Leaf Trends and Quality Expectations U.S. Tobacco Forum Myrtle Beach, S.C., July 17, 2009
Worldwide Leaf Production (x-PRC)
Worldwide Cigarette Production (x-PRC) + 0.3%
Chinese Cigarette Production + 4.5%
Worldwide 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 demand There has been major cigarette manufacturer consolidation throughout the last 5 years.
U.S. Quality Expectations
Leaf Quality Expectations Contract Company specific requirements NTRM FREE!! Tobacco moisture Pesticide Residues
Company Requirements Number of harvests Crop Throw Requirements Quality Expectations Color line that is in highest demand Overall adherence to all contract stipulations
NTRM
NTRM Zero Tolerance – Synthetic – Non-Synthetic – Organic Corporate NTRM Elimination Policy
NTRM On-Farm Inspection 100% Farm Inspection Grower education Farm Rating System
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
Pesticide 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 Residues Hidden problem Costly to detect Much more extensive testing is being required by more and more manufacturers Rejections by manufactures and leaf dealers
Concerns
SCHIP Effects $0.61 per pack tax increase on cigarettes 32% increase on cigars – The cap on the tax changed from $48.75 per 1000 pieces to $ per 1000 pieces $23.68 per pound increase on roll your own tobacco
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