1. Leaf Trends and Quality Expectations U.S. Tobacco Forum Myrtle Beach, S.C., July 17, 2009

2. Worldwide Leaf Production (x-PRC)

3. Worldwide Cigarette Production (x-PRC) + 0.3%

4. Chinese Cigarette Production + 4.5%

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.

6. U.S. Quality Expectations

7. Leaf Quality Expectations Contract Company specific requirements NTRM FREE!! Tobacco moisture Pesticide Residues

8. Company Requirements Number of harvests Crop Throw Requirements Quality Expectations Color line that is in highest demand Overall adherence to all contract stipulations

9. NTRM

10. NTRM Zero Tolerance – Synthetic – Non-Synthetic – Organic Corporate NTRM Elimination Policy

11. NTRM On-Farm Inspection 100% Farm Inspection Grower education Farm Rating System

12. 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

13. Pesticide Residues

14. 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

15. 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

16. Concerns

17. 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 $402.60 per 1000 pieces $23.68 per pound increase on roll your own tobacco

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

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

20. Questions