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Financial instruments and risk management
 12 Months Ended
Dec. 31, 2023
Financial Instruments And Risk Management  
Financial instruments and risk management

 

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. The Risk Policy was approved by the Board of Directors on December 7, 2023, valid for one year and is available at the Company’s website.

The Company’s risk management strategy, guided by the Risk Policy, has as main objectives:

»To protect the Company’s operating and financial results, as well as its equity from adverse changes in the market prices, particularly commodities, foreign exchange and interests;
»To protect the Company against counterparty risks in existing financial operations as well as to establish guidelines for sustaining the necessary liquidity to fulfil its financial commitments;
»To protect the cash of Company against price volatilities, adverse conditions in the markets in which the Company acts and adverse conditions in its production chain.

The Risk Policy defines the governance of the bodies responsible for the execution, tracking and approval of the risk management strategies, as well as the limits and instruments that can be used.

Additionally, the Management of the Company approved the following policies on November 10, 2021, which are available at the Company’s website:

»Financial Policy, which aims to: (i) establish guidelines for the management of the Company's financial debt and capital structure; and (ii) guide the Company's decision-making in connection with cash management (financial investments).
»Profit Allocation Policy, which aims to establish the practices adopted by the Company regarding the allocation of its profits, providing, among others, the periodicity of payment of dividends and the baseline used to establish the respective amount.

i) Indebtedness

The ideal capital structure definition at BRF is essentially associated with (i) strong cash position as a tolerance factor for liquidity shocks, which includes minimum cash analysis; (ii) net indebtedness; and (iii) minimization of the capital opportunity cost.

On December 31, 2023, the non-current gross debt, as presented below, represented 87.65% (83.75% as of December 31, 2022) of the total gross debt, which has an average term higher than eight years.

The Company monitors the gross debt and net debt as set forth below:

             
  12.31.23   12.31.22
   Current     Non-current     Total     Total 
Foreign currency loans and borrowings (1,521,567)     (9,571,818)   (11,093,385)    (12,549,181)
Local currency loans and borrowings (930,271)     (8,071,892)     (9,002,163)    (10,967,819)
Derivative financial instruments, net 32,282   470,011   502,293     (126,019)
Gross debt (2,419,556)   (17,173,699)   (19,593,255)    (23,643,019)
               
               
Cash and cash equivalents   9,264,664     -   9,264,664    8,130,929
Marketable securities   447,878   319,995   767,873    824,775
Restricted cash 13,814     72,395     86,209   89,717
    9,726,356   392,390    10,118,746    9,045,421
Net debt   7,306,800   (16,781,309)     (9,474,509)    (14,597,598)

 

ii) Derivative financial instruments

Summarized financial position of derivative financial instruments, that aim to protect the risks described below:

               
             
  Note         12.31.23   12.31.22
Assets                
Designated as hedge accounting                
Foreign exchange risk on operating income 23.2.1 ii)         103,558    8,726
Commodities price risk 23.2.2          5,510   108,966
Interest rate risk 23.2.3         529,830    9,517
Not designated as hedge accounting                
Foreign exchange risk on statement of financial position 23.2.1 i)          154    3,939
            639,052   131,148
                 
Current assets           109,222   120,865
Non-current assets           529,830     10,283
                 
Liabilities                
Designated as hedge accounting                
Foreign exchange risk on statement of financial position 23.2.1 i)          (52,149)    (84,633)
Foreign exchange risk on operating income 23.2.1 ii)         (7,600)    (17,551)
Commodities price risk 23.2.2          (14,363)    (26,730)
Interest rate risk 23.2.3           -     (122,002)
Not designated as hedge accounting                
Foreign exchange risk on statement of financial position 23.2.1 i)          (62,647)   (6,251)
              (136,759)     (257,167)
                 
Current liabilities            (76,940)    (82,468)
Non-current liabilities            (59,819)     (174,699)
                 
Position of derivative financial instruments - net           502,293     (126,019)

 

iii) Financial commitments

The table below summarizes the significant commitments and contractual obligations that may impact the Company’s liquidity:

                             
                               
  12.31.23
  Book
value		   Contractual cash flow   2024   2025   2026   2027   2028   2029 onwards
Non derivative financial liabilities                              
Loans and borrowings  20,095,548    29,239,484   3,360,512     2,381,197     3,865,863     3,784,178     1,507,940    14,339,794
Principal      19,856,354   2,073,011     1,355,195     2,929,729     2,984,936     939,150   9,574,333
Interest     9,383,130   1,287,501     1,026,002     936,134     799,242     568,790   4,765,461
Trade accounts payable  12,592,428    12,758,551    12,757,347     175     1,029   -   -    -
Lease liabilities 3,721,847   4,661,489   1,009,012     784,287     622,935     554,953     398,258   1,292,044
Derivative financial liabilities                              
Financial instruments designated hedge accounting for protection of:
Foreign exchange risk 59,749   59,749   59,749   -   -   -   -    -
Commodities price risk 14,363    14,363    14,363   -   -   -   -    -
Financial instruments not designated as hedge accounting for protection of:
Foreign exchange risk  62,647    18,732    -   -   -   18,732   -    -

 

The Company does not expect that the cash outflows to fulfill the obligations shown above will be significantly anticipated by factors unrelated to its best interests, or have its value substantially modified outside the normal course of business.

23.2.Market risk management
23.2.1.Foreign exchange risk

The 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

The Risk Policy regarding statement of financial position exposure has the objective to balance assets and liabilities denominated in foreign currencies, hedging the Company’s statement of financial position by using natural hedges, over-the-counter derivatives and exchange traded futures.

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:

       
         
    12.31.23   12.31.22
Cash and cash equivalents    2,970,268     3,691,668
Trade accounts receivable    4,788,635     6,013,713
Trade accounts payable     (1,195,133)    (1,484,810)
Loans and borrowings     (8,715,484)     (12,241,309)
Other assets and liabilities, net    (30,310)    35,371
Exposure of assets and liabilities in foreign currencies     (2,182,024)    (3,985,367)
Derivative financial instruments (hedge)    2,033,346     3,721,930
Exposure in result, net     (148,678)    (263,437)

 

The net exposure in Reais is mainly composed of the following currencies:

       
Net Exposure (1)   12.31.23   12.31.22
Chilean Pesos (CLP)     220,116     256,121
Euros (EUR)   (25,050)   (43,445)
Angolan kwanza (AOA)    97,368    53,723
Yen (JPY)    (1,241)    (3,268)
Argentinian Peso (ARS)    (3,146)    (4,614)
Turkish Liras (TRY)    76,439     214,936
U.S. Dollars (USD)    (513,164)    (736,890)
Total    (148,678)    (263,437)
(1)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 Company holds more financial liabilities in foreign currencies than assets and, therefore, holds derivative financial instruments to reduce such exposure.

As a result of this protection strategy the Company recognized as Financial income (expenses), net an expense of foreign exchange of derivatives of R$312,201 and an expense of R$284,720 of interest and fair value of derivatives, totaling an amount of R$596,921 for the year ended on December 31, 2023 (expense of R$1,038,171 during the year ended on December 31, 2022). This derivative result offsets a foreign exchange income over assets and liabilities of R$161,162 for the year ended on December 31, 2023 (R$474,052 during the year ended on December 31, 2022).

The derivative financial instruments acquired to hedge the foreign currency statement of financial position exposure on December 31, 2023 and are set forth below:

                         
12.31.23
Derivative instruments not designated   Asset   Liability   Maturity   Notional   Exercise rate   Fair value (R$)
Futures    BRL     USD    1st Qtr. 2024    USD  (224,250)    4.8690    (3,289)
Futures    USD     BRL    1st Qtr. 2024    USD   224,250    4.8690   3,444
Swap    USD + 4,35% p.a.     86,52% of CDI    3rd Qtr. 2026    USD   145,000    N/A      (41,087)
Swap    USD + 4.35% p.a.     CDI - 0,51% p.a.    3rd Qtr. 2026    USD   115,000    N/A      (18,732)
Non-deliverable forward    EUR     TRY    1st Qtr. 2024    EUR    5,000     31.1500     460
Non-deliverable forward    USD     TRY    1st Qtr. 2024    USD  14,900     30.6070    (2,008)
Non-deliverable forward    USD     AOA    1st Qtr. 2024    USD  10,000   860.5000    (1,041)
Non-deliverable forward    USD     AOA    2nd Qtr. 2024    USD    2,000   893.0000    (241)
Total                            (62,494)

 

 

                             
12.31.23
                          Fair value (R$)
 Derivative instruments designated - Fair value hedge   Hedged Object   Maturity   Asset   Liability   Notional   Instrument   Object (1)
                           
FX and interest rate swap    USD debt     1st Qtr. 2024     FX + 7,33% p.a.     100% CDI + 2.20% p.a.      30,000  USD    (17,201)   (80,378)
FX and interest rate swap    USD debt     2nd Qtr. 2024    FX + 6.32% p.a.    100% CDI + 1,61% p.a.    130,000  USD  (34,948)    80,534
                    160,000     (52,149)   156
(1)Corresponds to the accumulated amount of fair value hedge adjustments on the hedged items, included in the carrying amount of the senior unsecured notes.

 

ii) Operating income exposure

The Risk Policy regarding operating income exposure has the objective to hedge revenues and costs denominated in foreign currencies. The Company is supported by internal models to measure and monitor these risks, and uses financial instruments for hedging, designating the relations as cash flow hedges.

The Company has more sales in foreign currency than expenditures and, therefore, holds derivative financial instruments to reduce such exposure.

As a result of this protection strategy the Company recognized in the Net Revenue an income of R$303,837 for the year ended on December 31, 2023 (R$202,655 during the year ended on December 31, 2022).

The derivative financial instruments designated as cash flow hedges for foreing exchange operating income exposure on December 31, 2023 are set forth below:

                             
12.31.23
Cash flow hedge - Derivative instruments   Hedged object   Asset   Liability   Maturity   Notional   Designation rate   Fair value (1)
Non-deliverable forward    USD Exports     BRL     USD    1st Qtr. 2024    USD    128,500    5.2959     52,159
Non-deliverable forward    USD Exports     BRL     USD     2nd Qtr. 2024     USD   65,500    5.1633     14,564
Non-deliverable forward    USD Exports     BRL     USD    3rd Qtr. 2024    USD   45,500    5.2487     11,528
Collar    USD Exports     BRL     USD    1st Qtr. 2024    USD    295,000    5.0122     15,693
Collar    USD Exports     BRL     USD    2nd Qtr. 2024    USD   40,000    5.0151    2,014
                        574,500         95,958
(1)Correspond to the not realized portion of the hedge which is registered in Other comprehensive income.

 

During the 2nd quarter of 2023, the Bond BRF SA BRFSBZ 3.95 loan, designated as an export protection instrument, was settled and the amount of R$(548,639) previously accumulated in Other Comprehensive Income was reclassified to income for the year under Net Revenue.

iii) Investments exposure

The Company holds both investments (net assets) and loans (financial liabilities) denominated in foreign currency. To balance the accounting effects of such exposures, some non-derivative financial liabilities are designated as hedging instruments for the investments exposure.

As a result of this strategy, the Company recognized revenue of R$145,328 under Other comprehensive income for the year ended on December 31, 2023 (R$87,929 during the year ended on December 31, 2022).

The non-derivative financial instruments designated as net investment hedge instruments on December 31, 2023 are set forth below:

                         
12.31.23
Net investment hedge -
Non-derivative instruments		   Object (Investment)   Liability   Maturity   Notional   Rate   Exchange variation (1)
Bond - BRF SA BRFSBZ 4.35   Federal Foods LLC    USD    3rd Qtr. 2050    USD (2)   44,158   3.7649     (82,409)
Bond - BRF SA BRFSBZ 4.35   BRF Kuwait Food Management Company WLL    USD    3rd Qtr. 2050    USD (2)   88,552   3.7649     (96,199)
Bond - BRF SA BRFSBZ 4.35   Al Khan Foodstuff LLC    USD    3rd Qtr. 2050    USD (2)   53,446   3.7649     (70,185)
Bond - BRF SA BRFSBZ 4.35   BRF Foods GmbH    USD    3rd Qtr. 2050    USD (3)    170,721   5.1629   33,138
Bond - BRF SA BRFSBZ 4.35   Al-Wafi Al-Takamol International for Foods Products    USD    3rd Qtr. 2050    USD (3)   23,426   5.1629     8,639
                    380,303       (207,016)
(1)Corresponds to the effective portion of the hedge result accumulated in Other Comprehensive Income.
(2)Designated on August 1st, 2019.
(3)Designated on November 9, 2022.

 

23.2.2.Commodities price risk

The Company uses commodities as production inputs and is exposed to commodities price risk arising from future purchases. The management of such risk is performed through physical inventories, future purchases at fixed price and through derivative financial instruments.

The Risk Policy establishes coverage limits to the flow of purchases of corn, meal and soy, soybeans and soybean oil with the purpose of reducing the impact due to a price increase of these raw materials. The hedge may be reached using derivatives or by inventory management.

As a result of this protection strategy the Company recognized in the Cost of goods sold an expense of R$103,305 for year ended on December 31, 2023 (expense of R$437,324 during the year ended on December 31, 2022).

The Company performs purchases at variable prices in future and spot markets and, to hedge such exposure, it holds derivative financial instruments in long position (buy) to fix these prices in advance.

The financial instruments designated as cash flow hedges for the variable commodities price exposure on December 31, 2023 are set forth below:

                         
12.31.23
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    1st Qtr. 2024    4,000  ton    445.83   (390)
Collar - buy    Soybean meal purchase - floating price     Soybean meal - CBOT     1st Qtr. 2024     8,000  ton    458.42   (357)
Collar - buy    Soybean meal purchase - floating price     Soybean meal - CBOT     2nd Qtr. 2024      31,992  ton    460.11   (3,009)
Non-deliverable forward - buy    Corn purchase - floating price     Corn - CBOT     2nd Qtr. 2024    119,944  ton    198.28   (2,154)
Non-deliverable forward - buy    Corn purchase - floating price     Corn - CBOT     3rd Qtr. 2024    119,944  ton    198.57   (1,633)
Non-deliverable forward - buy    Corn purchase - floating price     Corn - CBOT     4th Qtr. 2024    119,944  ton    200.93   (1,509)
Collar - buy    Corn purchase - floating price     Corn - CBOT     2nd Qtr. 2023      82,008  ton    199.53   (1,153)
Collar - buy    Corn purchase - floating price     Corn - B3     1st Qtr. 2024      49,545  ton    1,136.19    1,106
Non-deliverable forward - buy    Soybean oil purchase - floating price     Soybean oil - CBOT     2nd Qtr. 2024     6,001  ton    1,107.23   (918)
Non-deliverable forward - buy    Soybean oil purchase - floating price     Soybean oil - CBOT     3rd Qtr. 2024     4,001  ton    1,094.04   (451)
Collar - buy    Corn purchase - floating price     Corn - B3     2nd Qtr. 2024      87,750  ton    1,178.85    2,207
                633,129         (8,261)
(1)Base price of each commodity in USD/ton, except for Corn – B3 denominated in R$/ton.

 

In certain cases, the Company performs futures purchases at fixed prices and, to hedge such exposure, it holds derivative financial instruments in short position (sell) to keep these prices at market value. The financial instruments designated as fair value hedges for the fixed commodities price exposure on December 31, 2023 are set forth below:

                         
12.31.23
Fair value hedge - Derivative instruments   Hedged object   Index   Maturity   Quantity   Exercise price (1)   Fair value
Corn future - sell    Corn purchase - fixed price     Corn - B3    3rd Qtr. 2024     69,633  ton    1,199.42   (592)
                  69,633         (592)
(1)Base price of each commodity in USD/ton, except for Corn – B3 denominated in R$/ton.

 

The open and liquidated derivative financial instrument still generate impacts in the statement of financial position of: i) Inventory a debit in the amount of R$95,986 on December 31, 2023 (R$18,853 on December 31, 2022); ii) Other comprehensive income a credit amount of R$322 on December 31, 2023 (credit of R$43,398 on December 31, 2022).

23.2.3.Interest rate risk

The interest rate risk may cause economic losses to the Company resulting from volatility in interest rates that affect its assets and liabilities.

The Company’s Risk Policy does not restrict exposure to different interest rates, neither establishes limits for fixed or floating rates. However, the Company continually monitors the market interest rates in order to evaluate any need to enter into hedging transactions to protect from the volatility of such rates and manage the mismatch between its financial assets and liabilities.

As a result of this protection strategy the Company recognize in the Financial Income (Expenses), Net an income of R$328,121 for the year ended on December 31, 2023 (expense of R$281,453 during the year ended on December 31, 2022).

The derivative financial instruments used to hedge the exposure to interest rates as of December 31, 2023 are presented in the table below:

                             
12.31.23
                          Fair value (R$)
Fair value hedge - Derivative instruments   Hedged Object   Maturity   Asset   Liability   Notional   Instrument   Object (1)
                           
Interest rate swap    Debenture - 1st issue - 3rd series - IPCA + 5.50% p.a.     2nd Qtr. 2026    IPCA + 5.50% p.a.    CDI + 0.57% p.a.    200,000  BRL    30,943   8,710
Interest rate swap    Debenture - 1st issue - 3rd series - IPCA + 5.50% p.a.     2nd Qtr. 2026    IPCA + 5.50% p.a.    100% of CDI    200,000  BRL    25,580    10,238
Interest rate swap    Debenture - 2nd issue - 1st series - IPCA + 5.30% p.a.     3rd Qtr. 2027    IPCA + 5.30% p.a.    CDI + 2.20% p.a.    400,000  BRL    63,003   (15,575)
Interest rate swap    Debenture - 2nd issue - 2nd series - IPCA + 5.60% p.a.     3rd Qtr. 2030    IPCA + 5.60% p.a.    CDI + 2.29% p.a.    595,000  BRL    80,526   (89,632)
Interest rate swap    Debenture - 3rd issue - single series - IPCA + 4.78% p.a.     2nd Qtr. 2031    IPCA + 4.78% p.a.    CDI + 0,12% a.a.     1,000,000  BRL  177,896    54,509
Interest rate swap    Debenture - 1st issue - 1ª series - IPCA + 6.83% p.a.     3rd Qtr. 2032    IPCA + 6.83% p.a.    109,32% of CDI    990,000  BRL  151,881   130,182
                     3,385,000     529,829    98,432
(1)Corresponds to the accumulated amount of fair value hedge adjustments on the hedged items, included in the carrying amount of the debentures.

 

23.3.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. The Company’s credit risk exposure can be assessed in notes 4, 5 and 6.

23.3.1.Credit risk in accounts receivable

The credit risk associated with trade accounts receivable is actively managed through specific systems and is supported by internal policies for credit analysis. The significant level of diversification and geographical dispersion of the customer portfolio significantly reduces the risk. However, the Company chooses to complement the risk management by contracting insurance policies for specific markets. The impairment of these financial assets is carried out based on expected credit losses.

23.3.2.Counterparty credit risk

The credit risk associated with marketable securities, cash and cash equivalents and derivative instruments in general is directed to counterparties with Investment Grade ratings. The maintenance of assets with counterparty risk is constantly assessed according to credit ratings and the Company’s portfolio concentration, aligned with the applicable impairment requisites.

23.4.Capital management and liquidity risk

The Company is exposed to liquidity risk as far as it needs cash or other financial assets to settle its obligations in the respective terms. The Company’s cash and liquidity strategy takes into consideration historical volatility scenarios of results as well as simulations of sectorial and systemic crisis. It is grounded on allowing resilience in scenarios of capital restriction.

23.5.Sensitivity analysis

Management believes that the most relevant risks that may affect the Company’s results, for which it uses derivative financial instruments to protect, are the volatility of commodities prices, foreign exchange rates and interest rates.

For the reasonably possible scenario of commodities, Management uses as a reference the future value of assets on December 31, 2023 and therefore understands that there will be no changes in the results of operations. As for the exchange rate, the likely scenario is referenced by external sources such as the Central Bank of Brazil (“BACEN”) and Bloomberg Focus report based on the exchange rate forecast for next year or in the absence of the latest available date.

In the possible and remote scenarios, both positive and negative variations of 15% and 30% respectively were considered in both cases from the reasonably possible scenario. Such sensitivity scenarios originate from information and assumptions used by Management in monitoring the previously mentioned risks.

The information used in the preparation of the analysis is based on the position as of December 31, 2023, which has been described in the items above. The estimated values may differ significantly to numbers and results that will be effectively registered by the Company. Positive values indicate gains and negative values indicate losses.

                   
    Scenario
    Remote   Possible   Reasonably   Possible   Remote
Exchange rate - Balance   - 30%   - 15%   Possible   + 15%   + 30%
USD   3.5000   4.2500   5.0000   5.7500   6.5000
                     
Monetary assets and liabilities     741,601     326,928   (87,745)    (502,418)    (917,091)
Derivative instruments - not designated    (599,427)    (264,252)    70,923     406,098     741,273
Net effect     142,174    62,676   (16,822)   (96,320)    (175,818)
                     
EUR   3.9690   4.8195   5.6700   6.5205   7.3710
                     
Monetary assets and liabilities    13,385   5,151    (3,082)   (11,316)   (19,550)
Derivative instruments - not designated    (6,913)    (2,661)   1,592   5,844    10,097
Net effect   6,472   2,490    (1,490)    (5,472)    (9,453)
                     
JPY   0.0263   0.0319   0.0375   0.0431   0.0488
                     
Monetary assets and liabilities   289    85    (119)    (323)    (526)
Net effect   289    85    (119)    (323)    (526)
                     
TRY   0.1149   0.1395   0.1641   0.1887   0.2133
                     
Monetary assets and liabilities   (52,450)   (26,118)   214    26,546    52,878
Derivative instruments - not designated    29,584    14,731    (121)   (14,973)   (29,825)
Net effect   (22,866)   (11,387)    93    11,573    23,053
                     
                     
AOA   0.0041   0.0049   0.0058   0.0067   0.0075
                     
Monetary assets and liabilities   (45,655)   (22,124)   1,406    24,936    48,467
Derivative instruments - not designated    17,061   8,268    (525)    (9,319)   (18,112)
Net effect   (28,594)   (13,856)   881    15,617    30,355
                     
ARS   0.0019   0.0023   0.0027   0.0031   0.0035
                     
Monetary assets and liabilities   2,160   1,949   1,738   1,527   1,316
Net effect   2,160   1,949   1,738   1,527   1,316
                     
CLP   0.0038   0.0047   0.0055   0.0063   0.0071
                     
Monetary assets and liabilities   (66,315)   (33,358)    (400)    32,557    65,515
Net effect   (66,315)   (33,358)    (400)    32,557    65,515
                     
    Scenario
    Remote   Possible   Reasonably   Possible   Remote
Exchange rate - Operating results   - 30%   - 15%   Possible   + 15%   + 30%
USD   3.5000   4.2500   5.0000   5.7500   6.5000
                     
Revenue in USD    (770,577)    (339,702)    91,173     522,048     952,923
NDF     321,241     141,616   (38,009)    (217,634)    (397,259)
Collar     442,768     191,518   (12,307)    (208,500)    (459,750)
Net effect    (6,568)    (6,568)    40,857    95,914    95,914
                     
    Scenario
    Remote   Possible   Reasonably   Possible   Remote
Exchange rate - Operating results   - 30%   - 15%   Possible   + 15%   + 30%
Soybean meal - CBOT   289   350   412   474   536
                     
Cost of sales   5,440   2,720     -    (2,720)    (5,440)
Collar    (4,628)    (2,079)     -   359   1,831
NDF    (496)    (248)     -   248   496
Net effect   316   393     -    (2,113)    (3,113)
                     
Soybean oil - CBOT   835   1,014   1,193   1,372   1,551
                     
Cost of sales   3,579   1,789     -    (1,789)    (3,579)
NDF    (3,579)    (1,789)     -   1,789   3,579
Net effect     -     -     -     -     -
                     
Corn - CBOT   139   169   199   228   258
                     
Cost of sales    26,323    13,162     -   (13,162)   (26,323)
Collar    (3,755)    (1,412)     -   343   2,282
NDF   (21,476)   (10,738)     -    10,738    21,476
Net effect   1,092   1,012     -    (2,081)    (2,565)
                     
Corn - B3   756   918   1,079   1,241   1,403
                     
Cost of sales    21,911    10,955     -   (10,955)   (21,911)
Collar   (15,696)    (349)     -    12,520    38,068
Future    22,039    11,019     -   (11,019)   (22,039)
Net effect    28,254    21,625     -    (9,454)    (5,882)

 

23.6.Financial instruments by category
             
  12.31.23
  Amortized cost   FVTOCI (3)   Fair value through profit and loss   Total
    Equity instruments    
Assets              
Cash and bank 1,607,257   -   -   1,607,257
Cash equivalents  -   -     7,657,407   7,657,407
Marketable securities 291,402   12,103     464,368   767,873
Restricted cash  86,209   -   -     86,209
Trade accounts receivable 4,434,070   -     337,898   4,771,968
Notes receivables  66,261   -   -     66,261
Derivatives not designated  -   -     154   154
Derivatives designated as hedge accounting (1)  -   -     638,898   638,898
               
Liabilities              
Trade accounts payable (12,592,428)   -   -   (12,592,428)
Loans and borrowings (2) (15,074,206)   -   (5,021,342)   (20,095,548)
Derivatives not designated  -   -     (62,647)   (62,647)
Derivatives designated as hedge accounting (1)  -   -     (74,112)   (74,112)
  (21,181,435)   12,103     3,940,624   (17,228,708)
(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 that 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.
(3)FVTOCI: Fair Value Through Other Comprehensive Income.

 

 

               
  12.31.22
  Amortized cost   FVTOCI (3)   Fair value through profit and loss   Total
    Equity instruments    
Assets              
Cash and bank 1,865,077   -   -   1,865,077
Cash equivalents  -   -     6,265,852   6,265,852
Marketable securities 379,145   11,752     433,878   824,775
Restricted cash  89,717   -   -     89,717
Trade accounts receivable 3,918,570   -     274,493   4,193,063
Other receivables  38,443   -   -     38,443
Derivatives not designated  -   -     3,939    3,939
Derivatives designated as hedge accounting  -   -     127,209   127,209
               
Liabilities              
Trade accounts payable (14,136,224)   -   -   (14,136,224)
Loans and borrowings (16,055,704)   -   (7,461,296)   (23,517,000)
Derivatives not designated  -   -    (6,251)     (6,251)
Derivatives designated as hedge accounting  -   -   (250,916)     (250,916)
  (23,900,976)   11,752   (613,092)   (24,502,316)

 

23.7.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 does not have financial instruments in this category.

The table below presents the overall classification of financial instruments accounted at fair value by measurement hierarchy. For year ended December 31, 2023, there were no changes among the 3 levels of hierarchy.

                     
  12.31.23   12.31.22
  Level 1   Level 2   Total   Level 1   Level 2   Total
Financial Assets                      
Fair value through other comprehensive income                      
Stocks   12,103     -     12,103     11,752   -   11,752
Fair value through profit and loss                      
Savings account and overnight   17,570     -     17,570     12,720   -   12,720
Term deposits  2,758,300     -    2,758,300    2,495,438   -     2,495,438
Bank deposit certificates   -    4,876,861    4,876,861     -     3,754,202     3,754,202
Financial treasury bills 412,107     -   412,107    364,543   -    364,543
Investment funds   21,186     -     21,186     19,018   -   19,018
Trade accounts receivable   -   337,898   337,898     -    274,493    274,493
Derivatives   -   639,052   639,052     -    131,148    131,148
Other titles   35,751     -     35,751     53,809   -   53,809
Financial Liabilities                      
Fair value through profit and loss                      
Derivatives   -     (136,759)     (136,759)     -   (257,167)   (257,167)
Loans and borrowings   -     (5,021,342)     (5,021,342)     -   (7,461,296)   (7,461,296)
   3,257,017   695,710    3,952,727    2,957,280   (3,558,620)   (601,340)

 

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.

                       
            12.31.23   12.31.22
    Currency   Maturity   Book
value		   Fair
value		   Book
value		   Fair
value
BRF S.A.                        
BRF SA BRFSBZ 4 3/4   USD   2024    -    -     (1,525,727)   (1,513,221)
BRF SA BRFSBZ 3.95   USD   2023    -    -     (1,185,479)   (1,209,990)
BRF SA BRFSBZ 4 7/8   USD   2030     (2,896,104)   (2,506,390)     (3,119,390)   (2,602,599)
BRF SA BRFSBZ 5 3/4   USD   2050     (3,209,653)   (2,398,081)     (3,463,081)   (2,503,033)
Debenture - 1st issue   BRL   2026    (830,144)   (853,640)    (768,428)   (756,718)
Debenture - 2nd issue   BRL   2027 - 2030     (2,681,294)   (3,048,882)     (2,355,427)   (2,366,883)
Debenture - 3rd issue   BRL   2031     (1,214,044)   (1,214,044)     (1,013,639)   (877,103)
Debenture - 4rd issue   BRL   2027 - 2032     (1,908,952)   (2,032,361)     (1,802,652)   (1,717,004)
BRF GmbH                        
BRF SA BRFSBZ 4.35   USD   2026     (1,453,805)   (1,360,530)     (2,608,613)   (2,367,075)
            (14,193,996)   (13,413,928)   (17,842,436)   (15,913,626)