Leaf Trends and Leaf Trends and Quality Expectations Quality Expectations

U.S. Tobacco Forum U.S. Tobacco Forum Myrtle Beach, S.C., July 17, 2009Myrtle Beach, S.C., July 17, 2009

Worldwide Leaf ProductionWorldwide Leaf Production(x-PRC)(x-PRC)

Worldwide Cigarette ProductionWorldwide Cigarette Production(x-PRC)(x-PRC)

+ 0.3%

Chinese Cigarette ProductionChinese Cigarette Production

+ 4.5%

Worldwide TrendsWorldwide Trends

Total Leaf Production and Cigarette production remained very stable with the exception of China

Greater variations in leaf production have occurred within different regions over the past 10 years

Future Production dependant on demandThere has been major cigarette

manufacturer consolidation throughout the last 5 years.

U.S. Quality ExpectationsU.S. Quality Expectations

Leaf QualityLeaf QualityExpectationsExpectations

Contract Company specific requirementsNTRM FREE!!Tobacco moisture

Pesticide Residues

Company RequirementsCompany Requirements

Number of harvestsCrop Throw RequirementsQuality ExpectationsColor line that is in highest demandOverall adherence to all contract

stipulations

NTRMNTRM

NTRMNTRM

Zero Tolerance– Synthetic– Non-Synthetic– Organic

Corporate NTRM Elimination Policy

NTRM On-Farm InspectionNTRM On-Farm Inspection

100% Farm InspectionGrower educationFarm Rating System

Tobacco MoistureTobacco Moisture

All companies require adherence to moisture levels

Some companies offer incentives for tobacco delivered in a certain moisture range

Rejection of the tobacco due to higher than acceptable moisture levels

Pesticide ResiduesPesticide Residues

Pesticide ResiduesPesticide Residues

Increased emphasis from all customers Applications of only approved pesticides at

labeled rates Follow all post harvest interval requirements Avoid application/drift of non-labeled

pesticides

Pesticide ResiduesPesticide Residues

Hidden problemCostly to detectMuch more extensive testing is being

required by more and more manufacturersRejections by manufactures and leaf

dealers

ConcernsConcerns

SCHIP EffectsSCHIP Effects

$0.61 per pack tax increase on cigarettes32% increase on cigars

– The cap on the tax changed from $48.75 per 1000 pieces to $402.60 per 1000 pieces

$23.68 per pound increase on roll your own tobacco

ConcernsConcerns

Input CostsAging grower populationLack of younger people beginning to grow

tobaccoAging Infrastructure

ConcernsConcerns

Increases on state cigarette taxesIncreases in state wide and city smoking

bans– NC and VA

QuestionsQuestions