complete and prepare the asset for its intended use.

2.21. Provisions

2.19.Provisions

Provisions are recognized when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

2.22. Onerous contracts

2.20.Onerous contracts

The Group enters into contracts, which require the Group to sell commodities in accordance with the Group’s expected requirements.sales. These contracts do not qualify as derivatives. These contracts are not recognized until at least one of the parties has performed under the agreement. However, when the contracts are onerous, the Group recognizes the present obligation under the contracts as a provision included in Provisionwithin “Provision and other liabilitiesliabilities” in the statement of financial position. Losses under these onerous contracts are recognized within “Other operating income, net” in the statement of income.

2.23. Current

The accompanying notes are an integral part of these consolidated financial statements.

F - 25

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and deferred income tax

per share data and as otherwise indicated)

2.21.Current and deferred income tax

The Group’s tax benefit or expense for theeach year comprises the charge for current tax currently payable and deferred taxation attributable to the Group’s operating subsidiaries. Tax is recognized in the statement of income, except to the extent that it relates to items recognized directly in equity. In this case, the tax is also recognized in equity.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position in the countries where the Group’s subsidiaries and joint ventures operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

The accompanying notes are an integral part of these consolidated financial statements.

F - 24

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.23. Current and deferred income tax (continued)
Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the date of the statement of financial position and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

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 income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group is able to control the timing of dividends from its subsidiaries and hence does not expect to remit overseas earnings in the foreseeable future in a way that would result in a charge to taxable profit. Hence deferred tax is recognized in respect of the retained earnings of overseas subsidiaries only to the extent that, at the date of the statement of financial position, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future has been entered into by the subsidiary.

2.24. Revenue recognition

2.22.Revenue recognition

The Group’s primary activities comprise agricultural and agro-industrial activities.

The Group’s agricultural activities comprise growing and selling agricultural produce. In accordance with IAS 41 “Agriculture”, cattle are measured at fair value with changes therein recognized in the statement of income as they arise. HarvestedAgricultural produce is measured at net realizable value with changes therein recognized in the statement of income as they arise. Therefore, sales of agricultural produce and cattle generally do not generate any separate gains or losses in the statement of income. See Notes 2.132.11 and 2.142.12 for additional details.

The Group’s agro-industrial activities comprise the selling of manufactured products (i.e. industrialized rice, milk-related products, coffee, ethanol, sugar, energy, among others). Sales of manufacturing products are measured at the fair value of the consideration received or receivable, net of returns and allowances, trade and other discounts, net of sales taxes, as applicable. Revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For export shipments, transfer occurs upon loading of the goods onto the relevant carrier.

The Group also provides certain agricultural-related services such as grain warehousing/conditioning and other services, e.g. handling and drying services. Revenue from services is recognized as services are provided.

          In December 2009,

The accompanying notes are an integral part of these consolidated financial statements.

F - 26

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.22.Revenue recognition (continued)

The Group began leasingleases owned farmland property to third parties under operating lease agreements. The leased assets are included within investment property on the Group’s statement of financial position. Rental income is recognized on a straight-line basis over the period of the lease.

          As from 2009, the

The Group is a party to a 10-year power agreement for the sale of electricity. The delivery period starts in May and ends in November of each year. In addition, as from 2010, theThe Group is also a party to a 15-year power agreement which delivery period starts in April and ends in November of each year. Prices under both agreements are adjusted annually for inflation. Revenue related to the sale of electricity under these two agreements is recorded based upon output delivered.

The accompanying notes are an integral part of these consolidated financial statements.

F - 25

2.23.Farmlands sales

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.25. Farmlands sales
The Group’s strategy is to profit from land appreciation value generated through the transformation of its productive capabilities. Therefore, the Group may seek to realize value from the sale of farmland assets and businesses.

Farmland sales are not recognized until (i) the sale is completed, (ii) the Group has determined that it is probable the buyer will pay, (iii) the amount of revenue can be measured reliably, and (iv) the Group has transferred to the buyer the risk of ownership, and does not have a continuing involvement. Gains from “farmland sales” are included in the statement of income under the line item “Other operating income, net”.

2.26. Earnings per share

2.24.Assets held for sale and discontinued operations

When the Group intends to dispose of, or classify as held for sale, a business component that represents a separate major line of business or geographical area of operations, or a subsidiary acquired exclusively with a view to resale, it classifies such operations as discontinued. The post tax profit or loss of the discontinued operations is shown as a single amount on the face of the statement of income, separate from the other results of the Group. Assets and liabilities classified as held for sale are measured at the lower of carrying value and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a disposal rather than through continuing use. This condition is regarded as met only when management is committed to the sale (disposal), the sale (disposal) is highly probable and expected to be completed within one year from classification and the asset is available for immediate sale (disposal) in its present condition. The statements of income for the comparative periods are represented to show the discontinued operations separate from the continuing operations.

2.25.Earnings per share

Basic lossearnings per share is calculated by dividing the net lossincome for the period attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted net lossearnings per share is computed by dividing the net lossincome for the period by the weighted average number of ordinary shares outstanding, and when dilutive, adjusted for the effect of all potentially dilutive shares, including share options, on an as-if converted basis. For all periods presented, there were no differences

The accompanying notes are an integral part of these consolidated financial statements.

F - 27

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in the weighted-average number of ordinaryUS$ thousands, except shares used for basic and diluted net loss per share data and as the effect of all potentially dilutive shares outstanding was anti-dilutive.

2.27. Equity-settled share-based payments
otherwise indicated)

2.26.Equity-settled share-based payments

The Group issues equity settled share-based payments to certain directors, topsenior management and employees. Options under the awards are measured at fair value at the date of grant. Management measures the fair value using the valuation technique that they consider to be the most appropriate to value each class of award. Methods used may include Black-Scholes calculations or other models as appropriate. The valuations take into account factors such as non-transferability, exercise restrictions and behavioral considerations. An expense is recognized to spread the fair value of each award over the vesting period on a straight-line basis, after allowing for an estimate of the awards that will eventually vest. The estimate of the level of vesting is reviewed at least annually, with any impact on the cumulative charge being recognized immediately.

2.28. Research and development

2.27.Research and development

Research phase expenditure is expensed as incurred. Development expenditure is capitalized as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. Research expenses have been immaterial to date. The Group has not capitalized any development expenses to date.

The accompanying notes are an integral part of these consolidated financial statements.

F - 26

3.Financial risk management

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management
Risk management principles and processes

The Group’s activities are exposed to a variety of financial risks. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize the Group’s capital costs by using suitable means of financing and to manage and control the Group’s financial risks effectively. The Group uses financial instruments to hedge certain risk exposures.

The Group’s approach to the identification, assessment and mitigation of risk is carried out by a StrategyRisk and Commercial Committee, which focuses on timely and appropriate management of risk. This StrategyRisk and Commercial Committee has overall accountability for the identification and management of risk across the Group.

The principal financial risks arising from financial instruments are raw material price risk, end-product price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk. This section provides a description of the principal risks and uncertainties that could have a material adverse effect on the Group’s strategy, performance, results of operations and financial condition. The principal risks and uncertainties facing the business, set out below, do not appear in any particular order of potential materiality or probability of occurrence.

Exchange rate risk

The Group’s cash flows, statement of income and statement of financial position are presented in US dollars and may be affected by fluctuations in exchange rates. Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency.

A significant majority of the Group’s business activities is conducted in the respective functional currencies of the subsidiaries (primarily the Brazilian Reais and the Argentine Peso). However, the Groupit transacts in currencies other than the respective functional currencies of the subsidiaries. To date, transactions denominated in currencies other than the respective functional currencies are denominated in US dollars. There are monetary balances held by the Group companies at each year-end that are denominated in US dollars (non-functional currency).

The Group’s net financial position exposure to the US dollar is managed on a case-by-case basis, partly by hedging certain expected cash flows with foreign exchange derivative contracts.

The accompanying notes are an integral part of these consolidated financial statements.

F - 28

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

The following tables show the Group’s net monetary position broken down by various currencies for each functional currency in which the Group operates for all the periodsyears presented. All amounts are shown in US dollars.

                     
  2010 
  Functional currency 
Net monetary position Argentine  Brazilian  Uruguayan       
(Liability)/ Asset Peso  Reais  Peso  US Dollar  Total 
 
Argentine Peso  (36,845)  —   —   —   (36,845)
Brazilian Reais  —   (222,106)  —   —   (222,106)
US Dollar  (71,378)  (33,361)  32,854   2,139   (69,746)
Uruguayan Peso  —   —   (56)  —   (56)
   
Total
  (108,223)  (255,467)  32,798   2.139   (328,753)
   
The accompanying notes are an integral part of these consolidated financial statements.

F - 27

   2013 
   Functional currency 

Net monetary position (Liability)/ Asset

  Argentine
Peso		  Brazilian
Reais		  Uruguayan
Peso		  US
Dollar		   Total 

Argentine Peso

   (45,397)   —      —      —       (45,397) 

Brazilian Reais

   —      (297,547)   —      —       (297,547) 

US Dollar

   (71,582)   (159,503)   27,759    110,533     (92,793) 

Uruguayan Peso

   —      —      (971)   —       (971) 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Total

   (116,979)   (457,050)   26,788    110,533     (436,708) 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 
   2012 
   Functional currency 

Net monetary position (Liability)/ Asset

  Argentine
Peso		  Brazilian
Reais		  Uruguayan
Peso		  US
Dollar		   Total 

Argentine Peso

   (38,035)   —      —      —       (38,035) 

Brazilian Reais

   —      (256,484)   —      —       (256,484) 

US Dollar

   (131,754)   (85,902)   18,031    157,479     (42,146) 

Uruguayan Peso

   —      —      (287)   —       (287) 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Total

   (169,789)   (342,386)   17,744    157,479     (336,952) 
  

 

 

  

 

 

  

 

 

  

 

 

   

 

 

 

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management (continued)
                     
  2009 
  Functional currency 
Net monetary position Argentine  Brazilian  Uruguayan       
(Liability)/ Asset Peso  Reais  Peso  US Dollar  Total 
 
Argentine Peso  25,438   —   —   —   25,438 
Brazilian Reais  —   (28,337)  —   —   (28,337)
US Dollar  (86,786)  (148,252)  (2,483)  52,471   (185,050)
Uruguayan Peso  —   —   5,260   —   5,260 
   
Total
  (61,348)  (176,589)  2,777   52,471   (182,689)
   
                     
  2008 
  Functional currency 
Net monetary position Argentine  Brazilian  Uruguayan       
(Liability)/ Asset Peso  Reais  Peso  US Dollar  Total 
 
Argentine Peso  (17,028)  —   —   —   (17,028)
Brazilian Reais  —   (29,343)  —   —   (29,343)
US Dollar  (45,461)  (106,180)  (3,105)  83,959   (70,787)
Uruguayan Peso  —   —   547   —   547 
   
Total
  (62,489)  (135,523)  (2,558)  83,959   (116,611)
   
The Group’s analysis shown on the tables below is carried out based on the exposure of each functional currency subsidiary against the US dollar. The Group estimatesestimated that, other factors being constant, a 10% devaluation (revaluation)appreciation of the US dollar against the respective functional currencies against the US dollar at year-end would (increase) or decrease(Loss) Profit Before Income Taxfor the years ended December 31, 2010, 20092013, and 2008,2012 would have increased the Group’sLoss Before Income Tax for the year. A 10% depreciation of the US dollar against the functional currencies would have an equal and opposite effect on the income statement. A portion of this effect would be recognized as describedother comprehensive income since a portion of the Company’s borrowings was used as cash flow hedge of the foreign exchange rate risk of a portion of its highly probable future sales in the tables below:
                     
  2010 
  Functional currency 
  Argentine  Brazilian  Uruguayan       
Net monetary position Peso  Reais  Peso  US Dollar  Total 
 
Argentine Peso  n/a   —   —   —   — 
Brazilian Reais  —   n/a   —   —   — 
US Dollar  (7,138)  (3,336)  3,285   n/a   (7,189)
Uruguayan Peso  —   —   n/a   —   — 
   
(Increase) or decrease in (Loss) Profit Before Income Tax
  (7,138)  (3,336)  3,285   —   (7,189)
   
                     
  2009 
  Functional currency 
  Argentine  Brazilian  Uruguayan       
Net monetary position Peso  Reais  Peso  US Dollar  Total 
 
Argentine Peso  n/a   —   —   —   — 
Brazilian Reais  —   n/a   —   —   — 
US Dollar  (8,679)  (14,825)  (248)  n/a   (23,752)
Uruguayan Peso  —   —   n/a   —   — 
   
(Increase) or decrease in (Loss) Before Income Tax
  (8,679)  (14,825)  (248)  —   (23,752)
   
US dollars (see Hedge Accounting—Cash Flow Hedge below for details).

   2013 
   Functional currency 

Net monetary position

  Argentine
Peso		  Brazilian
Reais		  Uruguayan
Peso		   US
Dollar		   Total 

Argentine Peso

   n/a    —      —       —       —    

Brazilian Reais

   —      n/a    —       —       —    

US Dollar

   (7,158)   (15,951)   2,776     —       (20,333) 

Uruguayan Peso

   —      —      n/a     —       —    
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

(Decrease) Increase in Profit Before Income Tax

   (7,158)   (15,951)   2,776     —       (20,333) 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 28

29

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

   2012 
   Functional currency 

Net monetary position

  Argentine
Peso		  Brazilian
Reais		  Uruguayan
Peso		   US
Dollar		   Total 

Argentine Peso

   n/a    —      —       —       —    

Brazilian Reais

   —      n/a    —       —       —    

US Dollar

   (13,175)   (8,590)   1,803     n/a     (19,962) 

Uruguayan Peso

   —      —      n/a     —       —    
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

(Decrease) Increase in Profit Before Income Tax

   (13,175)   (8,590)   1,803     —       (19,962) 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

 

The tables above only consider the effect of a hypothetical appreciation / depreciation of the US dollars on our net financial position. A hypothetical appreciation / depreciation of the US dollar against the functional currencies of the Company’s subsidiaries has historically had a positive / negative effect, respectively, on the fair value of the Company’s biological assets and the end prices of the Company’s agriculture produce, both of which are generally linked to the US dollar.

Hedge Accounting - Cash Flow Hedge

Effective July 1, 2013, the Group formally documented and designated cash flow hedging relationships to hedge the foreign exchange rate risk of a portion of its highly probable future sales in US dollars using a portion of its borrowings denominated in US dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps.

Principal amounts of long-term borrowings (non-derivative financial instruments) and notional values of foreign currency forward contracts (derivative financial instruments) were designated as hedging instruments. These instruments are exposed to Brazilian Reais/ US dollar foreign currency risks related to the operations in Brazil and to Argentine Peso/ US dollar foreign currency risks related to the operations in Argentina. Approximately 23.6 % of projected sales qualify as highly probable forecast transactions for hedge accounting purposes and were designated as hedged items.

The Group has prepared formal documentation in order to support the designation above, including an explanation of how the designation of the hedging relationship is aligned with the Group’s Risk Management Policy objective and strategy, identification of the hedging instrument, the hedged transactions, the nature of the risk being hedged and an analysis which demonstrates that the hedge is expected to be highly effective. The Group reassesses the prospective and retrospective effectiveness of the hedge on an ongoing basis comparing the foreign currency component of the carrying amount of the hedging instruments and of the highly probable future sales.

Cash flow hedge accounting permits that gains and losses arising from the effect of changes in foreign currency exchange rates on derivative and non-derivative hedging instruments not be immediately recognized in profit or loss, but be reclassified from equity to profit or loss in the same periods during which the future sales occur, thus allowing for a more appropriate presentation of the results for the period reflecting the strategy in the Group’s Risk Management Policy.

The accompanying notes are an integral part of these consolidated financial statements.

F - 30

Adecoagro S.A.

Notes to the Consolidated Financial risk management (continued)

Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

The Company expects that the cash flows will occur and affect profit or loss between 2014 and 2020.

For the year ended December 31, 2013, a total amount before income tax of US$ 26,694 was recognized in other comprehensive income and an amount of US$ (2,560) loss was reclassified from equity to profit or loss within “Financial results, net”.

                     
  2008 
  Functional currency 
  Argentine  Brazilian  Uruguayan       
Net monetary position Peso  Reais  Peso  US Dollar  Total 
 
Argentine Peso  n/a   —   —   —   — 
Brazilian Reais  —   n/a   —   —   — 
US Dollar  ( 4,546)  (10,618)  ( 310)  n/a   (15,474)
Uruguayan Peso  —   —   n/a   —   — 
   
(Increase) or decrease in (Loss) Before Income Tax
  (4,546)  (10,618)  (310)  —   (15,474)
   

Raw material price risk

Inflation in raw materials costs and in the costs of raw materials and goods and services from industry suppliers and manufacturers presents risks to project economics. A significant portion of the Group’s cost structure includes the cost of raw materials primarily seeds, fertilizers and agrochemicals, among others. Prices for these raw materials may vary significantly.

          The Group estimates that, for the years ended December 31, 2010, 2009 and 2008, other factors being constant, a 5% increase (or decrease) in prices of raw materials would (increase) or decreaseLoss Before Income Taxby approximately (US$ 6,810 ), (US$ 5,729) and (US$ 2,556), respectively.

End-product price risk

Prices for commodities products have historically been cyclical, reflecting overall economic conditions and changes in capacity within the industry, which affect the profitability of entities engaged in the agribusiness industry. The Group’s commercial team combines different actions to minimize downsideprice risk. A percentage of crops are to be sold during and post harvest period. The Group manages minimum and maximum prices for each commodity as well as gross margin per each crop as to decide when and the aim is to pick the best spothow to sell. End-product price risks are hedged if economically viable and possible.possible by entering into forward contracts with major trading houses or by using derivative financial instruments, consisting mainly of crops, sugar and coffee future contracts, but also includes occasionally put and call options. A movement in end-product futures prices would result in a change in the fair value of the end product hedging contracts. These fair value changes, after taxes, are recorded in the statement of income. The Group uses a variety of commodity-based derivative instruments to manage its exposure to price volatility stemming from its integrated crop production activities. These instruments consist mainly of crop future contracts, but also includes occasionally put and call options.

Contract positions are designed to ensure that the Group would receive a defined minimum price for certain quantities of its production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, the Group has assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The Group does not expect any material losses as a result of counterparty defaults. The Group is also obliged to pay margin deposits and premiums for these instruments. These estimates represent only the sensitivity of the financial instruments to market risk and not the Group exposure to end product price risks as a whole, since the crops and cattle products sales are not financial instruments within the scope of IFRS 7 disclosure requirements.

          The Group estimates that, for the years ended December 31, 2010, 2009 and 2008, other factors being constant, and a 5% increase (or decrease) in prices of the Group’s end products would (increase) or decreaseLoss Before Income Taxby approximately (US$ 1,280), (US$ 1,507) and (US$ 2,025), respectively.

The accompanying notes are an integral part of these consolidated financial statements.

F - 29

31

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

Liquidity risk

The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, the risk that borrowing facilities are not available to meet cash requirements and the risk that financial assets cannot readily be converted to cash without loss of value. Failure to manage financing risks could have a material impact on the Group’s cash flow and statement of financial position.

Prudent liquidity risk management includes managing the profile of debt maturities and funding sources close oversight of cash flows projections, maintaining sufficient cash, and ensuring the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. The Group’s ability to fund its existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate committedavailable funding lines from high quality lenders.

lenders; and reaching to have long-term financial facilities.

As of December 31, 2013, cash and cash equivalent of the Group totaled U$S 232.1 million, which could be used for managing liquidity risk.

The tabletables below analysesanalyzes the Group’s non-derivative financial liabilities and derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the statement of financial position except for short-term payables when discounting is not applied.

                     
  Less than  Between  Between 2  Over    
At 31 December 2010 1 year  1 and 2 years  and 5 years  5 Years  Total 
   
Trade and other payables  66,106   606   1,883   3,568   72,163 
Borrowings (excluding finance lease liabilities)  138,433   93,330   108,536   48,725   389,024 
Finance leases  367   81   —   —   448 
Derivative financial instruments  8,920   —   —   —   8,920 
   
Total
  213,826   94,017   110,419   52,293   470,555 
   
                     
  Less than  Between  Between 2  Over    
At 31 December 2009 1 year  1 and 2 years  and 5 years  5 Years  Total 
   
Trade and other payables  53,161   5,145   —   —   58,306 
Borrowings (excluding finance lease liabilities)  102,970   74,391   121,712   6,788   305,861 
Finance leases  677   243   —   —   920 
Derivative financial instruments  12,607   280   —   —   12,887 
   
Total
  169,415   80,059   121,712   6,788   377,974 
   
                     
  Less than  Between  Between 2  Over    
At 31 December 2008 1 year  1 and 2 years  and 5 years  5 Years  Total 
   
Trade and other payables  39,782   2,679   —   —   42,461 
Borrowings (excluding finance lease liabilities)  223,587   1,381   1,311   1,152   227,431 
Finance leases  627   255   —   —   882 
Derivative financial instruments  4,159   —   —   —   4,159 
   
Total
  268,155   4,315   1,311   1,152   274,933 
   

At 31 December 2013  Less
than
1 year		   Between
1 and 2
years		   Between 2
and 5
years		   Over
5 Years		   Total 

Trade and other payables

   86,962     587     2,091     268     89,908  

Borrowings (excluding finance lease liabilities)

   190,244     176,826     296,639     111,536     775,245  

Finance leases

   405     248     163     —       816  

Derivative financial instruments

   12,600     —       —       —       12,600  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   290,211     177,661     298,893     111,804     878,569  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
At 31 December 2012  Less
than
1 year		   Between
1 and 2
years		   Between 2
and 5
years		   Over
5 Years		   Total 

Trade and other payables

   67,119     1,757     26,814     1,280     96,970  

Borrowings (excluding finance lease liabilities)

   208,590     118,623     227,861     53,861     608,935  

Finance leases

   517     432     341     —       1,290  

Derivative financial instruments

   5,751     —       —       —       5,751  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   281,977     120,812     255,016     55,141     712,946  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 30

32

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

Interest rate risk

The Group’s financing costs may be significantly affected by interest rate volatility. Borrowings under the Group’s interest rate management policy may be fixed or floating rate. The Group maintains adequate committed borrowing facilities and holds most of its financial assets primarily in short-term, highly liquid investments that are readily convertible to known amounts of cash.

The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The interest rate profile of the Group’s borrowings is set out in Note 20.

21.

The Group occasionally manages its cash flow interest rate risk exposure by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Occasionally, the Group may enter into fixed-to-floating interest rate swaps to hedge the fair value interest rate risk arising where it has borrowed at fixed rates. The Group’s borrowings at variable rate were primarily US dollar or Brazilian Reais denominated.

The following table showstables show a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans (excluding finance leases).

These analyses are performed after giving effect to interest rate swaps.

The analysis for the year ended December 31, 20102013 is as follows (all amounts are shown in US dollars):

                 
  2010 
  Functional currency 
  Argentine  Brazilian       
Rate per currency denomination Peso  Reais  Uruguayan Peso  Total 
 
Fixed rate:
                
Argentine Peso  13   —   —   13 
Brazilian Reais  —   76,253   —   76,253 
US Dollar  34,465   7,013   475   41,953 
Uruguayan Peso  —   —   62   62 
   
Subtotal Fixed-rate borrowings
  34,478   83,266   537   118,281 
   
Variable rate:
                
Argentine Peso  —   —   —   — 
Brazilian Reais  —   113,514   —   113,514 
US Dollar  64,053   93,176   —   157,229 
   
Subtotal Variable-rate borrowings
  64,053   206,690   —   270,743 
   
Total borrowings as per analysis
  98,531   289,956   537   389,024 
   
Finance leases  171   277   —   448 
   
Total borrowings as per statement of financial position
  98,702   290,233   537   389,472 
   

   2013 
   Functional currency 

Rate per currency denomination

  Argentine
Peso		   Brazilian
Reais		   Uruguayan
Peso		   Total 

Fixed rate:

        

Argentine Peso

   30,426     —       —       30,426  

Brazilian Reais

   —       184,958     —       184,958  

US Dollar

   35,279     15,424     15     50,718  

Uruguayan Peso

   —       —       —       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Fixed-rate borrowings

   65,705     200,382     15     266,102  
  

 

 

   

 

 

   

 

 

   

 

 

 

Variable rate:

        

Brazilian Reais

   —       187,071     —       187,071  

US Dollar

   38,351     167,868     —       206,219  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Variable-rate borrowings

   38,351     354,939     —       393,290  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings as per analysis

   104,056     555,321     15     659,392  
  

 

 

   

 

 

   

 

 

   

 

 

 

Finance leases

   710     29     —       739  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings as per statement of financial position

   104,766     555,350     15     660,131  
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 31

33

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)
The analysis for the year ended December 31, 2009 is as follows (all amounts are shown in US dollars):
                 
  2009 
  Functional currency 
  Argentine  Brazilian       
Rate per currency denomination Peso  Reais  Uruguayan Peso  Total 
 
Fixed rate:
                
Argentine Peso  88   —   —   88 
Brazilian Reais  —   7,241   —   7,241 
US Dollar  49,608   —   —   49,608 
Uruguayan Peso  —   —   40   40 
   
Subtotal Fixed-rate borrowings
  49,696   7,241   40   56,977 
   
Variable rate:
                
Argentine Peso  —   —   —   — 
Brazilian Reais  —   139,695   —   139,695 
US Dollar  49,992   59,197   —   109,189 
   
Subtotal Variable-rate borrowings
  49,992   198,892   —   248,884 
   
Total borrowings as per analysis
  99,688   206,133   40   305,861 
   
Finance leases  257   663   —   920 
   
Total borrowings as per statement of financial position
  99,945   206,796   40   306,781 
   

The analysis for the year ended December 31, 20082012 is as follows (all amounts are shown in US dollars):

                 
  2008 
  Functional currency 
  Argentine  Brazilian       
Rate per currency denomination Peso  Reais  Uruguayan Peso  Total 
 
Fixed rate:
                
Argentine Peso  35,343   —   —   35,343 
Brazilian Reais  —   5,560   —   5,560 
US Dollar  53,599   —   1,703   55,302 
   
   
Subtotal Fixed-rate borrowings
  88,942   5,560   1,703   96,205 
   
Variable rate:
                
Argentine Peso  —   —   —   — 
Brazilian Reais  —   22,425   —   22,425 
US Dollar  —   108,801   —   108,801 
   
Subtotal Variable-rate borrowings
  —   131,226   —   131,226 
   
Total borrowings as per analysis
  88,942   136,786   1,703   227,431 
   
Finance leases  —   882   —   882 
   
Total borrowings as per statement of financial position
  88,942   137,668   1,703   228,313 
   

   2012 
   Functional currency 

Rate per currency denomination

  Argentine
Peso		   Brazilian
Reais		   Uruguayan
Peso		   Total 

Fixed rate:

        

Argentine Peso

   18,039     —       —       18,039  

Brazilian Reais

   —       119,340     —       119,340  

US Dollar

   70,221     —       501     70,722  

Uruguayan Peso

   —       —       44     44  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Fixed-rate borrowings

   88,260     119,340     545     208,145  
  

 

 

   

 

 

   

 

 

   

 

 

 

Variable rate:

        

Brazilian Reais

   —       197,171     —       197,171  

US Dollar

   52,112     80,584     —       132,696  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Variable-rate borrowings

   52,112     277,755     —       329,867  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings as per analysis

   140,372     397,095     545     538,012  
  

 

 

   

 

 

   

 

 

   

 

 

 

Finance leases

   1,046     75     —       1,121  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total borrowings as per statement of financial position

   141,418     397,170     545     539,133  
  

 

 

   

 

 

   

 

 

   

 

 

 

For the years ended December 31, 2013 and 2012, if interest rates on floating-rate borrowings had been 1% higher with all other variables held constant, the Group’s (Loss) /Profit Before Income Tax for the years would have (increased) / decreased as shown below. A 1% decrease in interest rates would have an equal and opposite effect on the income statement.

   2013 
   Functional currency 

Rate per currency denomination

  Argentine
Peso		  Brazilian
Reais		  Uruguayan
Peso		   Total 

Variable rate:

      

Brazilian Reais

   —      (1,871)   —       (1,871) 

US Dollar

   (384)   (1,679)   —       (2,063) 
  

 

 

  

 

 

  

 

 

   

 

 

 

Total effects on Profit Before Income Tax

   (384)   (3,550)   —       (3,934) 
  

 

 

  

 

 

  

 

 

   

 

 

 
   2012 
   Functional currency 

Rate per currency denomination

  Argentine
Peso		  Brazilian
Reais		  Uruguayan
Peso		   Total 

Variable rate:

      

Brazilian Reais

   —      (1,972)   —       (1,972) 

US Dollar

   (521)   (806)   —       (1,327) 
  

 

 

  

 

 

  

 

 

   

 

 

 

Total effects on Profit Before Income Tax

   (521)   (2,778)   —       (3,299) 
  

 

 

  

 

 

  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 32

34

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)
          At December 31, 2010, 2009 and 2008, if interest rates on floating-rate borrowings had been 1% higher (or lower) with all other variables held constant,(Loss) Before Income Taxfor the year would (increase) or decrease as follows:
                 
  2010 
  Functional currency 
  Argentine  Brazilian       
Rate per currency denomination Peso  Reais  Uruguayan Peso  Total 
 
Variable rate:
                
Argentine Peso  —   —   —   — 
Brazilian Reais  —   (1,134)  —   (1,134)
US Dollar  (641)  (932)  —   (1,573)
   
Total effects on (Loss) Before Income Tax
  (641)  (2,066)  —   (2,707)
   
                 
  2009 
  Functional currency 
  Argentine  Brazilian       
Rate per currency denomination Peso  Reais  Uruguayan Peso  Total 
 
Variable rate:
                
Argentine Peso  —   —   —   — 
Brazilian Reais  —   (1,397)  —   (1,397)
US Dollar  (500)  (592)  —   (1,092)
   
Total effects on (Loss) Before Income Tax
  (500)  (1,989)  —   (2,489)
   
                 
  2008 
  Functional currency 
  Argentine  Brazilian       
Rate per currency denomination Peso  Reais  Uruguayan Peso  Total 
 
Variable rate:
                
Argentine Peso  —   —   —   — 
Brazilian Reais  —   (224)  —   (224)
US Dollar  —   (1,088)  —   (1,088)
   
Total effects on (Loss) Before Income Tax
  —   (1,312)  —   (1,312)
   

The sensitivity analysis has been determined assuming that the change in interest rates had occurred at the date of the statement of financial position and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The 100 basis point increase or decrease represents management’s assessment of a reasonable possible change in those interest rates, which have the most impact on the Group, specifically the United States and Brazilian rates over the period until the next annual statement of financial position date.

The accompanying notes are an integral part of these consolidated financial statements.

F - 33

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.Financial risk management (continued)
Credit risk

The Group’s exposureexposures to credit risk takes the form of a loss that would be recognized if counterparties failed to, or were unable to, meet their payment obligations. These risks may arise in certain agreements in relation to amounts owed for physical product sales, the use of derivative instruments, and the investment of surplus cash balances. The Group is also exposed to political and economic risk events, which may cause non-payment of foreign currency obligations to the Group. The current credit crisis could also lead to the failure of companies in the sector, potentially including customers, partners, contractors and suppliers.

The Group is subject to credit risk arising from outstanding receivables, cash and cash equivalents and deposits with banks and financial institutions, and from the use of derivative financial instruments. The Group’s policy is to manage credit exposure to trading counterparties within defined trading limits. All of the Group’s significant counterparties are assigned internal credit limits (no individual trading counterparty has a credit limit higher to US$ 1.5 million).

limits.

The Group sells manufactured products, agricultural products and offers services to a large base of customers. Type and class of customers may differ depending on the Group ´sGroup’s business segments. MoreFor the years ended December 31, 2013 and 2012, more than 78% and 55% of the Group’s sales of crops were sold to 35 and 11 well-known customers (both multinational or local) with good credit history with the Group. In the Sugar, Ethanol and Energy segment, sales of ethanol were concentrated in 21 and 10 customers, which represented 94% and 89% of total sales of ethanol for the years ended December 31, 2013 and 2012, respectively. Approximately 83% and 79% of the Group’s sales of crops are exported throughsugar were concentrated in 6 and 5 well-known exporters with good quality standing. Sales of cattle are well dispersed. Sales of ethanol are concentrated with 10 external customers oftraders for the years ended December 31, 2013 and 2012, respectively. The remaining 17% and 21%, which 4 amount for more than two-thirds of sales. Approximately 87% of the Group’s sales of sugar relatemainly relates to “Very High Polarization or VHP“crystal sugar” and are, were dispersed among several customers. The remaining 13% of sugar sales relate to “cristal sugar”In 2013 and are concentrated with few customers. Energy2012, energy sales are 5.1% of total sales95% and 100% concentrated in 4 and 3 major customers. In the dairy segment, 55% and 43% of the Groupsales were concentrated in 4 and involve a small amount of external1 well-known customers.

No credit limits were exceeded during the reporting periods and management does not expect any losses from non-performance by these counterparties. If any of the Group’s customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, the Group assesses the credit quality of the customer taking into account its financial position, past experience and other factors (see Note 1213 for details). The Group may seek cash collateral, letter of credit or parent company guarantees, as considered appropriate. Sales to customers are primarily made by credit with customary payment terms. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Group’s exposure of credit risk arising from trade receivables is set out in Note 12.

13.

The accompanying notes are an integral part of these consolidated financial statements.

F - 35

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group holds cash on deposit with a number of financial institutions. The Group manages its credit risk exposure by limiting individual deposits to clearly defined limits. The Group only deposits with high quality banks and financial institutions. The maximum exposure to credit risk is represented by the carrying amount of cash and cash equivalents in the statement of financial position. As of December 31, 2013 and 2012, the total amount of cash and cash equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to transact with banks rated “BBB+” or higher. As of December 31, 2013 and 2012, 7 and 8 banks (primarily HSBC, Rabobank, Banco do Brasil, Votorantim, Itau, Citibank, and ABC Brasil) accounted for more than 85% of the total cash deposited. The remaining amount of cash and cash equivalents relates to cash in hand. Additionally, during the year ended December 31, 2013, the Group invested in fixed-term bank deposits with mainly four banks (Banco do Brasil, Itau, Votorantim and ABC Brasil) and also entered into derivative contracts (currency forward). The Group does not have investment in securities or other financial instruments for which risk may have increased due to the financial credit crisis. The Group’s exposure of credit risk arising from cash and cash equivalents is set out in Note 14.

15.

The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limitlimits the amount of credit exposure to any one counterparty based on an analysis of that counterparty’s relative credit standing. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which a counterparty’s obligations exceed the obligations with that counterparty.

Similarly, transactions involving derivative financial instruments are with counterparties with high credit ratings (See(see Note 1112 for details). The Group arranged interest rate swaps with Rabobank, BGT Pactual, HSBC and Votorantim in Brazil and Rabobank in Argentina. The Group also entered into crop commodity futures traded in the established trading markets of Argentina and Brazil through well-rated brokers. Management does not expect any counterparty to fail to meet its obligations.

The accompanying notes are an integral part of these consolidated financial statements.

F - 34

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.Financial risk management (continued)
Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for membersshareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Groupit may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt (including current and non-current borrowings as shown in the consolidated statement of financial position, if applicable) divided by total capital. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus total debt. During the year ended December 31, 2010,2013, the Group’s strategy which was unchanged from 2009, was to maintain the gearing ratio within 0.18 to 0.40,0.50, as follows:

   2013   2012 

Total Debt

   660,131     539,133  

Total Equity

   854,349     1,026,043  
  

 

 

   

 

 

 

Total Capital

   1,514,480     1,565,176  
  

 

 

   

 

 

 

Gearing Ratio

   0.44     0.34  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 36

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

             
  2010  2009  2008 
Total Debt  389,472   306,781   228,313 
Total Equity  723,102   757,156   638,428 
          
Total Capital  1,112,574   1,063,937   866,741 
          
Gearing Ratio
  0.35   0.29   0.26 
          

Derivative financial instruments

As part of its business operations, the Group uses a variety of derivative financial instruments to manage its exposure to the financial risks discussed above. The primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. As part of this strategy, the Group may enter into (i) interest rate derivatives to manage the composition of floating and fixed rate debt; (ii) currency derivatives to hedge certain foreign currency cash flows and to adjustmanage the currency composition of its assetscash and liabilities;cash equivalents; and (iii) crop future contracts and put and call options to manage its exposure to price volatility stemming from its integrated crop production activities. The Group’s policy is not to use derivatives for speculative purposes.

Derivative financial instruments involve, to a varying degree, elements of market and credit risk not recognized in the financial statements. The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged. The counterparties to the agreements relating to the Group’s contracts generally are large institutions with credit ratings equal to or higher than the Group’s.BBB+. The Group continually monitors the credit rating of such counterparties and seeks to limit its financial exposure to any one financial institution. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Group’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Group’s obligations to the counterparties. Non-hedging derivatives are classified as current when realization within 12 months is expected. Otherwise they are classified as non-current, although any portion that is expected to be realized within 12 months of the date of the statement of financial position is presented as current.

The accompanying notes are an integral part of these consolidated financial statements.

F - 35

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.Financial risk management (continued)
The following table showstables show the outstanding positions for each type of derivative contract as of the date of each statement of financial position:

Futures/ options

Futures

As of December 31, 2010

                 
  2010 
          Market    
     Notional  Value Asset/    
Type ofderivative contract Tons  amount  (Liability)  (Loss)/ Gain 
Futures:
                
Sale
                
Corn  6.9   149   141   141 
Soybean  24.6   5,939   (2,789)  (2,789)
Sugar  34.3   15,955   (3,287)  (3,287)
Coffee  0.8   3,213   (2,231)  (2,231)
Wheat  0.6   111   (4)  (4)
             
Total
  67.2   25,367   (8,170)  (8,170)
             
2013:

   2013 

Type of derivative contract

  Quantities
(thousands)
(**)		   Notional
amount		  Fair
Value Asset/
(Liability)		  (Loss)/Gain
(*)		 

Futures:

      

Sale

      

Corn

   19     3,054    22    22  

Soybean

   74     26,092    310    310  

Wheat

   89     15,883    859    859  

Sugar

   138     53,518    2,187    2,187  

OTC:

      

Soybean

   14     6,400    190    190  

Options:

      

Buy put

      

Soybean

   38     348    534    186  

Sell call

      

Soybean

   1     (7)   (7)   —    

Sell put

      

Soybean

   51     (160)   (190)   (30) 
  

 

 

   

 

 

  

 

 

  

 

 

 

Total

   424     105,128    3,905    3,724  
  

 

 

   

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 37

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

As of December 31, 2009

                 
  2009 
          Market    
     Notional  Value Asset/    
Type ofderivative contract Tons  amount  (Liability)  (Loss)/ Gain 
Futures:
                
Sale
                
Corn  26.8   3,835   (19)  (19)
Soybean  20.1   4,740   (184)  (184)
Sugar  92.2   42,283   (11,712)  (11,712)
Coffee  0.5   16   99   99 
             
Total
  139.6   50,874   (11,816)  (11,816)
             
          As of December 31, 2008
                 
  2008 
          Market    
     Notional  Value Asset/    
Type ofderivative contract Tons  amount  (Liability)  (Loss)/Gain 
Futures:
                
Sale
                
Corn  15.9   2,053   249   249 
Soybean  30.9   8,190   1,323   1,323 
Wheat  1.5   208   5   5 
             
Total
  48.3   10,451   1,577   1,577 
             
2012:

   2012 

Type of derivative contract

  Quantities
(thousands)
(**)		   Notional
amount		   Fair
Value Asset/
(Liability)		  (Loss)/Gain
(*)		 

Futures:

       

Sale

       

Corn

   99     24,472     1,082    1,082  

Soybean

   30     10,161     363    363  

Wheat

   3     484     (153)   (153) 

Sugar

   197     89,281     2,423    2,266  

Ethanol (thousands m3)

   8     4,723     (40)   (40) 

Coffee

   1     764     63    63  

OTC:

       

Sugar

   24     7,671     1,151    1,028  

Options:

       

Buy put

       

Sugar

   24     1,476     725    (43) 

Sell call

       

Corn

   2     17     (30)   (13) 

Sugar

   21     1,393     (916)   (317) 
  

 

 

   

 

 

   

 

 

  

 

 

 

Total

   409     140,442     4,668    4,236  
  

 

 

   

 

 

   

 

 

  

 

 

 

(*)Included in the line item “Gain from commodity derivative financial instruments” of Note 28.
(**)All quantities expressed in tons except otherwise indicated.

Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.

Floating-to-fixed interest rate swaps

Commencing in May 2012, the Group then entered into a US$ 60 million floating-to-fixed interest rate forward swap expiring November 15, 2016 expecting to hedge against the variability of the cash flows of the new IDB Tranche B facility (see Note 21). The redefined facility comprises a five-year US$ 60 million loan bearing interest at 180-day LIBOR plus 4.45% per annum (fixed interest rate: 5.70%).

The accompanying notes are an integral part of these consolidated financial statements.

F - 36

38

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.Financial risk management (continued)

The Group did not apply hedge accounting to any of these agreements. As of December 31, 2013 and 2012, the Group recorded a liability of US$ 0.60 million and US$ 0.22 million, respectively, the estimated fair value of the outstanding swaps at those dates.

Floating-to-fixed

Foreign currency fixed-to-floating interest rate swapsswap

In January 2009,August and September 2012 the GroupGroup’s subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a floating-to-fixed interest rate swap to hedge against the variabilityoperation with Deutsche Bank in an aggregate amount of the cash flows of the Tranche B facility entered into with the IDB. Tranche B of the IDB facility comprises a five-year US$ 48.230 million loan bearing interest at 180-day LIBOR(US$ 15 million per month). In those operations Adecoagro Vale do Ivinhema receives exchange variation plus 4.75%4.37% per annum. (See Note 20 for additional details). The Group’s exposure toyear, and pays CDI (an interbank floating interest rate changes throughin Reais) plus 2% per year, and at the Tranche B loan has been fully hedged throughsame time convert the use of an amortizingcurrency interest rate swap. This hedging arrangement will fully offset any additional interest rate expense incurred aspayment into Reais at a result of increases in interest rates. The notional amount of the agreement was US$ 48.2 million. This swap agreement expires on November 15, 2013.fixed exchange rate. The Group did not apply hedge accounting to this agreement.instrument. This swap expired on June 2013.

Foreign currency floating-to-fixed interest rate swap

In June 2012 the Group’s subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a Reais 230 million syndicated loan with Rabobank International Brasil, BGT Pactual, HSBC and Votorantim. The loan bears interest at a variable rate of CDI plus 3.60% per annum. At same moment and with same banks, the Company entered into a swap operation, which intention is to effectively convert the principal amount and interest rate denominated in Reais, to a principal amount an interest rate denominated in US$, plus a fixed rate of 7.70% per annum. The swap expires according to the due dates of the loan, until December 2015. As of December 31, 20102013 and 2009,2012, the Group recorded a liability of US$ 0.6 million10.06 and US$ 10.33 million respectively,representing the estimated fair value of the swap at those dates.

          In September 2010, the Group’s subsidiaries in Brazil, Angélica and UMA, entered into respective interest rate swap agreements to hedge their interest payments under certainas of their loans. Angélica’s facility with Banco Pine comprises a two-year US dollar denominated 6.0 million loan bearing interest at fixed rate of 11.25% per annum. Interest payments are hedged against local Brazilian Interbanking Deposit floating rate (“CDI”). UMA ´s facility with HSBC Bank comprises a two-year US dollar denominated 7.0 million loan bearing exchange variation plus 7.30% per annum. Interest payments are hedged against 99.80% of CDI floating rate. These swap agreements expire in August 2012. The Group did not apply hedge accounting to these agreements. As of December 31, 2010, the Group recorded liabilities of US$ 0.02 million and US$ 0.02 million respectively, the estimated fair value at that date of the swap of Angélica and UMA.date.

Currency forward

          The Group evaluated the impact on interest expense for the year considering an immediate 100 basis point change in interest rates. For

During the years ended December 31, 2010, 20092013, 2012 and 2008,2011, the Group entered into several currency forward contracts with Brazilian banks in order to hedge the fluctuation of the Brazilian Reais against the US Dollar for a 100 basis point increase/decrease in interest rates would result in an increase/decrease in interest expensetotal aggregate amount of US$ 0.712.5 million, US$ nil56.9 million, and US$ 0.0858.5 million, respectively.

The Group evaluated the impact on the interest rate swaps’ fair value considering an immediate 100 basis point changecurrency forward contract entered in interest rates. As2013 and outstanding as of December 31, 20102013 has maturity date in June 2014, while those entered in 2012 had maturity dates ranging between June 2013 and 2009,December 2013, and those entered in 2011 had maturity dates ranging between February 2012 and December 2012. The outstanding contracts resulted in a 100 basis point increase/decreaserecognition of a loss of US$ 3.1 million in interest rates would result2013 and of a gain of US$ 0.8 million in an approximate2012 and a loss of US$ 0.58.5 million in 2011. Gains and US$ 0.5 million increase/decreaselosses on currency forward contracts are included within “Financial results, net” in the fair valuestatement of interest rate swap, respectively. income.

The fair valueaccompanying notes are an integral part of these consolidated financial statements.

F - 39

Adecoagro S.A.

Notes to the swap has been calculated using a discounted cash flow analysis.

Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4.Critical accounting estimates and judgments

Critical accounting policies are those that are most important to the portrayal of the Group’s financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments and estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable. The Group’s critical accounting policies are discussed below.

Actual results could differ from estimates used in employing the critical accounting policies and these could have a material impact on the Group’s results of operations. The Group also has other policies that are considered key accounting policies, such as the policy for revenue recognition. However, these other policies, which are discussed in the notes to the Group’s financial statements, do not meet the definition of critical accounting estimates, because they do not generally require estimates to be made or judgments that are difficult or subjective.

The accompanying notes are an integral part of these consolidated financial statements.

F - 37

(a) Business combinations – purchase price allocation

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4.Critical accounting estimates and judgments (continued)
(a)Business combinations — purchase price allocation
Accounting for business combinations requires the allocation of the Group’s purchase price to the various assets and liabilities of the acquired business at their respective fair values. The Group uses all available information to make these fair value determinations, and for major acquisitions, may hire an independent appraisal firm to assist in making fair value estimates. 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.

(b) Impairment testing

At the date of each statement of financial position, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The Group’s property, plant and equipment items generally do not generate independent cash flows.

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities.(see Note 2.8). As of the acquisition date, any goodwill acquired is allocated to the cash-generating unit (‘CGU’) expected to benefit from the business combination.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually as of September of each year, or more frequently if events or changes in circumstances indicate that the carrying amount may be impaired. The impairment review requires management to undertake certain judgments, including estimating the recoverable value of the CGU to which the goodwill relates, based on either fair value less costs-to-sell or the value-in-use, as appropriate, in order to reach a conclusion on whether it deems the goodwill is impaired or not.

For purposes of the impairment testing, each CGU represents the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets.

The accompanying notes are an integral part of these consolidated financial statements.

F - 40

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4.Critical accounting estimates and judgments (continued)

Farmland businesses may be used for different activities that may generate independent cash flows. When farmland businesses are used for single activities (i.e. crops), these are considered as one CGU. Generally, each separate farmland business within Argentina and Uruguay are treated as single CGUs. Otherwise, when farmland businesses are used for more than one segment activity (i.e. crops and cattle or rental income), the farmland is further subdivided into two or more CGUs, as appropriate, for purposes of impairment testing. For its properties in Brazil, management identified a farmland together with its related mill as separate CGUs.

Management reviewed the carrying amounts of its property, plant and equipment and finite lived intangible assets as of December 31, 2013 to determine whether there was any indication of potential impairment. Management concluded that no impairment testing for property, plant and equipment and finite lived intangible assets was necessary as of year-end. As regards the mandatory impairment testing of goodwill, management tested all CGUs with allocated goodwill in Argentina, Uruguay and Brazil as of September 30, 2013 and determined that none of the CGUs were impaired as of that date. There were no events or changes in circumstances, which would warrant an impairment testing of goodwill as of December 31, 2013.

CGUs tested based on a fair-value-less-costs-to-sell model at September 30, 2013 and 2012:

Based on thesethe criteria described above, management identified a total amount of thirty-six CGUs.

The accompanying notes are an integral partforty-one CGUs as of these consolidated financial statements.

F - 38

September 30, 2013 and forty-three CGUs as of September 30, 2012 for purposes of the impairment testing.

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4.Critical accounting estimates and judgments (continued)
          For the years ended December 31, 2009 and 2008, due to the situation in the international markets and domestic issues within the countries whereAs of September 30, 2013, the Group operates, the Group tested for impairment allidentified 10 CGUs regardless of which CGUs have allocated any goodwill.
          For the year ended December 31, 2010, the Group only tested for impairment in Argentina and Uruguay (2012: 10 CGUs) to be tested based on this model (all CGUs with allocated goodwill, due to there is not any indication that those assets have suffered an impairment loss. Additionally, the Group tested all CGUs in Brazil due mainly to the operating losses from continuing operations suffered during that period in the Coffee and Sugar, Ethanol and Energy segments.
goodwill). Estimating the fair value less costs-to-sell is based on the best information available, and refers to the amount at which the CGU could be bought or sold in a current transaction between willing parties. In calculating the fair value less costs-to-sell, and value-in-use of its CGUs, management may be assisted by the work of external advisors.
CGUs tested based on a fair-value-less-costs-to-sell model for the years ended December 31, 2010, 2009 and 2008:
          The Group identified 31 CGUs in Argentina and Uruguay. The Group tested all of these CGUs based on a fair value less costs-to-sell model as of December 31, 2009 and 2008. When using this model, the Group applies the “sales comparison approach” as its method of valuing most properties. This method relies on results of sales of similar agricultural properties to estimate the value of the CGU. 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 the Group would realize if sold at arm’s length by a willing seller to a willing buyer.

Fair values are determined by extensive analysis. Farmland values are based onanalysis, which includes current and potential soil productivity of the land’s productive capabilityland (the ability to produce crops and maintain livestock) projected margins derived from soil use, rental value obtained for soil use, if applicable, and other factors such as climate and location. Farmland is assessed according to its productivity value, that is, the ability of the land to produce crops and/or maintain livestock. Farmland ratings are established by considering such factors as soil texture and quality, yields, topography, drainage and rain levels. Farmland may contain farm outbuildings. A farm outbuilding is any improvement or structure that is used for farming operations. Outbuildings are valued based on their size, age and design.

Based on the factors described above, each farm property is assigned different soil classifications 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.

The first step to establishing an assessment for a farm property is a sales investigation that identifies the valid farm sales in the area where the farm is located.

A price per hectare is assigned for each soil class within each farm property. This price per hectare is determined based on the quantitative and qualitative analysis mainly described above considering parameters such as:

above.

The accompanying notes are an integral part of these consolidated financial statements.

F - 41

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4.•Current soil productivityCritical accounting estimates and yields;
•Potential soil productivity based on market participant best use of soil property;
•Projected gross margin derived from soil use;
•Rental value obtained for soil use, if applicable;
•Similar comparable farmland property within the topographic area.judgments (continued)

The results are then tested against actual sales, if any, and current market conditions to ensure the values produced are accurate, consistent and fair.

The accompanying notes are an integral part of these consolidated financial statements.

F - 39

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)
The following table shows only the 810 CGUs (2012: 10 CGUs) where goodwill was allocated as of December 31, 2010, 2009 and 2008at each period end and the corresponding amount of goodwill allocated to each one:
             
  December 31,  December 31,  December 31, 
CGU / Operating segment / Country 2010  2009  2008 
La Carolina / Crops / Argentina  176   189   209 
La Carolina / Cattle / Argentina  29   31   34 
El Orden / Crops / Argentina  215   218   240 
El Orden / Cattle / Argentina  35   36   40 
La Guarida / Crops / Argentina  2,574   3,141   3,187 
La Guarida / Cattle / Argentina  255   304   309 
Los Guayacanes / Crops / Argentina  1,966   2,426   2,463 
Doña Marina / Rice / Argentina  7,023   —   — 
          
Closing net book amount of goodwill allocated to CGUs (Note 8)
  12,273   6,345   6,482 
          
Closing net book amount of PPE items and other assets  76,779   52,759   58,294 
          
Total assets allocated to 8 CGUs
  89,052   59,104   64,776 
          
          The remaining 23 CGUs in Argentina and Uruguay without allocated goodwill are not detailed here for simplicity purposes. Property, plant and equipment, investment property, and finite-life intangible assets allocated to these 24 CGUs have an aggregated net book value of US$ 217,138 and US$ 229,079 as of December 31, 2009 and 2008, respectively.

CGU / Operating segment / Country

 September 30,
2013		  September 30,
2012		 

La Carolina / Crops / Argentina

  30    149  

La Carolina / Cattle / Argentina

  111    24  

El Orden / Crops / Argentina

  109    182  

El Orden / Cattle / Argentina

  63    30  

La Guarida / Crops / Argentina

  1,677    2,179  

La Guarida / Cattle / Argentina

  265    216  

Los Guayacanes / Crops / Argentina

  1,349    1,664  

Doña Marina / Rice / Argentina

  4,765    5,877  

Huelen / Crops / Argentina

  5,339    6,585  

El Colorado / Crops / Argentina

  2,694    3,323  
 

 

 

  

 

 

 

Closing net book value of goodwill allocated to CGUs tested
(Note 8)

  16,402    20,229  
 

 

 

  

 

 

 

Closing net book value of PPE items and other assets allocated
to CGUs tested

  80,385    99,413  
 

 

 

  

 

 

 

Total assets allocated to CGUs tested

  96,787    119,642  
 

 

 

  

 

 

 

Based on the testing above, the Group determined that none of the CGUs, with allocated goodwill, were impaired as of December 31, 2010, 2009at September 30, 2013 and 2008. Additionally, none of the CGUs without allocated goodwill, were impaired as of December 31, 2009 and 2008.

2012.

CGUs tested based on a value-in-use model at September 30, 2013 and 2012:

Based on the criteria described above, management identified a total amount of forty-one CGUs as of September 30, 2013 and forty-three CGUs as of September 30, 2012 for purposes of the years ended December 31, 2010, 2009 and 2008:

          Theimpairment testing.

As of September 30, 2013, the Group identified 53 CGUs in Brazil. The Group tested all CGUs(2012: 3 CGUs) in Brazil basedto be tested base on a value-in-use model.this model (all CGUs with allocated goodwill). In performing the value-in-use calculation, the Group applied pre-tax rates to discount the future pre-tax cash flows. In each case, these key assumptions have been made by management reflecting past experience and are consistent with relevant external sources of information, such as appropriate market data.

In calculating value-in-use, management may be assisted by the work of external advisors.

The accompanying notes are an integral part of these consolidated financial statements.

F - 42

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4.Critical accounting estimates and judgments (continued)

The key assumptions used by management in the value-in-use calculations which are considered to be most sensitive to the calculation are:

             
Key Assumptions 2010 2009 2008
Financial projections Covers 8 years for Ivinhema
Covers 4 years for all others		 Covers 8 years for Ivinhema
Covers 4 years for all others		 Covers 8 years for Ivinhema
Covers 4 years for all others
Yield average growth rates 1-3% 1-3% 1-2%
Future pricing increases 2% per annum 2% per annum 2% per annum
Future cost increases 2% per annum 2% per annum 2% per annum
Discount rates 8.67% 9.81% 12.4%
Perpetuity rate 2.5% 2.5% 2.5%
The accompanying notes are an integral part of these consolidated financial statements.

F - 40

Key Assumptions

  

September 30,

2013

  

September 30,

2012

Financial projections

  Covers 4 years for UMA  Covers 4 years for UMA
  Covers 8 years for AVI  Covers 8 years for AVI

Yield average growth rates

  0-3%  0-3%

Future pricing increases

  3% per annum  3% per annum

Future cost increases

  3% per annum  3% per annum

Discount rates

  7.65%  9.16%

Perpetuity growth rate

  4.5%  4.5%

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)
Discount rates are based 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. The risk premium adjustment is assessed for factors specific to the respective CGUs and reflects the countries that the CGUs operate in.

The following table shows only the 3 CGUs where goodwill was allocated as of December 31, 2010, 2009 and 2008at each period end and the corresponding amount of goodwill allocated to each one:

             
  December 31,  December 31,  December 31, 
CGU/ Operating segment 2010  2009  2008 
Ivinhema / Sugar, Ethanol and Energy  9,531   9,120   6,796 
UMA / Sugar, Ethanol and Energy  3,575   3,421   2,549 
UMA (f.k.a. Alfenas Café Ltda) / Coffee  1,115   1,067   794 
          
Closing net book amount of goodwill allocated to CGUs (Note 8)
  14,221   13,608   10,139 
          
Closing net book amount of PPE items and other assets  88,324   90,157   85,981 
          
Total assets allocated to 3 CGUs
  102,545   103,765   96,120 
          
          The remaining 2 CGUs in Brazil without allocated goodwill are not detailed here for simplicity purposes. Property, plant and equipment and finite-life intangible assets allocated to these 2 CGUs have an aggregated net book value of US$ 403,494, US$ 345,976 and US$ 199,552 as of December 31, 2010, 2009 and 2008, respectively.

CGU/ Operating segment

  September 30,
2013		   September 30,
2012		 

AVI / Sugar, Ethanol and Energy

   7,121     7,820  

UMA / Sugar, Ethanol and Energy

   2,671     2,933  

UMA (f.k.a. Alfenas Café Ltda) / Coffee

   1,017     1,099  
  

 

 

   

 

 

 

Closing net book value of goodwill allocated to CGUs tested (Note 8)

   10,809     11,852  
  

 

 

   

 

 

 

Closing net book value of PPE items and other assets allocated to CGUs tested

   559,332     517,052  
  

 

 

   

 

 

 

Total assets allocated to 3 CGUs tested

   570,141     528,904  
  

 

 

   

 

 

 

Based on the testing above, the Group determined that none of the CGUs, where value-in-use was appliedwith allocated goodwill, were impaired as of December 31, 2010, 2009at September 30, 2013 and 2008.

2012.

Management views these assumptions as conservative and does not believe that any reasonable change in the assumptions would cause the carrying value of these CGU’s to exceed the recoverable amount.

(c) Biological assets

The nature of the Group’s biological assets and the basis of determination of their fair value are explained under Note 2.13.2.11. The discounted cash flow model 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. Unobservable inputs are determined based on the best information available, for example by reference to historical information of past practices and results, statistical and agronomical information, and other analytical techniques. Key assumptions include future market prices, estimated yields at the point of harvest, estimated production cycle, future cash flows, future costs of harvesting and other costs, and estimated discount rate.

The accompanying notes are an integral part of these consolidated financial statements.

F - 43

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4.Critical accounting estimates and judgments (continued)

Market prices are generally determined by reference to observable data in the principal market for the agricultural produce. Harvesting costs and other costs are estimated based on historical and statistical data. Yields are estimated based on several factors including the location of the farmland and 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 the Group’s control including but not limited to extreme or unusual weather conditions, plagues and other crop diseases, among other factors.

The accompanying notes are an integral part of these consolidated financial statements.

F - 41

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. Critical accounting estimates and judgments (continued)
The key assumptions discussed above are highly sensitive. Reasonable shifts in assumptions including but not limited to increases or decreases in prices, costs and discount factors used would result in a significant increase or decrease to the fair value of biological assets. In addition, cash flows are projected over a number of years and based on estimated production. Estimates of production in themselves are dependent 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 on 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, the Group made no changes to the models and assumptions. During the year ended December 31, 2010, new information has been gained and accordingly the Group 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. The Group 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 US$ 90.9 million for the year ended December 31, 2010.

(d) 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 rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.

(e) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes 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 the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax assets are reviewed 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.settled. Deferred tax assets and liabilities are not discounted. In assessing the recoverability of deferred tax assets, management considers 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. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. (See(see Note 2122 for details).

(f) Allowance for trade receivables

Management maintains 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, management bases its 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.

The accompanying notes are an integral part of these consolidated financial statements.

F - 42

44

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information

5.Segment information

IFRS 8 “Operating Segments” requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of 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 (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM evaluates the business based on the differences in the nature of its operations, products and services. The amount reported for each segment item is the measure reported to the chief operating decision makerCODM for these purposes.

The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.

The Group’s‘Farming’is further comprised of five reportable segments:

•The Group’s‘Crops’Segment consists of planting, harvesting and sale of grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning and handling and drying services to third parties. Each underlying crop in the Crops segment does not represent a separate operating segment. Management seeks to maximize the use of the land through the cultivation of one or more type of crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some of them out of the Group ´s control. Management is focused on the long-term performance of the productive land, and to that extent, the performance is assessed considering the aggregated combination, if any, of crops planted in the land. A single manager is responsible for the management of operating activity of all crops rather than for each individual crop.
•The Group’s‘Rice’Segment consists of planting, harvesting, processing and marketing of rice;
•The Group’s‘Dairy’Segment consists of the production of raw milk, which is processed into manufactured products and marketed through the Group’s joint venture La Lácteo;
•The Group’s‘Coffee’Segment consists of cultivating coffee beans and marketing own and third party’s coffee production;
•The Group’s‘Cattle’Segment consists of purchasing and fattening of beef cattle for sale to meat processors and local livestock auction markets. In December 2009, the Group strategically decided to sell a significant amount of heads of cattle from owned farmlands to Quickfood S.A., an international third party meat processor. Additionally, the contract provides for the third party to lease the Group’s farmland under an operating lease agreement to raise and fatten the purchased cattle. As required by the Antitrust Law, the Group reported this transaction to the Argentine Antitrust Commission for formal approval. As of the date of these consolidated financial statements, the authorization is still pending. The Group does not have any evidence which may indicate this transaction will not be formally approved.
•The Group’s‘Sugar, Ethanol and Energy’Segment consists of cultivating sugarcane which is processed in owned sugar mills, transformed into ethanol, sugar and electricity and marketed;
•The Group’s‘Land Transformation’Segment comprises the (i) identification and acquisition of underdeveloped and undermanaged farmland businesses for which the Group generally closes a deal for a price lower than the land’s fair value (generating gains); and (ii) realization of value through the strategic disposition of assets (generating profits).

The accompanying notes areGroup’s‘Crops’ Segment consists of planting, harvesting and sale of grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning and handling and drying services to third parties. Each underlying crop in the Crops segment does not represent a separate operating segment. Management seeks to maximize the use of the land through the cultivation of one or more type of crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some of them out of the Group´s control. Management is focused on the long-term performance of the productive land, and to that extent, the performance is assessed considering the aggregated combination, if any, of crops planted in the land. A single manager is responsible for the management of operating activity of all crops rather than for each individual crop.

The Group’s ‘Rice’Segment consists of planting, harvesting, processing and marketing of rice;

The Group’s‘Dairy’ Segment consists of the production and sale of raw milk,

The Group’s‘Coffee’ Segment consists of cultivating coffee beans and marketing own and third party’s coffee production;

The Group’s‘Cattle’ Segment consists mainly in the lease of cattle grazing land (not suitable for crop production) to an integral partinternational meat processor;

The Group’s‘Sugar, Ethanol and Energy’ Segment consists of these consolidated financial statements.cultivating sugarcane which is processed in owned sugar mills, transformed into ethanol, sugar and electricity and marketed;

F - 43

The Group’s‘Land Transformation’ Segment comprises the (i) identification and acquisition of underdeveloped and undermanaged farmland businesses; and (ii) realization of value through the strategic disposition of assets (generating profits).

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)
The measurement principles for the Group’s segment reporting structure are based on the IFRS principles adopted in the consolidated financial statements. Revenue generated and goods and services exchanged between segments are calculated on the basis of market prices.

The following table presents information with respect to the Group’s reportable segments. Certain other activities of a holding function nature not allocable to the segments are disclosed in the column ‘Corporate’‘Corporate’.

The accompanying notes are an integral part of these consolidated financial statements.

F - 44

45

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

5.Segment information (continued)

Segment analysis for the year ended December 31, 2010

                                         
  Farming  Sugar,          
                      Farming  Ethanol and  Land       
  Crops  Rice  Dairy  Coffee  Cattle  subtotal  Energy  Transformation  Corporate  Total 
Sales of manufactured products and services rendered  344   59,280   —   2,709   3,718   66,051   228,478   —   —   294,529 
Cost of manufactured products sold and services rendered  —   (52,017)  —   (2,546)  —   (54,563)  (164,638)  —   —   (219,201)
                               
Gross Profit from Manufacturing Activities
  344   7,263   —   163   3,718   11,488   63,840   —   —   75,328 
                               
Sales of agricultural produce and biological assets  107,818   2,305   14,297   4,863   2,407   131,690   48   —   —   131,738 
Cost of agricultural produce sold and direct agricultural selling expenses  (107,818)  (2,305)  (14,297)  (4,863)  (2,407)  (131,690)  (48)  —   —   (131,738)
Initial recognition and changes in fair value of biological assets and agricultural produce  38,879   9,360   9,129   (2,630)  737   55,475   (86,003)  —   —   (30,528)
Gain from changes in net realizable value of agricultural produce after harvest  7,482   —   —   517   —   7,999   —   —   —   7,999 
                               
Gross Profit / (loss) from Agricultural Activities
  46,361   9,360   9,129   (2,113)  737   63,474   (86,003)  —   —   (22,529)
                               
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
  46,705   16,623   9,129   (1,950)  4,455   74,962   (22,163)  —   —   52,799 
                               
General and administrative expenses  (7,087)  (3,773)  (2,910)  (983)  (350)  (15,103)  (19,080)  —   (22,379)  (56,562)
Selling expenses  (1,522)  (8,154)  (333)  (655)  (175)  (10,839)  (41,689)  —   —   (52,528)
Other operating income, net  (6,194)  345   —   (2,165)  70   (7,944)  5,305   20,837   26   18,224 
Share of loss of joint ventures  —   —   (50)  —   —   (50)  —   —   —   (50)
                               
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)
                               
                                         
Depreciation and amortization  1,711   2,080   423   449   333   4,996   32,567   —   —   37,563 
Initial recognition and changes in fair value of biological assets (unrealized)  8,719   6,273   3,610   (2,450)  (36)  16,116   (96,795)  —   —   (80,679)
Initial recognition and changes in fair value of agricultural produce (unrealized)  7,229   742   —   (71)  —   7,900   405   —   —   8,305 
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)  22,931   2,345   5,519   (109)  773   31,459   10,387   —   —   41,846 
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)  2,050   —   —   (523)  —   1,527   —   —   —   1,527 
Gain from changes in net realizable value of agricultural produce after harvest (realized)  5,432   —   —   1,040   —   6,472   —   —   —   6,472 
Property, plant and equipment, net  204.454   50,899   4,202   25,265   18,831   303,650   448,342   —   —   751,992 
Investment property  —   1,168   —   —   20,249   21,417   —   —   —   21,417 
Goodwill  4,931   7,023   —   1,115   319   13,388   13,106   —   —   26,494 
Biological assets  31,247   21,555   7,130   21,577   401   81,910   104,847   —   —   186,757 
Investment in joint ventures  —   —   6,271   —   —   6,271   —   —   —   6,271 
Inventories  22,926   8,422   883   7,023   61   39,315   17,855   —   —   57,170 
                               
Total segment assets
  263,299   89,066   19,063   54,980   39,542   465,950   584,151   —   —   1,051,101 
                               
Borrowings  (59,339)  (41,050)  (10,262)  (13,651)  —   (124,302)  (265,170)  —   —   (389,472)
                               
Total segment liabilities
  (59,339)  (41,050)  (10,262)  (13,651)  —   (124,302)  (265,170)  —   —   (389,472)
                               
2013

  Farming  Sugar,
Ethanol		  Land
Transformation		  Corporate  Total 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
subtotal		  and
Energy		    

Sales of manufactured products and services rendered

  510    104,576    —      —      3,237    108,323    316,984    —      —      425,307  

Cost of manufactured products sold and services rendered

  —      (84,654)   —      —      (89)   (84,743)   (187,518)   —      —      (272,261) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit from Manufacturing Activities

  510    19,922    —      —      3,148    23,580    129,466    —      —      153,046  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Sales of agricultural produce and biological assets

  184,607    2,517    30,661    439    616    218,840    477    —      —      219,317  

Cost of agricultural produce sold and direct agricultural selling expenses

  (184,607)   (2,517)   (30,661)   (439)   (616)   (218,840)   (477)   —      —      (219,317) 

Initial recognition and changes in fair value of biological assets and agricultural produce

  24,356    8,339    7,761    (8,332)   (267)   31,857    (70,980)   —      —      (39,123) 

Changes in net realizable value of agricultural produce after harvest

  12,607    —      —      121    —      12,728    147    —      —      12,875  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit / (loss) from Agricultural Activities

  36,963    8,339    7,761    (8,211)   (267)   44,585    (70,833)   —      —      (26,248) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Margin on Manufacturing and Agricultural Activities Before Operating Expenses

  37,473    28,261    7,761    (8,211)   2,881    68,165    58,633    —      —      126,798  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

General and administrative expenses

  (4,101)   (4,424)   (1,087)   (1,119)   —      (10,731)   (19,434)   —      (23,187)   (53,352) 

Selling expenses

  (6,236)   (16,104)   (454)   (422)   (75)   (23,291)   (44,571)   —      (207)   (68,069) 

Other operating income, net

  7,632    438    494    (291)   (1)   8,272    13,290    28,172    (84)   49,650  

Share of loss of joint ventures

  (219)   —      —      —      —      (219)   —      —      —      (219) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit / (loss) from Operations Before Financing and Taxation

  34,549    8,171    6,714    (10,043)   2,805    42,196    7,918    28,172    (23,478)   54,808  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit from discontinued operations

  —      —      1,767    —      —      1,767    —      —      —      1,767  

Depreciation and amortization

  (2,171)   (4,731)   (1,086)   (375)   (89)   (8,452)   (59,980)   —      —      (68,432) 

Initial recognition and changes in fair value of biological assets (unrealized)

  894    2,211    (234)   (8,121)   —      (5,250)   (47,341)   —      —      (52,591) 

Initial recognition and changes in fair value of agricultural produce (unrealized)

  3,956    669    —      (211)   —      4,414    (5,279)   —      —      (865) 

Initial recognition and changes in fair value of biological assets and agricultural produce (realized)

  19,506    5,459    7,995    —      (267)   32,693    (18,360)   —      —      14,333  

Changes in net realizable value of agricultural produce after harvest (unrealized)

  (292)   —      —      —      —      (292)   —      —      —      (292) 

Changes in net realizable value of agricultural produce after harvest (realized)

  12,899    —      —      121    —      13,020    147    —      —      13,167  

Property, plant and equipment, net

  157,664    55,411    20,097    8,293    2,040    243,505    547,015    —      —      790,520  

Investment property

  —      —      —      —      10,147    10,147    —      —      —      10,147  

Goodwill

  9,956    4,233    —      978    389    15,556    9,313    —      —      24,869  

Biological assets

  35,982    30,596    9,450    1,944    396    78,368    213,776    —      —      292,144  

Investment in joint ventures

  3,179    —      —      —      —      3,179    —      —      —      3,179  

Inventories

  27,240    10,128    1,563    213    —      39,144    69,245    —      —      108,389  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total segment assets

  234,021    100,368    31,110    11,428    12,972    389,899    839,349    —      —      1,229,248  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Borrowings

  68,886    41,906    10,477    —      —      121,269    538,862    —      —      660,131  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total segment liabilities

  68,886    41,906    10,477    —      —      121,269    538,862    —      —      660,131  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 45

46

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

5.Segment information (continued)

Segment analysis for the year ended December 31, 2009

                                         
  Farming  Sugar,          
                      Farming  Ethanol and  Land       
  Crops  Rice  Dairy  Coffee  Cattle  subtotal  Energy  Transformation  Corporate  Total 
Sales of manufactured products and services rendered  9,667  ��67,317   752   7,984   172   85,892   97,494   —   —   183,386 
Cost of manufactured products sold and services rendered  (5,447)  (56,576)  (613)  (7,120)  —   (69,756)  (110,327)  —   —   (180,083)
                               
Gross Profit / (loss) from Manufacturing Activities
  4,220   10,741   139   864   172   16,136   (12,833)  —   —   3,303 
                               
Sales of agricultural produce and biological assets  82,362   2,033   11,142   6,281   28,306   130,124   93   —   —   130,217 
Cost of agricultural produce sold and direct agricultural selling expenses  (82,362)  (2,033)  (11,142)  (6,281)  (28,306)  (130,124)  (93)  —   —   (130,217)
Initial recognition and changes in fair value of biological assets and agricultural produce  6,563   12,170   3,374   (16,207)  4,704   10,604   61,064   —   —   71,668 
Gain from changes in net realizable value of agricultural produce after harvest  11,362   191   —   1,234   —   12,787   —   —   —   12,787 
                               
Gross Profit / (loss) from Agricultural Activities
  17,925   12,361   3,374   (14,973)  4,704   23,391   61,064   —   —   84,455 
                               
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
  22,145   23,102   3,513   (14,109)  4,876   39,527   48,231   —   —   87,758 
                               
General and administrative expenses  (6,280)  (2,883)  (2,221)  (2,126)  (2,909)  (16,419)  (13,922)  —   (22,052)  (52,393)
Selling expenses  (1,587)  (7,485)  (777)  (1,353)  (1,045)  (12,247)  (18,922)  —   —   (31,169)
Other operating income, net  4,776   (942)  (108)  806   377   4,909   (10,467)  18,839   (210)  13,071 
Share of loss of joint ventures  —   —   (294)  —   —   (294)  —   —   —   (294)
                               
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 
                               
                                         
Depreciation and amortization  2,066   1,452   403   570   353   4,844   25,512   —   —   30,356 
Initial recognition and changes in fair value of biological assets (unrealized)  4,433   6,759   32   (12,662)  127   (1,311)  57,335   —   —   56,024 
Initial recognition and changes in fair value of agricultural produce (unrealized)  1,485   —   —   (3,043)  —   (1,558)  1,375   —   —   (183)
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)  645   5,411   3,342   (502)  4,577   13,473   2,354   —   —   15,827 
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)  134   —   —   (7)  —   127   —   —   —   127 
Gain from changes in net realizable value of agricultural produce after harvest (realized)  11,228   191   —   1,241   —   12,660   —   —   —   12,660 
Property, plant and equipment, net  248,594   31,282   10,652   2,680   767   293,975   388,903   —   —   682,878 
Investment property  —   —   —   —   21,246   21,246   —   —   —   21,246 
Goodwill  6,110   —   —   1,067   237   7,414   12,539   —   —   19,953 
Biological assets  27,467   11,524   4,313   21,634   815   65,753   164,701   —   —   230,454 
Investment in joint ventures  —   —   6,506   —   —   6,506   —   —   —   6,506 
Inventories  23,832   9,460   1,086   1,992   716   37,086   20,816   —   —   57,902 
                               
Total segment assets
  306,003   52,266   22,557   27,373   23,781   431,980   586,959   —   —   1,018,939 
                               
Borrowings  63,893   39,850   9,963   3,493   —   117,199   189,582   —   —   306,781 
                               
Total segment liabilities
  63,893   39,850   9,963   3,493   —   117,199   189,582   —   —   306,781 
                               
2012

  Farming  Sugar,
Ethanol		  Land
Transformation		  Corporate  Total 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
subtotal		  and
Energy		    

Sales of manufactured products and services rendered

  589    92,438    —      —      4,390    97,417    282,109    —      —      379,526  

Cost of manufactured products sold and services rendered

  —      (78,617)   —      —      (230)   (78,847)   (185,131)   —      —      (263,978) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit from Manufacturing Activities

  589    13,821    —      —      4,160    18,570    96,978    —      —      115,548  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Sales of agricultural produce and biological assets

  195,617    1,466    18,868    8,363    637    224,951    223    —      —      225,174  

Cost of agricultural produce sold and direct agricultural selling expenses

  (195,617)   (1,466)   (18,868)   (8,363)   (637)   (224,951)   (223)   —      —      (225,174) 

Initial recognition and changes in fair value of biological assets and agricultural produce

  35,471    6,463    2,060    (4,196)   (131)   39,667    (23,024)   —      —      16,643  

Changes in net realizable value of agricultural produce after harvest

  15,850    —      —      154    —      16,004    —      —      —      16,004  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit / (loss) from Agricultural Activities

  51,321    6,463    2,060    (4,042)   (131)   55,671    (23,024)   —      —      32,647  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Margin on Manufacturing and Agricultural Activities Before Operating Expenses

  51,910    20,284    2,060    (4,042)   4,029    74,241    73,954    —      —      148,195  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

General and administrative expenses

  (4,436)   (4,072)   (906)   (1,082)   (23)   (10,519)   (22,239)   —      (24,933)   (57,691) 

Selling expenses

  (5,904)   (16,157)   (319)   (304)   (60)   (22,744)   (35,690)   —      (168)   (58,602) 

Other operating income, net

  (9,330)   1,065    22    2,387    (16)   (5,872)   9,797    27,513    (341)   31,097  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit / (loss) from Operations Before Financing and Taxation

  32,240    1,120    857    (3,041)   3,930    35,106    25,822    27,513    (25,442)   62,999  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss from discontinued operations

  —      —      (4,040)   —      —      (4,040)   —      —      —      (4,040) 

Depreciation and amortization

  (2,073)   (3,823)   (896)   (587)   (189)   (7,568)   (46,900)   —      —      (54,468) 

Initial recognition and changes in fair value of biological assets (unrealized)

  6,169    4,352    115    (2,615)   —      8,021    (24,783)   —      —      (16,762) 

Initial recognition and changes in fair value of agricultural produce (unrealized)

  4,803    —      —      (1,581)   —      3,222    205    —      —      3,427  

Initial recognition and changes in fair value of biological assets and agricultural produce (realized)

  24,499    2,111    1,945    —      (131)   28,424    1,554    —      —      29,978  

Changes in net realizable value of agricultural produce after harvest (unrealized)

  877    —      —      1,147    —      2,024    —      —      —      2,024  

Changes in net realizable value of agricultural produce after harvest (realized)

  14,973    —      —      (993)   —      13,980    —      —      —      13,980  

Property, plant and equipment, net

  200,223    68,527    22,047    21,081    11,065    322,943    557,954    —      —      880,897  

Investment property

  —      —      —      —      15,542    15,542    —      —      —      15,542  

Goodwill

  13,201    5,613    —      1,093    516    20,423    10,677    —      —      31,100  

Biological assets

  42,091    30,836    12,149    16,211    979    102,266    195,870    —      —      298,136  

Investment in joint ventures

  —      —      2,613    —      —      2,613    —      —      —      2,613  

Financial assets

  11,878    —      —      —      —      11,878    —      —      —      11,878  

Inventories

  29,731    12,411    2,376    2,562    —      47,080    48,241    —      —      95,321  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total segment assets

  297,124    117,387    39,185    40,947    28,102    522,745    812,742    —      —      1,335,487  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Borrowings

  79,820    56,567    14,142    8,686    —      159,215    379,918    —      —      539,133  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total segment liabilities

  79,820    56,567    14,142    8,686    —      159,215    379,918    —      —      539,133  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 46

47

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

5.Segment information (continued)

Segment analysis for the year ended December 31, 2008

                                         
  Farming  Sugar,          
                      Farming  Ethanol and  Land       
  Crops  Rice  Dairy  Coffee  Cattle  subtotal  Energy  Transformation  Corporate  Total 
Sales of manufactured products and services rendered  3,134   53,280   2,171   8,544   164   67,293   49,880   —   —   117,173 
Cost of manufactured products sold and services rendered  (2,807)  (39,862)  (1,849)  (6,978)  —   (51,496)  (54,087)  —   —   (105,583)
                               
Gross Profit / (loss) from Manufacturing Activities
  327   13,418   322   1,566   164   15,797   (4,207)  —   —   11,590 
                               
Sales of agricultural produce and biological assets  92,853   3,645   12,650   7,404   9,193   125,745   1,291   —   —   127,036 
Cost of agricultural produce sold and direct agricultural selling expenses  (92,853)  (3,645)  (12,650)  (7,404)  (9,193)  (125,745)  (1,291)  —   —   (127,036)
Initial recognition and changes in fair value of biological assets and agricultural produce  28,005   7,854   2,633   4,485   3,788   46,765   14,235   —   —   61,000 
Gain from changes in net realizable value of agricultural produce after harvest  2,211   —   —   (950)  —   1,261   —   —   —   1,261 
                               
Gross Profit from Agricultural Activities
  30,216   7,854   2,633   3,535   3,788   48,026   14,235   —   —   62,261 
                               
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
  30,543   21,272   2,955   5,101   3,952   63,823   10,028   —   —   73,851 
                               
General and administrative expenses  (3,885)  (398)  (1,835)  (3,308)  (2,206)  (11,632)  (12,646)  —   (21,355)  (45,633)
Selling expenses  (3,959)  (7,647)  (967)  (902)  (473)  (13,948)  (10,548)  —   —   (24,496)
Other operating income, net  4,824   29   18   (27)  16   4,860   211   13,974   (1,722)  17,323 
Excess of fair value of net assets acquired over cost  —   —   —   —   —   —   —   1,227   —   1,227 
Share of loss of joint ventures  —   —   (838)  —   —   (838)  —   —   —   (838)
                               
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 
                               
                                         
Depreciation and amortization  6,517   710   348   798   517   8,890   19,424   —   —   28,314 
Initial recognition and changes in fair value of biological assets (unrealized)  332   —   1,840   3,355   2,567   8,094   13,448   —   —   21,542 
Initial recognition and changes in fair value of agricultural produce (unrealized)  3,551   —   —   931   —   4,482   298   —   —   4,780 
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)  24,122   7,854   793   199   1,221   34,189   489   —   —   34,678 
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)  —   —   —   (99)  —   (99)  —   —   —   (99)
Gain from changes in net realizable value of agricultural produce after harvest (realized)  2,211   —   —   (851)  —   1,360   —   —   —   1,360 
Property, plant and equipment, net  232,465   50,804   12,069   12,523   33,041   340,902   230,517   —   —   571,419 
Spin-off assets  —   —   —   —   —   —   —   45,311   —   45,311 
Goodwill  3,610   —   —   794   383   4,787   11,834   —   —   16,621 
Biological assets  21,059   6,908   4,732   25,453   19,629   77,781   48,167   —   —   125,948 
Investment in joint ventures  —   —   7,508   —   —   7,508   —   —   —   7,508 
Inventories  21,201   9,212   —   5,326   878   36,617   24,604   —   —   61,221 
                               
Total segment assets
  278,335   66,924   24,309   44,096   53,931   467,595   315,122   45,311   —   828,028 
                               
Borrowings  45,322   36,258   9,065   —   —   90,645   137,668   —   —   228,313 
                               
Total segment liabilities
  45,322   36,258   9,065   —   —   90,645   137,668   —   —   228,313 
                               
2011

  Farming  Sugar,
Ethanol		  Land
Transformation		  Corporate  Total 
  Crops  Rice  Dairy  Coffee  Cattle  Farming
subtotal		  and
Energy		    

Sales of manufactured products and services rendered

  557    82,523    —      713    4,746    88,539    277,318    —      —      365,857  

Cost of manufactured products sold and services rendered

  —      (68,721)   —      (629)   (408)   (69,758)   (167,646)   —      —      (237,404) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit from Manufacturing Activities

  557    13,802    —      84    4,338    18,781    109,672    —      —      128,453  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Sales of agricultural produce and biological assets

  147,389    721    19,697    13,457    963    182,227    —      —      —      182,227  

Cost of agricultural produce sold and direct agricultural selling expenses

  (147,389)   (721)   (19,697)   (13,457)   (963)   (182,227)   —      —      —      (182,227) 

Initial recognition and changes in fair value of biological assets and agricultural produce

  38,014    10,139    6,939    (697)   468    54,863    31,948    —      —      86,811  

Gain from changes in net realizable value of agricultural produce after harvest

  10,953    —      —      (430)   —      10,523    —      —      —      10,523  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Gross Profit / (loss) from Agricultural Activities

  48,967    10,139    6,939    (1,127)   468    65,386    31,948    —      —      97,334  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Margin on Manufacturing and Agricultural Activities Before Operating Expenses

  49,524    23,941    6,939    (1,043)   4,806    84,167    141,620    —      —      225,787  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

General and administrative expenses

  (8,003)   (6,278)   (1,173)   (1,153)   (269)   (16,876)   (21,082)   —      (27,184)   (65,142) 

Selling expenses

  (2,270)   (14,488)   (401)   (463)   (74)   (17,696)   (41,708)   —      —      (59,404) 

Other operating income, net

  1,843    372    (2)   2,020    (3)   4,230    11,220    8,832    299    24,581  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Profit / (loss) from Operations Before Financing and Taxation

  41,094    3,547    5,363    (639)   4,460    53,825    90,050    8,832    (26,885)   125,822  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Loss from discontinued operations

  —      —  ��   (1,034)   —      —      (1,034)   —      —      —      (1,034) 

Depreciation and amortization

  (1,469)   (3,105)   (600)   (530)   (226)   (5,930)   (28,254)   —      —      (34,184) 

Initial recognition and changes in fair value of biological assets (unrealized)

  —      —      1,503    (1,394)   —      109    8,797    —      —      8,906  

Initial recognition and changes in fair value of agricultural produce (unrealized)

  1,474    2,234    —      697    —      4,405    3,825    —      —      8,230  

Initial recognition and changes in fair value of biological assets and agricultural produce (realized)

  36,540    7,905    5,436    —      468    50,349    19,326    —      —      69,675  

Gain from changes in net realizable value of agricultural produce after harvest (unrealized)

  1,944    —      —      (128)   —      1,816    —      —      —      1,816  

Gain from changes in net realizable value of agricultural produce after harvest (realized)

  9,009    —      —      (302)   —      8,707    —      —      —      8,707  

The accompanying notes are an integral part of these consolidated financial statements.

F - 47

48

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

5.Segment information (continued)

Total segment assets are measured in a manner consistent with that of the consolidated financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. The Group’s investment in the joint venture Grupo La LácteoCHS S.A. is allocated to the ‘Dairy’‘Crops’ segment. Therefore, the Group’s share of profit or loss after income taxes and its carrying amount are reported in this segment.

Total reportable segments’ assets are reconciled to total assets as per the statement of financial position as follows:

             
  2010  2009  2008 
Total reportable assets as per Segment Information
  1,050,101   1,018,939   828,028��
Intangible assets (excluding goodwill)  2,159   1,906   1,487 
Deferred income tax assets  67,463   45,113   18,713 
Trade and other receivables  149,957   128,277   84,540 
Other assets  26   34   87 
Derivative financial instruments  876   99   2,019 
Cash and cash equivalents  70,269   74,806   93,360 
          
Total assets as per the Statement of Financial Position
  1,340,851   1,269,174   1,028,234 
          

   2013   2012 

Total reportable assets as per Segment Information

   1,229,248     1,335,487  

Intangible assets (excluding goodwill)

   2,472     1,780  

Deferred income tax assets

   48,368     35,391  

Trade and other receivables

   194,432     179,878  

Other assets

   707     1,398  

Derivative financial instruments

   4,102     5,212  

Cash and cash equivalents

   232,147     218,809  
  

 

 

   

 

 

 

Total assets as per the Statement of Financial Position

   1,711,476     1,777,955  
  

 

 

   

 

 

 

Total segment liabilities are measured in a manner consistent with that of the consolidated financial statements. These liabilities are allocated based on the operations of the segment.

Total reportable segments’ liabilities are reconciled to total liabilities as per the statement of financial position as follows:

             
  2010  2009  2008 
Total reportable liabilities as per Segment Information
  389,472   306,781   228,313 
Trade and other payables  81,021   68,920   52,760 
Deferred income tax liabilities  111,495   107,045   94,627 
Payroll and social liabilities  16,656   11,185   6,859 
Provisions for other liabilities  9,207   4,978   1,601 
Current income tax liabilities  978   222   1,487 
Derivative financial instruments  8,920   12,887   4,159 
          
Total liabilities as per the Statement of Financial Position
  617,749   512,018   389,806 
          
          The Group’s non-current

   2013   2012 

Total reportable liabilities as per Segment Information

   660,131     539,133  

Trade and other payables

   95,916     104,260  

Deferred income tax liabilities

   57,623     75,389  

Payroll and social liabilities

   27,597     24,460  

Provisions for other liabilities

   2,950     2,732  

Current income tax liabilities

   310     187  

Derivative financial instruments

   12,600     5,751  
  

 

 

   

 

 

 

Total liabilities as per the Statement of Financial Position

   857,127     751,912  
  

 

 

   

 

 

 

Non-current assets and net revenue and fair value gains and losses are shown by geographic region. These are the regions in which the Group is active: Argentina, Brazil and Uruguay. Non-current assets are allocated to the regions according to the location of the assets in question. Non-current assets encompass intangible assets; property, plant and equipment; investments accounted for using the equity method as well as other non-current assets. Net revenue and fair value gains and losses are allocated according to the location of the respective operations.

The accompanying notes are an integral part of these consolidated financial statements.

F - 48

49

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

5.Segment information (continued)

As of and for the year ended December 31, 2010:

                 
  Argentina  Brazil  Uruguay  Total 
Property, plant and equipment  246,602   495,075   10,315   751,992 
Investment property  21,417   —   —   21,417 
Intangible assets  1,115   1,044   —   2,159 
Goodwill  12,272   14,222   —   26,494 
Investment in joint ventures  6,271   —   —   6,271 
Non-current portion of biological assets  7,169   97,047   —   104,216 
Initial recognition and changes in fair value of biological assets and agricultural produce  54,226   (86,557)  1,803   (30,528)
Gain from changes in net realizable value of agricultural produce after harvest  8,157   (123)  (35)  7,999 
Sales of manufactured products sold and services rendered  62,455   232,074   —   294,529 
Sales of agricultural produce and biological assets  109,387   17,158   5,193   131,738 
2013:

   Argentina   Brazil  Uruguay   Total 

Property, plant and equipment

   206,852     573,675    9,993     790,520  

Investment property

   10,147     —      —       10,147  

Intangible assets

   1,725     747    —       2,472  

Goodwill

   14,579     10,290    —       24,869  

Investment in joint ventures

   3,179     —      —       3,179  

Non-current portion of biological assets

   9,483     215,720    —       225,203  

Initial recognition and changes in fair value of biological assets and agricultural produce

   33,640     (76,511)   3,748     (39,123) 

(Loss) Gain from changes in net realizable value of agricultural produce after harvest

   12,850     (40)   65     12,875  

Sales of manufactured products sold and services rendered

   108,281     312,607    4,419     425,307  

Sales of agricultural produce and biological assets

   190,391     16,459    12,467     219,317  

As of and for the year ended December 31, 2009:

                 
  Argentina  Brazil  Uruguay  Total 
Property, plant and equipment  228,723   430,175   23,980   682,878 
Investment property  21,246   —   —   21,246 
Intangible assets  243   1,663   —   1,906 
Goodwill  6,347   13,606   —   19,953 
Investment in joint ventures  6,506   —   —   6,506 
Non-current portion of biological assets  4,379   165,968   —   170,347 
Initial recognition and changes in fair value of biological assets and agricultural produce  26,995   42,348   2,325   71,668 
Gain from changes in net realizable value of agricultural produce after harvest  10,001   1,794   992   12,787 
Sales of manufactured products sold and services rendered  68,020   115,366   —   183,386 
Sales of agricultural produce and biological assets  99,661   25,304   5,252   130,217 
2012:

   Argentina   Brazil  Uruguay  Total 

Property, plant and equipment

   272,730     597,284    10,883    880,897  

Investment property

   15,542     —      —      15,542  

Intangible assets

   1,187     593    —      1,780  

Goodwill

   19,329     11,771    —      31,100  

Investment in joint ventures

   2,613     —      —      2,613  

Non-current portion of biological assets

   12,885     212,081    —      224,966  

Initial recognition and changes in fair value of biological assets and agricultural produce

   39,475     (25,002)   2,170    16,643  

Gain from changes in net realizable value of agricultural produce after harvest

   16,190     (31)   (155)   16,004  

Sales of manufactured products sold and services rendered

   96,945     282,536    45    379,526  

Sales of agricultural produce and biological assets

   178,990     31,956    14,228    225,174  

The accompanying notes are an integral part of these consolidated financial statements.

F - 49

50

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

5.Segment information (continued)

As of and for the year ended December 31, 2008:

                 
  Argentina  Brazil  Uruguay  Total 
Property, plant and equipment  267,945   284,046   19,428   571,419 
Intangible assets  252   1,235   —   1,487 
Goodwill  6,483   10,138   —   16,621 
Investment in joint ventures  7,508   —   —   7,508 
Non-current portion of biological assets  17,342   58,359   —   75,701 
Initial recognition and changes in fair value of biological assets and agricultural produce  31,124   26,639   3,237   61,000 
Gain from changes in net realizable value of agricultural produce after harvest  1,442   343   (524)  1,261 
Sales of manufactured products sold and services rendered  54,990   62,026   157   117,173 
Sales of agricultural produce and biological assets  92,120   24,653   10,263   127,036 
2011:

   Argentina   Brazil   Uruguay  Total 

Initial recognition and changes in fair value of biological assets and agricultural produce

   47,196     37,617     1,998    86,811  

Gain from changes in net realizable value of agricultural produce after harvest

   10,539     651     (667)   10,523  

Sales of manufactured products sold and services rendered

   86,606     279,251     —      365,857  

Sales of agricultural produce and biological assets

   143,505     29,864     8,858    182,227  

The accompanying notes are an integral part of these consolidated financial statements.

F - 50

51

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

6. Property, plant and equipment

6.Property, plant and equipment

Changes in the Group’s property, plant and equipment in 2010, 20092013 and 20082012 were as follows:

                                 
              Machinery,              
              equipment,              
      Farmland  Buildings and  furniture and  Computer      Work in    
  Farmlands  improvements  facilities  fittings  equipment  Vehicles  progress  Total 
At January 1, 2008
                                
Cost  374,299   3,448   35,828   69,973   326   1,905   81,520   567,299 
Accumulated depreciation  —   (2,395)  (10,282)  (15,547)  (150)  (908)  —   (29,282)
                         
Net book amount  374,299   1,053   25,546   54,426   176   997   81,520   538,017 
                         
Year ended December 31, 2008
                                
Opening net book amount  374,299   1,053   25,546   54,426   176   997   81,520   538,017 
Exchange differences  (43,094)  (119)  (10,235)  (29,346)  (253)  126   (27,270)  (110,191)
Additions  740   189   59,759   110,181   1,294   308   13,825   186,296 
Acquisition of subsidiary  —   —   —   —   —   —   —   — 
Transfers  —   —   —   —   —   —   —   — 
Disposals  (11,466)  (30)  (798)  (2,187)  (3)  (75)  —   (14,559)
Depreciation charge (Note 25)  —   (230)  (3,926)  (23,313)  (343)  (332)  —   (28,144)
                         
Closing net book amount
  320,479   863   70,346   109,761   871   1,024   68,075   571,419 
     ��                   
At December 31, 2008
                                
Cost  320,479   3,488   84,554   148,621   1,364   2,264   68,075   628,845 
Accumulated depreciation  —   (2,625)  (14,208)  (38,860)  (493)  (1,240)  —   (57,426)
                         
Net book amount  320,479   863   70,346   109,761   871   1,024   68,075   571,419 
                         
Year ended December 31, 2009
                                
Opening net book amount  320,479   863   70,346   109,761   871   1,024   68,075   571,419 
Exchange differences  5,131   (665)  18,053   35,981   321   (112)  21,568   80,277 
Additions  2,602   279   7,319   26,242   427   574   65,063   102,506 
Transfers  —   —   12,815   34,961   104   —   (47,880)  — 
Transfers to investment property (Note 7)  (21,246)  —   —   —   —   —   —   (21,246)
Disposals  (2,797)  (16)  (71)  (3,943)  (11)  (166)  —   (7,004)
Reclassification to non-income tax credits (*)  —   —   —   (8,631)  —   —   —   (8,631)
Disposals of subsidiary  (4,297)  —   (26)  (61)  —   —   —   (4,384)
Depreciation charge (Note 25)  —   (27)  (5,782)  (23,662)  (330)  (258)  —   (30,059)
                         
Closing net book amount
  299,872   434   102,654   170,648   1,382   1,062   106,826   682,878 
                         
At December 31, 2009
                                
Cost  299,872   3,086   122,644   233,170   2,205   2,560   106,826   770,363 
Accumulated depreciation  —   (2,652)  (19,990)  (62,522)  (823)  (1,498)  —   (87,485)
                         
Net book amount  299,872   434   102,654   170,648   1,382   1,062   106,826   682,878 
                         

   Farmlands  Farmland
improvements		  Buildings
and
facilities		  Machinery,
equipment,
furniture
and
fittings		  Computer
equipment		  Vehicles  Work in
progress		  Total 

At January 1, 2012

         

Cost

   313,685    4,068    190,704    319,661    3,355    3,122    84,556    919,151  

Accumulated depreciation

   —      (3,138)   (37,087)   (115,220)   (1,881)   (2,129)   —      (159,455) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net book amount

   313,685    930    153,617    204,441    1,474    993    84,556    759,696  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Year ended December 31, 2012

         

Opening net book amount

   313,685    930    153,617    204,441    1,474    993    84,556    759,696  

Exchange differences

   (34,911)   2    (13,800)   (17,418)   (123)   (254)   (9,348)   (75,852) 

Additions

   —      29    756    35,840    862    1,585    208,507    247,579  

Acquisition of subsidiary (Note 32)

   —      —      —      —      —      —      —      —    

Transfers from investment property (Note 7)

   9,625    —      —      —      —      —      —      9,625  

Transfers

   —      9,287    24,528    26,634    27    —      (60,476)   —    

Disposals

   —      —      (85)   (806)   (6)   (26)   —      (923) 

Disposals of subsidiaries

   (4,118)   —      (30)   (1)   —      —      —      (4,149) 

Reclassification to non-income tax credits (*)

   —      —      (188)   (774)   —      —      —      (962) 

Depreciation (Note 26)

   —      (1,731)   (15,912)   (35,275)   (641)   (558)   —      (54,117) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Closing net book amount

   284,281    8,517    148,886    212,641    1,593    1,740    223,239    880,897  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 51

52

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

6. Property, plant and equipment (continued)
                                 
              Machinery,              
              equipment,              
      Farmland  Buildings and  furniture and  Computer      Work in    
  Farmlands  improvements  facilities  fittings  equipment  Vehicles  progress  Total 
Year ended December 31, 2010
                                
Opening net book amount  299,872   434   102,654   170,648   1,382   1,062   106,826   682,878 
Exchange differences  (4,919)  (27)  2,337   7,272   45   (33)  4,173   8,848 
Additions  974   10   4,964   22,337   592   455   67,654   96,986 
Acquisition of subsidiary (Note 31)  13,666   —   375   33   —   2   —   14,076 
Transfers  —   153   65,398   68,291   68   —   (133,910)  — 
Transfers from investment property (Note 7)  6,767   —   —   —   —   —   —   6,767 
Disposals  (10,948)  (153)  (2,360)  (456)  (36)  (122)  —   (14,075)
Reclassification to non-income tax credits (*)  —   —   —   —   —   —   (6,271)  (6,271)
Depreciation charge (Note 25)  —   (172)  (8,120)  (28,215)  (449)  (261)  —   (37,217)
                         
Closing net book amount
  305,412   245   165,248   239,910   1,602   1,103   38,472   751,992 
                         
At December 31, 2010
                                
Cost  305,412   3,069   193,358   330,647   2,874   2,862   38,472   876,694 
Accumulated depreciation  —   (2,824)  (28,110)  (90,737)  (1,272)  (1,759)  —   (124,702)
                         
Net book amount  305,412   245   165,248   239,910   1,602   1,103   38,472   751,992 
                         

6.Property, plant and equipment (continued)

  Farmlands  Farmland
improvements		  Buildings
and
facilities		  Machinery,
equipment,
furniture
and
fittings		  Computer
equipment		  Vehicles  Work in
progress		  Total 

At December 31, 2012

        

Cost

  284,281    13,386    201,885    363,136    4,115    4,427    223,239    1,094,469  

Accumulated depreciation

  —      (4,869)   (52,999)   (150,495)   (2,522)   (2,687)   —      (213,572) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net book amount

  284,281    8,517    148,886    212,641    1,593    1,740    223,239    880,897  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Year ended December 31, 2013

        

Opening net book amount

  284,281    8,517    148,886    212,641    1,593    1,740    223,239    880,897  

Exchange differences

  (59,531)   (1,826)   (22,513)   (25,973)   (179)   (365)   (30,042)   (140,429) 

Additions

  —      194    9,896    46,621    1,387    326    72,055    130,479  

Acquisition of subsidiary (Note 32)

  —      —      —      —      —      —      —      —    

Transfers from investment property (Note 7)

  1,664    —      —      —      —      —      —      1,664  

Transfers

  (12)   4,012    87,049    116,565    67    (8)   (207,673)   —    

Disposals

  (7,638)   (20)   (615)   (2,156)   (16)   (35)   —      (10,480) 

Disposals of subsidiaries

  (1,921)   —      (373)   —      —      —      —      (2,294) 

Reclassification to non-income tax credits (*)

  —      —      (837)   454    —      —      —      (383) 

Depreciation (Note 26)

  —      (2,025)   (15,031)   (50,242)   (1,162)   (474)   —      (68,934) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Closing net book amount

  216,843    8,852    206,462    297,910    1,690    1,184    57,579    790,520  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2013

        

Cost

  216,843    15,746    274,492    498,647    5,374    4,345    57,579    1,073,026  

Accumulated depreciation

  —      (6,894)   (68,030)   (200,737)   (3,684)   (3,161)   —      (282,506) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net book amount

  216,843    8,852    206,462    297,910    1,690    1,184    57,579    790,520  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(*)Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. The procedure adopted initially was to recognize such credits proportionally to the depreciationAs of these fixed assets on a monthly basis. During 2009, the Group elected to change the procedure to recognize these federalDecember 31, 2013, ICMS tax credits separately when the assets is purchased and, as permitted, the tax credits already “embedded” within the cost of the assets were reclassified to tax credit (See Note 12).trade and other receivables.

The accompanying notes are an integral part of these consolidated financial statements.

F - 52

53

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

6. Property, plant and equipment (continued)

6.Property, plant and equipment (continued)

An amount of US$ 29,603;61,109; US$ 16,89547,935 and US$ 16,59028,407 of depreciation charges are included in “Cost of manufactured products sold and services rendered” for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively. An amount of US$ 7,614;6,352; US$ 13,1645,557 and US$ 11,5544,424 of depreciation charges are included in “General and administrative expenses” for the years ended December 31, 2010, 20092013, 2012 and 2008,2011, respectively.

          In 2010, An amount of US$ 503, US$ 625 and US$ 1,016 of depreciation charges are included in “Selling expenses” for the years ended December 31, 2013, 2012 and 2011, respectively. An amount of US$ 970, US$ nil and US$ 906 of depreciation charges were not charged to the statement of income and were capitalized in “Inventories” for the years ended December 31, 2013, 2012 and 2011, respectively.

During the year ended December 31, 2013, borrowing costs of US$ 5,453 (2009:10,074 (2012: US$ 3,890; 2008: US$ 7,685)17,506) were capitalized as components of the cost of acquisition or construction for qualifying assets.

Certain of the Group’s assets have been pledged as collateral to secure the Group’s borrowings and other payables. The net book value of the pledged assets amounts to US$ 334,743488,674 as of December 31, 2010 (2009:2013 (2012: US$ 114,825; 2008: US$ 80,103)305,032).

Where assets are financed by leasing agreements and substantially all the risks and rewards of ownership are substantially transferred to the Group (“finance leases”) the assets are treated as if they had been purchased outright and the corresponding liability to the leasing company is included as an obligation under finance leases. Depreciation on assets held under finance leases is charged to the income statement on the same basis as owned assets. Leasing payments are treated as consisting of capital and interest elements and the interest is charged to the statement of income as a financing charge. Assets under finance leases comprise vehicles, machinery and equipment. All other leases are treated as operating leases and the relevant annual rentals are charged to the statement of income as incurred (See(see Note 30)31).

7. Investment property

7.Investment property

Changes in the Group’s investment property in 2010, 20092013 and 20082012 were as follows:

             
  2010  2009  2008 
Beginning of the year  21,246   —   — 
Acquisition of subsidiary (Note 31)  7,935   —   — 
Transfers (i), (ii)  (6,767)  21,246   — 
Exchange difference  (997)  —   — 
          
End of the year
  21,417   21,246   — 
          

   2013  2012 

Beginning of the year

   15,542    27,883  

Transfers (i)

   (1,664)   (9,625) 

Exchange difference

   (3,731)   (2,716) 
  

 

 

  

 

 

 

End of the year

   10,147    15,542  
  

 

 

  

 

 

 

Cost

   10,147    15,542  

Accumulated depreciation

   —      —    
  

 

 

  

 

 

 

Net book amount

   10,147    15,542  
  

 

 

  

 

 

 

The following amounts have been recognized in the statement of income in the line “Sales of manufactured products and services rendered”:

             
  2010  2009  2008 
Rental income  3,718   172   — 

   2013   2012   2011 

Rental income

   3,446     4,735     4,980  

(i)Transferred from property, plant and equipment in 2009. Relates to farmland rented out to third parties. See Note 30 for details.
(ii)Transferred to property, plant and equipment in 2010.2013 and 2012. Relates to finalization of contracts with third parties.

As of December 31, 2010,2013, the fair value (level 3) of investment property iswas US$ 96.4 million.

58 million (2012: US$ 67 million).

The accompanying notes are an integral part of these consolidated financial statements.

F - 53

54

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

8. Intangible assets

8.Intangible assets

Changes in the Group’s intangible assets in 2010, 20092013 and 20082012 were as follows:

                 
  Goodwill  Trademarks  Software  Total 
At January 1, 2008
                
Cost  21,157   2,153   373   23,683 
Accumulated amortization  —   (321)  (147)  (468)
             
Net book amount  21,157   1,832   226   23,215 
             
Year ended December 31, 2008
                
Opening net book amount  21,157   1,832   226   23,215 
Exchange differences  (3,351)  (397)  (4)  (3,752)
Disposal of subsidiary  (1,185)  —   —   (1,185)
Amortization charge (i) (Note 25)  —   (159)  (11)  (170)
             
Closing net book amount
  16,621   1,276   211   18,108 
             
At December 31, 2008
                
Cost  16,621   1,756   369   18,746 
Accumulated amortization  —   (480)  (158)  (638)
             
Net book amount  16,621   1,276   211   18,108 
             
Year ended December 31, 2009
                
Opening net book amount  16,621   1,276   211   18,108 
Exchange differences  3,332   303   98   3,733 
Disposal of subsidiary  —   173   142   315 
Amortization charge (i) (Note 25)  —   (196)  (101)  (297)
             
Closing net book amount
  19,953   1,556   350   21,859 
             
At December 31, 2009
                
Cost  19,953   2,232   609   22,794 
Accumulated amortization and impairment  —   (676)  (259)  (935)
             
Net book amount  19,953   1,556   350   21,859 
             
Year ended December 31, 2010
                
Opening net book amount  19,953   1,556   350   21,859 
Exchange differences  (482)  742   31   291 
Additions  —   6   27   33 
Acquisition of subsidiary (Note 31)  7,023   —   —   7,023 
Disposals  —   (207)  —   (207)
Amortization charge (i) (Note 25)  —   (213)  (133)  (346)
             
Closing net book amount
  26,494   1,884   275   28,653 
             
At December 31, 2010
                
Cost  26,494   2,773   667   29.934 
Accumulated amortization  —   (889)  (392)  (1,281)
             
Net book amount  26,494   1,884   275   28,653 
             

   Goodwill  Trademarks  Software  Others  Total 

At January 1, 2012

      

Cost

   34,886    2,667    818    —      38,371  

Accumulated amortization

   —      (1,075)   (541)   —      (1,616) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net book amount

   34,886    1,592    277    —      36,755  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Year ended December 31, 2012

      

Opening net book amount

   34,886    1,592    277    —      36,755  

Exchange differences

   (3,786)   (65)   (32)   —      (3,883) 

Additions

   —      —      276    83    359  

Amortization charge (i) (Note 26)

   —      (171)   (180)   —      (351) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Closing net book amount

   31,100    1,356    341    83    32,880  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2012

      

Cost

   31,100    2,602    1,062    83    34,847  

Accumulated amortization

   —      (1,246)   (721)   —      (1,967) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net book amount

   31,100    1,356    341    83    32,880  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Year ended December 31, 2013

      

Opening net book amount

   31,100    1,356    341    83    32,880  

Exchange differences

   (6,231)   (76)   (129)   (11)   (6,447) 

Additions

   —      —      1,319    57    1,376  

Amortization charge (i) (Note 26)

   —      (151)   (188)   (129)   (468) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Closing net book amount

   24,869    1,129    1,343    —      27,341  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2013

      

Cost

   24,869    2,526    2,252    129    29,776  

Accumulated amortization

   —      (1,397)   (909)   (129)   (2,435) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net book amount

   24,869    1,129    1,343    —      27,341  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

(i)An amount of US$ 134; US$ 101188 and US$ 11180 of amortization charges are included in “General and administrative expenses” for the years ended December 31, 2010, 20092013 and 2008,2012, respectively. An amount of US$ 212; US$ 196280 and US$ 159171 of amortization charges are included in “Selling expenses” for the years ended December 31, 2010, 20092013 and 2008,2012, respectively. There were no impairment charges for any of the years presented (see Note 4 (b)).

9.Biological assets

Changes in the Group’s biological assets in 2013 and 2012 were as follows:

   2013  2012 

Beginning of the year

   298,136    239,600  

Increase due to purchases

   729    1,678  

Initial recognition and changes in fair value of biological assets (i)

   (39,123)   16,643  

Decrease due to harvest

   (325,032)   (317,645) 

Decrease due to disposals

   (39,490)   (20,908) 

Costs incurred during the year

   441,881    395,339  

Exchange differences

   (44,957)   (16,571) 
  

 

 

  

 

 

 

End of the year

   292,144    298,136  
  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 54

55

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

9. Biological assets
          Changes in the Group’s biological assets in 2010, 2009 and 2008 were as follows:
             
  2010  2009  2008 
Beginning of the year
  230,454   125,948   102,562 
Increase due to purchases  681   296   3,276 
Disposal of subsidiary (Note 15)  —   (86)  (376)
Initial recognition and changes in fair value of biological assets (i)  (30,528)  71,668   61,000 
Decrease due to harvest  (237,465)  (84,990)  (54,709)
Decrease due to sales  (2,138)  (37,014)  (6,382)
Costs incurred during the year  224,969   136,625   49,949 
Exchange differences  784   18,007   (29,372)
          
End of the year
  186,757   230,454   125,948 
          

9.Biological assets (continued)

(i)Biological asset with a production cycle of more than one year (that is, sugarcane, coffee, dairy and cattle) generated ‘Initial“Initial recognition and changes in fair value of biological assets’assets” amounting to US$ (78,767)(71,818) for the year ended December 31, 2010 (2009:2013 (2021: US$ 52,935; 2008:(25,291); 2011: US$ 25,141)38,658). In 2010,2013, an amount of US$ (60,146) (2009:(29,781) (2012: US$ 29,834; 2008:(21,984); 2011: US$ 29,576)101,671) was attributable to price changes, and an amount of US$ (18,621) (2009:(42,037) (2012: US$ 23,101; 2008:(3,307); 2011: US$ (4,435)(63,013)) was attributable to physical changes.

Biological assets in 2010, 20092013 and 20082012 were as follows:

             
  2010  2009  2008 
Non-current
            
Cattle for dairy production (i)  7,130   4,313   4,732 
Breeding cattle (i)  —   —   11,858 
Other cattle (ii)  39   66   267 
Sown land — coffee (iii)  18,600   18,540   24,763 
Sown land — sugarcane (iii)  78,447   147,428   34,081 
          
   104,216   170,347   75,701 
          
Current
            
Breeding cattle (i)  —   —   3,543 
Other cattle (iv)  362   749   3,961 
Sown land — coffee (v)  2,977   3,094   690 
Sown land — sugarcane (v)  26,400   17,273   14,086 
Sown land — crops (ii)  31,247   27,467   21,059 
Sown land — rice (ii)  21,555   11,524   6,908 
          
   82,541   60,107   50,247 
          
Total biological assets
  186,757   230,454   125,948 
          

   2013   2012 

Non-current

    

Cattle for dairy production (i)

   9,450     12,149  

Other cattle (ii)

   33     736  

Sown land – coffee (iii)

   1,944     16,211  

Sown land – sugarcane (iii)

   213,776     195,870  
  

 

 

   

 

 

 
   225,203     224,966  
  

 

 

   

 

 

 

Current

    

Other cattle (iv)

   363     243  

Sown land – crops (ii)

   35,982     42,091  

Sown land – rice (ii)

   30,596     30,836  
  

 

 

   

 

 

 
   66,941     73,170  
  

 

 

   

 

 

 

Total biological assets

   292,144     298,136  
  

 

 

   

 

 

 

(i)Classified as bearer and mature biological assets.
(ii)Classified as consumable and immature biological assets.
(iii)Classified as bearer and immature biological assets.
(iv)As of December 31, 2010,2013, and amount of US$ 186 (2009: 493; 2008: 2,718)363 (2012: 243) was classified as consumable and mature biological assets, and an amount of US$ 176 (2009: 256; 2008: 1,243)215,720 (2012: nil) was classified as consumable and immature biological assets.
(v)As of December 31, 2010, and amount of US$ nil (2009: nil; 2008: nil) was classified as bearer and mature biological assets, and an amount of US$ 29,378 (2009: 20,367; 2008: 14,776) was classified as bearer and immature biological assets.
The accompanying notes are an integral part of these consolidated financial statements.

F - 55

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Biological assets (continued)
The fair value less estimated point of sale costs of agricultural produce at the point of harvest amounted to US$ 241,762169,614 for the year ended December 31, 2010 (2009:2013 (2012: US$ 88,113; 2008:304,221; 2011: US$ 57,457)325,843).
          Commencing

A drought occurred during the middleDecember 2011 affecting some of 2008farms in Argentina and lasting until the middle of 2009, the areas in which the Group operates suffered one of the worst droughts of the last 50 to 70 years, which resulted in a reduction in its agricultural production per hectare compared with historical average yields.

Uruguay. As a result, of the drought, actual yields for cropsexpected yield consider in 2008/2009 decreased as compared with historical average yields,the Biological Asset model was reduced generating a negative impact in ‘Initial“Initial recognition and changes in fair value of biological assets and agricultural produce’produce” of U$S nil for the year endedUS$ 4.5 million as of December 31, 2010 (2009: US$ 16.4; million 2008: US$ 2.0 million). Additionally, actual yields for rice in 2008/2009 decreased as compared with historical average yields, generating a negative impact in ‘Initial recognition and changes in2011.

The following table presents the Group´s biological assets that are measured at fair value of biological assets and agricultural produce’ of nil for the year endedal December 31, 2010 (2009: US$ 4.2 million; 2008: nil).

10. Investments in joint ventures
          The investment in joint ventures represents2013:

   2013 
   Level 1   Level 2   Level 3   Total 

Cattle for dairy production

   —       9,450     —       9,450  

Other cattle

   —       396     —       396  

Sown land – coffee

   —       —       1,944     1,944  

Sown land – sugarcane

   —       —       213,776     213,776  

Sown land – crops

   —       —       35,982     35,982  

Sown land – rice

   —       —       30,596     30,596  

There were no transfers between any levels during the Group’s share of 50% in Grupo La Lacteo.

          In November 2007, the Group’s subsidiary, Adeco Agropecuaria S.A. entered into a milk supply offer agreement (the “Milk Supply Agreement”) with La Lacteo (amended in February 2010). Pursuant to the Milk Supply Agreement, Adeco Agropecuaria S.A. is committed to sell to La Lacteo and La Lacteo is obligated to purchase certain amount of the daily milk production subject to certain conditions. However, Adeco Agropecuaria S.A. is not obligated to sell to La Lacteo and La Lacteo is not obligated to purchase more than 50% of its milk requirements for a four-month period subject to certain conditions. The Milk Supply Agreement fixes the price of milk that La Lacteo pays to Adeco Agropecuaria S.A. at the monthly market price of milk plus 3%. The Milk Supply Agreement terminates in November 2017. In addition, if Adeco Agropecuaria S.A. receives a more favorable proposal from a third party compared to the agreement, Adeco Agropecuaria S.A. is free to sell the production to such party. However, La Lacteo has a right of first refusal.
          The following amounts represent the Group’s 50% share of the assets and liabilities, and income and expenses of the joint venture:
             
  2010  2009  2008 
Assets:
            
Non-current assets  4,944   5,008   3,621 
Current assets  5,697   5,689   10,019 
          
   10,641   10,697   13,640 
          
Liabilities:
            
Non-current liabilities  735   740   273 
Current liabilities  3,635   3,451   5,859 
          
   4,370   4,191   6,132 
          
Net assets of joint venture
  6,271   6,506   7,508 
          
             
  2010  2009  2008 
Income  1,989   2,268   1,605 
Expenses  (2,039)  (2,562)  (2,443)
          
Loss after income tax
  (50)  (294)  (838)
          
year.

The accompanying notes are an integral part of these consolidated financial statements.

F - 56

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.

9.Biological assets (continued)

The movement in the fair value of the assets within level 3 of the hierarchy is as follows:

   Sown land –
coffee		  Sown land –
sugarcane		  Sown land –
crops		  Sown land –
rice		 

Beginning of the year

   16,211    196,083    41,876    30,836  

Initial recognition and changes in fair value of biological assets (i)

   (8,331)   (70,982)   24,357    8,339  

Decrease due to harvest

   —      (154,187)   (122,313)   (48,532) 

Decrease due to disposals

   (8,213)   —      —      —    

Costs incurred during the year

   2,586    273,375    98,355    44,457  

Exchange differences

   (309)   (30,513)   (6,293)   (4,504) 
  

 

 

  

 

 

  

 

 

  

 

 

 

End of the year

   1,944    213,776    35,982    30,596  
  

 

 

  

 

 

  

 

 

  

 

 

 

(i)Change in unrealized gains or losses for the year included in profit or loss for assets held at the end of the reporting period, under “Initial recognition and changes in fair value of biological assets” amounted to US$ 53,222 loss (see Note 5).

The following significant unobservable inputs were used to measure the Group´s biological assets:

Description

Valuation
technique(s)

Unobservable

inputs

Range of unobservable inputs

Relationship of unobservable inputs

to fair value

Sown land – coffeeDiscounted cash flowsCoffee yield – tonnes per hectare; Production Costs – US$ per hectare.-Coffee yield: 1.8-3.0 tn/ha
-Production Costs: 6,000-8,000 USS/ha		The higher the coffee yield, the higher the fair value. The higher the costs per hectare, the lower the fair value.
Sown land – sugarcaneDiscounted cash flowsSugarcane yield – tonnes per hectare; Sugarcane TRS (kg of sugar per ton of cane) Production Costs – US$ per hectare. (Include maintenance, harvest and leasing costs)-Sugarcane yield: 60-90 tn/ha
-Sugarcane TRS: 120-147 kg of sugar/ton of cane
-Maintenance costs: 402-603 US$/ha
-Harvest costs: 10.2-15.4 US$/ton of cane
-Leasing costs: 11.5-17.3 tn/ha		The higher the sugarcane yield, the higher the fair value. The higher the maintenance, harvest and leasing costs per hectare, the lower the fair value. The higher the TRS of sugarcane, the higher the fair value.
Sown land – cropsDiscounted cash flows

Crops yield – tonnes per hectare; Commercial Costs – usd per hectare;

Production Costs – US$ per hectare.

-Crops yield: 2.12-2.83 tn/ha for Wheat, 4.81-6.46 tn/ha for Corn, 1.91-2.49 tn/ha for Soybean and 1.74-2.37 for Sunflower
-Commercial Costs: 66-111 US$/ha for Wheat, 179-297 US$/ha for Corn, 77-124 US$/ha for Soybean and 65-108 US$/ha for Sunflower
-Production Costs: 281-357 US$/ha for Wheat, 410-478 US$/ha for Corn, 285-331 US$/ha for Soybean and 279-341 US$/ha for Sunflower		The higher the crops yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.
Sown land – riceDiscounted cash flows

Rice yield – tonnes per hectare;

Commercial Costs – usd per hectare;

Production Costs – US$ per hectare.

-Rice yield: 5.07-6.82 tn/ha
-Commercial Costs: 6-10 US$/ha
-Production Costs: 705-1,158 US$/ha		The higher the rice yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.

The accompanying notes are an integral part of these consolidated financial statements.

F - 57

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

9.Biological assets (continued)

As of December 31, 2013, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a decrease (increase) in the fair value of our plantations less cost to sell of US$ 49.1 million for sugarcane, US$ 3.0 million for coffee, US$ 1.6 million for crops and US$ 3.2 million for rice.

As of December 31, 2013, 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 US$ 25.7 million for sugarcane and US$ 1.4 million for coffee. As of December 31, 2013, 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 US$ 3.6 million for crops and US$ 8.2 million for rice.

The accompanying notes are an integral part of these consolidated financial statements.

F - 58

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.Investments in joint ventures

The table below lists the Group’s investment in joint ventures (continued)

for the years ended December 31, 2013, 2012 and 2011:

       % of ownership interest held 

Name of the entity

  Country of
incorporation and
operation		   December 31,
2013		  December 31,
2012		  December 31,
2011		 

La Lacteo S.A.

   Argentina     —      50%   50% 

CHS AGRO S.A. (i)

   Argentina     50%   —      —    

(i)On February 26, 2013, the Group formed CHS AGRO, a joint venture with CHS Inc. CHS Inc. a leading farmer-owned energy, grains and foods company based in the United States. The Group holds 50% interest in CHS AGRO. CHS AGRO will build a sunflower processing facility located in the city of Pehuajo, Province of Buenos Aires, Argentina. The facility will process black oil and confectionary sunflower into specialty products such as in-shell seeds and oil seeds, which will be entirely exported to markets in Europe and the Middle East. The joint venture will grow confectionary sunflower on leased farms, while black oil sunflower will be originated from third parties. The Group and CHS Inc have made capital contribution of approximately US$ 4 million each during 2013 for the construction of the facility.

During 2013, the Group acquired the remaining 50% interest in its joint venture La Lacteo and subsequently sold its 100% interest (see Note 11).

   2013  2012 

At the beginning of the year

   2,613    4,299  

Share of loss

   (1,349)   (2,761) 

Exchange differences

   (887)   (646) 

Capital contribution

   4,172    3,000  

Disposal of investment (Note 11)

   (1,370)   —    

Impairment charge (*)

   —      (1,279) 
  

 

 

  

 

 

 

At the end of the year

   3,179    2,613  
  

 

 

  

 

 

 

(*)Impairment loss recognized due to the continuous operating losses in La Lacteo.

The following amounts represent the Group’s share of the assets (including goodwill) and liabilities, and income and expenses of the joint ventures:

   2013   2012 

Assets:

    

Non-current assets

   7,608     4,185  

Current assets

   4,079     5,672  
  

 

 

   

 

 

 
   11,687     9,857  
  

 

 

   

 

 

 

Liabilities:

    

Non-current liabilities

   5,863     659  

Current liabilities

   2,645     6,585  
  

 

 

   

 

 

 
   8,508     7,244  
  

 

 

   

 

 

 

Net assets of joint venture

   3,179     2,613  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 59

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.Investments in joint ventures (continued)

   2013  2012  2011 

Income

   9,236    1,616    2,040  

Expenses

   (10,556)   (4,377)   (3,074) 
  

 

 

  

 

 

  

 

 

 

Loss after income tax (i)

   (1,320)   (2,761)   (1,034) 
  

 

 

  

 

 

  

 

 

 

(i)For the year ended December 31, 2013 an amount of US$ (1,101) was presented within “Profit/(loss) for the year from discontinued operations” (2012: US$ (4,040) ; 2011: US$ (1,034)). See Note 11.

The shares in these joint ventures are not publicly traded, so they have not listed market price available.

There are no contingent liabilities relating to the group’s interest in the joint venture,ventures, and no contingent liabilities of the venture itself.

          In addition, on November 23, 1999,ventures themselves.

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s subsidiary Pilagá S.A. entered into ajoint ventures have not reached the legal capped amounts.

11.Net assets held for sale and discontinued operations

On June 6, 2013, the Group acquired the remaining 50% interest in its joint venture La Lacteo S.A. (“La Lacteo”) for US$ 1, and collected US$ 5.1 million associated with a third party, Copra S.A.,the acquisition.

The acquisition of the remaining 50% in La Lacteo was done exclusively with the view to resale and met the definition of discontinued operation. The Group elected to account for the purpose of obtaining rights to use public waters and construct a dam for irrigated rice production.acquisition applying the short-cut method under IFRS 5. As of the transaction date, it was determined that the fair value less costs to sell of these consolidated financial statements,La Lacteo was not significant. The Group’s previously held interest in La Lacteo was remeasured to fair value and the joint venture has not started operationscumulative exchange differences recognized in equity were reclassified to the income statement. At the acquisition date La Lacteo was valued at fair value less costs to sell.

On July 31, 2013, the Group sold its 100% interest in La Lacteo for Argentine Pesos 1. In addition, the Milk Supply Offer Agreement between La Lacteo and approvals have not been obtained.

11. Financial instruments by category
Adeco Agropecuaria S.A. (a Group subsidiary) was terminated without penalties.

The net effects of the described transactions resulted in a gain of US$ 2.9 million, recorded in the statement of income within “Profit / (Loss) of the year from discontinued operations”.

12.Financial instruments by category

The following table showstables show the carrying amounts of financial assets and financial liabilities by category of financial instrument and a reconciliation to the corresponding line item in the statements of financial position, as appropriate. Since the line items “Trade and other receivables, net” and “Trade and other payables” contain both financial instruments and non-financial assets or liabilities (such as other tax receivables or advance payments for services to be received in the future), the reconciliation is shown in the columns headed “Non-financial assets” and “Non-financial liabilities.”

                     
      Assets at fair  Subtotal       
  Loans and  value through  financial  Non-financial    
  receivables  profit and loss  assets  assets  Total 
December 31, 2010 Assets as per statement of financial position
                    
Trade and other receivables  64,964   —   64,694   85,263   149,957 
Derivative financial instruments  —   876   876   —   876 
Cash and cash equivalents  70,269   —   70,269   —   70,269 
                
Total
  134,963   876   135,839   85,263   221,102 
                
                     
  Liabilities at  Other          
  fair value  financial  Subtotal       
  through profit  liabilities at  financial  Non-financial    
  and loss  amortized cost  liabilities  liabilities  Total 
Liabilities as per statement of financial position
                    
Trade and other payables  —   72,163   72,163   8,858   81,021 
Borrowings (excluding finance lease liabilities)  —   389,024   389,024   —   389,024 
Finance leases  —   448   448   —   448 
Derivative financial instruments  8,920   —   8,920   —   8,920 
                
Total
  8,920   461,635   470,555   8,858   479,413 
                

The accompanying notes are an integral part of these consolidated financial statements.

F - 57

60

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11. Financial instruments by category (continued)
                     
      Assets at fair  Subtotal       
  Loans and  value through  financial  Non-financial    
  receivables  profit and loss  assets  assets  Total 
December 31, 2009 Assets as per statement of financial position
                    
Trade and other receivables  60,904   —   60,904   67,373   128,277 
Derivative financial instruments  —   99   99   —   99 
Cash and cash equivalents  74,806   —   74,806   —   74,806 
                
Total
  135,710   99   135,809   67,373   203,182 
                
                     
  Liabilities at  Other          
  fair value  financial  Subtotal       
  through profit  liabilities at  financial  Non-financial    
  and loss  amortized cost  liabilities  liabilities  Total 
Liabilities as per statement of financial position
                    
Trade and other payables  —   58,306   58,306   10,614   68,920 
Borrowings (excluding finance lease liabilities)  —   305,861   305,861   —   305,861 
Finance leases  —   920   920   —   920 
Derivative financial instruments  12,887   —   12,887   —   12,887 
                
Total
  12,887   365,087   377,974   10,614   388,588 
                
                     
      Asset at fair  Subtotal       
  Loans and  value through  financial  Non-financial    
  receivables  profit and loss  assets  assets  Total 
December 31, 2008 Assets as per statement of financial position
                    
Trade and other receivables  31,157   —   31,157   53,383   84,540 
Derivative financial instruments  —   2,019   2,019   —   2,019 
Cash and cash equivalents  93,360   —   93,360   —   93,360 
                
Total
  124,517   2,019   126,536   53,383   179,919 
                

12.Financial instruments by category (continued)

  Loans and
receivables		  Assets
at fair
value
through
profit
or loss		  Available
for sale
assets		  Subtotal
financial
assets		  Non-financial
assets		  Total 

December 31, 2013 Assets as per statement of financial position

      

Trade and other receivables

  89,682    —      —      89,682    104,750    194,432  

Derivative financial instruments

  —      4,102    —      4,102    —      4,102  

Cash and cash equivalents

  232,147    —      —      232,147    —      232,147  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  321,829    4,102    —      325,931    104,750    430,681  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

   Liabilities
at fair
value
through
profit
or loss		   Other
financial
liabilities
at
amortized
cost		   Subtotal
financial
liabilities		   Non-financial
liabilities		   Total 

Liabilities as per statement of financial position

          

Trade and other payables

   4,819     85,089     89,908     6,008     95,916  

Borrowings (excluding finance lease liabilities)(i)

   15     659,377     659,392     —       659,392  

Finance leases

   —       739     739     —       739  

Derivative financial instruments

   12,600     —       12,600     —       12,600  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   17,434     745,205     762,639     6,008     768,647  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

(i)Effective July 1, 2013, the Group formally documented and designated cash flow hedging relationships to hedge the foreign exchange rate risk of a portion of its highly probable future sales in US dollars using a portion of its borrowings denominated in US dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps (see Note 3).

   Loans and
receivables		   Assets
at fair
value
through
profit
or loss		   Available
for sale
assets		   Subtotal
financial
assets		   Non-financial
assets		   Total 

December 31, 2012 Assets as per statement of financial position

            

Trade and other receivables

   68,833     —       —       68,833     111,045     179,878  

Equity investment in Santa Regina

   —       —       11,878     11,878     —       11,878  

Derivative financial instruments

   —       5,212     —       5,212     —       5,212  

Cash and cash equivalents

   218,809     —       —       218,809     —       218,809  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   287,642     5,212     11,878     304,732     111,045     415,777  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 58

61

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11. Financial instruments by category (continued)
                     
  Liabilities at  Other          
  fair value  financial  Subtotal       
  through profit  liabilities at  financial  Non-financial    
  and loss  amortized cost  liabilities  liabilities  Total 
Liabilities as per statement of financial position
                    
Trade and other payables  —   42,461   42,461   10,299   52,760 
Borrowings (excluding finance lease liabilities)  —   227,431   227,431   —   227,431 
Finance leases  —   882   882   —   882 
Derivative financial instruments  4,159   —   4,159   —   4,159 
                
Total
  4,159   270,774   274,933   10,299   285,232 
                

12.Financial instruments by category (continued)

   Liabilities
at fair
value
through
profit
or loss		   Other
financial
liabilities
at
amortized
cost		   Subtotal
financial
liabilities		   Non-financial
liabilities		   Total 

Liabilities as per statement of financial position

          

Trade and other payables

   —       96,800     96,800     7,460     104,260  

Borrowings (excluding finance lease liabilities)

   —       538,012     538,012     —       538,012  

Finance leases

   —       1,121     1,121     —       1,121  

Derivative financial instruments

   5,751     —       5,751     —       5,751  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

   5,751     635,933     641,684     7,460     649,144  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities carried at amortized cost also included liabilities under finance leases where the Group is the lessee and which therefore have to be measured in accordance with IAS 17. The categories disclosed are determined by reference to IAS 39. Finance leases are excluded from the scope of IFRS 7. Therefore, finance leases have been shown separately.

Because of the short maturities of most trade accounts receivable and payable, other receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date do not differ significantly from their respective fair values. The fair value of long-term borrowings is disclosed in Note 20.

21.

Income, expense, gains and losses on financial instruments can be assigned to the following categories:

                 
      Assets/ liabilities       
      at fair value  Other financial    
  Loans and  throughprofit  liabilities at      
  receivables  and loss  amortized cost  Total 
December 31, 2010
                
Interest income (i)  1,341   —   —   1,341 
Interest expense (i)  —   —   (34,369)  (34,369)
Foreign exchange gains/ (losses) (ii)  372   —   (11,029)  (10,657)
Loss from derivative financial instruments(iii)  —   5,124   —   5,124 
             
Net result
  1,713   5,124   (45,398)  (38,561)
             

   Loans and
receivables		  Assets/
liabilities
at fair
value
through
profit
or loss		   Other
financial
liabilities
at
amortized
cost		  Total 

December 31, 2013

      

Interest income (i)

   6,882    —       —      6,882  

Interest expense (i)

   (32,162)   —       (17,087)   (49,249) 

Foreign exchange gains/ (losses) (ii)

   12,550    —       (33,637)   (21,087) 

Gain from derivative financial instruments(iii)

   —      558     —      558  
  

 

 

  

 

 

   

 

 

  

 

 

 

Net result

   (12,730)   558     (50,724)   (62,896) 
  

 

 

  

 

 

   

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 59

62

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11. Financial instruments by category (continued)
                 
      Assets/ liabilities       
      at fair value  Other financial    
  Loans and  through profit  liabilities at    
  receivables  and loss  amortized cost  Total 
December 31, 2009
                
Interest income (i)  472   —   —   472 
Interest expense (i)  —   —   (28,222)  (28,222)
Foreign exchange gains/ (losses) (ii)  11,939   —   (13,936)  (1,997)
Gain from derivative financial instruments(iii)  —   (7,486)  —   (7,486)
             
Net result
  12,411   (7,486)  (42,158)  (37,233)
             
                 
      Assets/ liabilities       
      at fair value  Other financial    
  Loans and  through profit  liabilities at    
  receivables  and loss  amortized cost  Total 
December 31, 2008
                
Interest income (i)  1,494   —   —   1,494 
Interest expense (i)  —   —   (23,324)  (23,324)
Foreign exchange gains/ (losses) (ii)  —   —   (24,184)  (24,184)
Loss from derivative financial instruments(iii)  —   1,848   —   1,848 
             
Net result
  1,494   1,848   (47,508)  (44,166)
             

12.Financial instruments by category (continued)

   Loans and
receivables		  Assets/
liabilities
at fair
value
through
profit
or loss		  Other
financial
liabilities
at
amortized
cost		  Total 

December 31, 2012

     

Interest income (i)

   11,249    —      —      11,249  

Interest expense (i)

   —      —      (27,672)   (27,672) 

Foreign exchange gains/ (losses) (ii)

   (15,915)   —      (10,165)   (26,080) 

Gain from derivative financial instruments(iii)

   —      (4,002)   —      (4,002) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net result

   (4,666)   (4,002)   (37,837)   (46,505) 
  

 

 

  

 

 

  

 

 

  

 

 

 

   Loans and
receivables		   Assets/
liabilities
at fair
value
through
profit
or loss		   Other
financial
liabilities
at
amortized
cost		  Total 

December 31, 2011

       

Interest income (i)

   8,019     —       —      8,019  

Interest expense (i)

   —       —       (34,017)   (34,017) 

Foreign exchange gains/ (losses) (ii)

   9,899     1,405     (23,987)   (12,683) 

Loss from derivative financial instruments(iii)

   —       17,417     —      17,417  
  

 

 

   

 

 

   

 

 

  

 

 

 

Net result

   17,918     18,822     (58,004)   (21,264) 
  

 

 

   

 

 

   

 

 

  

 

 

 

(i)Included in “Financial results, net” in the statement of income.
(ii)Included in “Financial results, net” in the statement of income.
(iii)Included in “Other operating income, net” and “Financial results, net” in the statement of income.

Determining fair values

          IAS 39

IFRS 13 defines the fair value of a financial instrument as the amount for whichprice that would be received to sell an asset or paid to transfer a financial asset could be exchanged, or a financial liability settled, between knowledgeable, willing parties in an arm’s length transaction.orderly transaction between market participants at the measurement date. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 7.13. This valuation hierarchy provides for three levels. The initial basis for the allocation is the “economic investment class”. Only if this does not result in an appropriate allocation the Group deviates from such an approach in individual cases. The allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking. The disclosures have not been providedlevel in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on a comparativethe basis as permitted by IFRS 7.

          Forof the year endedlowest level input that is significant to the fair value measurement in its entirety.

As of December 31, 2010,2013 and 2012, the financial instruments recognized at fair value on the statement of financial position comprise derivative financial instruments.

The accompanying notes are an integral part of these consolidated financial statements.

F - 60

63

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11. Financial instruments by category (continued)

12.Financial instruments by category (continued)

In the case of Level 1, valuation is based on unadjusted quoted prices in active markets for identical financial assets that the Group can refer to at the date of the statement of financial position. A market is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price information to be available on an ongoing basis. Since a quoted price in an active market is the most reliable indicator of fair value, this should always be used if available. The financial instruments the Group has allocated to this level mainly comprise crop futures and options traded on the stock market. In the case of securities, the Group allocates them to this level when either a stock market price is available or prices are provided by a price quotation on the basis of actual market transactions.

Derivatives not traded on the stock market allocated to Level 2 are valued using models based on observable market data. For this, the Group uses inputs directly or indirectly observable in the market, other than quoted prices. If the financial instrument concerned has a fixed contract period, the inputs used for valuation must be observable for the whole of this period. The financial instruments the Group has allocated to this level mainly comprise interest-rate swaps and foreign-currency interest-rate swaps.

In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as no observable market data are available. The inputs used reflect the Group’s assumptions regarding the factors, which market players would consider in their pricing. The Group uses the best available information for this, including internal company data. The Group does not have financial instruments allocated to this level for any of the years presented.

The following table presentstables present the Group’s financial assets and financial liabilities that are measured at fair value as of December 31, 20102013 and 2012 and their allocation to the fair value hierarchy:

                 
  2010 
  Level 1  Level 2  Level 3  Total 
Assets
                
Derivative financial instruments  876   —   —   876 
             
Total assets
  876   —   —   876 
             
Liabilities
                
Derivative financial instruments  2,197   6,723   —   8,920 
             
Total liabilities
  2,197   6,723   —   8,920 
             

   2013 
   Level 1  Level 2  Level 3   Total 

Assets

      

Derivative financial instruments

   3,912    190    —       4,102  
  

 

 

  

 

 

  

 

 

   

 

 

 

Total assets

   3,912    190    —       4,102  
  

 

 

  

 

 

  

 

 

   

 

 

 

Liabilities

      

Derivative financial instruments

   (425)   (12,175)   —       (12,600) 
  

 

 

  

 

 

  

 

 

   

 

 

 

Total liabilities

   (425)   (12,175)   —       (12,600) 
  

 

 

  

 

 

  

 

 

   

 

 

 
   2012 
   Level 1  Level 2  Level 3   Total 

Assets

      

Derivative financial instruments

   5,212    —      —       5,212  

Equity investment in Santa Regina

   —      11,878    —       11,878  
  

 

 

  

 

 

  

 

 

   

 

 

 

Total assets

   5,212    11,878    —       17,090  
  

 

 

  

 

 

  

 

 

   

 

 

 

Liabilities

      

Derivative financial instruments

   (361)   (5,390)   —       (5,751) 
  

 

 

  

 

 

  

 

 

   

 

 

 

Total liabilities

   (361)   (5,390)   —       (5,751) 
  

 

 

  

 

 

  

 

 

   

 

 

 

There were no transfers within level 1 and 2 during the years ended December 31, 2013 and 2012.

The accompanying notes are an integral part of these consolidated financial statements.

F - 64

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

12.Financial instruments by category (continued)

When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods. The Group uses a range of valuation models for this purpose, details of which may be obtained from the following table:

Class

  

Pricing Method

  

Parameters

  

Pricing Model

  Level   Total 
Futures  Quoted price  -  -   1     3,150  
Options  Quoted price  -  -   1     337  
Options/ OTC  Quoted price  -  Black & Scholes   2     190  
Foreign-currency interest-rate swaps  Theoretical price  

Swap curve;

Money market interest-rate curve;

Foreign-exchange curve.

  Present value method   2    
Interest-rate swaps  Theoretical price  

Swap curve;

Money market interest-rate curve

  Present value method   2     (12,175) 
          

 

 

 
           (8,498) 
          

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 61

65

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11. Financial instruments by category (continued)

13.
ConceptPricing MethodParametersPricing Model
FuturesQuoted price——
OptionsQuoted price——
Options/ OTCQuoted price—Montecarlo
Foreign-currency
interest-rate swaps		Theoretical priceSwap curve;
Money market interest-rate
curve; Foreign-exchange curve.		Present value method
Interest-rate swapsTheoretical priceSwap curve;
Money market interest-rate curve		Present value methodTrade and other receivables, net
12. Trade and other receivables, net
             
  2010  2009  2008 
Non current
            
Prepaid expenses  —   4,263   295 
Income tax credits  3,628   4,241   3,984 
Non-income tax credits (i)  8,681   11,279   3,521 
Escrow deposits (ii)  —   —   600 
Receivable from disposal of subsidiary (iii) (Note 15)  13,656   —   — 
Cash collateral  3,079   1,858   — 
Other receivables  1,708   424   212 
          
Non current portion
  30,752   22,065   8,612 
          
Current
            
Trade receivables  32,702   47,894   24,670 
Receivables from related parties (Note 33)  1,662   2,554   4,368 
Less: Allowance for trade receivables  (1,323)  (906)  (391)
          
Trade receivables — net
  33,041   49,542   28,647 
          
Prepaid expenses  8,299   5,530   5,016 
Advances to suppliers  14,274   10,167   15,714 
Income tax credits  6,954   6,569   4,548 
Non-income tax credits (i)  38,006   23,500   15,842 
Escrow deposits (ii)  —   1,028   3,683 
Cash collateral  2,342   2,763   — 
Receivable from disposal of subsidiary (iii) (Note 15)  10,432   5,475   — 
Receivable with related parties (Note 33)  291   796   180 
Other receivables  5,566   842   2,298 
          
Subtotal
  86,164   56,670   47,281 
          
Current portion
  119,205   106,212   75,928 
          
Total trade and other receivables, net
  149,957   128,277   84,540 
          
The accompanying notes are an integral part of these consolidated financial statements.

F - 62

   2013  2012 

Non current

   

Trade receivables

   4,676    —    
  

 

 

  

 

 

 

Receivables from related parties (Note 34)

   —      2,253  
  

 

 

  

 

 

 

Trade receivables - net

   4,676    2,253  
  

 

 

  

 

 

 

Advances to suppliers

   10,658    12,850  

Income tax credits

   7,058    4,594  

Non-income tax credits (i)

   13,941    16,528  

Judicial deposits

   2,706    2,570  

Receivable from disposal of subsidiary (Note 16)

   9,202    2,094  

Cash collateral

   451    2,049  

Other receivables

   4,560    1,092  
  

 

 

  

 

 

 

Non current portion

   53,252    44,030  
  

 

 

  

 

 

 

Current

   

Trade receivables

   46,326    41,067  

Receivables from related parties (Note 34)

   —      144  

Less: Allowance for trade receivables

   (545)   (588) 
  

 

 

  

 

 

 

Trade receivables - net

   45,781    40,623  
  

 

 

  

 

 

 

Prepaid expenses

   7,786    12,766  

Advances to suppliers

   16,088    11,213  

Income tax credits

   5,519    4,256  

Non-income tax credits (i)

   43,700    48,838  

Cash collateral

   6,554    296  

Receivable from disposal of farmland (Note 16)

   —      3,018  

Receivable from disposal of subsidiaries (Note 16)

   6,174    9,395  

Other receivables

   9,578    5,443  
  

 

 

  

 

 

 

Subtotal

   95,399    95,225  
  

 

 

  

 

 

 

Current portion

   141,180    135,848  
  

 

 

  

 

 

 

Total trade and other receivables, net

   194,432    179,878  
  

 

 

  

 

 

 

(i)Includes US$ 383 reclassified from property, plant and equipment.

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12. Trade and other receivables, net (continued)
(i) Includes US$ 6,721 reclassified from property, plant and equipment.
(ii) In connection with certain acquisitions, the Group deposited a portion of the consideration that would otherwise have been delivered to the sellers into an escrow account with a third party escrow agent to secure specified indemnification obligations of the sellers under the respective agreements.
(iii) Relates to the sale of a subsidiary (comprising mainly of a farmland business) for which total net proceeds of US$ 24,088 million have not been fully collected as of year-end (See Note 15).
The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other receivables approximate their carrying amount, as the impact of discounting is not significant.

The accompanying notes are an integral part of these consolidated financial statements.

F - 66

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

13.Trade and other receivables, net (continued)

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies (expressed in US dollars):

             
  2010  2009  2008 
Currency
            
US Dollar  53,561   23,620   21,504 
Argentine Peso  38,977   29,504   35,032 
Uruguayan Peso  697   6,036   3,516 
Brazilian Reais  56,722   69,117   24,488 
          
   149,957   128,277   84,540 
          

   2013   2012 

Currency

    

US Dollar

   30,054     50,184  

Argentine Peso

   50,512     50,422  

Uruguayan Peso

   520     565  

Brazilian Reais

   113,346     78,707  
  

 

 

   

 

 

 
   194,432     179,878  
  

 

 

   

 

 

 

As of December 31, 20102013 trade receivables of US$ 9,379 (2009:14,319 (2012: US$ 11,255; 2008: US$ 12,791)2,662) were past due but not impaired. The ageing analysis of these receivables is as follows:

             
  2010  2009  2008 
Up to 3 months  7,929   8,790   8,686 
3 to 6 months  542   1,208   1,435 
Over 6 months  908   1,257   2,670 
          
   9,379   11,255   12,791 
          

   2013   2012 

Up to 3 months

   13,432     2,408  

3 to 6 months

   827     46  

Over 6 months

   60     208  
  

 

 

   

 

 

 
   14,319     2,662  
  

 

 

   

 

 

 

The Group recognizes an allowance for trade receivables when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Delinquency in payments is considered an indicator that the trade receivable is impaired.

Delinquency in payments is an indicator that a receivable may be impaired. However, management considers all available evidence in determining when a receivable is impaired. Generally, trade receivables, which are more than 180 days past due are fully provided for. However, certain receivables 180+ days overdue are not provided for based on a case-by-case analysis of credit quality analysis. Furthermore, receivables, which are not 180+ days overdue, may be provided for if specific analysis indicates a potential impairment.

The accompanying notes are an integral part of these consolidated financial statements.

F - 63

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12. Trade and other receivables, net (continued)
Movements on the Group’s allowance for trade receivables are as follows:
             
  2010  2009  2008 
At January 1
  906   391   1,170 
Charge of the year  632   664   15 
Acquisition of subsidiary  14   —   — 
Unused amounts reversed  (189)  —   (787)
Used during the year  —   (113)  — 
Exchange differences  (40)  (36)  (7)
          
At December 31
  1,323   906   391 
          

   2013  2012 

At January 1

   588    1,622  

Charge of the year

   591    272  

Unused amounts reversed

   (255)   (21) 

Used during the year

   (220)   (1,086) 

Exchange differences

   (159)   (199) 
  

 

 

  

 

 

 

At December 31

   545    588  
  

 

 

  

 

 

 

The creation and release of allowance for trade receivables have been included in “Selling expenses” in the statement of income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

The other classes within other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group only holds a mortgagemortgages as collateral for the sale of La Macarena farmland.

Agrícola Ganadera San José S.R.L.

The accompanying notes are an integral part of these consolidated financial statements.

F - 67

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

13.Trade and other receivables, net (continued)

As of December 31, 20102013, approximately 23%51% (2012: 81%) of the outstanding unimpaired trade receivables (neither past due nor impaired) relate to sales to 109 well-known multinational companies with good credit quality standing, including but not limited to Bunge, Noble Argentina, LDC Argentina, Quickfood, or its affiliates,Compersucar Trading A.V.V., Ipiranga Produtos de Petroleo S.A., Camara de Comercializacao de Energia Electrica CCEE, Petrobras Distribuidora S.A., Glencore Grain B. V., Louis Dreyfus Commodities Suisse S.A., among others. Most of these entities or their parent companies are externally credit-rated. The Group reviews these external ratings from credit agencies.

The remaining percentage as of both December 31, 20102013 and 20092012 of the outstanding unimpaired trade receivables (neither past due nor impaired) relate to sales to a dispersed large quantity of customers for which external credit ratings may not be available. However, the total base of customers without an external credit rating is relatively stable.

New customers with less than six months of history with the Group are closely monitored. The Group has not experienced credit problems with these new customers to date. The majority of the customers for which an external credit rating is not available are existing customers with more than six months of history with the Group and with no defaults in the past. A minor percentage of customers may have experienced some non-significant defaults in the past but fully recovered.

     As of December 31, 2010 and 2009, the total amount of cash and cash equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to work with banks rated “BBB+” or higher. At December 31, 2010 and 2009, 7 banks accounted for more than 84% of the total cash deposited, including but not limited to HSBC, Bank do Brasil and/or its affiliates in local countries, among others. The remaining amount of cash and cash equivalents relates to cash in hand. The Group does not have investment in securities or other financial instruments for which risk may have increased due to the financial credit crisis.
     The Group arranged the interest rate swaps with Citibank N.A. (United States), HSBC S.A. (Brazil) and Banco Pine S.A. (Brazil). Crop commodity futures are traded in the established trading markets of Argentina and Brazil through well rated brokers. Counterparty risk derived from these transactions is not material.
The accompanying notes are an integral part of these consolidated financial statements.

F - 64

14.Inventories

   2013   2012 

Raw materials

   37,859     36,607  

Finished goods

   67,689     56,508  

Stocks held by third parties

   2,824     2,195  

Others

   17     11  
  

 

 

   

 

 

 
   108,389     95,321  
  

 

 

   

 

 

 

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Inventories
             
  2010  2009  2008 
Raw materials  25,292   23,843   20,584 
Finished goods  25,601   30,338   40,506 
Stocks held by third parties  6,267   3,299   — 
Others  10   422   131 
          
   57,170   57,902   61,221 
          
The cost of inventories recognized as expense and included in “Cost of manufactured products sold and services rendered” amounted to US$ 208,485272,261 for the year ended December 31, 2010 (2009:2013 (2012: US$ 83,120; 2008:263,978 and 2011: US$ 50,229)226,413). The cost of inventories recognized as expense and included in “Cost of agricultural produce sold and direct agricultural selling expenses” amounted to US$ 101,288159,936 for the year ended December 31, 2010 (2009:2013 (2012: US$ 77,280; 2008:174,602 and 2011: US$ 83,149)148,177).
14. Cash and cash equivalents
             
  2010  2009  2008 
Cash at bank and on hand  31,768   72,903   93,153 
Short-term bank deposits  38,501   1,903   207 
          
   70,269   74,806   93,360 
          
15. Disposals
     As part of the Group’s strategy to profit from farmland value appreciation opportunities, from time to time, the Group completes sales of farmlands.
(a) Sales of farmlands
     On December 21, 2010 the Group completed the sale of La Macarena, a farm located in Río Negro, Uruguay for cash consideration of US$ 34 million. This transaction resulted in a gain of US$ 20 million included within “Other operating income, net” in the statement of income as of December 31, 2010. Cash collected at December 31, 2010 totaled US$ 10 million. Remaining receivable will be collected during 2011 and 2012 (see Note 12).
(b) Sales and spin-off of subsidiaries
     In December 2009 and May 2008, the Group completed the sale of two wholly owned subsidiaries (La Paz Agropecuaria S.R.L. and La Agraria S.A.) for an aggregate sales price of US$ 47 million. These subsidiaries were mainly comprised of farmland businesses. Net gain from the sale of these businesses amounted to US$ 18.8 million and US$ 14.0 million for the years ended December 31, 2009 and 2008, respectively, and are included under the line item “Other operating income, net” in the statement of income.
     The Group acquired an entity named Agro Invest in December 2007. Certain farmland businesses within Agro Invest were acquired with a view of disposal through a tax-free spin-off availed under the tax laws of Argentina, the country of domicile of Agro Invest. This transaction did not generate any income or loss. The spin-off was completed in February 2009. Accordingly, that portion of the acquired business totalizing US$ 45.3 million was classified as held for disposal other-than-by-sale in the acquisition balance sheet and as of December 31, 2007 and 2008 (shown in the line item “Spin-off assets” in the statement of financial position). This disposal did not meet the criteria of IFRS 5 to qualify as a discontinued operation. As required by the Antitrust Law, the Group has reported this transaction to the Antitrust Commission for formal approval. As of the date of these consolidated financial statements, the authorization is still pending. The Group does not have any evidence which may indicate that this transaction will not be formally approved.

15.Cash and cash equivalents

   2013   2012 

Cash at bank and on hand

   165,362     137,980  

Short-term bank deposits

   66,785     80,829  
  

 

 

   

 

 

 
   232,147     218,809  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 65

68

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

15. Disposals (continued)
     Assets classified

16.Disposals

Year ended December 31, 2011

On November 30, 2011 the Group completed the sale of “La Alegría”, a 2,438 hectare farm located in General Villegas, province of Buenos Aires, Argentina, for a total consideration of US$13.7 million collected in full as spin-offof year-end. This transaction resulted in a gain of US$ 8.8 million included within “Other operating income, net”.

Year ended December 31, 2012

On June 29, 2012, the Group sold its 100% interest in Agricola Ganadera San Jose S.A., a subsidiary whose main assets relatedcomprised of farmland, at a consideration of US$ 9.3 million. The sale price was collected US$ 5 million in cash and the remaining amount will be collected in two equal installments plus interest in June 2013 and 2014. This transaction resulted in a gain of US$ 8 million recorded in other operating income in the statement of income.

On December 27, 2012, the Group disposed of a 51% interest out of the 100% interest held in Santa Regina Agropecuaria S.A. at a consideration of US$ 12.4 million. The main asset of the subsidiary is the Santa Regina farm located in General Villegas, Province of Buenos Aires, Argentina. The Group granted an option to the Agro Invest’s disposal arebuyer to acquire the following:

             
  2010  2009  2008 
Farmlands  —   —   43,012 
Trade and other receivables, net  —   —   2,299 
          
   —   —   45,311 
          
     Cumulative translation adjustments recognized directlyremaining 49% interest on or before June 2014 at US$ 13.1 million. The Group entered into a lease contract with the buyer to use the land for the next two crop years as from May 2013. The sale price was collected US$ 5.2 million in equity relating to assets classified as spin-off assets arecash and the following:
             
  2010  2009  2008 
Foreign exchange translation adjustments  —   —   4,410 
          
   —   —   4,410 
          
     Managementremaining amount will be collected in two installments plus interest, US$ 1 million in June 2013 and US$ 6.2 million in December 2013. The Group evaluated the criteria set forth in IFRS 5effect of potential voting rights arising from the option and concluded that nonethe interest retained in Santa Regina represents an available for sale financial asset under IAS 39.

The transaction generated a gain for the sale of these disposals qualified as discontinued operations.

16. Shareholders’ contributions
         
  Number of  Share capital and 
  shares  share premium 
At 1 January 2008
  95,494   466,603 
Contributed capital  16,926   149,021 
       
At 31 December 2008
  112,420   615,624 
Contributed capital  7,580   67,719 
       
At 31 December 2009
  120,000   683,343 
Contributed capital  —   — 
       
At 31 December 2010
  120,000   683,343 
       
17. Equity-settled share-based payments
     The Group set two equity-settled share-based payment plans, namely the “Adecoagro/ IFH 2004 Stock Incentive Option Plan” and the “Adecoagro/ IFH 2007/2008 Equity Incentive Plan” (the “Option Schemes”) under whichUS$ 9 million. In addition, since the Group grants equity-settled optionsceased to directors, senior managershave control over the subsidiary, the retained 49% interest was remeasured to its fair value and selected employeesa gain of US$ 10.4 million was recognized in the statement of income under “Other operating income, net”.

Year ended December 31, 2013

In December 2013, the Group completed the sale of “San Agustín”, a 5,066 hectare farm located in the province of Corrientes, Argentina, for a total consideration of US$17.5 million collected in full as of year-end. This transaction resulted in a gain of US$ 15 million included within “Other operating income, net”.

In October 2013, the Group completed the sale of the Group’s subsidiaries.

San Martin farm for a total price of US$ 8.0 million, equivalent to US$ 2,294 per hectare which was collected in full as of year-end. San Martin is a 3,502 hectare farm located in the province of Corrientes, Argentina. The farm was used for cattle grazing activities and is a subdivision of the Ita Caabo farm acquired by the Group in 2007. This transaction resulted in a gain of US$ 6.5 million included within “Other operating income, net”.

In May 2013, the Group completed the sale of the Mimoso farm (through the sale of the Brazilian subsidiary Fazenda Mimoso Ltda.) and Lagoa do Oeste farm located in Luis Eduardo Magalhaes, Bahia, Brazil. The farms have a total area of 3,834 hectares of which 904 hectares are planted with coffee trees. In addition, the Group entered into an agreement whereby the buyer will operate and make use of 728 hectares of existing coffee trees in Adecoagro’s Rio de Janeiro farm during an 8-year period. Pursuant to the terms of the agreement, we will retain property to these coffee trees, which will still have an estimate useful life of 10 years upon the expiration of the agreement. The total consideration of this operation was a nominal amount of Brazilian Reais 49 million (US$ 24 million), from which Brazilian Reais 12,371 (US$ 6 million) were collected as of December 31, 2013. The remaining amount will be collected in three equal installments in 2014, 2015 and 2016. This transaction resulted in a gain of US$ 5.7 million recorded in other operating income in the statement of income.

In June 2013, the Group completed the sale of the remaining 49% interest in Santa Regina S.A., a company whose main underlying asset is the Santa Regina farm. This transaction resulted in a gain of US$ 1.2 million recorded in other operating income in the statement of income.

The accompanying notes are an integral part of these consolidated financial statements.

F - 66

69

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

17.Equity-settled unit-based payments (continued)Shareholders’ contributions
     As

The share capital of the Group is represented by common shares with a nominal value of US$ 1.5 per share and one vote each.

   Number of shares   Share capital and
share premium		 

At 1 January 2011

   120,000     683,343  

At January 24, 2011, after reverse stock split (1)

   80,000     683,343  

Issue of shares on January 28, 2011 (2)

   40,069     423,030  

Employee share options exercised (Note 18)

   37     326  

Restricted shares issued (Note 18)

   427     641  

Restricted shares vested (Note 18)

   —       746  

Non controlling interest acquired through exchange of Shares (4)

   —       (1,281) 
  

 

 

   

 

 

 

At 31 December 2011

   120,533     1,106,805  

Employee share options exercised (Note 18)

   32     312  

Restricted shares vested (Note 18)

   —       1,347  

Non controlling interest acquired through exchange of Shares (4)

   1,655     15,199  
  

 

 

   

 

 

 

At 31 December 2012

   122,220     1,123,663  

Employee share options exercised (Note 18)

   —       126  

Restricted shares and units vested (Note 18)

   162     2,963  

Non controlling interest acquired through exchange of Shares (4)

   —       —    

Purchase of own shares

   —       (4,107) 
  

 

 

   

 

 

 

At 31 December 2013

   122,382     1,122,645  
  

 

 

   

 

 

 

(1)The Extraordinary General Meeting of Adecoagro’s shareholders held on January 24, 2011 approved a reverse stock split of Adecoagro’s common shares, changing the nominal value of Adecoagro’s common shares from US$ 1 to US$ 1,5. Therefore, Adecoagro reduced total shares outstanding as of that date from 119,999,997 shares to 79,999,985 shares.
(2)On January 28, 2011 the Company successfully completed an initial public offering (IPO) of its shares in the New York Stock Exchange. The Company issued 28,405,925 shares, at a price of US$ 11 per share. In addition, on February 11, 2011, the Company issued 4,285,714 shares, at a price of US$ 11 per share, as a consequence of the over-alloment option exercised by the underwriters of the initial public offering, raising an overall amount of approximately US$ 359 million.

On January 28, 2011, Adecoagro’s also issued and sold to Al Gharrafa Investment Company 7,377,598 common shares at a purchase price per share of US$ 10.65, which is equal to the price per common share paid by the underwriters acting in the initial public offering of the Company. This transaction was conditioned upon, and closed immediately after, the closing of the initial public offering of the Company. Consequently the Company raised US$ 79 million.

The Company used these funds to finance part of the Reorganizationconstruction costs of Ivinhema (sugar and ethanol mill in Brazil) and for potential investments in the Reverse Stock Split (see Note 1),acquisition of farmland and capital expenditures required in the Management Committeeexpansion of IFHthe farming business.

Related transaction costs totaling US$ 15 million net of tax have been netted off with the deemed proceeds, on the Share premium issued.

The accompanying notes are an integral part of these consolidated financial statements.

F - 70

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

17.Shareholders’ contributions (continued)

During 2011, the Company agreed to contribute the full proceed from the IPO to International Farmland Holdings LP, increasing its interest to 98.64%.

(3)As a consequence of new contributions made in International Farmland Holdings LP fully attributable to the Group, non controlling interest was reduced from 2% to 1.36%.
(4)During 2012, the Company issued 1,654,752 shares to certain limited partners of International Farmland Holdings LP (“IFH”) in exchange for their residual interest, totaling 1.36% interest in IFH. After this exchange, the Company holds 100% of IFH interest.

Share Repurchase Program

On September 24, 2013, the Board of Directors of the Company (the “Board”)has authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has commenced on September 24, 2013 and will be reviewed by the Board of Directors after a 12-month period: repurchases of shares under the program will be made from time to time in open market transactions in compliance with the trading conditions of Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, and applicable rules and regulations. The share repurchase program does not require Adecoagro to acquire any specific number or amount of shares and may be modified, suspended, reinstated or terminated at any time in the Company’s discretion and without prior notice. The size and the timing of repurchases will depend upon market conditions, applicable legal requirements and other factors.

As of December 31, 2013, the Company repurchased 654,454 shares under this program, of which 17,162 have each resolvedbeen applied to amend and rename: (a)some exercise of the IFH 2004Company’s stock option plan.

18.Equity-settled share-based payments

The Group has set a “2004 Incentive Option Plan, initially effective, May 28, 2004, into this Adecoagro/IFH 2004 Stock Incentive Option Plan (the “Plan”), effective as of the Effective Date to reflect the conversion of options to purchase ordinary units of IFH (the “IFH Options”) into options (“Options”) to purchase or subscribe for the Company’s ordinary shares, par value US$ 1.50 per share (the “Ordinary Shares”); (b) the IFH 2007/Plan” and a “2007/2008 Equity Incentive Plan, initially effective, November 13, 2007, into this Adecoagro/IFH 2007/2008 Equity Incentive Plan (the “Plan”Plan” (collectively referred to as “Option Schemes”), effective as under which the Group granted equity-settled options to senior managers and selected employees of the Effective Date,Group´s subsidiaries. Additionally, in 2010 the Group has set a “Adecoagro Restricted Share and Restricted Stock Unit Plan” (referred to reflectas “Restricted Share Plan”) under which the conversionGroup grants restricted shares to senior and medium management and key employees of options to purchase ordinary units of IFH (“IFH Options”) into options to purchase or subscribe for the Company’s ordinary shares, par value US$ 1.50 per share. The Plans contain terms and conditions that are intended to maintain in all material respects the same, and in no event greater, economic benefit to optionees as provided under the Plans as in effect prior to the Reorganization Date.

Group’s subsidiaries.

(a)Option Schemes

The Group recognized aggregate compensation expense of US$ 1.70.1 million for the year ended 2010 (2009:December 31, 2013 (2012: US$ 2.80.2 million; 2008:2011: US$ 3.80.9 million) related to the options granted under the Option Schemes.

The fair value of the options under the Option Schemes was measured at the date of grant using the Black-Scholes valuation technique. This valuation model takes into account factors such as non transferability, expected volatility, exercise restrictions and behavioral considerations.

     Key grant-date fair value and other assumptions under the Option Schemes are detailed below:
                                 
  May  May  May  Feb  Oct  Dec  Jan  Nov 
Grant Date 2004  2005  2006  2006  2006  2007  2009  2009 
   
Expected volatility  39%  37%  36%  36%  36%  36%  21%  22%
Expected life  5,77   5,37   4,97   5,05   4,8   6,5   6,5   6,5 
Risk free rate  3,46%  3,56%  4,46%  4,13%  4,14%  3,22%  1,85%  2,31%
Expected dividend yield  1%  1%  1%  1%  1%  1%  0%  0%
Fair value per option $1,48  $1,40  $2,02  $1,67  $1,98  $3,19  $2,35  $2,52 
Possibility of ceasing employment before vesting  0%  0%  0%  0%  0%  0,17%  0,56%  0,92%
Exercise price $3,88  $3,88  $3,88  $4,74  $5,75  $8,55  $8,93  $8,93 
                     
  Jan  Jan  Jun  Sep  Sep 
Grant Date 2010  2010  2010  2010  2010 
   
Expected volatility  22%  22%  22%  22%  22%
Expected life  6,5   6,5   6,5   6,5   6,5 
Risk free rate  2,34%  2,34%  1,79%  1,41%  1,41%
Expected dividend yield  0%  0%  0%  0%  0%
Fair value per option $2,41  $2,25  $2,11  $2,03  $2,19 
Possibility of ceasing employment before vesting  1,05%  1,05%  1,55%  1,76%  1,76%
Exercise price $8,55  $8,93  $8,93  $8,93  $8,55 

The accompanying notes are an integral part of these consolidated financial statements.

F - 67

71

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

17. Equity-settled unit-based payments (continued)

18.Equity-settled unit-based payments (continued)

Key grant-date fair value and other assumptions under the Option Schemes are detailed below:

Grant Date  Jan
2009		  Nov
2009		  Jan
2010		  Jan
2010		  Jun
2010		  Sep
2010		  Sep
2010		 

Expected volatility

   21%   22%   22%   22%   22%   22%   22% 

Expected life

   6.50    6.50    6.5    6.5    6.5    6.5    6.5  

Risk free rate

   1,85%   2,31%   2.34%   2.34%   1.79%   1.41%   1.41% 

Expected dividend yield

   0%   0%   0%   0%   0%   0%   0% 

Fair value per option

  $3.52   $3.78   $3.62   $3.38   $3.17   $3.05   $3.28  

Possibility of ceasing employment before vesting

   0.02%   0.21%   0.21%   0.21%   0.38%   0.43%   0.43% 

Exercise price

  $13.40   $13.40   $12.82   $13.40   $13.40   $13.40   $12.82  

Since the Group’s shares were not publicly traded at the time the options were granted, expected volatility was determined by calculating the historical volatility of share prices of comparable entities in representative stock markets. The expected life used in the model was adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations. On January 28, 2011 the Company completed its initial public offering in the New York Stock Exchange (see Note 34)17).

Details of each plan are as follow:

The Adecoagro/ IFH 2004 Stock Incentive Option Plan

This scheme was effectively established in 2004 and is administered by the Compensation Committee of the Company. Options under the Adecoagro/ IFH 2004 Stock Incentive Option Plan vest over a 3-year period from the date of grant at 33% on each anniversary of the grant date. Options are exercisable over a ten-year period. The exercise price of the options is determined by the Compensation Committee but under no circumstances the price may be less than 100% of the fair market value of the shares at the date of grant. For this scheme, there are no performance requirements for the exercising of options, except that a participant’s employment with the Group must not have been terminate prior to the date of exercise of the relevant option. If the participant ceases to be employee for cause any unvested option shall automatically expired and shall not be exercisable. In addition, if the participant ceases to be an employee for reason of death, any portion of the share option held by he or she that has vested on that date may be exercised by his or her legal representative for the period of one year. Finally if the participant ceases to be an employee for any reason other than cause or death any portion of any vested option held may be exercisable for a period of three months.

Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Adecoagro/ IFH 2004 Stock Incentive Option Plan are as follows:

                         
  2010  2009  2008 
  Average      Average      Average    
  exercise      exercise      exercise    
  price per  Options  price per  Options  price per  Options 
  share  (thousands)  share  (thousands)  share  (thousands) 
At January 1  4.49   3,602   4.49   3,602   4.49   3,602 
Granted  —   —   —   —   —   — 
Forfeited  4.85   (338)  —   —   —   — 
Exercised  —   —   —   —   —   — 
Expired  —   —   —   —   —   — 
                   
At December 31
  4.45   3,264   4.49   3,602   4.49   3,602 
                   

   2013  2012  2011 
   Average
exercise
price  per
share		   Options
(thousands)		  Average
exercise
price  per
Share		   Options
(thousands)		  Average
exercise
price  per
share		   Options
(thousands)		 

At January 1

   6.68     2,100    6.68     2,134    6.74     2,401  

Forfeited

   8.62     (21)   8.62     (2)   7.31     (230) 

Exercised

   5.83     (17)   6.71     (32)   5.83     (37) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

At December 31

   6.67     2,062    6.68     2,100    6.68     2,134  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 72

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.Equity-settled unit-based payments (continued)

Options outstanding at year end under the Adecoagro/ IFH 2004 Incentive Option Plan have the following expiry date and exercise prices:

                 
  Exercise    
  price per  Shares (in thousands) 
  share  2010  2009  2008 
Expiry date:                
May 1, 2014  3.88   1,011   1,011   1,011 
May 1, 2015  3.88   834   858   858 
May 1, 2016  3.88   343   481   481 
February 16, 2016  4.74   165   165   165 
October 1, 2016  5.75   911   1,087   1,087 
The accompanying notes are an integral part of these consolidated financial statements.

F - 68

   Exercise
price per
share		             
    Shares (in thousands) 
Expiry date:    2013   2012   2011 

May 1, 2014

   5.83     674     674     674  

May 1, 2015

   5.83     553     553     556  

May 1, 2016

   5.83     156     173     192  

February 16, 2016

   7.11     110     110     110  

October 1, 2016

   8,62     569     590     602  

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
17. Equity-settled unit-based payments (continued)
The Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan

This scheme was effectively established in late 2007 and is administered by the Compensation Committee of the Company. Options under the Adecoagro/ IFH 2007/2008 Equity Incentive Plan vest over a 4-year period from the date of grant at 25% on each anniversary of the grant date. Options are exercisable over a ten-year period. The exercise price of the options is determined by the Compensation Committee but under no circumstances the price may be less than 100% of the fair market value of the shares at the date of grant. For this scheme, there are no performance requirements for the exercising of options, except that a participant’s employment with the Group must not have been terminated prior to the date of exercise of the relevant option. If the participant ceases to be employee for cause any unvested option shall automatically expired and shall not be exercisable. In addition, if the participant ceases to be an employee for reason of death, any portion of the share option held by he or she that has vested on that date may be exercised by his or her legal representative for the period of one year. Finally if the participant ceases to be an employee for any reason other than cause or death any portion of any vested option held may be exercisable for a period of three months.

Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Adecoagro/ IFH 2007/2008 Equity Incentive Plan are as follows:

                         
  2010  2009  2008 
  Average      Average      Average    
  exercise      exercise      exercise    
  price per  Options  price per  Options  price per  Options 
  share  (thousands)  share  (thousands)  share  (thousands) 
At January 1  8.68   3,046   8.55   1,969   8.55   1,969 
Granted  8.84   297   8.93   1,070   —   — 
Forfeited  8.55   (172)  —   —   —   — 
Exercised  —   —   —   —   —   — 
Expired  —   —   —   —   —   — 
                   
At December 31
  8.70   3,170   8.68   3,046   8.55   1,969 
                   

   2013  2012  2011 
   Average
exercise
price per
share		   Options
(thousands)		  Average
exercise
price  per
share		   Options
(thousands)		  Average
exercise
price per
share		   Options
(thousands)		 

At January 1

   13.06     2,013    13.06     2,038    13.06     2,228  

Granted

   —       —      —       —      —       —    

Forfeited

   13.01     (262)   13.06     (24)   12.89     (190) 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

At December 31

   13.07     1,751    13.06     2,013    13.06     2,038  
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 73

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.Equity-settled unit-based payments (continued)

Options outstanding at year-end under the Adecoagro/ IFH 2007/2008 Equity Incentive Plan have the following expiry date and exercise prices:

                 
  Exercise    
  price per  Shares (in thousands) 
  share  2010  2009  2008 
Expiry date:                
Dec 1, 2017  8.55   1,796   1,969   1,969 
Jan 30, 2019  8.93   1,050   1,050   — 
Nov 1, 2019  8.93   27   27   — 
Jan 30, 2020  8.55   53   —   — 
Jan 30, 2020  8.93   121   —   — 
Jun 30, 2020  8.93   33   —   — 
Sep 1, 2020  8.93   66   —   — 
Sep 1, 2020  8.55   23   —   — 
The accompanying notes are an integral part of these consolidated financial statements.

F - 69

   Exercise
price per
share		             
     Shares (in thousands) 
Expiry date:    2013   2012   2011 

Dec 1, 2017

   12.82     963     1,138     1,149  

Jan 30, 2019

   13.40     608     687     687  

Nov 1, 2019

   13.40     8     8     18  

Jan 30, 2020

   12.82     26     28     32  

Jan 30, 2020

   13.40     65     71     71  

Jun 30, 2020

   13.40     22     22     22  

Sep 1, 2020

   13.40     44     44     44  

Sep 1, 2020

   12.82     15     15     15  

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
17. Equity-settled unit-based payments (continued)
The following table shows the exercisable shares at year end under both the Adecoagro/ IFH 2004 Incentive Option Plan and the Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan:
     
  Exercisable shares 
  in thousands 
2010  3.253 
2009  3.057 
2008  2.337 
Adecoagro S.A.

   Exercisable shares
in thousands		 

2013

   3,769  

2012

   3,849  

2011

   3,681  

During 2013, 17,162 options were exercised under the 2004 Incentive Option Plan. Accordingly, the Group issued and registered these shares with a nominal value of US$ 1.5.

(b)Restricted Share and Restricted Stock Unit Plan

The Restricted Share and Restricted Stock Unit Plan

     As was effectively established in 2010 and amended in November 2011 is administered by the Compensation Committee of October 28, 2010, the BoardCompany. Restricted shares under the Restricted Share or Restricted Stock Units Plan vest over a 3-year period from the date of Directors authorized and approved Adecoagro S.A.grant at 33% on each anniversary of the grant date. Participants are entitled to receive one common share of the Company for each restricted share or restricted unit issued. For the Restricted Share Plan (the “Plan”),there are no performance requirements for the delivery of common shares, except that a participant’s employment with the Group must not have been terminated prior to the relevant vesting date. If the participant ceases to be an employee for any reason, any unvested restricted share shall not be converted into common shares and the participant shall cease for all purposes to be a shareholder with respect to such shares.

On July 18, 2011, the Group issued and registered 427,293 restricted shares with a nominal value of US$ 1.5, which provides for awardswere granted under the Restricted Share Plan. While the restricted shares are not vested, they are recognized in “Other reserves”. Once they are vested, the reserve is reversed and a share premium is recognized.

During 2013, 120,811 (2012: 120,811) restricted shares were vested.

The accompanying notes are an integral part of these consolidated financial statements.

F - 74

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.Equity-settled unit-based payments (continued)

At December 31, 2013, the Group recognized compensation expense US$ 3.7 million related to the restricted shares granted under the Restricted Share Plan (2012: US$ 3.8 million).

The restricted shares under the Restricted Share Plan were measured at fair value at the date of grant.

Key grant-date fair value and other assumptions under the Restricted Share Plan are detailed below:

Grant Date  Apr 1,
2011		  Apr 1,
2011		  May 13,
2011		  Apr 1,
2012		  May 15,
2012		  Apr 1,
2013		  May 15,
2013		 

Fair value

   12.69    12.69    12.36    9.81    9.33    8.08    7.48  

Possibility of ceasing employment before vesting

   1.42%   1.86%   0%   3%   0%   5%   0% 

Movements in the number of restricted shares to employees, officers, members ofoutstanding under the Restricted Share Plan are as follows:

   Restricted
shares
(thousands)		  Restricted
stock units
(thousands)		  Restricted
shares
(thousands)		  Restricted
stock units
(thousands)		 
   2013  2013  2012  2012 

At January 1

   234    515    356    —    

Granted (1)

   —      362    —      515  

Forfeited

   (6)   (10)   (2)   —    

Vested

   (119)   (169)   (121)   —    
  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31

   110    699    234    515  
  

 

 

  

 

 

  

 

 

  

 

 

 

(1)Approved by the Board of Directors of March 19, 2013 and the Shareholders Meeting of April 17, 2013.

During 2013 5,827 restricted shares became forfeited and other service providers of the Company. The purpose of the Plan is to further align the interests of participants with those of the shareholders by providing participants with long-term incentive compensation opportunities tiedwere returned to the performance ofGroup. These restricted shares are held by the Company’s ordinary shares.

     The maximum number of ordinaryGroup as treasury shares with respect to which awards may be made under the Plan is 1,178,571 (1.5% of the ordinary shares issued and outstanding upon consummation of initial public offering and the private placement with Al Gharrafa Transaction). The Committee anticipates that such number of shares will be sufficient for grants of awards under the Plan for a period of five years. Shares subject to awards that become forfeited, expired, settled in cash or otherwise terminated without delivery of such shares will again be available for future awards under the Plan. The shares available for issuance as well as outstanding awards under the Plan are subject to adjustmentpresented within “Treasury shares” in the eventstatement of a reorganization, stock split or similar change.
     As of December 31, 2010 no awards under the Plan has been made.
18. Legal and other reserves
changes in shareholders’ equity.

19.Legal and other reserves

According to the laws of certain of the countries in which the Group operates, a portion of the profit of the year (5%) is separated to constitute legal reserves until they reach legal capped amounts. These legal reserves are not available for dividend distribution and can only be released to absorb losses.

The legal limit of these reserves has not been met.

In addition, from time to time, the subsidiaries of the Group may separate portions of their profits of the year to constitute voluntary reserves according to company law and practice. These voluntary reserves may be released for dividend distribution.

Legal and other reserves amount to US$ 6,53638,549 as of December 31, 2010 (2009:2013 (2012: US$ 7,855; 2008: US$ 7,089)37,654) and are included within the balance of retained earnings in the statement of changes in shareholders’ equity.

The accompanying notes are an integral part of these consolidated financial statements.

F - 70

75

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

19. Trade and other payables
             
  2010  2009  2008 
Non-current
            
Trade payables (i)  4,239   5,047   2,679 
Payable from acquisition of subsidiary (Note 31) (i)  5,802   —   — 
Taxes payable  1,331   1,391   — 
Other payables  413   384   — 
Contingent consideration arising on a business combination  —   —   3,411 
          
   11,785   6,822   6,090 
          
Current
            
Trade payables  49,597   50,377   37,975 
Payable from acquisition of subsidiary (Note 31) (i)  5,802   —   — 
Advances from customers  2,560   871   446 
Amounts due to related parties (Note 33)  4,892   330   1,087 
Taxes payable  4,967   3,527   2,877 
Contingent consideration arising on a business combination  —   4,825   3,565 
Other payables  1,418   2,168   720 
          
   69,236   62,098   46,670 
          
Total trade and other payables
  81,021   68,920   52,760 
          

19.Legal and other reserves (continued)

The Company may make distributions in the form of dividends or otherwise to the extent that it has distributable retained earnings or available distributable reserves (including share premium) that result from the Stand Alone Financial Statements prepared in accordance with Luxembourg GAAP. No distributable retained earning result from the Stand Alone Financial Statements of the Company as of December 31, 2013, but the Company has distributable reserves in excess of US$ 914,135.

20.Trade and other payables

   2013   2012 

Non-current

    

Payable from acquisition of property, plant and equipment (i)

   2,605     3,126  

Taxes payable

   —       37  

Other payables

   346     432  

Escrows arising on business combinations (Note 32)

   —       980  
  

 

 

   

 

 

 
   2,951     4,575  
  

 

 

   

 

 

 

Current

    

Trade payables

   84,009     88,123  

Advances from customers

   2,900     4,529  

Amounts due to related parties (Note 34)

   1,069     562  

Taxes payable

   3,108     2,894  

Escrows arising on business combinations (Note 32)

   1,030     1,508  

Other payables

   849     2,069  
  

 

 

   

 

 

 
   92,965     99,685  
  

 

 

   

 

 

 

Total trade and other payables

   95,916     104,260  
  

 

 

   

 

 

 

(i)These trades payable are mainly collateralized by property, plant and equipment of the Group.

The fair values of current trade and other payables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other payables approximate their carrying amounts, as the impact of discounting is not significant.

     (i) These trades payable are mainly collateralized by property, plant and equipment of the Group.
20. Borrowings
             
  2010  2009  2008 
Non-current
            
Bank borrowings  250,591   202,891   3,844 
Obligations under finance leases  81   243   255 
          
   250,672   203,134   4,099 
          
Current
            
Bank overdrafts  209   —   19,771 
Bank borrowings  138,224   102,970   203,816 
Obligations under finance leases  367   677   627 
          
   138,800   103,647   224,214 
          
Total borrowings
  389,472   306,781   228,313 
          
     As of December 31, 2010, total bank borrowings include collateralized liabilities of US$ 350,654 (2009: US$ 203,503; 2008: US$ 130,789). These loans are mainly collateralized by property, plant and equipment and shares of certain subsidiaries of the Group.

21.Borrowings

   2013   2012 

Non-current

    

Bank borrowings

   511,753     353,540  

Obligations under finance leases

   411     709  
  

 

 

   

 

 

 
   512,164     354,249  
  

 

 

   

 

 

 

Current

    

Bank overdrafts

   5,750     111  

Bank borrowings

   141,889     184,361  

Obligations under finance leases

   328     412  
  

 

 

   

 

 

 
   147,967     184,884  
  

 

 

   

 

 

 

Total borrowings

   660,131     539,133  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 71

76

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

20. Borrowings (continued)

21.Borrowings (continued)

As of December 31, 2013, total bank borrowings include collateralized liabilities of US$ 625,533 (2012: US$ 346,469). These loans are mainly collateralized by property, plant and equipment, sugarcane plantations, sugar export contracts and shares of certain subsidiaries of the Group.

The maturity of the Group’s borrowings (excluding obligations under finance leases) and the Group’s exposure to fixed and variable interest rates is as follows:

             
  2010  2009  2008 
Fixed rate:
            
Less than 1 year  52,326   30,579   95,209 
Between 1 and 2 years  22,425   5,724   678 
Between 2 and 3 years  7,661   5,173   191 
Between 3 and 4 years  7,394   5,167   127 
Between 4 and 5 years  5,920   5,167   — 
More than 5 years  22,555   5,167   — 
          
   118,281   56,977   96,205 
          
Variable rate:
            
Less than 1 year  86,107   72,391   128,378 
Between 1 and 2 years  70,905   68,667   703 
Between 2 and 3 years  54,436   55,907   703 
Between 3 and 4 years  17,506   49,511   249 
Between 4 and 5 years  15,619   787   41 
More than 5 years  26,170   1,621   1,152 
          
   270,743   248,884   131,226 
          
   389,024   305,861   227,431 
          

   2013   2012 

Fixed rate:

    

Less than 1 year

   56,932     60,049  

Between 1 and 2 years

   38,393     19,066  

Between 2 and 3 years

   37,762     24,364  

Between 3 and 4 years

   29,467     21,760  

Between 4 and 5 years

   27,803     20,870  

More than 5 years

   75,745     62,036  
  

 

 

   

 

 

 
   266,102     208,145  
  

 

 

   

 

 

 

Variable rate:

    

Less than 1 year

   90,707     124,423  

Between 1 and 2 years

   107,392     71,978  

Between 2 and 3 years

   100,949     73,684  

Between 3 and 4 years

   54,212     45,969  

Between 4 and 5 years

   12,586     11,100  

More than 5 years

   27,444     2,713  
  

 

 

   

 

 

 
   393,290     329,867  
  

 

 

   

 

 

 
   659,392     538,012  
  

 

 

   

 

 

 

Borrowings incurred by the Group’s subsidiaries in Brazil are repayable at various dates between January 20112014 and July 2020September 2023 and bear either fixed interest rates ranging from 4.00%2.50% to 16.58%13.47% per annum or variable rates based on LIBOR or other specific base-rates plus spreads ranging from 2.65%4.72% to 18.99%14.11% per annum. At December 31, 20102013 LIBOR (six months) was 0.46% (2009: 0.49%; 2008: 3.12%0.28% (2012: 0. 51%).

Borrowings incurred by the Group’sGroup´s subsidiaries in Argentina are repayable at various dates between January 20112014 and November 20152019 and bear either fixed interest rates ranging from 2.60%5.70% and 6.00%7.00% per annum and variable rates based on LIBOR + 7.5% per annum.

     As of December 31, 2010, total borrowings include (i) a US-dollar denominated 30.2 million loan (principal plus accrued interest) with a syndicated of banks, led by Rabobank International Brasil S.A. (“Rabobank”) (2009: US$ 40.2 million; 2008: US$ 51.1. million) due in 2013 (the “Syndicated Loan”); (ii) a Reais-denominated 135.9 million loan (principal plus accrued interest) (equivalent to US$ 81.6 million as of December 31, 2010) with BNDES-FINEM (the “BNDES Loan Facility”) due in 2018; (iii) a U.S. dollar-denominated 60,291 million loan with the Interamerican Development Bank (IDB) (the “IDB Facility”); (iv) a Reais-denominated 70.0 million facility (of which, as of December 31, 2010, the Group have received R$70.0 million, equivalent to US$ 42.0 million) from Banco do Brasil S.A. (BDB) (“The BDB Facility”) due between 2012 and 2020; and (v) a U.S. dollar-denominated 50.0 million loan with the Deutsche Bank AG London Branch (DB) (The “DB facility”) due in 2013.

The accompanying notes are an integral part of these consolidated financial statements.

F - 72

77

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

20. Borrowings (continued)

21.•Syndicated Loan and BNDES Loan FacilityBorrowings (continued)

Brazilian Subsidiaries

The Syndicated Loan bears interest at LIBOR plus 2.65% per annum and the BNDES Loan Facility bears interest at a country-specific variable rate (“TJLP rate”) plus 4.05% per annum (TJLP at December 31, 2010 was 6.00%). The Syndicated Loan and the BNDES Loan Facility contain certain customary financial covenants, events of default and restrictions which require the Group to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends, except as would not result in a breachmain loans of the financial covenants. These financial covenants are measured in accordance with generally accepted accounting principles in Brazil (“Group’s Brazilian GAAP”) and measured on an annual basis as of the end of each fiscal year. Certain covenants are measured on a combined basis aggregating the borrowing subsidiaries and others are measured on an individual basis. Under the Syndicated Loan, defaults by either Angélica, UMA, Adeco Agropecuária Brasil S.A. or Adeco Brasil Participações S.A. on any indebtedness with an aggregate principal amount over US$ 500,000 can result in acceleration of the full outstanding loan amount due to the syndicate of banks. The obligations under this facility are secured by (i) a mortgage of the Takuare farm; (ii) a pledge on the capital stock (“quotas”) of Angélica; and (iii) liens over the Angélica mill and equipment, all of which are property of Angélica.

          During 2008, for the Syndicated Loan and the BNDES Loan Facility, the Group was required to meet (i) a debt service coverage ratio on an individual basis of more than 1.0; (ii) a liquidity ratio on an individual basis of more than 1.0; (iii) a liquidity ratio on an aggregate basis of more than 1.2; (iv) an interest coverage ratio on an aggregate basis of more than 3.0; and (v) a net bank debt to EBITDA ratio on an aggregate basis of less than 5.0.
          Furthermore, on December 30, 2009, the Group entered into an amendment to the Syndicated Loan and the BNDES Loan Facility to modify the terms of the financial ratios covenants. Pursuant to the amendment, the Group is required to meet redefined certain financial ratios on an annual basis as of the end of each of the fiscal years commencing as of December 31, 2009. The Group was in compliance with these redefined covenants as of December 31, 2009 and December 31, 2010.
          The redefined financial covenants were as follows:
                 
  2010  2011  2012 to 2013  2014 to 2018 
Financial ratios:
                
Debt Service Coverage Ratio (individual)  > 0.65   > 1.00   > 1.00   > 1.30 
Liquidity Ratio (individual)  > 1.00   > 1.00   > 1.00   > 1.00 
Liquidity Ratio (aggregate)  > 0.65   > 1,00   > 1.20   > 1.20 
Interest Coverage Ratio (aggregate)  > 2.00   > 2.00   > 4.00   > 4.00 
Net Bank Debt / EBITDA (aggregate)  < 5.50   < 3.00   < 3.00   < 3.00 
Subsidiaries are:

       

Capital Outstanding as of

December 31 2013

     

Bank

 Grant Date Nominal
amount
(In  millions)		  Millions
of Reais		  Millions of
equivalent Dollars		  Maturity
date		 

Annual Interest Rate

Rabobank / Itaú BBA / Santander / Itaú Unibanco / Bradesco / HSBC (Finem ANG) (1)

 March 2008 R$151    81.4    34.7   April 2018 Partially Long-Term Interest Rate (TJLP), as disclosed by the Brazilian Central Bank + 4.05% and partially Interest Rate Resolution 635/87 (average BNDES external funding rate) + 3.67%

Banco Do Brasil

 July 2010 R$70    57.6    24.6   July 2020 10% with 15% of bonus performance

BTG Pactual / HSBC / Votorantim / Rabobank (2)

 May 2012 R$.230    153.3    65.4   May 2015 CDI + 3.6%

Bradesco

 May 2012 US$11.7    —     11.7   May 2016 7.20%

Banco Do Brasil (3)

 October 2012 R$130    130.0    55.5   October 2022 2.94% per annum with 15% of bonus performance

Itau BBA

 December 2012 R$45.9    44.4    19.0   December 2022 2.50%

Itau BBA (4)

 March 2013 R$75    75.0    32.0   March 2019 CDI + 3.2%

ING / ABN /Bladex Loan (5)

 July 2013 US$70    —      70.0   October 2016 LIBOR 6M plus 4.5%

Rabobank / Bradesco / HSBC / PGGM / Hinduja Bank (6)

 September 2013 US$90    —      90.0   September 2017 LIBOR 3M plus 4.75%

Banco do Brasil / Itaul BBA Finem Loan (7)

 September 2013 R$273    138.1    58.9   January 23 5.69

BNDES Finem Loan (8)

 November 2013 R$215    60.0    25.6   January 23 3.34%

(1)Collateralized by (i) a first degree mortgage of the Takuare farm; (ii) a pledge on the capital stock (“quotas”) of Adecoagro Brasil Participações S/A; and (iii) liens over the Angélica mill and equipment, all of which are property of Adecoagro Vale do Ivinhema.
(2)Collateralized by (i) a first-degree mortgage of the Conquista, Alto Alegre, Dom Fabrício, Nossa Senhora Aparecida, Água Branca farms, (ii) pledge of sugarcane and (iii) sales contracts.
(3)Collateralized by (i) a second degree mortgage of the Sapalio farm and (ii) liens over the Ivinhema mill and equipment, all of which are property of Adecoagro Vale do Ivinhema.
(4)Collateralized by power sales contract
(5)Collateralized by (i) pledge of sugarcane and (ii) sales contracts.
(6)Collateralized by (i) pledge of sugarcane and (ii) sales contracts.
(7)Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm, (ii) a second degree mortgage of the Takuare farm, (iii) liens over the Ivinhema mill and equipment.
(8)Collateralized by (i) liens over the Ivinhema mill and equipment, all of which are property of Adecoagro Vale do Ivinhema and (ii) power sales contracts.

The accompanying notes are an integral part of these consolidated financial statements.

F - 73

78

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

21.Borrowings (continued)

The abovementioned loans have to comply with financial covenants. The financial covenants are measured considering the statutory financial statements of the Brazilian Subsidiaries. The covenants to comply with are defined as follows and detailed in the table below:

20. Borrowings (continued)Interest Coverage

= (Adjusted EBITDA)/(Net Financial Expenses)

Solvency = Equity/(Total Assets)

Net Bank Debt/Adjusted EBITDA = (Bank Debt-Cash)/(Adjusted EBITDA)

Debt Service Coverage= (Adjusted EBITDA)/(Payment of long term debt-Net Financial Expenses- dividends)

Bank

 

Ratio

     2014          2015          2016      2017
         and on        		 

Rabobank / Itaú BBA / Santander / Itaú Unibanco / Bradesco / HSBC (Finem ANG)

 Interest Coverage  [³] 2    [³] 2    [³] 2    [³] 2  
 Solvency  [³] 40%   [³] 40%   [³] 40%   [³] 40% 
 Net Bank Debt / EBITDA  [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5  

Banco Do Brasil

 Debt service coverage  [³] 1.2    [³] 1.2    [³] 1.2    [³] 1.2  

BTG Pactual / HSBC / Votorantim / Rabobank

 Interest Coverage  [³] 2     
 Solvency  [³] 40%    
 Net Bank Debt / EBITDA  [£] 6     

Bradesco

 Net Debt / Sugarcane Milled Tons  [£] 80    [£] 80    
 Net Debt/Equity  [£] 80%   [£] 80%   

Banco Do Brasil (1)

 Debt service coverage  [³] 1.2    [³] 1.2    [³] 1.2    [³] 1.2 

Itau BBA

 Net Bank Debt / EBITDA  [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

Itau BBA (2)

 Net Bank Debt / EBITDA  [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

ING / ABN /Bladex

 Interest Coverage  [³] 2    [³] 2    
 Solvency  [³] 40%   [³] 40%   
 Net Bank Debt / EBITDA  [£] 5.0    [£] 4.0    

Rabobank / Bradesco / HSBC / PGGM / Hinduja Bank (3)

 Interest Coverage  [³] 2    [³] 2    [³] 2   
 Solvency  [³] 40%   [³] 40%   [³] 40%  
 Net Bank Debt / EBITDA  [£] 5.0    [£] 4.5    [£] 4.5   

Banco do Brasil / Itau BBA Finem Loan

 Debt Service Coverage  [³] 1.2    [³] 1.2    [³] 1.2    [³] 1.2  
 Net Bank Debt / EBITDA  [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

BNDES Finem Loan (4)

 Solvency  [³] 40%   [³] 40%   [³] 40%   [³] 40% 
 Net Bank Debt / EBITDA  [£] 4.5    [£] 4.5    [£] 4.0    [£] 3.5 / [£] 3.0  

During 2013 and 2012 the Group was in compliance with all financial covenants.

The accompanying notes are an integral part of these consolidated financial statements.

F - 79

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

21.Borrowings (continued)

Argentinian Subsidiaries

 • 

IDB Facility

The amended IDB Facility is divided into a seven-year US$ 31 million tranche (Tranche A)(“Tranche A”) and a five-year US$ 49 million tranche (Tranche B).(“Tranche B”) with a final maturity in November 2018 and 2016, respectively. Tranche A originally bore interest at 180-day LIBOR plus 5% per annum although subsequently revised to a fixed rate of 7.52%6.11% per annum. Tranche B bears interest at 180-day LIBOR plus 4.75%4.45% per annum. The Group entered into a floating to fix interest rate forward swap, fixing LIBOR at 1.25%, effective May 2012.

Payment of principal plus interest of both tranches are made on a bi-annual basis. The proceeds of this loan were used to make capital investments and refinance short-term debt. The IDB facilityFacility is collateralized by property, plant and equipment with a net book value of US$ 40.724.765 million, by a mortgage over (i) Carmen and La Rosa farms which are property of Adeco Agropecuaria S.A.; and (ii) El Meridiano farm which is the property of Pilagá S.A.

          Under the IDB Facility, defaults

Defaults by either Adeco Agropecuaria S.A. or Pilagá S.AS.A. on any indebtedness with an aggregate principal amount over US$ 3.0 million can result in acceleration of the full outstanding loan amount due to the IDB. The IDB Facility also contains certain customary financial covenants and restrictions which requires the Grouprequire us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. The financial covenants are measured in accordance with generally accepted accounting principles in Argentina (“Argentine GAAP”) and measured both on quarterly or annually basis.

          The subsidiariesArgentina. Adeco Agropecuaria S.A. and Pilagá S.A. are required under the original terms of the IDB Facility to meet every quarter : (i) a debt to EBITDA ratio on an individual basis of less than 3.75; (ii) a debt to EBITDA ratio on an aggregate basis of less than 4.0; (iii) a total liabilities to total equity ratio on an individual basis of less than 1.40; (iv) a total liabilities to total equity ratio on an aggregate basis of less than 1.20; (v) a current asset to current liabilities ratio on an aggregate basis of more than 1.30; (vi) an interest coverage ratio on an aggregate basis of more than of more than 2.0; and (vii) a loan coverage ratio of more than 1.5 on an aggregate basis.
          During 2009, the Group was in compliance with the loan coverage ratio on an aggregate basis for all quarters, in compliance with the total liabilities to total equity ratio on for Adeco Agropecuaria S.A. for three quarters, in compliance with the current asset to current liabilities ratio on an aggregate basis for one quarter, but Adeco Agropecuaria S.A. and Pilagá S.A. were not in compliance of the remaining financial ratio covenants. During 2009, the total liabilities to total equity ratio for Adeco Agropecuaria S.A. was 1.46 for its quarter of noncompliance and the aggregate current asset to current liabilities ratio ranged from 0.68 to 0.85 during the three quarters of noncompliance. For the remaining ratios, the debt to EBITDA ratio for Adeco Agropecuaria S.A. ranged from less than zero (negative EBITDA) to13.13, the debt to EBITDA ratio for Pilagá S.A ranged from less than zero (negative EBITDA) to 49.3, the total liabilities to total equity ratio for Pilagá S.A. ranged from 1.81 to 2.71, the aggregate debt to EBITDA ratio ranged from 8.02 to 36.6, the aggregate total liabilities to total equity ratio ranged from 1.27 to 1.54 and the aggregate interest coverage ratio ranged from 0.23 to 1.43. The IDB granted waivers for each breach of the financial ratio covenants.
          On May 14, 2010, the Group entered into an amendment to the IDB Facility to modify the terms of the existing financial ratio covenants. Since the date of the loan amendment, the Group has been in compliance with all of the amended financial ratio covenants. Pursuant to the amended ratios, the Group is now required to meetfollowing financial ratios for aggregate EBITDA, aggregate total debt, and aggregate capital expenditures(measured on a quarterly basis commencing in the 2010 fiscal year as set forth below. The Group is required to meet, as of the end of the fourth quarter of 2010 and as of each fiscal quarter thereafter, financial ratios for aggregate debt to EBITDA, aggregate total liabilities to total equity, aggregate current assets to current liabilities, aggregate interest coverage, aggregate debt to equity, aggregate short-term debt to total debt and debt to equity on an individual basis. The redefined financial covenants were as follows:
The accompanying notes are an integral part of these consolidated financial statements.

F - 74

combined basis):

   2013   2014   2015   2016   2017   2018 

Total Debt (>; in million) (i)

   160,000     160,000     160,000     160,000     160,000     160,000  

Current Ratio (>) (ii)

   1.15x     1.20x     1.20x     1.20x     1.20x     1.20x  

Interest Coverage Ratio (>) (ii)

   2.20x     2.25x     2.30x     2.40x     2.50x     2.60x  

Liabilities to Equity (<) (ii)

   1.40x     1.40x     1.40x     1.40x     1.40x     1.40x  

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
20. Borrowings (continued)
                 
  2010 4Q  2011  2012  2013 
Financial ratios:
                
EBITDA (aggregate) (in millions of $)  N/A   N/A   N/A   N/A 
Total Debt (aggregate) (in millions of $)  < 115.00   < 115.00   < 115.00   < 115.00 
Capital Expenditures (aggregate)(in millions of $)  < 15.00   N/A   N/A   N/A 
Debt to EBITDA (aggregate)  < 5.00   < 4.75   < 4.25   < 3.75 
Total Liabilities to Total Equity (aggregate)  < 1.50   < 1.50   < 1.30   < 1.30 
Current Asset to Current Liabilities (aggregate) (i)  > 1.30   > 1.10/1.30   > 1.10/1.30   > 1.10/1.30 
Interest Coverage (aggregate)  > 1.40   > 2.10   > 2.35   > 2.60 
Debt to Equity (aggregate)  < 1.20   < 1.20   < 1.20   < 1.20 
Short-Term Debt to Total Debt (aggregate) (ii)  < 0.57   < 0.50   < 0.50   < 0.50 
Debt to Equity (individual)  < 1.70   < 1.5(iii)  < 1.20   < 1.20 
(i)From 2011 onwards, for the first, second and third quarters the ratio is >1.10. From 2011 onwards, for the fourth quarter the ratio is >1.30.Measured on a quarterly basis.
(ii)Measured annually.
(iii)On March 24, 2011, the Group entered into an amendment to the IDB Facility to redefine this financial ratio covenant.on yearly basis

In addition, the IDB Facility contains a change of control provision requiring acceleration of amounts due under the facility.

•BDB Facility
          In July 2010, Angélica, a Brazilian subsidiary, entered into a Reais-denominated 70.0 million loan (equivalent to US$ 42.0 million as of December 31, 2010) with Banco do Brasil S.A. due in 2020. The BDB Facility bears a fixed interest rate of 10% per annum

During 2013 and is repayable on a monthly basis starting in August 2012 and ending in July 2020 (until August 2012, interest will be pay be quarterly). As of September 30, 2010, the Group received R$51.5 million (equivalent to US$ 30.9 million as of December 31, 2010). Under the BDB Facility, defaults by either Angélica or any of the Brazilian subsidiaries on any indebtedness can resultwas in acceleration of the full outstanding loan amount due to BDB. The BDB Facility contains customary covenants and restrictions. Angélica’s obligations under the BDB Facility is secured by (i) a second mortgage of the Sapálio farm, which is owned by the subsidiary Ivinhema Agroenergia Ltda. and (ii) a first pledge on the equipment acquired or to be acquired by Angélicacompliance with the proceeds of such facility. Angélica is currently not, and has not been, in violation of any of theall financial ratio covenants for the BDB Facility. The following table lists the financial ratios covenants Angélica subsidiary is currently required to meet under the BDB Facility:

The accompanying notes are an integral part of these consolidated financial statements.

F - 75

covenants.

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
20. Borrowings (continued)
Financial Ratios2010 to 20132014 to 2020
Debt Service Coverage Ratio (individual)>1.00>1.30
Liquidity Ratio (individual)>1.00>1.00
•DB Facility
          On July 28, 2010, Angélica also entered into a U.S. dollar-denominated 50.0 million facility with Deutsche Bank AG London Branch, due in 2013. Borrowings under this facility are repayable on various dates between July 2011 and July 2013 and bear an annual interest at a variable rate equal to LIBOR plus 8.5%. Angélica pledged and granted to DB a continuing first priority security interest on its debt service reserve account and all investment property, financial assets or other property credited thereto, deposited or carried therein. Under the DB Facility, defaults by Angélica on any indebtedness with an aggregate principal amount over US$ 5.0 million or by Adecoagro LLC on any indebtedness with an aggregate principal amount over US$ 10.0 million can result in acceleration of the full outstanding loan amount due to DB. The DB Facility contains customary covenants and restrictions, including restrictions on the payment of dividends until the balance on the loan are less than US$ 14 million and restrictions on the incurrence of debt except for a US$ 50 million working capital allowance provided certain other restrictions are met. In addition to the pledge, Angélica’s obligations under the DB Facility are also secured by a second mortgage of its Takuarê farm. Angélica is currently not, and has not been, in violation of any of the financial ratio covenants for the DB Facility. The following table lists the financial ratios covenants Angélica is currently required to meet under the DB Facility:
       
Financial Ratios 2010 2011 2012
Interest Coverage Ratio (individual) >1.65 >3.10 >3.50
Leverage Ratio (individual) <8.50 <3.40 <2.50
Capital Expenditures (individual) (in millions of R$) <154.00 <50.00 <50.00
          The Group estimates that the carrying amount of short-term loans approximates fair value due to their short-term nature. The Group estimates that the fair values of the long-term bank loans are estimated based on the current rates offered to the Group for debt of similar terms and maturities. The Group’s fair value of long-term bank loans was not significantly different from the carrying value at December 31, 2010, 2009 and 2008.
The carrying amounts of the Group’s borrowings are denominated in the following currencies (expressed in US dollars):
             
  2010  2009  2008 
Currency            
Argentine Peso  13   88   35,343 
US Dollar  199,182   158,797   164,103 
Uruguayan Peso  62   40   — 
Brazilian Reais  190,215   147,856   28,867 
          
   389,472   306,781   228,313 
          

   2013   2012 

Currency

    

US Dollar

   257,283     203,881  

Brazilian Reais

   372,058     316,586  

Argentine Peso

   30,775     18,622  

Uruguayan Peso

   15     44  
  

 

 

   

 

 

 
   660,131     539,133  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 76

80

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

20. Borrowings (continued)

21.Borrowings (continued)

Obligations under finance leases

Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.

Gross finance lease liabilities —- minimum lease payments:

             
  2010  2009  2008 
Not later than one year  396   719   801 
Later than one year and not later than five years  81   243   327 
          
   477   962   1,128 
Future finance charges on finance leases  (29)  (42)  (246)
          
Present value of finance lease liabilities
  448   920   882 
          

   2013   2012 

Not later than one year

   328     417  

Later than one year and not later than five years

   411     713  
  

 

 

   

 

 

 
   739     1,130  

Future finance charges on finance leases

   —       (9) 
  

 

 

   

 

 

 

Present value of finance lease liabilities

   739     1,121  
  

 

 

   

 

 

 

The present value of finance lease liabilities is as follows:

             
  2010  2009  2008 
Not later than one year  367   677   627 
Later than one year and not later than five years  81   243   255 
          
   448   920   882 
          

   2013   2012 

Not later than one year

   328     412  

Later than one year and not later than five years

   411     709  
  

 

 

   

 

 

 
   739     1,121  
  

 

 

   

 

 

 

Under the terms of the lease agreements, no contingent rents are payable. The interest rate inherent in these finance leases is fixed at the contract date for all of the lease term. The average interest rate on finance lease payables at December 31, 20102013 was 10.67% (2009: 14.75%; 2008: 15.36%13.23% (2012: 9.86%).

21. Taxation

22.Taxation

Adecoagro is subject in Luxembourg to the applicable general tax regulations.

regulations in Luxembourg.

The Group’s income tax has been calculated on the estimated assessable taxable profit for the year at the rates prevailing in the respective foreign tax jurisdictions. The subsidiaries of the Group in the jurisdictions where the Group operates are required to calculate their income taxes on a separate basis; thus,basis according to the rules and regulations of the jurisdictions where they areoperate. Therefore, the Group is not legally permitted to compensate subsidiaries ´subsidiaries’ losses against subsidiariessubsidiaries’ income. The details of the provision for the Group’s foreignconsolidated income tax are as follows:

             
  2010  2009  2008 
Current income tax  (3,956)  (1,034)  903 
Deferred income tax  20,219   6,449   9,546 
          
Income tax benefit
  16,263   5,415   10,449 
          

   2013  2012  2011 

Current income tax

   (979)   (1,377)   (13,520) 

Deferred income tax

   10,256    6,813    (1,142) 
  

 

 

  

 

 

  

 

 

 

Income tax benefit (expense)

   9,277    5,436    (14,662) 
  

 

 

  

 

 

  

 

 

 

The statutory tax rate in the countries where the Group operates for all of the years presented are:

Tax Jurisdiction

  Income Tax Rate 
Tax JurisdictionIncome Tax Rate

Argentina

   35%

Brazil

   34%

Uruguay

   25%

The accompanying notes are an integral part of these consolidated financial statements.

F - 77

81

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

21. Taxation (continued)

22.Taxation (continued)

In September 2013, Argentina enacted a law that amends its income tax law. The law includes a new 10% withholding tax on dividend distributions made by Argentine companies to individuals and foreign beneficiaries. As of December 31, 2013, the Company did not record any liability on retain earnings at their Argentine subsidiaries due to its dividend policy which defines that the Company intends to retain any future earnings to finance operations and the expansion of their business and does not intend to distribute or pay any cash dividends on our common shares in the foreseeable future.

Deferred tax assets and liabilities of the Group as of December 31, 2010, 20092013 and 20082012, without taking into consideration the offsetting of balances within the same tax jurisdiction, will be recovered or settled as follows:

             
  2010  2009  2008 
Deferred income tax asset to be recovered after more than 12 months  66,756   44,139   16,068 
Deferred income tax asset to be recovered within 12 months  707   974   2,645 
          
Deferred income tax assets
  67,463   45,113   18,713 
          
             
Deferred income tax liability to be recovered after more than 12 months  108,644   108,585   92,457 
Deferred income tax liability to be recovered within 12 months  2,851   6,460   2,170 
          
Deferred income tax liability
  111,495   107,045   94,627 
          
             
          
Deferred income tax liabilities, net
  44,032   61,932   75,914 
          

   2013   2012 

Deferred income tax asset to be recovered after more than 12 months

   75,668     11,463  

Deferred income tax asset to be recovered within 12 months

   17,692     65,095  
  

 

 

   

 

 

 

Deferred income tax assets

   93,360     76,558  
  

 

 

   

 

 

 

Deferred income tax liability to be settled after more than 12 months

   97,509     79,896  

Deferred income tax liability to be settled within 12 months

   5,106     36,659  
  

 

 

   

 

 

 

Deferred income tax liability

   102,615     116,555  
  

 

 

   

 

 

 

Deferred income tax liabilities, net

   9,255     39,997  
  

 

 

   

 

 

 

The gross movement on the deferred income tax account is as follows:

             
  2010  2009  2008 
Beginning of year  61,932   75,914   100,661 
Exchange differences  (4,961)  (7,000)  (11,237)
Acquisition of subsidiary  7,280   —   — 
Disposal of subsidiary (Note 15)  —   (533)  (3,964)
Income tax benefit  (20,219)  (6,449)  (9,546)
          
End of year
  44,032   61,932   75,914 
          

   2013  2012  2011 

Beginning of year

   39,997    55,908    44,032  

Exchange differences

   (12,259)   (8,741)   (4,282) 

Acquisition of subsidiary

   —      —      15,016  

Disposal of subsidiary (Note 16)

   (201)   (357)   —    

Tax charge relating to cash flow hedge (i)

   (8,026)   —      —    

Income tax (expense) / benefit

   (10,256)   (6,813)   1,142  
  

 

 

  

 

 

  

 

 

 

End of year

   9,255    39,997    55,908  
  

 

 

  

 

 

  

 

 

 

(i)Relates to the gain or loss before income tax of cash flow hedge recognized in other comprehensive income amounting to US$ 6,167 for the year ended December 31, 2013.

The accompanying notes are an integral part of these consolidated financial statements.

F - 82

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

22.Taxation (continued)

The movement in the deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

                 
  Property, plant and          
Deferred income tax liabilities equipment  Biological assets  Others  Total 
At January 1, 2008
  102,864   6,730   119   109,713 
Charged/(credited) to the statement of income  (1,723)  3,512   229   2,018 
Disposal of subsidiary  (3,813)  (151)  —   (3,964)
Exchange differences  (11,130)  (1,902)  (108)  (13,140)
             
At December 31, 2008
  86,198   8,189   240   94,627 
             
Charged/(credited) to the statement of income  (5,065)  20,384   670   15,989 
Disposal of subsidiary  (510)  (14)  (9)  (533)
Exchange differences  (1,771)  (1,555)  288   (3,038)
             
At December 31, 2009
  78,852   27,004   1,189   107,045 
             
Charged/(credited) to the statement of income  (1,992)  2,051   (376)  (317)
Acquisition of subsidiary  7,280   —   —   7,280 
Exchange differences  (2,546)  (263)  296   (2,513)
             
At December 31, 2010
  81,594   28,792   1,109   111,495 
             
The accompanying notes are an integral part of these consolidated financial statements.

F - 78

Deferred income tax liabilities

  Property,
plant and
equipment		  Biological
assets		  Others  Total 

At January 1, 2011

   81,594    28,792    1,109    111,495  

Charged/(credited) to the statement of income

   6,943    (8,189)   (764)   (2,010) 

Acquisition of subsidiary

   15,016    —      —      15,016  

Exchange differences

   (7,502)   (4,117)   1,138    (10,481) 
  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2011

   96,051    16,486    1,483    114,020  
  

 

 

  

 

 

  

 

 

  

 

 

 

(Credited)/charged to the statement of income

   (601)   3,951    13,277    16, 627  

Acquisition of subsidiary

   (357)   —      —      (357) 

Exchange differences

   (11,684)   (1,644)   (407)   (13,735) 
  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2012

   83,409    18,793    14,353    116,555  
  

 

 

  

 

 

  

 

 

  

 

 

 

(Credited) /charged to the statement of income

   12,590    (4,394)   2,864    11,060  

Disposal of subsidiary

   (622)   —      —      (622) 

Exchange differences

   (18,339)   (3,247)   (2,792)   (24,378) 
  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2013

   77,038    11,152    14,425    102,615  
  

 

 

  

 

 

  

 

 

  

 

 

 

Deferred income tax assets

  Provisions  Tax loss
carryforwards		  Equity-settled
share-based
compensation		  Biological
Assets		  Others  Total 

At January 1, 2011

   3,308    36,711    4,842    17,893    4,709    67,463  

Charged/(credited) to the statement of income

   2,364    7,455    1,117    (15,357)   1,269    (3,152) 

Exchange differences

   (604)   (3,521)   —      503    (2,577)   (6,199) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2011

   5,068    40,645    5,959    3,039    3,401    58,112  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Charged/(credited) to the statement of income

   1,033    21,652    757    (302)   300    23,440  

Exchange differences

   (530)   (3,880)   —      (236)   (348)   (4,994) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2012

   5,571    58,417    6,716    2,501    3,353    76,558  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Charged/(credited) to the statement of income

   1,161    13,200    (299)   2,922    4,332    21,316  

Disposal of subsidiary

   —      (421)   —      —      —      (421) 

Tax charge relating to cash flow hedge

   —      8,026    —      —      —      8,026  

Exchange differences

   (905)   (9,602)   —      (549)   (1,063)   (12,119) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2013

   5,827    69,620    6,417    4,874    6,622    93,360  
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. Taxation (continued)
                         
          Equity-settled          
      Tax loss  share-based  Biological       
Deferred income taxassets Provisions  carryforwards  compensation  Assets  Others  Total 
At January 1, 2008
  806   3,679   1,860   —   2,707   9,052 
Charged/(credited) to the statement of income  (171)  11,145   1,366   —   (776)  11,564 
Exchange differences  (195)  (1,099)  —   —   (609)  (1,903)
                   
At December 31, 2008
  440   13,725   3,226   —   1,322   18,713 
                   
Charged/(credited) to the statement of income  675   19,201   999   —   1,563   22,438 
Exchange differences  150   3,479   —   —   333   3,962 
                   
At December 31, 2009
  1,265   36,405   4,225   —   3,218   45,113 
                   
Charged/(credited) to the statement of income  1,980   (2,655)  617   19,525   435   19,902 
Exchange differences  63   2,961   —   (1,632)  1,056   2,448 
                   
At December 31, 2010
  3,308   36,711   4,842   17,893   4,709   67,463 
                   
          Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through the future taxable profits is probable. Tax loss carry forwards may have expiration dates or may be permanently available for use by the Group depending on the tax jurisdiction where the tax loss carry forward is generated. Tax loss carry forwards in Argentina and Uruguay generally expire within 5 years. Tax loss carry forwards in Brazil do not expire. However, in Brazil, the taxable profit for each year can only be reduced by tax losses up to a maximum of 30%.

The accompanying notes are an integral part of these consolidated financial statements.

F - 83

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

22.Taxation (continued)

In order to fully realize the deferred tax asset, the Group will need to generate future taxable income in the countries where the net operating lossestax loss carry forward were incurred. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that as at December 31, 2010,2013, it is probable that the Group will realize all of the deferred tax assets in Argentina and some portion of the deferred tax assets in Brazil.

As of December 31, 2010,2013, the Group’s tax loss carry forwards and thetheir corresponding jurisdictions which generated them are as follows:

Jurisdiction

Tax loss carry forward   Expiration Period

Argentina

   55,307  
JurisdictionTax loss carry forwardExpiration Period
Argentina5,718   5 years
Brazil

Uruguay

   133,2292,4135 years

Brazil

152,372   No expiration date

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognizedrecognize deferred income tax assets of US$ 10.73.8 million at December 31, 2010 in respect of losses amounting to US$ 30.6 million than11.2 that can be carried forward against future taxable income.

These losses do not expire.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:

             
  2010  2009  2008 
Tax calculated at the tax rates applicable to profits in the respective countries  (23,004)  (8,100)  (12,789)
Non-deductible items  3,210   702   488 
Unused tax losses, net  7,642   688   853 
Non-taxable income  (4,234)  —   — 
Others  123   1,295   999 
          
Income tax benefit
  (16,263)  (5,415)  (10,449)
          

   2013  2012  2011 

Tax calculated at the tax rates applicable to profits in the respective countries

   (13,094)   959    30,947  

Non-deductible items

   2,398    1,978    2,075  

Derecognition / (recognition) of previously recognized (unrecognized) tax losses

   3,811    (2,845)   (14,617) 

Non-taxable income

   (2,319)   (5,744)   (4,056) 

Others

   (73)   216    313  
  

 

 

  

 

 

  

 

 

 

Income tax (benefit) / expense

   (9,277)   (5,436)   14,662  
  

 

 

  

 

 

  

 

 

 

23.Payroll and social security liabilities

   2013   2012 

Non-current

    

Social security payable

   1,458     1,512  
  

 

 

   

 

 

 
   1,458     1,512  
  

 

 

   

 

 

 

Current

    

Salaries payable

   5,782     4,816  

Social security payable

   3,849     3,063  

Provision for vacations

   11,481     9,745  

Provision for bonuses

   5,027     5,324  
  

 

 

   

 

 

 
   26,139     22,948  
  

 

 

   

 

 

 

Total payroll and social security liabilities

   27,597     24,460  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 79

84

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

22. Payroll and social security liabilities
             
  2010  2009  2008 
Non-current
            
Social security payable  1,178   1,106   834 
          
   1,178   1,106   834 
          
Current
            
Salaries payable  3,471   2,446   1,416 
Social security payable  2,223   1,831   936 
Provision for vacations  6,155   4,802   2,532 
Provision for bonuses  3,629   1,000   1,141 
          
   15,478   10,079   6,025 
          
Total payroll and social security liabilities
  16,656   11,185   6,859 
          
23. Provisions for other liabilities

24.Provisions for other liabilities

The Group is subject to several laws, regulations and business practices of the countries where it operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, labor and social security, administrative and civil and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and it can reasonably estimate them. The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity.

The table below shows the movements in the Group’s provisions for other liabilities categorized by type of provision:

                 
  Labor, legal and  Tax and social       
  other claims  security  Onerous contracts  Total 
At January 1, 2008
  844   2,950   —   3,794 
Additions  327   78   —   405 
Used during year  (240)  (1,570)  —   (1,810)
Exchange differences  (122)  (666)  —   (788)
             
At December 31, 2008
  809   792   —   1,601 
             
Additions  2,549   801   —   3,350 
Used during year  (6)  (158)  —   (164)
Exchange differences  18   173   —   191 
             
At December 31, 2009
  3,370   1,608   —   4,978 
             
Additions  1,770   552   3,947   6,269 
Used during year  (1,379)  (705)  —   (2,084)
Exchange differences  (27)  71   —   44 
             
At December 31, 2010
  3,734   1,526   3,947   9,207 
             
The accompanying notes are an integral part of these consolidated financial statements.

F - 80

   Labor, legal and
other claims		  Tax and social
security		  Onerous contracts  Total 

At January 1, 2012

   2,460    1,669    198    4,327  

Additions

   2,422    1,911    5,257    9,590  

Used during year

   (2,001)   (3,457)   (5,402)   (10,860) 

Exchange differences

   (247)   (69)   (9)   (325) 
  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2012

   2,634    54    44    2,732  
  

 

 

  

 

 

  

 

 

  

 

 

 

Additions

   1,811    62    2,766    4,639  

Used during year

   (1,123)   (114)   (2,683)   (3,920) 

Exchange differences

   (490)   (2)   (9)   (501) 
  

 

 

  

 

 

  

 

 

  

 

 

 

At December 31, 2013

   2,832    —      118    2,950  
  

 

 

  

 

 

  

 

 

  

 

 

 

\

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
23. Provisions for other liabilities (continued)
Analysis of total provisions:
             
  2010  2009  2008 
Non current  4,606   3,326   777 
Current  4,601   1,652   824 
          
   9,207   4,978   1,601 
  ��       

   2013   2012 

Non current

   2,293     1,892  

Current

   657     840  
  

 

 

   

 

 

 
   2,950     2,732  
  

 

 

   

 

 

 

The Group is engaged in several legal proceedings, including tax, labor, civil, administrative and other proceedings in Brazil, and Argentina,which qualified as contingent liabilities for which has established provisions in an aggregate claimed nominal amount of US$ 0.519.11 million and US$ 11.1 as of December 31, 2010.

24. Sales
             
  2010  2009  2008 
Sales of manufactured products and services rendered:
            
Rice  58,876   65,521   51,681 
Ethanol  114,793   62,811   29,385 
Sugar  98,385   26,143   20,495 
Soybean oil and meal  —   8,420   1,692 
Energy  15,040   8,216   — 
Coffee  2,709   7,984   8,544 
Services  749   2,848   2,507 
Rental income  3,718   172   — 
Powder milk  —   720   2,171 
Others  259   551   698 
          
   294,529   183,386   117,173 
          
Sales of agricultural produce and biological assets:
            
Soybean  64,890   35,696   37,333 
Cattle  2,978   28,639   9,548 
Corn  23,968   14,654   22,547 
Cotton  2,395   11,905   5,813 
Milk  13,415   10,809   12,295 
Wheat  7,939   10,218   15,407 
Coffee  4,863   6,281   7,404 
Sunflower  4,880   5,517   5,615 
Barley  1,171   3,106   2,816 
Seeds  2,537   2,352   3,822 
Others  2,702   1,040   4,436 
          
   131,738   130,217   127,036 
          
Total sales
  426,267   313,603   244,209 
          
2013 and 2012, respectively.

The accompanying notes are an integral part of these consolidated financial statements.

F - 81

85

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

24. Sales (continued)

25.Sales

   2013   2012   2011 

Sales of manufactured products and services rendered:

      

Rice

   101,906     89,062     82,079  

Ethanol

   150,382     121,544     116,599  

Sugar

   133,597     134,766     130,348  

Energy

   32,463     25,649     24,393  

Coffee

   —       —       713  

Services

   2,929     3,575     767  

Operating Leases

   3,446     4,780     4,980  

Others

   584     150     5,978  
  

 

 

   

 

 

   

 

 

 
   425,307     379,526     365,857  
  

 

 

   

 

 

   

 

 

 

Sales of agricultural produce and biological assets:

      

Soybean

   68,850     66,721     61,385  

Cattle for dairy

   2,244     1,634     1,896  

Other cattle

   616     623     957  

Corn

   79,277     67,915     42,959  

Cotton

   6,119     16,489     9,101  

Milk

   28,417     17,234     17,801  

Wheat

   20,379     30,611     24,232  

Coffee

   439     8,363     13,457  

Sunflower

   8,030     7,887     7,413  

Sorghum

   146     875     1,237  

Barley

   1,419     4,220     828  

Seeds

   2,617     2,294     784  

Others

   764     308     177  
  

 

 

   

 

 

   

 

 

 
   219,317     225,174     182,227  
  

 

 

   

 

 

   

 

 

 

Total sales

   644,624     604,700     548,084  
  

 

 

   

 

 

   

 

 

 

Commitments to sell commodities at a future date

The Group entered into contracts to sell non financialnon-financial instruments, mainly, sugar, soybean and corn through sales forward contracts. Those contracts are held for purposes of delivery the non financialnon-financial instrument in accordance with the Group’s expected sales. Accordingly, as the own use exception criteria are met, those contracts are not recorded as derivatives.

The notional amount of these contracts is US$ 77.2149.7 million as of December 31, 2010 (2009:2013 (2012: US$ 29.175 million; 2008:2011: US$ 9.1)65.9 million) comprised primarily of 91,82820,778 tons of sugar (US$ 42.47.5 million), 79,25028,800 tons of soybean (U$S 19.49.6 million), 2,600 tons of cotton (US$ 4.4 million), 19,157 tons of wheat (US$ 5.4 million) and 42,10074,600 tons of corn (US$ 7.712.5 million), which expire between January 20112014 and September 2011.

25. Expenses by nature
2014.

The accompanying notes are an integral part of these consolidated financial statements.

F - 86

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

26.Expenses by nature

The Group presented the statement of income under the function of expense method. Under this method, expenses are classified according to their function as part of the line items “cost of manufactured products sold and services rendered”, “cost of agricultural produce sold and direct agricultural selling expenses”, “general and administrative expenses” and “selling expenses”.

The following table provides the additional disclosure required on the nature of expenses and their relationship to the function within the Group:

             
  2010  2009  2008 
Cost of agricultural produce and biological assets sold  117,992   116,728   104,992 
Raw materials and consumables used in manufacturing activities  136,208   95,959   44,444 
Services  14,727   39,374   24,136 
Salaries and social security expenses (Note 26)  52,728   37,099   40,061 
Depreciation and amortization  37,563   30,356   28,314 
Taxes (*)  25,821   20,474   12,975 
Maintenance and repairs  14,299   17,046   6,713 
Freights  24,198   11,322   8,686 
Export taxes / selling taxes  7,846   5,612   9,940 
Fuel and lubricants  9,336   5,507   4,407 
Lease expense and similar arrangements (**)  3,262   2,764   1,782 
Others  16,049   11,621   16,298 
          
Total expenses by nature
  460,029   393,862   302,748 
          

   2013   2012   2011 

Cost of agricultural produce and biological assets sold

   191,213     194,107     168,837  

Raw materials and consumables used in manufacturing activities

   158,352     159,968     147,339  

Services

   14,201     18,670     20,437  

Salaries and social security expenses (Note 27)

   61,019     63,089     57,259  

Depreciation and amortization

   68,432     54,468     34,184  

Taxes (*)

   4,836     2,102     2,159  

Maintenance and repairs

   10,085     10,815     16,032  

Freights

   37,909     35,470     31,956  

Export taxes / selling taxes

   34,410     32,683     31,006  

Fuel and lubricants

   8,603     7,625     8,522  

Lease expense and similar arrangements (**)

   2,610     3,200     2,592  

Others

   21,329     23,248     23,854  
  

 

 

   

 

 

   

 

 

 

Total expenses by nature

   612,999     605,445     544,177  
  

 

 

   

 

 

   

 

 

 

(*)Excludes export taxes and selling taxes.
(**)Relates to various cancellable operating lease agreements for office and machinery equipment.

For the year ended December 31, 2010,2013, an amount of US$ 219,201272,261 is included as “cost of manufactured products sold and services rendered” (2009:(2012: US$ 180,083; 2008:263,978; 2011: US$ 105,583)237,404); an amount of US$ 131,738219,317 is included as “cost of agricultural produce sold and direct agricultural selling expenses” (2009:(2012: US$ 130,217; 2008:225,174; 2011: US$ 127,036)182,227); an amount of US$ 56,56253,352 is included in “general and administrative expenses” (2009:(2012: US$ 52,393; 2008:57,691; 2011: US$ 45,633)65,142); and an amount of US$ 52,52868,069 is included in “selling expenses” as described above (2009:(2012: US$ 31,169; 2008:58,602; 2011: US$ 24,496)59,404).

The accompanying notes are an integral part of these consolidated financial statements.

F - 82

87

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

26. Salaries and social security expenses
             
  2010  2009  2008 
Wages and salaries  40,090   27,777   30,516 
Social security costs  10,857   6,442   5,643 
Equity-settled share-based compensation  1,781   2,880   3,902 
          
   52,728   37,099   40,061 
          
Number of employees  5,263   5,290   4,544 
          
27. Other operating income, net
             
  2010  2009  2008 
Gain from the sale of subsidiaries (Note 15)  —   18,839   13,974 
(Loss)/gain from commodity derivative financial instruments  106   (7,486)  1,848 
Loss from onerous contracts — forwards  (3,935)  —   — 
Gain from disposal of farmland (Note 15)  20,837   —   — 
Gain from disposal of other property items  847   337   479 
Others  369   1,381   1,022 
          
   18,224   13,071   17,323 
          
28. Financial results, net
             
  2010  2009  2008 
Finance income:            
- Interest income  1,341   472   1,494 
- Foreign exchange gains, net  7,324   10,903   — 
- Gain from interest rate/foreign exchange rate derivative financial instruments  5,018   —   — 
- Other income  2,876   178   1,058 
          
Finance income
  16,559   11,553   2,552 
          
             
Finance costs:            
- Interest expense  (34,369)  (28,222)  (23,324)
- Foreign exchange losses, net  —   —   (24,932)
- Taxes  (2,104)  (2,060)  (1,982)
- Loss from interest rate/foreign exchange rate derivative financial instruments  —   (314)  — 
- Other expenses  (3,023)  (3,620)  (622)
          
Finance costs
  (39,496)  (34,216)  (50,860)
          
             
          
Total financial results, net
  (22,937)  (22,663)  (48,308)
          

27.Salaries and social security expenses

   2013   2012   2011 

Wages and salaries

   42,291     43,519     40,596  

Social security costs

   14,925     15,432     12,986  

Equity-settled share-based compensation

   3,803     4,138     3,677  
  

 

 

   

 

 

   

 

 

 
   61,019     63,089     57,259  
  

 

 

   

 

 

   

 

 

 

Number of employees

   7,494     7,051     5,560  
  

 

 

   

 

 

   

 

 

 

28.Other operating income, net

   2013  2012  2011 

Gain from the sale of subsidiaries (Note 16)

   779    27,513    —    

Gain from disposal of farmland and other assets (Note 16)

   26,434    —      8,832  

Gain from commodity derivative financial instruments

   19,586    1,821    19,664  

Loss from onerous contracts – forwards

   (292)   (2,302)   (5,333) 

Gain from disposal of other property items

   670    882    394  

Gain from disposal of financial assets (Note 16)

   1,188    —      —    

Others

   1,285    3,183    1,024  
  

 

 

  

 

 

  

 

 

 
   49,650    31,097    24,581  
  

 

 

  

 

 

  

 

 

 

29.Financial results, net

   2013  2012  2011 

Finance income:

    

- Interest income

   6,882    11,249    8,019  

- Other income

   352    289    1,113  
  

 

 

  

 

 

  

 

 

 

Finance income

   7,234    11,538    9,132  
  

 

 

  

 

 

  

 

 

 

Finance costs:

    

- Interest expense

   (49,249)   (27,672)   (34,017) 

- Cash flow hedge – transfer from equity

   (2,560)   —      —    

- Foreign exchange losses, net

   (21,087)   (26,080)   (12,683) 

- Taxes

   (3,815)   (4,265)   (5,273) 

- Loss from interest rate/foreign exchange rate derivative financial instruments

   (19,028)   (5,823)   (2,247) 

- Other expenses

   (3,177)   (2,814)   (8,121) 
  

 

 

  

 

 

  

 

 

 

Finance costs

   (98,916)   (66,654)   (62,341) 
  

 

 

  

 

 

  

 

 

 

Total financial results, net

   (91,682)   (55,116)   (53,209) 
  

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these consolidated financial statements.

F - 83

88

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

30.Earnings per share

29. Earnings per share(a) Basic

Basic and diluted lossearnings per share is calculated by dividing the lossprofit attributable to equity holders of the Group by the weighted average number of shares in issue during the year.

             
  2010  2009  2008 
Loss attributable to equity holders of the Group  (43,904)  (260)  (18,947)
Weighted average number of shares in issue (thousands)  121,667   120,000   112,420 
          
Basic and diluted losses per share
  (0.361)  (0.002)  (0.168)
          
period excluding ordinary shares held as treasury shares (Note 16).

   2013  2012  2011 

(Loss) / Profit from continuing operations attributable to equity holders of the Group

   (27,597)   13,488    57,036  

Profit/(Loss) from discontinued operations attributable to equity holders of the Group

   1,767    (40,91)   (1,018) 
  

 

 

  

 

 

  

 

 

 

Weighted average number of shares in issue (thousands)

   122,302    121,365    117,028  
  

 

 

  

 

 

  

 

 

 

Basic (loss) / earnings per share from continuing operations

   (0.226)   0.111    0.488  
  

 

 

  

 

 

  

 

 

 

Basic earnings / (loss) per share from discontinued operations

   0.014    (0.034)   (0.009) 
  

 

 

  

 

 

  

 

 

 

(b) Diluted net loss

Diluted earnings per share is computedcalculated by dividing the net loss for the period byadjusting the weighted average number of ordinary shares outstanding and when dilutive, adjusted for the effectto assume conversion of all potentially dilutive shares, includingpotential shares. The Group has one category of dilutive potential shares: equity-settled share options, on an as-if converted basis.options. For all periods presented, there were no differences inthese instruments, a calculation is done to determine the weighted-average number of ordinary shares used for basic and diluted net loss perthat could have been acquired at fair value, based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the effectnumber of all potentially dilutive shares outstanding was anti-dilutive.that would have been issued assuming the exercise of the equity-settled share options. As of December 31, 2010,2013, there were 6.4 million (2009: 6.6 million and 2008: 5.6 million)2,431 thousands (2012: 2,528 thousands; 2011: 2,038 thousands) share options outstanding that could potentially have a dilutive impact in the future but were antidilutive for the periods presented.

   2013  2012  2011 

(Loss) / Profit from continuing operations attributable to equity holders of the Group

   (27,597)   13,488    57,036  

Profit /(Loss) from discontinued operations attributable to equity holders of the Group

   1,767    (40,91)   (1,018) 
  

 

 

  

 

 

  

 

 

 

Weighted average number of shares in issue (thousands)

   122,302    121,365    117,028  

Adjustments for:

    

- Employee share options and restricted units (thousands)

   807    1,104    822  
  

 

 

  

 

 

  

 

 

 

Weighted average number of shares for diluted earnings per share (thousands)

   123,109    122,469    117,850  
  

 

 

  

 

 

  

 

 

 

Diluted (loss) / earnings per share from continuing operations

   (0.226)   0.111    0.484  
  

 

 

  

 

 

  

 

 

 

Diluted earnings / (loss) per share from discontinued operations

   0.014    (0.034)   (0.009) 
  

 

 

  

 

 

  

 

 

 

As explained in Note 17, on January 24, 2011 the Extraordinary General Meeting of Adecoagro’s shareholders held on January 24, 2011 approved the reverse split of Adecoagro’s common shares, changing the nominal value of Adecoagro’s common shares from US$ 1 to US$ 1.5. Accordingly, the calculation of basic and diluted earnings per share for all periods presented.

30. Disclosurepresented had been adjusted retrospectively.

The accompanying notes are an integral part of leasesthese consolidated financial statements.

F - 89

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and similar arrangements

per share data and as otherwise indicated)

31.Disclosure of leases and similar arrangements

The Group as lessee

Operating leases:

The Group leases various offices and machinery under cancellable operating lease agreements. LeaseAn amount of US$ 1.28 million of lease expense was US$ 4.41 million for the year ended December 31, 2010 (2009: US$ 2.2 million; 2008: US$ 3.0 million). Lease expense is included in “General and administrative expenses” in the consolidated statement of income.

income for the year ended December 31, 2013 (2012: US$ 1.50 million; 2011: US$ 0.99 million). An amount of US$ 1.27 million of lease expense was included in “Cost of manufactured products sold and services rendered” in the consolidated statement of income for the year ended December 31, 2013 (2012: US$ 1.46 million; 2011: US$ 3.61). An amount of US$ 0.12 million of lease expense was included in “Selling expenses” in the consolidated statement of income for the year ended December 31, 2013 (2012: US$ 0.20 million; 2011: US$ 0.18 million).

The Group leases land for crop cultivation in Argentina. The leases have an average term of a crop year and are renewable at the option of the lessee for additional periods. Under the lease agreements, rent accrues generally at the time of harvest. Rent is payable at several times during the crop year. Lease expense was US$ 8.0117.85 million for the year ended December 31, 2010 (2009:2013 (2012: US$ 4.317.60 million; 2008: 2.52011: US$ 10.52 million). Lease expense is capitalized as part of biological assets, affecting the periodically re-measurement of the biological assets at fair value. Based on this accounting policy, the line item ‘Initial recognition and changes in fair value of biological assets and agricultural produce’ in the consolidated income statement is directly affected by the lease expense that has been capitalized.

The future aggregate minimum lease payments under cancellable operating leases are as follows:

             
  2010  2009  2008 
No later than 1 year  3,246   11,681   773 
Later than 1 year and no later than 5 years  2,110   3,824   1,982 
Thereafter  478   487   — 
          
   5,834   15,992   2,755 
          
The accompanying notes are an integral part of these consolidated financial statements.

F - 84

   2013   2012 

No later than 1 year

   10,313     8,941  

Later than 1 year and no later than 5 years

   6,090     6,411  

Thereafter

   —       —    
  

 

 

   

 

 

 
   16,403     15,352  
  

 

 

   

 

 

 

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
30. Disclosure of leases and similar arrangements (continued)
Agriculture “partnerships”(parceriaby its exact term in Portuguese):

The Group enters into contracts with landowners to cultivate sugarcane on their land. These contracts have an average term of 5 years.

Under these contracts, the Group makes payments based on the market value of sugarcane per hectare (in tons) used by the Group in each harvest, with the market value based on the price of sugarcane published by CONSECANA and a fixed amount of total recoverable sugar per ton. Lease expense was US$ 15.8150 million for the year ended December 31, 2010 (2009:2013 (2012: US$ 9.930.4 million; 2008: 6.32011: US$ 17.1 million). Lease expense is included in “Initial recognition and changes in fair value of biological assets and agricultural produce” in the statement of income.

Finance leases:

     When a lease transfers substantially all risks and rewards to the Group as lessee, the Group initially recognizes the leased assets in the consolidated statement of financial position at the lower of fair value or present value of the future minimum lease payments.

Most of the leased assets carried in the consolidated statement of financial position as part of a finance lease relate to long-term rental and lease agreements for vehicles, machinery and equipment. The net book value of assets under finance leases amounts to US$ 448, US$ 9001,046 and US$ 1,5621,531 as of December 31, 2010, 20092013 and 2008,2012, respectively.

     At the commencement of the lease term, the Group recognizes a lease liability equal to the carrying amount of the leased asset. In subsequent periods, the liability decreases by the amount of lease payments made to the lessors using the effective interest method. The interest component of the lease payments is recognized in the statement of income.

Information on the breakdown of the present value of finance leases and its components is disclosed in Note 20.

21.

The accompanying notes are an integral part of these consolidated financial statements.

F - 90

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

31.Disclosure of leases and similar arrangements (continued)

The Group as lessor

Operating leases:

The Group acts as a lessor in connection with an operating lease related to leased farmland. The lease payments received are recognized in profit or loss. The lease has a term of ten years.

The following amounts have been recognized in the statement of income in the line “Sales of manufactured products and services rendered”:

             
  2010  2009  2008 
Rental income  3,718   172   — 

   2013   2012   2011 

Rental income

   3,446     4,735     4,980  

The future minimum rental payments receivable under cancellable leases are as follows:

             
  2010  2009  2008 
No later than 1 year  4,520   2,370   — 
Later than 1 year and no later than 5 years  18,081   9,483   — 
Thereafter  17,704   11,853   — 
            
   40,305   23,706   — 
          

   2013   2012 

No later than 1 year

   1,458     3,801  

Later than 1 year and no later than 5 years

   3,417     15,205  

Thereafter

   553     7,286  
  

 

 

   

 

 

 
   5,428     26,292  
  

 

 

   

 

 

 

In September 2013, Marfrig Argentina S.A., an Argentine company and a subsidiary of Marfrig Alimentos S.A. (“Marfrig”) notified the Group of their intention to early terminate the lease agreement entered into with the Group on December 2009 for grazing land. The termination of the lease agreement was effective in the fourth quarter of 2013. The Group and Marfrig are currently in negotiations concerning the terms and conditions of the early termination of the lease agreement. The Group has also entered into negotiations with third parties for the lease of the grazing land after the effective date of the termination of the lease agreement.

Finance leases:

The Group does not act as a lessor in connection with finance leases.

The accompanying notes are an integral part of these consolidated financial statements.

F - 85

32.Business combinations

Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
31. Business combinations
Acquisitions completed during the year ended December 31, 2010
2011

Acquisition of DinalucaCompañía Agroforestal Sociedad Anónima (Dinaluca)(Agroforestal)

On August 23, 2010,18, 2011, the Group acquired 100% of the issued share capital of Dinaluca,Agroforestal, an Argentina-basedArgentine-based company mainly involved in the lease of farmlands,agricultural and beef cattle industry, for a total consideration of US$ 20.118.0 million. The purchase price includes a cash paymentacquisition involved an escrow in an amount of US$ 7.91.5 million, and seller financing of US$ 12.2 million plus accrued interest at LIBOR plus 2% on outstanding amounts payablewhich was retained in two equal installments onescrow by the first anniversary and second anniversaryGroup to secure certain obligations of the transaction. These payment obligations are guaranteed byseller. The escrowed amount is to be released within a pledgethree-year period as from the date of the acquired shares in favor of the former shareholders of Dinaluca.

acquisition.

In the period from acquisition to December 31, 2010, Dinaluca2011, Agroforestal contributed revenues of US$ 0,060.5 million and gainnet loss of US$ 0.070.1 million to the Group’s consolidated results. If DinalucaAgroforestal had been acquired on January 1, 2010,2011, combined revenues of the Group would have been US$ 403.74.2 million (unaudited) and LossProfit Before Income Tax would have been US$ 60.81.4 million (unaudited) for the year ended December 31, 2010.2011. For purposes of this note the term revenues comprises the line items “sales of manufactured products and services rendered”, “sales of agricultural produce and biological assets”, “initial recognition and changes in fair value of biological assets and agricultural produce” and “changes in net realizable value of agricultural produce after harvest”. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortization, as appropriate, that would have been charged assuming the fair value adjustments to net assets acquired had been applied from January 1, 2010,2011, together with its consequential tax effects.

The accompanying notes are an integral part of these consolidated financial statements.

F - 91

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

32.Business combinations (continued)

Results, assets and liabilities of DinalucaAgroforestal as from the acquisition date are included within the ‘Rice’‘Crops’ and ‘Cattle’ segments.

Details of the net assets acquired and goodwill are as follows:

Purchase consideration:

Cash paid

   
Purchase consideration:
1,350  
Cash paid7,900

Present value of seller financing (*)

   11,60415,056  

Escrow (*)

   1,379  

Total purchase consideration

   19,50417,785  
  

 

Fair value of net assets acquired

   12,48114,049  

Goodwill

   
Goodwill
7,0233,736  
  

 

(*)Discounted at present value as of the date of acquisition.

The goodwill generated on the acquisition was attributable mainly to the Group’s expected benefits from diversification and expansion into high-yield potential farmland properties.

The assets and liabilities at the date of acquisition are as follows:

         
  Fair value  Book value (*) 
Cash and cash equivalents  28   28 
Property, plant and equipment  14,075   1,729 
Investment property  7,935   766 
Deferred income tax  (6,930)  (101)
Other current assets  1,330   1,330 
Other current liabilities  (3,957)  (3,957)
       
Net assets acquired
  12,481   (205)
       

Fair value

Cash and cash equivalents

76

Property, plant and equipment

15,291

Investment property

3,709

Biological assets

1,495

Deferred tax liabilities

(6,858) 

Provisions for other liabilities

(39) 

Other current assets

1,219

Other current liabilities

(844) 

Net assets acquired

14,049

The outflow of cash and cash equivalents on the acquisition can be calculated as follows:

Cash paid

1,350

Cash and cash equivalents in subsidiary acquired

(76) 

Cash outflow on acquisition

1,274

Acquisition of Simoneta Sociedad Anónima (Simoneta)

On August 19, 2011, the Group acquired 100% of the issued share capital of Simoneta, an Argentine-based company mainly involved in agricultural industry, for a total consideration of US$ 26.4 million. The acquisition also involved contingent consideration to the seller in an amount of US$ 1.0 million, which was retained in escrow by the Group to secure certain obligations of the seller. The escrowed amount is to be released within a three-year period as from the date of acquisition.

The accompanying notes are an integral part of these consolidated financial statements.

F - 86

92

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

31. Business combinations (continued).
     (*) Carrying amounts

32.Business combinations (continued)

In the period from acquisition to December 31, 2011, Simoneta contributed revenues of assets, liabilitiesUS$ 1 million and contingent liabilities in Dinaluca’s books, determined in accordance with IFRS, immediately before the combination are not disclosed separately, as Dinaluca did not report IFRS information. Book values correspond to accounting records maintained under local GAAP priornet loss of US$ 0.1 million to the acquisition.

Group’s consolidated results. If Simoneta had been acquired on January 1, 2011, combined revenues of the Group would have been US$ 6 million (unaudited) and Profit Before Income Tax would have been US$ 3 million (unaudited) for the year ended December 31, 2011. For purposes of this note the term revenues comprises the line items “sales of manufactured products and services rendered”, “sales of agricultural produce and biological assets”, “initial recognition and changes in fair value of biological assets and agricultural produce” and “changes in net realizable value of agricultural produce after harvest”. These amounts have been calculated using the Group’s accounting policies and by adjusting the results of the subsidiary to reflect the additional depreciation and amortization, as appropriate, that would have been charged assuming the fair value adjustments to net assets acquired had been applied from January 1, 2011, together with its consequential tax effects. Results, assets and liabilities of Simoneta as from the acquisition date are included within the ‘Crops’ segment.

Details of the net assets acquired and goodwill are as follows:

Purchase consideration:

Cash paid

11,000

Present value of seller financing (*)

14,124

Escrow (*)

923

Total purchase consideration

26,047

Fair value of net assets acquired

18,644

Goodwill

7,403

(*)Discounted at present value as of the date of acquisition.

The goodwill generated on the acquisition was attributable mainly to the Group’s expected benefits from diversification and expansion into high-yield potential farmland properties.

The assets and liabilities at the date of acquisition are as follows:

Fair value

Cash and cash equivalents

657

Property, plant and equipment

15,701

Investment property

5,961

Deferred tax liabilities

(7,705) 

Provisions for other liabilities

(116) 

Other current and non current assets

5,385

Other current liabilities

(1,239) 

Net assets acquired

18,644

The outflow of cash and cash equivalents on the acquisition can be calculated as follows:

Cash paid

   
Cash paid7,90011,000  

Cash and cash equivalents in subsidiary acquired .

   (28657)

Cash outflow on acquisition

   
Cash outflow on acquisition
7,87210,343  
  

 
Acquisitions completed during the year ended December 31, 2008
          The Group completed no significant acquisitions during the year ended December 31, 2008.
          In January 2008, the Group completed the acquisition of the remaining 50% non controlling interest in Fazenda Mimoso (“Mimoso”) for an aggregate consideration of US$ 1 million. The previous 50% interest in Mimoso was acquired in February 2007 for a total purchase price of US$ 1.3 million, on which date the Group obtained control due to a shareholders agreement with the sellers. That acquisition was included in the aggregate disclosure of other non-significant acquisitions completed in 2007. The acquisition of the remaining 50% was treated as a transaction with parties external to the Group and generated negative goodwill of US$ 1.2 million due to the excess of fair value of net assets acquired over cost.

The accompanying notes are an integral part of these consolidated financial statements.

F - 87

93

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

32. Group companies

33.Group subsidiaries

The following table details the companies making upsubsidiaries that comprised the Group as of December 31, 2010, 20092013 and 2008:

           
      2010 2009 2008
    Country of Ownership Ownership Ownership
    incorporation and percentage held if percentage held if percentage held if
  Activities operation not 100% not 100% not 100%
Details of principal subsidiary undertakings:
          
Operating companies (unless otherwise stated):
          
Americas
          
Adeco Agropecuaria S.A. (a) Argentina — — —
Pilagá S.A. (a) Argentina 99.84% 99.84% 99.84%
Cavok S.A. (a) Argentina — — —
Establecimientos El Orden S.A. (a) Argentina — — —
Bañado del Salado S.A. (a) Argentina — — —
Agrícola Ganadera San José S.R.L. (a) Argentina — — —
Santa Regina Agropecuaria S.R.L. (a) Argentina — — —
La Paz Agropecuaria S.R.L. (a) Argentina (i) (i) —
Agro Invest S.A. (a) Argentina — — 54.25%
Forsalta S.A. (a) Argentina — — —
Dinaluca S.A. (a) Argentina — (ii) (ii)
Adeco Agropecuaria Brazil S.A. (b) Brazil — — —
Adecoagro Comercio Exportação e importação Ltda (f.k.a. Alfenas Café Ltda) (c) Brazil (iv) — —
Angélica Agroenergia Ltda. (b) Brazil — — —
Usina Monte Alegre Ltda. (b) Brazil — — —
Fazenda Mimoso Ltda. (c) Brazil — — —
Ivinhema Agronergia S.A. (f.k.a. Amandina Agroenergía Ltda.) (b) Brazil — — —
Kelizer S.C.A. (a) Uruguay — — —
Adecoagro Uruguay S.R.L. (a) Uruguay — — —
Holdings companies:
          
Americas
          
Adeco Brazil Participacoes S.A. — Brazil — — —
International Farmland Holdings LP — United States 98.00% 98.00% 98.00%
Adecoagro LP — United States — — —
Ladelux S.C.A. — Uruguay — — —
Asia
          
AFI (L) LTD. — Malaysia (iii) — —
Europe
          
Kadesh Hispania S.L. — Spain — — —
Leterton España S.L. — Spain — — —
Ona Ltd. — Malta — — —
Toba Ltd. — Malta — — —
Details of principal joint venture undertakings:
          
Americas
          
Grupo La Lácteo (d) Canada 50.00% 50.00% 50.00%
2012:

         2013  2012 
   Activities  Country of
incorporation
and operation		  Ownership
percentage
held if not
100%		  Ownership
percentage
held if not
100%		 

Details of principal subsidiary undertakings: Operating companies (unless otherwise stated):

      

Adeco Agropecuaria S.A.

       (a)  Argentina   —      —    

Pilagá S.A.

       (a)  Argentina   99.84%   99.84% 

Cavok S.A.

       (a)  Argentina   —      —    

Establecimientos El Orden S.A.

       (a)  Argentina   —      —    

Bañado del Salado S.A.

       (a)  Argentina   —      —    

Agrícola Ganadera San José S.A.

       (a)  Argentina    (i)    (i) 

Santa Regina S.A.

       (a)  Argentina    (iii)    (iii) 

Agro Invest S.A.

       (a)  Argentina   —      —    

Forsalta S.A.

       (a)  Argentina   —      —    

Dinaluca S.A.

       (a)  Argentina   —      —    

Simoneta S.A.

       (a)  Argentina   —      —    

Compañía Agroforestal S.M.S.A.

       (a)  Argentina   —      —    

Adeco Agropecuaria Brazil S.A.

       (b)  Brazil   —      —    

Adecoagro Vale do Ivinhema Ltda.

       (b)  Brazil   —      —    

Usina Monte Alegre Ltda.

       (b)  Brazil   —      —    

Fazenda Mimoso Ltda.

       (c)  Brazil    (ii)   —    

Kelizer S.A.

       (a)  Uruguay   —      —    

Agroglobal S.A. (f.k.a. Adecoagro Uruguay S.A.)

       (a)  Uruguay   —      —    

Holdings companies:

      

Adeco Brazil Participacoes S.A.

   —     Brazil   —      —    

International Farmland Holdings LP

   —     United States   99.99%   99.99% 

Adecoagro LP

   —     United States   —      —    

Ladelux S.C.A.

   —     Uruguay   —      —    

Spain Holding Companies (e)

   —     Spain   —      —    

Ona Ltd.

   —     Malta   —      —    

Toba Ltd.

   —     Malta   —      —    

(a)Mainly crops, rice, cattle and others
(b)Mainly sugarcane, ethanol and energy
(c)Mainly coffee
(d)Mainly dairy
(e)Comprised by: Kadesh España S.L; Leterton España S.L.; Global Calidon SL; Global Mirabilis SL; Global Asterion SL; Global Acasto SL; Global Anceo SL; Global Laertes SL; Global Seward SL.; Global Acamante SL; Global Carelio SL; Global Pindaro SL; Global Pileo SL; Global Hisingen SL; Peak Tezas SL; Peak City SL.

The accompanying notes are an integral part of these consolidated financial statements.

F - 88

94

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

32. Group companies (continued)
(a) Mainly crops, rice, cattle and others

(b) Mainly sugarcane, ethanol and energy

(c) Mainly coffee

(d) Mainly dairy

(i) Sold in December 2009

(ii) Acquired in August 2010 (Note 31)

(iii) In process of liquidation

(iv) Merged with Usina Monte Alegre Ltda
     There are no associated undertakings for any of the periods presented.

33.Group companies (continued)

(i)In June 2012, the Group completed the sale of Agricula Ganadera San José S.A. (Note 16).
(ii)In May 2013, the Group completed the sale of Fazenda Mimoso Ltda. (Note 16).
(iii)In June 2013, the Group completed the sale of Santa Regina S.A. (Note 16).

The percentage voting right for each principal subsidiary is the same as the percentage of capital stock held. Issued share capital represents only ordinary shares/ quotas, units or their equivalent. There are no preference shares or units issued in any subsidiary undertaking.

33. Related-party transactions

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s joint ventures have not reached the legal capped amounts.

34.Related-party transactions

The following is a summary of the balances and transactions with related parties:

                             
      Income (loss) included in the    
    Description of statement of income  Balance receivable (payable) 
Related party Relationship transaction 2010  2009  2008  2010  2009  2008 
Grupo La Lácteo Joint venture Sales of goods  13,397   10,849   12,617   —   —   — 
    Purchases of goods  —   (748)  (1,566)  —   —   — 
    Receivables from related parties (Note 12)  —   —   —   1,662   2,554   4,368 
    Payables (Note 19)  —   —   —   —   —   (1,087)
                             
Mario Jorge de Lemos Vieira/ Cia Agropecuaria Monte Alegre/ Alfenas Agricola Ltda/ Marcelo Weyland Barbosa Vieira/ Paulo Albert Weyland Vieira (i) Cost of manufactured products sold and services rendered (ii)  (3,334)  (2,155)  (1,764)  —   —   — 
                           
   Receivables from related parties (Note 12)  —   —   —   291   796   180 
   Payables (Note 19)  —   —   —   (4,892)  (330)  — 
                             
Marcelo Weyland Barbosa Vieira/ Paulo Albert Weyland Vieira/ Mario Jorge de Lemos Vieira/ Corina de Almeida Leite (i) Tax charge  4,138   —   —   —   —   — 
    Payables (Note 19)  —   —   —       —   — 
                            
Management and selected employees Employment Compensation selected employees (iii)  (6,593)  (8,330)  (9,368)  (13,659)  (11,914)  (9,092)

Related party

  Relationship  

Description of transaction

  Income (loss) included in the
statement of income		  Balance receivable
(payable)/(equity)		 
     2013  2012  2011  2013  2012 

Grupo La Lácteo

   Joint venture   Sales of goods   7.432    8,231    16,459    —      —    
   Purchases of goods   (25)   53    —      —      —    
   Receivables from related parties (Note 13)   —       —      —      2,253  
   Interest income   33    377    —      —      —    

Santa Regina Agropecuaria S.A.

   Investment   Receivables from related parties   —      —      —      —      144  

Mario Jorge de Lemos Vieira/ Cia Agropecuaria Monte Alegre/ Alfenas Agricola Ltda/ Marcelo Weyland Barbosa Vieira/ Paulo Albert Weyland Vieira

   (i)  Cost of manufactured products sold and services rendered (ii)   (2.650)   (4,215)   (3,136)   —      —    
   Receivables from related parties (Note 13)   —      —      —      —      —    
   Payables (Note 20)    —      —      (667)   (562) 

UMA members

   (i)  Tax charge   —      —      —      —      —    

Ospraie

   (i)  Consent fee (iii)   —      —      (3,000)   —      —    

Directors and senior management

   Employment   Compensation selected employess   (7,367)   (7,367)   (6,594)   (17,472)   (18,072) 

CHS Agro

   Joint venture   Purchases of goods   402    —      —      —      —    
   Payables (Note 19)   —      —      —      (402)   —    

The accompanying notes are an integral part of these consolidated financial statements.

F - 89

95

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

33. Related-party transactions (continued)
(i) Shareholders of the Company.

(ii) Relates to agriculture partnership agreements (“parceria”).

(iii) Includes compensation expense under equity-settled share-based payments (Note 17).
Ospraie Consent Agreement
     On December 14, 2010, the Group entered into a consent agreement with Ospraie Special Opportunities Master Holdings Ltd, or Ospraie, one of the Groups shareholders, pursuant to which the Company should pay to Ospraie an aggregate amount of US$ 3 million, subject to certain conditions, promptly following the completion of the initial public offering in consideration for their agreement to waive certain of their rights under the Groups’ shareholders agreement, which terminates upon the initial public offering. The payment was made in February 2011.
34. Events after the date of the statement of financial position
Initial Public Offering (IPO) and private placement
     On January 28, 2011 the Company successfully completed an initial public offering of its shares in the New York Stock Exchange. The Company issued 28,405,925 shares, at a price of US$ 11 per share. In addition, on February 11, 2010, the Company issued 4,285,714 shares as a consequence of the over-alloment option exercised by the underwriters of the initial public offering, raising an overall amount of approximately US$ 359 million.
     On January 28, 2011, Adecoagro issued and sold to Al Gharrafa 7,377,598 common shares at a purchase price per share of US$ 10,65, which is equal to the price per common share paid by the underwriters acting in the initial public offering of the Group. This transaction was conditioned upon, and close immediately after, the closing of the initial public offering of the Company. Consequently the company raised US$ 79 million.
     The Company intend to use these funds to finance part of the construction costs of Ivinhema (sugar and ethanol mill in Brazil) and for potential investments in the acquisition of farmland and capital expenditures required in the expansion of the farming business.

34.Related-party transactions (continued)

(i)Shareholders of the Company.
(ii)Relates to agriculture partnership agreements (“parceria”).
(iii)One-time cost related to the agreement entered into with Ospraie to waive certain rights following the completion of initial public offering.

The accompanying notes are an integral part of these consolidated financial statements.

F - 9096