CROP REPORT AUGUST 2016

CROP REPORT

AUGUST 2016

2

CONTENT

BRAZIL BAHIA - FILLER PAGE 3

BRAZIL BAHIA - MATA FINA WRAPPER PAGE 4

BRAZIL ARAPIRACA - WRAPPER PAGE 5

BRAZIL CUBRA - WRAPPER PAGE 6

BRAZIL - FLUE CURED PAGE 7

BRAZIL - BURLEY PAGE 9

CANADA - DARK FIRE AND DARK AIRCURED PAGE 10

COLOMBIA - CARMEN CUBITA PAGE 11

DOMINICAN REPUBLIC - PILOTO CUBANO/OLOR/CRIOLLO PAGE 12

INDONESIA - BESUKI/NO-NORTH UTARA PAGE 13

INDONESIA - JATIM/VO PAGE 15

INDONESIA – BESUKI/VO PAGE 16

PARAGUAY - CRIOLLO PAGE 17

PHILIPPINES - ISABELA PAGE 18

US - FLUE CURED PAGE 20

US - DARK FIRE AND DARK AIR CURED PAGE 21

US - BURLEY PAGE 22

3

BRAZIL BAHIA – FILLER

HISTORICAL PRODUCTION

2015/2016 CROP STATUS

Current operational activity:

We started packing in June, as planned. Quality is good, and in accordance with previous

estimates.

HCIG/CdF Volume (packed weight) 2015/2016 crop: 500 MT


Farmer contracting occurred without major problems and we were able to contract a sufficient

number of farmers.

Growing season started a bit slow due to lack of rainfalls at the end of May and beginning of

June. By early July weather conditions had improved and almost all farmers were able to

transplant their seedlings within the regular timing.

Rainfalls are still below average at the moment and some growing areas will have reduced

productions volumes as a result. Due to the reduced incidence of foliar diseases we expect the

reduction in volume to be partially offset by improved quality in practically all areas.

HCIG/CdF Volume (packed weight) 2016/2017 crop (target): 500 MT

ECONOMIC DATA

Exchange Rate August 23: USD 1,00 = 3,20047 BRL

Inflation: 8,74 % July 2016

2000

1400

1100

800

0

500

1000

1500

2000

2500

2013/2014 2014/2015 2015/2016 2016/2017 est.

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Crop Year

Bahia Production (Packed weight MT)

4

BRAZIL – BAHIA MATA FINA WRAPPER




Sorting process started in June, in our Bahia operation. Overall quality is good. We expect to

finish sorting by end of November.

HCIG/CdF Volume (Packed weight) 2015/2016 crop: 55 MT


Growing conditions:

General weather conditions have been excellent so far. Even though rainfalls have been below

average for the period we managed to prevent major problems by use of irrigation.

Development in the field has been excellent with much less foliar diseases and plagues than

usual.


About 70% of the crop has been harvested by now. Tobaccos are curing well in the barns and

part of the crop has been transferred to the factory, undergoing fermentation.

Quality is very promising; due to the many sunny days during the crop tobacco has plenty of oil

and this will help to produce a bigger amount of darker wrapper material.

HCIG/CdF Volume (Packed weight) 2016/2017 crop (expected): 80 MT

60 58 55

80

0

10

20

30

40

50

60

70

80

90

2013/2014 2014/2015 2015/2016 2016/2017

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Crop Year

Bahia Mata Fina wrapper Production (Packed weight MT)

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BRAZIL – ARAPIRACA WRAPPER




All wrapper tobaccos have been shipped to our operation in the DR for final sorting and

grading. Fillers have been shipped to customers.



Growing conditions:

Rainfalls have been much less than normal this year and we expect a considerable reduction of

the overall crop volume. This will mainly affect the local twist tobacco market and we already

see a price increase for this kind of tobacco. Due to a broad contract farmer base our wrapper

production will only be slightly affected. Quality is very good due to good oil and the absence of

foliar diseases in most areas.


We have bought about 90% of our target volume so far. Tobaccos are curing well and overall

quality is very good.

HCIG/CdF Volume (packed weight) 2016/2017 crop (expected): 40 MT

95

65

120

80

0

20

40

60

80

100

120

140

2013/2014 2014/2015 2015/2016 2016/2017 est.

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MT

Crop Year

Arapiraca wrapper Production (Packed weight MT)

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BRAZIL – CUBRA WRAPPER




We started the sorting in April, in our factory in Bahia. General quality is good and we expect

to finish sorting by the end of October.



Growing conditions:

General weather conditions have been excellent so far. Even though rainfalls have been below

average for the period we managed to prevent major problems by use of irrigation.

Development in the field has been excellent with much less foliar diseases and plagues than

usual.


We have harvested about 85% of the crop so far. Tobaccos are curing well in the barns and part

of the crop has been transferred to the factory, undergoing fermentation.

Quality is very promising; due to the many sunny days during the crop tobacco has plenty of oil

and this will help to produce a bigger amount of dark wrapper material from the Viso and

Ligeiro grades.

HCIG/CdF Volume (packed weight) 2016/2017 crop (expected): 75 MT

88 88

85

75

65

70

75

80

85

90

2013/2014 2014/2015 2015/2016 2016/2017

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Crop Year

Cubra wrapper Production (Packed weight MT)

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BRAZIL SOUTH – FLUE CURED As of August 8th, 2016 Summary:

Seedling production is following regular schedule and with no major diseases

occurring. This will assure that the contracted area will be effectively transplanted.

Favourable weather conditions during the second half of July are speeding up seedling

development and consequently the transplanting, especially in the Old Belt Area.

Transplanting will also be intense during September in all other areas.

Up to the end of July, around 20% of the Flue Cured tobaccos have been transplanted.

Rio Grande do Sul Central Area - Old Belt

Already transplanted 42% of the crop.

Highlands

Seedlings development phase. Started transplanting late August.

South

Seedlings development phase. Start transplanting by mid of August.

Santa Catarina Coastal Area

Santa Catarina’s coastal area has already transplanted 83% of the crop.

Itajai Valley

Already transplanted 18% of the crop.

Highlands North

Seedlings development phase. Start transplanting late August.

Paraná Irati Area


8

Volumes: Total Brazil Flue-Cured

Planted area:

Hectares

Yield: Kgs/Hectare

Volume: Kgs

2017 (Estimated) Source: Afubra

265,909 2,200 585,000,000

2016 Estimated

Source: Afubra 252,000 1,826 460,000,000

2015 Final

Source Afubra 263,620 2,257 595,000,000

Crop Status: Estimate

Region Transplanting Topping Harvesting Curing Purchasing

Rio Grande do Sul

30% 0% 0% 0% 0%

Santa Catarina 25% 0% 0% 0% 0%

Parana

0% 0% 0% 0% 0%

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BRAZIL SOUTH – BURLEY

As of August 8h, 2016 Summary:

Seedlings production is following regular schedule.

Burley and Galpao Comum transplanting will start during the month of August.

Rio Grande do Sul Highlands

Seedlings development phase. Start transplanting by mid of August.

Santa Catarina and Parana West SC/PR


AIR CURED GALPÃO West SC/PR


Volumes: Total BRL Burley

Planted area:

Hectares

Yield: Kgs/Hectare

Volume: Kgs

2017 (Estimated) Source: Afubra

35,122 2,050 72,000,000

2016 (Estimated)

Source: Afubra 28,572 1,924 55,000,000

2015 Final

Source: Afubra 40,090 2,070 83,000,000

Crop Status: Estimate

Transplanting Topping Harvesting Curing Purchased

0% 0% 0% 0% 0%

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CANADA - DARK FIRE AND DARK AIR CURED As of August 12th, 2016 Summary:

Crops are good to very good in yield potential and quality. Eastern Region has adequate rainfall and looks good. No reports of disease pressure. Some weather fleck reported. DAC should begin harvest within 2 weeks. DFC harvest starts beginning of September.

Volumes: Total Canadian DFC and DAC

Type Planted Area Yield: Lbs./acre Volume: Lbs.

2016 DFC 441 3,050 1,345,050

(610,104 kgs)

2016 DAC 111 2,800 310,800

(140,976 kgs)

Crop Status: H&C Estimate


100% 95% 0% 0% 0% DFC

100 % 95% 0% 0% 0% DAC

11

COLOMBIA – CARMEN CUBITA


2016 CROP STATUS

Growing conditions:

All the farmers finished seedbeds. For the moment the weather is ideal, plants develop well

and show good growth.


We finished the new STP program and continue to work with our farmers applying good

agricultural practices and emphasizing the NTRM program and all other important programs

such as Green Tobacco Sickness, Biodiversity etc.

ECONOMIC DATA

The Colombian economy has slowed down due to oil prices, inflation increases.

Exchange Rate August 23: USD 1,00 = 2890 COP


1500

2200

1100 11501250

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500

1000

1500

2000

2500

2012 2013 2014 2015 2016 est.

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Crop Year

Carmen Cubita Production (Packed weight MT)

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DOMINICAN REPUBLIC


2017 CROP STATUS

Growing conditions:

Within 6 weeks seedbeds will commence for new crop. There will be a low volume being

planted. This has to do mainly with the market conditions, but also with the weather forecast.

After a few years of heavy drought, it is thought to be a wet year. As market is demanding

heavier tobaccos, it seems that the conditions will not be optimal to reach this.

Other remarks:

Market continues to be slow. New legislation in both Europe and USA has a negative effect on

buying plans.

Elections have passed and the previous president, Danilo Medina, was chosen again. He took

office with his new cabinet last Tuesday.

ECONOMIC DATA Exchange Rate August 23: USD 1,00 = 46,15 DOP


6200

2800

6100

7000

4500

0

1000

2000

3000

4000

5000

6000

7000

8000

2013 2014 2015 2016 2017 est

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Crop Year

Piloto Cubano/Olor/Criollo Production (Packed weight MT)

13

INDONESIA – BESUKI/NOTA – NORTH UTARA


2015 CROP STATUS

NOTA crop current activities:

All tobaccos from crop 2015 are 100% sorted and packed.

General stock situation old crops:

Overall, stocks in the market are decreasing due to the situation of the 2015 NOTA crop.

Expectation is that there will remain some stocks of affected tobaccos with some exporters.

Fillers remain readily available, although overall quality is relatively low.

35003000

5200

3000

2000

0

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2000

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5000

6000

2012 2013 2014 2015 2016 (est)

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Crop Year

Besuki NOTA (Packed Weight MT)

3000

5000

3100

4000 4000

0

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2000

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5000

6000

2012 2013 2014 2015 2016 (est)

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Crop Year

Besuki North Utara (Packed Weight MT)

14

2016 CROP STATUS

Weather conditions:

The 2016 crop has been heavily affected by adverse weather conditions. Continuous rains are

the cause of many diseases in the crop and a high incidence of Cercospora. Crop is also delayed

due to prolonged transplanting/replanting periods. Hard winds cause additional damage to the

already difficult crop.

Crop activities NOTA:

We have started receiving the contracted farmers’ crop since beginning August and the lower

stalk positions are coming in slowly. Overall quality is much lower than normal and leaf size is

slightly shorter than normal. Cercospora, curing disorders, glassy and papery material are the

main causes for concern. Besides these negatives, luckily there are areas that perform well,

especially in the far south where there has been less rain. Early buying prices have been high due

to the fact that some exporters are in need of tobacco and this drives up the price. Besides this,

farmers are trying to recover their negative results of previous years now that demand has

increased, even though quality is low.

NOTA purchasing is expected to continue until the end of September and will quickly be

followed by the Semi-Utara and Utara crops as there has not been a break between plantings.

We have 150 hectares of NOTA and Semi-Utara under direct farmer contracts, expected yields

will be slightly short of the forecasted 270 MT green.

Crop activities Utara: Most farmers have transplanted for the second crop, the Utara. Expectations are high for this

crop since weather has improved somewhat and expectations are that most of the pickings will

be in the curing barns by October before the new rains will start again. We have another 150

hectares under direct contracting for this crop which expects to yield around 270 MT. All direct

farmers of NOTA and Utara are following our approved CPA application and 100 % of these

tobaccos are strung with cotton rope in the curing barns to eliminate the risk of plastic

contamination.

Construction:

The construction is going as planned and we have moved our main office to our Mayang

compound. The guesthouse is also completed and we have been able to receive the first guests.

New sorting warehouse is ahead of schedule and completion is due for Mid-September which is

ahead of the new grading season.

HCIG/CdF Volume (packed weight) 2015 crop: 1,600 MT

HCIG/CdF Estimated volume (packed weight) 2016 crop: 1,100 MT

ECONOMIC DATA

Exchange Rate August 23: USD 1, 00 = 13219 IDR


15

INDONESIA – JATIM/VO


2016 CROP STATUS

2016 crop situation:

Quality expected to be poor overall, many foresee BC to be the highest available grade in

quantity. Purchasing of the new crop will start in September when we will have a clearer picture

of the situation. Overall quality is lower because of the same adverse weather conditions as in

the rest of Java, continuous rains with a high disease occurrence which also makes it difficult to

sun cure. Prices are expected to be relatively high considering the overall quality will probably

be low. Crop size expected to fall to about 5,000 MT from 7,000 MT last year. Madura quality

will be similar and quantity less than 2,000 MT. Overall expectation is that there will be little to

no AB and AC material available and this will for sure be expensive.

30000

1200014000

10000

6000

0

5000

10000

15000

20000

25000

30000

35000

2012 2013 2014 2015 2016 (est)

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Crop year

Jatim VO (Packed Weight MT)

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INDONESIA –BESUKI/VO


2016 CROP STATUS

Growing conditions:

Overall quality of the Kasturi is also expected to be lower than normal and expected quantity

will be down to about 5,000 MT for this season. This quantity could go up significantly since

there are many late plantings but still too early to forecast what will become of this. Like the

Besuki/NO and Jatim/Madura crop, the Kasturi is affected by the weather which is expected to

leave its marks on the quality.

Lately some previous crop stocks are being bought but still some old stocks remain with the

dealers.

25000

13000 12000

75005000

0

5000

10000

15000

20000

25000

30000

2012 2013 2014 2015 2016 (est)

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Crop year

Besuki VO (Packed Weight MT)

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PARAGUAY – CRIOLLO


2017 CROP STATUS

Crop 2017 is now at the seedbed/transplanting stage. Tobacco growers suffered a poor crop in

2016, caused by El Ninõ effects in the region. Actual planting intention is excellent and farmers

are eager to produce quality/healthy tobacco but, as usual, this will greatly depend on the

weather. At this moment it is still too early to gauge what the production will be.

Normal crop production range between 2.000/2.500 tons for export. Considering that there is

no unsold tobacco in the field and that exporters only carry unsold low grades, we expect some

competition during the buying season, to start by the end of 2016. This situation will generate

higher buying prices hence, higher costs.

General comments:

So far, winter progresses normally and forecasts are optimistic. Exchange rate remains pretty

stable and so does inflation.

ECONOMIC DATA

Exchange Rate August 23 USD 1,00 = 5550 PYG


2500

3200

2600

750

0

500

1000

1500

2000

2500

3000

3500

2012/2013 2013/2014 2014/2015 2015/2016

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Crop Year

Criollo Production (Packed Weight MT)

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PHILIPPINES – ISABELA (DAC & BURLEY)



Isabela DAC:

Receiving of the 2015/2016 crop started on May 16 and ended on July 28.

All farmers have delivered 100% of their tobacco and the overall crop quality was good.

Thanks to the improved quality compared to last year, farmers received much better return of

their crop this year.

72007900

580 720

0

2000

4000

6000

8000

10000

2012/2013 2013/2014 2014/2015 2015/2016

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Crop Year

Isabela & Cagayan Province Production DAC (Packed Weight MT)

7560

9135

8000 7800

0

2000

4000

6000

8000

10000

2012/2013 2013/2014 2014/2015 2015/2016

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Crop Year

Isabela & Cagayan Province Production Burley (Packed Weight MT)

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Growing Conditions:

Started good for the 2015/2016 crop, with close to normal weather conditions.

Especially for the early planted tobacco the quality was very good and yields higher than

normal. In some lower areas the quality and yield was affected by flooding.

Temperatures during time of harvesting and curing was favorable and only a few incidents of

diseases was detected during the growing season.

Current operations:

The DAC crop is now under fermentation and initial sorting and packing will start early

December.

Agronomy:

We are now planning for the 2016/2017 crop. Identifying farmers for recruitment.

Fertilizer recommendations will be based on soil test analyses of growing areas.

Fertilizers and CPA’s will be supplied by HCIG/CdF. Application and methods will be directed

by the HCIG/CdF agronomy department.

HCIG/CdF Production:

2015/2016 crop final DAC production was 85,000 kg (green)

2016/2017 crop estimated DAC production 200,000 kg (green)

ECONOMIC DATA

Exchange Rate August 23: USD 1,00 = 46,54 PHP


20

US - FLUE CURED As of August 18th, 2016 Summary:

Receiving stations throughout the entire belt have opened.

Lower stalk tobaccos that have been received appear average to above average in colour

and quality. Middle and upper stalk tobaccos in the field continue to appear average to above

average. Above average rainfall in isolated areas of Eastern North Carolina during July has

adversely affected a small portion of the crop.

Volumes: Total US Flue-Cured

Planted area: Acres

Yield: lbs./acre

Volume: lbs.

2016 (Estimated) Source: H&C

216,700

2,100

455,070,000

(206,416,525 kgs)

2015 Final

Source: USDA

220,000

2,210

486,250,000

(220,559,552 kgs)


Transplanting Topping Harvesting Curing Purchasing

100% 98% 16% 16% 8%

21

US DARK FIRE AND DARK AIR CURED As of August 18th, 2016 Summary:

Excessive rain has continued into August. July and August saw more rain than average. Wet conditions in the dark belts of Tennessee and Kentucky have slowed down the

harvest of the crop. Reports of disease issues and spotting. There is still good to average tobacco, overall crop is below average.

Volumes: Total US DFC and DAC

Planted area: Acres

Yield: lbs./acre

Volume: lbs.

2016 DFC

(Estimated) Source: H&C

15,748

2,857

45,000,000 (20,411,656 kgs)

2015 DFC

Final

Source: USDA

17,500

3,157

55,240,000 (25,057,000 kgs)

2016 DAC

(Estimated) Source: H&C

5,274

2,465

13,000,000 (5,896,700 kgs)

2015 DAC

Final

Source: USDA

6,200

2,750

17,050,000 (7,733,749 kgs)



100% 98% 20% 0% 0%

22

US BURLEY As of August 18th, 2016 Summary:

Western and Central Kentucky and Middle Tennessee have continued to be plagued

with heavy rains since early July. Those areas received the most damage.

Diseases like target spot and black shank have affected some areas of surviving tobacco

in the field. Wind damage has affected a portion of the remaining tobacco.

Harvest has begun throughout southern portions of the belt.

Volumes: Total US Burley

Planted area:

Acres

Yield: lbs./acre

Volume: lbs.

2016 (Estimated) Source: H&C

79,150

1,604

126,956,600

(57,586,613 kgs)

2015 Final

Source: USDA

78,900

1,834

144,675,000

(65,623,554 kgs)



100% 75% 15% 5% 0%

Documents

CROP REPORT AUGUST 2016