Leaf Trends and Quality Expectations U.S. Tobacco Forum Durham, NC June 11, 2010

Worldwide Trends Total flue-cured production is remaining very stable throughout the world There are greater variations in flue-cured production within different regions throughout the past years Future Production totally dependant on demand

Worldwide Trends Total burley production has declined throughout the world This primarily due to a shift in sales away from an American blended cigarette to a Virginia blended cigarette. There continues to be consolidation of cigarette manufacturers throughout the world.

U.S. Quality Expectations

Leaf Quality Expectations Contract Company specific requirements NTRM FREE!! Tobacco moisture Pesticide Residues FDA regulation affecting the farm level

Company Requirements Number of harvests Crop Throw Requirements Quality Expectations Color line that is in highest demand Crop Protection Agent residue requirements Overall adherence to all contract stipulations

NTRM

NTRM Zero Tolerance – Synthetic – Non-Synthetic – Organic Increased emphasis as a result of FDA

NTRM Farm Inspections Increased picking at the farm level Grower education Farm Ratings

Tobacco 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

Crop Protection Agent Residues

CPA 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 HUGE POTENTIAL FDA IMPLICATIONS

Potential FDA Implications Complete traceability CPA residues NTRM issues TSNA levels Increased regulations from all countries

Concerns

Concerns Input Costs Aging grower population Lack of younger people beginning to grow tobacco Aging Infrastructure

Concerns Increases on state cigarette taxes Increases in state wide and city smoking bans – NC and VA

Questions