FINANCIAL INSTRUMENTS AND RISK MANAGEMENT | For the year ended December 31, 2020, the Income (loss) from discontinued operations was null. 23. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT 23.1. Overview In the ordinary course of business, the Company is exposed to credit, liquidity and market risks, which are actively managed in compliance with the Financial Risk Management Policy (“Risk Policy”) and internal guidelines and strategic documents subject to such policy, executing the formal designation of its hedge accounting relations, as disclosed in the financial statements for the year ended on December 31, 2020. 23.2. Credit risk management The Company is exposed to the credit risk related to the financial assets held: trade and non-trade accounts receivable, marketable securities, derivative instruments and cash and equivalents. On September 30, 2021, the Company held financial investments over R$ 100,000 The Company also held derivative contracts with the following financial institutions: Banco Bradesco, Banco do Brasil, Banco Itaú, Banco Santander, Banco Votorantim, Bank of America Merrill Lynch, Banco BNP Paribas, Citibank, Goldman Sachs, J.P. Morgan Chase Bank, Morgan Stanley, Rabobank, T.Garanti Bankasi A.Ş. and Banco XP. 23.3. Capital management and liquidity risk On September 30, 2021, the long-term consolidated gross debt represented 87.51 93.66 The Company monitors the gross debt and net debt as set forth below: 09.30.21 12.31.20 Current Non-current Total Total Foreign currency loans and borrowings (2,334,507) (13,931,707) (16,266,214) (15,739,134) Local currency loans and borrowings (526,743) (7,385,645) (7,912,388) (6,665,292) Derivative financial liabilities (186,147) (36,077) (222,224) (385,696) Gross debt (3,047,397) (21,353,429) (24,400,826) (22,790,122) Marketable securities and cash and cash equivalents 7,233,026 375,906 7,608,932 8,235,360 Derivative financial assets 83,144 2,139 85,283 377,990 Restricted cash 24,529 1 24,530 24,358 Net debt (16,682,081) (14,152,414) The table below summarizes the significant commitments and contractual obligations that may impact the Company’s liquidity: 09.30.21 Book Contractual cash flow Up to 12 months Oct - Dec 2022 2023 2024 2025 2026 onwards Non derivative financial liabilities Loans and borrowings 24,178,602 39,715,036 3,441,569 530,504 3,948,651 3,011,583 1,812,210 26,970,519 Principal 26,996,059 2,226,146 400,000 2,839,213 2,054,081 907,058 18,569,561 Interest 12,718,977 1,215,423 130,504 1,109,438 957,502 905,152 8,400,958 Trade accounts payable 11,089,196 11,195,643 11,183,638 3,272 5,778 2,849 106 - Supply chain finance 1,889,219 1,917,319 1,917,319 - - - - - Lease liabilities 2,555,210 3,214,065 519,189 144,233 515,998 405,335 311,068 1,318,242 Derivative financial liabilities Financial instruments designated as cash flow hedge Interest rate derivatives 36,077 36,077 - - - - - 36,077 Currency derivatives 82,654 82,654 82,654 - - - - - Commodities derivatives 94,094 94,094 94,094 - - - - - Financial instruments not designated as cash flow hedge Currency derivatives 9,399 9,399 9,399 - - - - - The Company does not expect that the cash outflows to fulfill the obligations shown above will be significantly influenced by factors unrelated to its best interests, or substantially modified outside the normal course of business. 23.4. Market risk management 23.4.1. Interest rate risk The indebtedness is essentially linked to fixed coupon (R$, USD, EUR e TRY), Interbank Deposit Certificate (“CDI”), Broad Consumer Price Index (“IPCA”) and London Interbank Offered Rate (“LIBOR”). In situations of adverse market changes that result in an increase in these rates, the cost of floating-rate debt rises and on the other hand, the cost of fixed-rate debt decreases in relative terms. Regarding the marketable securities, the Company holds, mainly, instruments indexed by the CDI for investments in Brazil and fixed coupon in USD for investments in the foreign market. The Company’s exposure to interest rates can be assessed in notes 5 and 14. The derivative financial instruments used to hedge the exposure to interest rates as of September 30, 2021 are presented in the table below: 09.30.21 Fair value (R$) Fair value hedge - Derivative instruments Hedged Object Maturity Asset Liability Notional Instrument Object (1) Interest rate swap Debenture - 2nd Issue - 1st series - IPCA + 5.30% p.a 3rd Qtr. 2027 IPCA + 5.30% p.a CDI + 2.16% p.a. 705,000 BRL (2,351) 27,316 Interest rate swap Debenture - 2nd Issue - 2nd series - IPCA + 5.60% p.a 3rd Qtr. 2030 IPCA + 5.60% p.a CDI + 2.32% p.a. 1,495,000 BRL (31,528) 71,026 Interest rate swap Debenture - 3rd Issue - single series - IPCA + 4.78% p.a 2nd Qtr. 2031 IPCA + 4.78% p.a CDI + 0.60% p.a. 200,000 BRL (59) (1,376) (33,938) 96,966 (1) Corresponds to the accumulated amount of fair value hedge adjustments on the hedged items, included in the carrying amount of the debentures. 23.4.2. Foreign exchange risk This risk is the one that may cause unexpected losses to the Company resulting from volatility of the FX rates, reducing its assets and revenues, or increasing its liabilities and costs. The Company’s exposure is managed in three dimensions: statement of financial position exposure, operating income exposure and investments exposure. i. Statement of financial position exposure Assets and liabilities denominated in foreign currency for which the exchange variations are recognized in the Financial Results are as follows, summarized in Brazilian Reais: 09.30.21 12.31.20 Cash and cash equivalents 1,562,136 2,855,979 Trade accounts receivable 6,567,534 5,765,753 Trade accounts payable (1,144,743) (859,790) Loans and borrowings (15,274,760) (14,947,793) Other assets and liabilities, net 12,934 225,694 Exposure of assets and liabilities in foreign currencies (8,276,899) (6,960,157) Derivative financial instruments (hedge) 7,764,347 6,849,947 Exposure in result, net (512,552) (110,210) The net P&L exposure is mainly composed of the following currencies: Net P&L Exposure 09.30.21 12.31.20 Argentinian Peso (ARS) (5,804) (5,310) Angolan kwanza (AOA) 263,009 - Euros (EUR) (57,530) 112,672 Yen (JPY) 82,372 29,976 Turkish Liras (TRY) (241,033) 178,906 U.S. Dollars (USD) (553,566) (426,454) Total (512,552) (110,210) The Company is exposed to other currencies, although they have been grouped in the currencies above due to its high correlation or for not being individually significant. The derivative financial instruments acquired to hedge the foreign currency statement of financial position exposure on September 30, 2021 are not designated as hedge accounting and are set forth below: 09.30.21 Derivative instruments not designated Asset Liability Maturity Notional Exercise rate Fair value (R$) Non-deliverable forward EUR BRL 4th Qtr. 2021 EUR 265,000 6.4336 (8,522) Non-deliverable forward USD BRL 4th Qtr. 2021 USD 715,000 5.4864 12,727 Futures - B3 USD BRL 4th Qtr. 2021 USD 358,000 5.4672 6,462 Currency swap USD + 1.29% p.a. CDI + 0.80% p.a. 1st Qtr. 2022 USD 47,583 - 8,450 Non-deliverable forward EUR JPY 4th Qtr. 2021 EUR 19,230 130.0080 (877) Non-deliverable forward USD EUR 4th Qtr. 2021 EUR 34,133 1.1719 2,225 Total 20,465 ii. Operating income exposure The derivative and non-derivative financial instruments designated as cash flow hedges for foreing exchange operating income exposure on September 30, 2021 are set forth below: 09.30.21 Cash flow hedge - Derivative instruments Hedged object Asset Liability Maturity Notional Designation rate Fair value Non-deliverable forward USD Exports BRL USD 4th Qtr. 2021 USD 313,000 5.3157 (48,724) Non-deliverable forward USD Exports BRL USD 1st Qtr. 2022 USD 63,000 5.4348 (8,220) Non-deliverable forward USD Exports BRL USD 2nd Qtr. 2022 USD 5,000 5.5782 (365) Collar USD Exports BRL USD 4th Qtr. 2021 USD 44,000 5.5772 3,204 Collar USD Exports BRL USD 1st Qtr. 2022 USD 30,000 5.7162 1,869 Collar USD Exports BRL USD 2nd Qtr. 2022 USD 10,000 5.7125 (187) (52,423) 09.30.21 Cash flow hedge - Non-derivative instruments Hedged object Liability Maturity Notional Designation rate Fair value (1) Bond BRF SA BRFSBZ 5 7/8 (2) USD Exports USD 2nd Qtr. 2022 USD 70,928 2.0213 (426,732) Bond BRF SA BRFSBZ 3.95 USD Exports USD 2nd Qtr. 2023 USD 150,000 2.0387 (510,105) (936,837) (1) Corresponds to the effective portion of the hedge result accumulated in Other Comprehensive Income. (2) For this instrument, the initial designation was of USD150,000, however there were repurchases with corresponding revocation of the designation in the amounts of USD31,338 at the rate of 3.2408, USD9,350 at the rate of 4.1827, USD27,190 at the rate of 5.1889 e USD11,194 at the rate of 5.5714. The accumulated exchange rate variation of the revoked portions is fixed and reserved in Other Comprehensive Income until the recognition of the hedge object in the second quarter of 2022. iii. Investments exposure The Company holds investments abroad in functional currencies different than the Brazilian Real, which generate currency exposure that affects directly the Company’s Equity, in Other Comprehensive Income. The non-derivative financial instruments designated as net investment hedge instruments on September 30, 2021 are set forth below: 09.30.21 Net investment hedge - Object (Investment) Liability Maturity Notional Rate Fair value (1) Bond - BRF SA BRFSBZ 4.35 Federal Foods LLC USD 3rd Qtr. 2026 USD 75,673 3.7649 (127,395) Bond - BRF SA BRFSBZ 4.35 BRF Al Yasra Food USD 3rd Qtr. 2026 USD 108,757 3.7649 (169,128) Bond - BRF SA BRFSBZ 4.35 Al Khan Foodstuff LLC USD 3rd Qtr. 2026 USD 65,570 3.7649 (109,230) (405,753) (1) Corresponds to the effective portion of the hedge result accumulated in Other Comprehensive Income. 23.4.3. Commodities price risk The financial instruments designated as cash flow hedges and fair value hedges for the commodities price exposure on September 30, 2021 are set forth below: 09.30.21 Cash flow hedge - Derivative instruments Hedged object Index Maturity Quantity Exercise price (1) Fair value Non-deliverable forward - buy Soybean meal purchase - floating price Soybean meal - CBOT 4th Qtr. 2021 32,977 ton 417.29 (9,400) Non-deliverable forward - buy Soybean meal purchase - floating price Soybean meal - CBOT 1st Qtr. 2022 85,963 ton 412.66 (21,089) Non-deliverable forward - buy Soybean meal purchase - floating price Soybean meal - CBOT 2nd Qtr. 2022 184,877 ton 395.96 (22,888) Non-deliverable forward - buy Soybean meal purchase - floating price Soybean meal - CBOT 3rd Qtr. 2022 30,946 ton 387.86 (1,943) Collar - buy Soybean meal purchase - floating price Soybean meal - CBOT 4th Qtr. 2021 9,989 ton 421.11 (2,156) Collar - buy Soybean purchase - floating price Soybean - CBOT 4th Qtr. 2021 19,999 ton 458.84 172 Non-deliverable forward - buy Corn purchase - floating price Corn - B3 3rd Qtr. 2022 2,025 ton 1,333.16 (33) Collar - buy Corn purchase - floating price Corn - B3 4th Qtr. 2021 13,230 ton 1,587.07 126 Collar - buy Corn purchase - floating price Corn - B3 1st Qtr. 2022 17,037 ton 1,683.33 (303) Collar - buy Corn purchase - floating price Corn - B3 2nd Qtr. 2022 7,992 ton 1,616.67 (97) Collar - buy Soybean oil purchase - floating price Soybean oil - CBOT 4th Qtr. 2021 2,994 ton 794.77 7,069 (50,542) (1) Base price of each commodity in USD/ton, except for Corn – B3 denominated in R$/ton. 09.30.21 Cash flow hedge - Protection object Assets Liabilities Maturity Notional Exercise price Fair value (R$) Non-deliverable forward Cost in USD USD TRY 4th Qtr. 2021 USD 7,098 8.8251 998 998 09.30.21 Fair value hedge - Derivative instruments Hedged object Index Maturity Quantity Exercise price (1) Fair value Non-deliverable forward - sell Soybean purchase - fixed price Soybean - CBOT 1st Qtr. 2022 15,000 ton 503.65 2,956 Non-deliverable forward - sell Corn purchase - fixed price Corn - CBOT 4th Qtr. 2021 179,299 ton 202.24 (8,839) Non-deliverable forward - sell Corn purchase - fixed price Corn - CBOT 1st Qtr. 2022 63,077 ton 200.41 (4,783) Non-deliverable forward - sell Corn purchase - fixed price Corn - CBOT 2nd Qtr. 2022 170,790 ton 216.20 59 Non-deliverable forward - sell Corn purchase - fixed price Corn - CBOT 3rd Qtr. 2022 39,995 ton 184.67 (5,034) Corn future - sell Corn purchase - fixed price Corn - B3 4th Qtr. 2021 7,803 ton 1,562.51 186 Corn future - sell Corn purchase - fixed price Corn - B3 1st Qtr. 2022 104,571 ton 1,631.40 2,488 Corn future - sell Corn purchase - fixed price Corn - B3 2nd Qtr. 2022 9,882 ton 1,537.49 124 Corn future - sell Corn purchase - fixed price Corn - B3 3rd Qtr. 2022 176,985 ton 1,339.50 1,459 Corn future - sell Corn purchase - fixed price Corn - B3 4th Qtr. 2022 14,985 ton 1,350.41 - Collar - sell Corn purchase - fixed price Corn - B3 4th Qtr. 2021 62,910 ton 1,649.32 4,350 Collar - sell Corn purchase - fixed price Corn - B3 1st Qtr. 2022 25,380 ton 1,567.91 248 Put - Buy Corn purchase - fixed price Corn - B3 4th Qtr. 2021 5,994 ton 1,616.67 583 (6,203) (1) Base price of each commodity in USD/ton, except for Corn – B3 denominated in R$/ton. 09.30.21 Fair value hedge - Protection object Assets Liabilities Maturity Notional Exercise price Fair value Non-deliverable forward Cost in USD BRL USD 4th Qtr. 2021 USD 36,262 5.3508 (5,001) Non-deliverable forward Cost in USD BRL USD 1st Qtr. 2022 USD 20,196 5.3666 (4,335) Non-deliverable forward Cost in USD BRL USD 2nd Qtr. 2022 USD 36,924 5.6119 (4,575) Non-deliverable forward Cost in USD BRL USD 3rd Qtr. 2022 USD 7,386 5.6278 (1,387) (15,298) 23.5. Effects of hedge instruments on financial information The effects of financial instruments for hedging exchange rate, commodities price and interest rates in the condensed consolidated statement of income (loss) for the period, in Other Comprehensive Income and in the condensed consolidated statement of financial position are set forth below: Income for the period Jul - Sep 2021 Note Exposure Hedge accounting Foreign Exchange Commodities Interest Rate Total Net Sales 12,349,193 - - 12,349,193 Derivatives result Operating Results Cash flow 40,792 - - 40,792 Net Revenue 25 12,389,985 - - 12,389,985 Cost of Sales - (9,757,320) - (9,757,320) Derivatives result Operating Results Cash flow / Fair value - (7,983) - (7,983) Cost of Sales - (9,765,303) - (9,765,303) Interests on loans and borrowings - - (361,115) (361,115) Interest Rate Derivatives result Interest expenses Fair value - - (40,065) (40,065) Foreign Exchange variation on assets and liabilities (625,672) - - (625,672) Foreign Exchange Derivatives result Financial Position Not designated 594,162 - - 594,162 Effects on Financial Result 27 (31,510) - (401,180) (432,690) Other Comprehensive Income Jul - Sep 2021 Exposure Hedge accounting Foreign Exchange Commodities Interest Rate Total Derivative Instruments - current Operating Results Cash flow (183,860) (169,440) - (353,300) Non-derivative Instruments – current Operating Results Cash flow (31,010) - - (31,010) Non-derivative Instruments – non-current Operating Results Cash flow (65,580) - - (65,580) Non-derivative Instruments - non-current Foreign investments Net investment (106,955) - - (106,955) Other Comprehensive Income (1) (387,405) (169,440) - (556,845) Income for the period Jan - Sep 2021 Note Exposure Hedge accounting Foreign Exchange Commodities Interest Rate Total Net Sales 34,539,353 - - 34,539,353 Derivatives result Operating Results Cash flow 79,510 - - 79,510 Net Revenue 25 34,618,863 - - 34,618,863 Cost of Sales - (27,388,645) - (27,388,645) Derivatives result Operating Results Cash flow / Fair value - (184,594) - (184,594) Cost of Sales - (27,573,239) - (27,573,239) Interests on loans and borrowings - - (1,216,925) (1,216,925) Interest Rate Derivatives result Interest expenses Fair value - - (35,025) (35,025) Foreign Exchange variation on assets and liabilities (359,457) - - (359,457) Foreign Exchange Derivatives result Financial Position Not designated 178,101 - - 178,101 Effects on Financial Result 27 (181,356) - (1,251,950) (1,433,306) Other Comprehensive Income Jan - Sep 2021 Exposure Hedge accounting Foreign Exchange Commodities Interest Rate Total Derivative Instruments - current Operating Results Cash flow (100,366) (209,373) - (309,739) Non-derivative Instruments – current Operating Results Cash flow (17,214) - - (17,214) Non-derivative Instruments – non-current Operating Results Cash flow (36,405) - - (36,405) Non-derivative Instruments - non-current Foreign investments Net investment (61,079) - - (61,079) Other Comprehensive Income (1) (215,064) (209,373) - (424,437) (1) All effects are presented gross of taxes. Statement of financial position 09.30.21 Note Exposure Hedge accounting Foreign Exchange Commodities Interest Rate Total Designated derivatives Operating Results Cash flow / Fair value (66,723) (56,745) (33,938) (157,406) Not designated derivatives Financial Position Not designated 20,465 - - 20,465 Asset / (Liability) net (46,258) (56,745) (33,938) (136,941) Derivative Instruments - current (2) Operating Results Cash flow (52,423) (38,067) - (90,490) Non-derivative instruments – current Operating Results Cash flow (426,732) - - (426,732) Non-derivative instruments – non-current Operating Results Cash flow (510,105) - - (510,105) Non-derivative Instruments - non-current Foreign investments Net investment (405,753) - - (405,753) Other Comprehensive Income (1) (1,395,013) (38,067) - (1,433,080) Derivatives result Operating Results Cash flow / Fair value - 538,512 - 538,512 Inventories 7 - 538,512 - 538,512 (1) All effects are presented gross of taxes. (2) Includes R$(2,192) related to the time value of the foreign exchange option contracts, and R$(234) related to the time value of the commodity options contracts. Statement of financial position 12.31.20 Note Exposure Hedge accounting Foreign Exchange Commodities Interest Rate Total Designated derivatives Operating Results Cash flow / Fair value 95,558 (144,057) - (48,499) Not designated derivatives Financial Position Not designated 55,442 - (14,649) 40,793 Asset / (Liability) net 151,000 (144,057) (14,649) (7,706) Derivative Instruments - current Operating Results Cash flow 47,942 171,306 - 219,248 Non-derivative instruments – non-current Operating Results Cash flow (883,218) - - (883,218) Non-derivative Instruments - non-current Foreign investments Net investment (344,674) - - (344,674) Other Comprehensive Income (1,179,950) 171,306 - (1,008,644) Derivatives result Operating Results Cash flow / Fair value - 442,398 - 442,398 Inventories 7 - 442,398 - 442,398 In the statement of cash flows, the effect of the derivative financial instruments designated as hedge accounting is presented in the line item in which the hedged object is recorded. For the instruments not designated, the effects are presented in the Derivative Financial Instruments line item. Summarized financial position of derivative financial instruments: 09.30.21 12.31.20 Assets Designated as hedge accounting Currency derivatives 15,931 177,208 Commodities derivatives 37,349 125,304 Interest rate derivatives 2,139 - Not designated as hedge accounting Currency derivatives 29,864 75,478 85,283 377,990 Current assets 83,144 377,756 Non-current assets 2,139 234 Liabilities Designated as hedge accounting Currency derivatives (82,654) (81,650) Commodities derivatives (94,094) (269,361) Interest rate derivatives (36,077) - Not designated as hedge accounting Currency derivatives (9,399) (20,036) Interest rate derivatives - (14,649) (222,224) (385,696) Current liabilities (186,147) (384,969) Non-current liabilities (36,077) (727) 23.6. Sensitivity analysis The Management believes that the most relevant risks that may affect the Company’s results are the volatility of commodities prices and foreign exchange rates. Currently the fluctuation of the interest rates does not affect significantly the Company’s results since Management has chosen to keep at fixed rates a considerable portion of its debts. The amounts below represent the possible impacts (incremental results) of the hedging instruments and their respective hedged positions, considering situations of increase and decrease in the selected risk factors. The information used in the preparation of the analysis is based on the position as of September 30, 2021, which has been described in the items above. The future results may diverge significantly of the estimated values if the reality presents different than the assumptions used. Positive values indicate gains and negative values indicate losses. Scenario Exchange rate - Balance Base - 50% - 25% - 10% + 10% + 25% + 50% USD 5.4394 2.7197 4.0796 4.8955 5.9833 6.7993 8.1591 Monetary Assets and Liabilities 3,433,220 1,716,610 686,644 (686,644) (1,716,610) (3,433,220) Derivative Instruments - Not designated (3,156,437) (1,578,218) (631,287) 631,287 1,578,218 3,156,437 Net effect 276,783 138,392 55,357 (55,357) (138,392) (276,783) EUR 6.2983 3.1492 4.7237 5.6685 6.9281 7.8729 9.4475 Monetary Assets and Liabilities 820,571 410,286 164,114 (164,114) (410,286) (820,571) Derivative Instruments - Not designated (786,712) (393,356) (157,342) 157,342 393,356 786,712 Net effect 33,859 16,930 6,772 (6,772) (16,930) (33,859) JPY 0.0488 0.0244 0.0366 0.0439 0.0537 0.0610 0.0732 Monetary Assets and Liabilities (102,161) (51,080) (20,432) 20,432 51,080 102,161 Derivative Instruments - Not designated 60,975 30,488 12,195 (12,195) (30,488) (60,975) Net effect (41,186) (20,592) (8,237) 8,237 20,592 41,186 TRY 0.6124 0.3062 0.4593 0.5512 0.6736 0.7655 0.9186 Monetary Assets and Liabilities 120,516 60,258 24,103 (24,103) (60,258) (120,516) Net effect 120,516 60,258 24,103 (24,103) (60,258) (120,516) AOA 0.0091 0.0045 0.0068 0.0082 0.0100 0.0113 0.0136 Monetary Assets and Liabilities (131,504) (65,752) (26,301) 26,301 65,752 131,504 Net effect (131,504) (65,752) (26,301) 26,301 65,752 131,504 Scenario Exchange rate - Operating results Base - 50% - 25% - 10% + 10% + 25% + 50% USD 5.4394 2.7197 4.0796 4.8955 5.9833 6.7993 8.1591 Revenue in USD (1,865,518) (932,759) (373,104) 373,104 932,759 1,865,518 NDF 1,036,206 518,103 207,241 (207,241) (518,103) (1,036,206) Collar 222,657 108,429 39,893 (23,342) (88,388) (202,615) Loans - Designated 600,858 300,429 120,172 (120,172) (300,429) (600,858) Net effect (5,797) (5,798) (5,798) 22,349 25,839 25,839 Scenario Exchange rate - Operating results Base - 50% - 25% - 10% + 10% + 25% + 50% USD 5.4394 2.7197 4.0796 4.8955 5.9833 6.7993 8.1591 Cost of Sales (274,059) (137,030) (54,812) 54,812 137,030 274,059 NDF 274,059 137,030 54,812 (54,812) (137,030) (274,059) Net effect - - - - - - Scenario Operating results - Commodities Base (1) - 50% - 25% - 10% + 10% + 25% + 50% Soy Grain - CBOT 464 232 348 418 510 580 696 Cost of Sales 1,160 580 232 (232) (580) (1,160) Collar (4,139) (1,832) (447) 554 1,938 4,246 NDF 3,505 1,753 701 (701) (1,753) (3,505) Net effect 526 501 486 (379) (395) (419) Soybean Meal - CBOT 371 185 278 334 408 464 556 Cost of Sales 63,940 31,970 12,788 (12,788) (31,970) (63,940) Collar (1,810) (905) (362) 238 537 1,369 NDF (62,130) (31,065) (12,426) 12,426 31,065 62,130 Net effect - - - (124) (368) (441) Soybean Oil - CBOT 1,294 647 970 1,165 1,423 1,617 1,941 Cost of Sales 1,937 968 387 (387) (968) (1,937) Collar (1,547) (968) (387) 387 968 1,937 Net effect 390 - - - - - Corn - CBOT 213 107 160 192 235 267 320 Cost of Sales (48,318) (24,159) (9,664) 9,664 24,159 48,318 NDF 48,318 24,159 9,664 (9,664) (24,159) (48,318) Net effect - - - - - - Corn - B3 1,445 722 1,084 1,300 1,589 1,806 2,167 Cost of Sales (266,037) (133,018) (53,207) 53,207 133,018 266,037 Collar 40,052 20,741 9,025 (5,087) (13,216) (32,528) NDF 219,671 109,835 43,934 (43,934) (109,835) (219,671) Put 4,594 2,297 919 (502) (502) (502) Net effect (1,720) (145) 671 3,684 9,465 13,336 (1) Base price of each commodity in USD/ton, except for Corn – B3 denominated in R$/ton. 23.7. Financial instruments by category Schedule of financial instruments by category 09.30.21 Amortized cost Fair value through other comprehensive income Fair value through profit and loss Total Equity instruments Assets Cash and bank 2,203,097 - - 2,203,097 Cash equivalents - - 4,686,747 4,686,747 Marketable securities 347,650 13,290 358,148 719,088 Restricted cash 24,530 - - 24,530 Trade accounts receivable 3,236,504 - 315,657 3,552,161 Other receivables 76,476 - - 76,476 Derivatives not designated - - 29,864 29,864 Derivatives designated as hedge accounting (1) - - 55,419 55,419 Liabilities Trade accounts payable (11,089,196) - - (11,089,196) Supply chain finance (1,889,219) - - (1,889,219) Loans and borrowings (2) (21,782,488) - (2,396,114) (24,178,602) Derivatives not designated - - (9,399) (9,399) Derivatives designated as hedge accounting (1) - - (212,825) (212,825) Written option– business combination - - (471,738) (471,738) (28,872,646) 13,290 2,355,759 (26,503,597) (1) All derivatives are classified at fair value through profit and loss. Those designated as hedge accounting instruments have their gains and losses also affecting Equity and Inventories. (2) The part of the loans and borrowings the is object in a fair value hedge is classified as Fair value through profit and loss. The rest of the loans and borrowings balance is classified as amortized cost and those designated as cash flow or net investment hedge accounting instruments have their gains and losses also affecting Equity. 12.31.20 Amortized cost Fair value through other comprehensive income Fair value through profit and loss Total Equity instruments Assets Cash and bank 2,439,072 - - 2,439,072 Cash equivalents - - 5,137,553 5,137,553 Marketable securities 287,504 42,029 329,202 658,735 Restricted cash 24,358 - - 24,358 Trade accounts receivable 3,789,616 - 310,265 4,099,881 Other receivables 86,404 - - 86,404 Derivatives not designated - - 75,478 75,478 Derivatives designated as hedge accounting - - 302,512 302,512 Liabilities Trade accounts payable (9,009,987) - - (9,009,987) Supply chain finance (1,452,637) - - (1,452,637) Loans and borrowings (22,404,426) - - (22,404,426) Derivatives not designated - - (34,685) (34,685) Derivatives designated as hedge accounting - - (351,011) (351,011) Written option– business combination - - (185,401) (185,401) (26,240,096) 42,029 5,583,913 (20,614,154) 23.8. Fair value of financial instruments The fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Depending on the inputs used for measurement, the financial instruments at fair value may be classified into 3 hierarchy levels: » Level 1 – Uses quoted prices (unadjusted) for identical instruments in active markets. In this category are classified investments in stocks, savings accounts, overnights, term deposits, Financial Treasury Bills (“LFT”) and investment funds; » Level 2 – Uses prices quoted in active markets for similar instruments, prices quoted for identical or similar instruments in non-active markets and evaluation models for which inputs are observable. In this level are classified the investments in Bank Deposit Certificates (“CDB”) and derivatives, which are measured by well-known pricing models: discounted cash flows and Black-Scholes. The observable inputs are interest rates and curves, volatility factors and foreign exchange rates; » Level 3 – Instruments for which significant inputs are non-observable. The Company has a financial liability arising from a put option written in the context of a business combination. The table below presents the overall classification of financial instruments measured at fair value by measurement hierarchy. For the nine-month period ended on September 30, 2021, there were no changes among the 3 levels of hierarchy. 09.30.21 12.31.20 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial Assets Fair value through other comprehensive income Stocks 13,290 - - 13,290 42,029 - - 42,029 Fair value through profit and loss Savings account and overnight 600,449 - - 600,449 1,220,232 - - 1,220,232 Term deposits - - - - 250,189 - - 250,189 Bank deposit certificates - 4,082,178 - 4,082,178 - 3,662,448 - 3,662,448 Financial treasury bills 318,893 - - 318,893 312,515 - - 312,515 Investment funds 43,375 - - 43,375 21,371 - - 21,371 Trade accounts receivable - 315,657 - 315,657 - 310,265 - 310,265 Derivatives - 85,283 - 85,283 - 377,990 - 377,990 Financial Liabilities Fair value through profit and loss Derivatives - (222,224) - (222,224) - (385,696) - (385,696) Loans and borrowings - (2,396,114) - (2,396,114) - - - - Written option– business combination - - (471,738) (471,738) - - (185,401) (185,401) 976,007 1,864,780 (471,738) 2,369,049 1,846,336 3,965,007 (185,401) 5,625,942 Except for the items set forth below, the fair value of all other financial instruments is approximate to their book value. The fair value of the bonds set forth below is based on prices observed in active markets, level 1 of the fair value hierarchy, while the debentures are based on level 2 and are measured by discounted cash flows. Schedule of comparison between book value and fair value of financial instruments 09.30.21 12.31.20 Currency Maturity Book Fair Book Fair BRF S.A. BRF SA BRFSBZ 5 7/8 USD 2022 (392,757) (405,968) (367,714) (389,611) BRF SA BRFSBZ 4 3/4 USD 2024 (1,633,188) (1,726,110) (1,538,086) (1,659,891) BRF SA BRFSBZ 3.95 USD 2023 (1,283,410) (1,329,486) (1,207,468) (1,275,598) BRF SA BRFSBZ 2 3/4 EUR 2022 (1,060,043) (1,072,548) (1,081,404) (1,105,478) BRF SA BRFSBZ 4 7/8 USD 2030 (3,760,174) (3,817,461) (3,951,539) (4,333,054) BRF SA BRFSBZ 5 3/4 USD 2050 (4,234,323) (4,182,534) (4,106,115) (4,705,851) Debenture - 1st Issue BRL 2026 (815,842) (817,075) (771,138) (778,016) Debenture - 2nd Issue BRL 2030 (2,292,024) (2,297,006) (2,250,867) (2,225,796) Debenture - 3rd Issue BRL 2031 (1,018,992) (882,766) - - BRF GmbH BRF SA BRFSBZ 4.35 USD 2026 (2,676,797) (2,813,142) (2,577,667) (2,779,574) (19,167,550) (19,344,096) (17,851,998) (19,252,869) 23.8.1. Level 3 measurement The Company holds a financial liability arising from a put option written in the context of a business combination. This option gives the non-controlling shareholder the right to sell its equity stake in the subsidiary for an amount equivalent, in Turkish Liras, to a multiple of the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of the economic group of this subsidiary in the last 12 months prior to the exercise. The exercise period is comprised of the six-month period beginning on May 25, 2021. This liability is measured at the present value of redemption amount using internal assumptions regarding the results of that economic group. The effects of the subsequent measurement resulted in a loss in financial results of R$ 278,618 533,774 352,790 143,421 |