Sadia, Brazil's largest food company, lost $1.1B on the same FX options that sank Aracruz

Sadia was one of Brazil's largest food companies, a major exporter of poultry and processed meats. Founded in 1944 in Concórdia, Santa Catarina, it had grown into a global food producer with billions in annual revenue.

Like Aracruz, Sadia had accumulated a large portfolio of foreign exchange derivatives — primarily FX options and credit options — that bet the Brazilian real would continue to strengthen against the US dollar. The strategy had been profitable during the years of real appreciation.

When the Brazilian real collapsed in the 2008 financial crisis, Sadia's derivatives positions incurred losses of approximately $1.09 billion. The loss was devastating for a company with $4.5 billion in annual revenue.

The derivatives disaster forced Sadia into a merger with rival Perdigão in 2009, creating BRF (Brazil Foods), one of the world's largest food companies. The merger was orchestrated by BNDES, the Brazilian development bank, which was a major shareholder in both companies.