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BIOLOGICAL ASSETS

6 Months Ended

Jun. 30, 2021

13.BIOLOGICAL ASSETS

The rollforward of biological assets is set forth below:


Balances on December 31, 2019		10,571,499
Addition		3,392,975
Depletion		(3,094,742)
Transfers		(23,471)
Gain on fair value adjustment		466,484
Disposal		(93,847)
Other write-offs		(57,688)
Balances on December 31, 2020		11,161,210
Addition		1,611,674
Depletion		(1,489,460)
Transfers		28,292
Gain on fair value adjustment		564,533
Disposal		(136,044)
Other write-offs		(19,348)
Balances on June 30, 2021		11,720,857

For the six-month period ended June 30, 2021, the Company reassessed the main assumptions used in measuring the fair value of biological assets. The fair value of forests is determined by the income method (“income approach”) using the discounted cash flow model.

The calculation of fair value of the biological assets falls under Level 3 in the hierarchy set forth in IFRS 13 — Measurement of Fair Value, due to the complexity and structure of calculation.

The main assumptions such as Average annual growth (“IMA”), discount rate, and average gross selling price of eucalyptus, stand out as being the most sensitive where increases or reductions in these assumptions generate significant gains or losses in the measurement of fair value.

The assumptions used in measurement of the fair value of biological assets were:

Average cycle of forest formation of 6 and 7 years;

ii)

Effective area of forest from the 3^rd year of planting;

iii)

IMA consists of the estimated volume of production of wood with bark in m³ per hectare, ascertained based on the genetic material used in each region, silvicultural practices and forest management, production potential, climate factors and ground conditions;

iv)

The estimated average standard cost per hectare includes expenses on silvicultural and forest management, applied to each year of formation of the biological cycle of forests, plus costs of land lease agreements and opportunity cost of own land;

The average gross selling prices of eucalyptus were based on specialized research on transactions carried out by the Company with independent third parties; and

vi)

The discount rate used in cash flows is measured based on capital structure and other economic assumptions in an independent market participant in the sale of standing wood (forests).

The following table discloses the measurement of the premises adopted:


	June 30,		December 31,
	2021		2020
Planted useful area (hectare)	954,008		1,020,176
Mature assets	102,941		111,866
Immature assets	851,067		908,310
Average annual growth (IMA) - m³/hectare /year	38.55		38.43
Average gross sale price of eucalyptus - R$/m³	72.61		70.22
Discount rate - %	8.9	%	8.9	%

The pricing model considers net cash flows, after deduction of taxes on profit at the applicable rates.

The fair value adjustment justified by variation of indicators mentioned above, which combined, resulted in a positive variation of R$564,533 recognized under other operating income (expense), net.


	June 30,	December 31,
	2021	2020
Physical changes	268,831	156,906
Price	295,702	309,578
	564,533	466,484

The Company manages the financial risks related to agricultural activities in a preventive manner. To reducing risks from edaphoclimatic factors, the weather is monitored through meteorological stations and, in the event of pests and diseases, our Department of Forestry Research and Development, an area specialized in physiological and phytosanitary aspects, has procedures to diagnose and act rapidly against any occurrences and losses.

The Company has no biological assets pledged in the six-month period ended June 30, 2021 and year ended December 31, 2020.