10-Oct-10

CHINA TOBACCO

ASSOCIATED TOBACCO COMPANY - CHINA

Tobacco Crop Review 2010

Tobacco Crop Review 2010

CHIN A TOBACCO

China Statistical Information

Total Area: Land Area: Coast Line: Land use: 9,600,000 sq. Km 9,326,410 sq. Km 18,000 Km Arable land: 13.09% Permanent crops: 1.7% Other: 85.21%
8.50 7.50 6.50 5.50 2005 2006 2007 2008 2009

Exchange Rate RMB-USD

8.19 6.81 2010 Sept.

Population: GDP: CPI: Rate of Exchange:

1.37 billionest.Oct.2010 8.2% 3% 1USD= 6.73 RMB (Oct, 2010)

FOREX Reserve:

2,454.20 Billion USD

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Tobacco Crop Review 2010

STMA- State Tobacco Monopoly Administration

The tobacco Industry in China is controlled by State Tobacco Monopoly Administration (STMA) with the head office being based in Beijing capital city. STMA is responsible for the assimilation and compilation of Government policies and directives and further outlines and defines the production quotas for: Farmers production per province. Domestic factories / province ( domestic / export) Cigarette production, both domestic and export. Import and export both to and from international markets. Regulatory body on machinery and packaging divisions. Below STMA is CTI in Beijing who is responsible for all import and export and export of tobacco and the implementation of STMA mandates. The provincial arms of CTI and their responsibilities are as follows: CNTC - Responsible for tobacco production for domestic and export use. CTIEC - Responsible for sourcing, processing and marketing of tobacco for export markets.

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Tobacco Crop Review 2010

Tobacco Crop Production 2010

Total FCV production for 2010 is approximately 2.4 billion kilos together with approximately 114.5 million kilos of Air Cured tobaccos (Burley and Oriental combined) resulting in a total production of approximately 2.51 billion kilos, as represented in the graph adjacent.
2,500 2,000

1,500

1,000

500

0 2006 2007 2008 2009 2010

Flue Cured Virginia

Burley; Air Cured

Chinese Tobacco Production and Export Quota

1,000,000 FCV Production FCV Quota Burley Production 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010

Burley Quota

YUNNAN

GUIZHOU

SICHUAN

HENAN

HUNAN

FUJIAN

SHANDONG

HUBEI

HEILONGJIANG LIAONING
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Tobacco Crop Review 2010

Yunnan Province FCV 2010

Total

crop production for 2010 is approximately 938,500mt (green) Export quota for 2010 is 73,000mt (green) Total production in 2009 is 930,000mt (green) The main seed varieties used in this province are K326, YN85, YN87 and Hongda. The main growing areas are Yuxi, Honghe, Qujing and Chongxiong respectively.

Guizhou Province FCV 2010

Total

crop production for 2010 is approximately 360,000mt (green) Export quota 2010 is 38,000mt (green) Total crop production in 2009 - 360,000mt (green) Export quota 2009 38,000mt (green) The main seed varieties used in this province are K326, YN85 (0ver 70%) and YN87. Main tobacco growing areas: Zunyi, Bijie, Qianxinan, Tongren and Qiannan.

Sichuan Province FCV 2010

Total

crop production for 2010 is approximately 176,500mt (green) Export quota 2010 is 18,000mt (green) Total crop production in 2009 - 190,500mt (green) Export quota 2009 16,000mt (green) The main seed varieties used in this province are YN85, YN87 and GD (Gold Dollar) Main tobacco growing areas: Liangshan, Guangyuan, Panzihua, Luzhou and Chongqing. ** These figures for Sichuan province include the Chongqing municipality area
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Tobacco Crop Review 2010

Henan Province FCV 2010

Total crop production for 2010 is approximately

154,000mt (green) Export quota 2010 is 5,000mt (green) Total crop production for 2009 - 164,000mt (green) Export quota 2009 5,000mt (green) The main seed varieties: YN87 (30%), Zhongyan100 (36%), NC89 (7%), and Y-6(13%) Luoyang, Nanyang and Xuchang respectively.

Main tobacco growing areas: Sanmenxia,

Hunan Province FCV 2010

Total

crop production for 2010 is approximately 172,500mt (green) Export quota 2010 is 7,000mt (green) Total crop production for 2009 175,000mt (green) Export quota 2009 7,000mt (green) The main seed varieties used in this province are YN87, Zhongyan100, NC89 and Zhongyan 201. and Changsha.

The main growing areas: Changde, Xiangxi

Fujian Province FCV 2010

Total crop production for 2010 is

approximately 100,000mt (green) Export quota 2010 is 3,00mt (green) Total crop production in 2009 150,000mt (green The main seed varieties used in this province are K326, YN85 and YN87. Main tobacco growing areas: Longyan, Nanming and Sanming.

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Tobacco Crop Review 2010

Shandong Province FCV 2010

Total crop production for 2010 is

approximately 73,000mt (green) Export quota 2010 is 5,000mt (green) Total crop production for 2009 75,700mt (green). Export quota 2009 5,000mt (green) The main seed varieties used in this province are K326, NC89, Zhongyan100, YN85 and YN87. Main tobacco growing areas: Weifang, Linyi and Rizhao.

Hubei Province FCV and Burley 2010 FCV

Total crop production for 2010 is

approximately 98,500mt (green) Export quota for 2010 is 7,000mt (green) Total crop production for 2009 86,000mt (green) Export quota for 2009 7,000mt (green) The main seed varieties used in this province are Y87 (60%), K326 (33%), Y85, Zhongyan100 and K326LF. The main growing areas: Enshi and Yichang.

Burley

Total crop production for 2010 is approximately 28,000mt (green) Export quota for 2010 is 8,000mt (green) Total crop production for 2009 29,500mt (green) Export quota for 2009 8,500mt (green) The main seed variety used in this province is JB80. Main tobacco growing area is Enshi.

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Tobacco Crop Review 2010

Heilongjiang Province FCV 2010

Total crop production for 2010 is

approximately 70,000mt (green) Export quota for 2010 is 16,500mt (green) Total crop production for 2009 79,000mt (green) Export quota for 2009 10,000mt (green) The main seed varieties used in this province are 91 21 and NC89. Main tobacco growing areas are Mudanjiang and Harbin.

Liaoning Province FCV 2010

Total crop production for 2009 is

approximately 28,500mt (green) Export quota 2010 is 7,000mt (green) Total crop production for 2009 25,000mt (green) Export quota 2009 6,000mt (green) The main seed varieties used in this province are Liao15 and YN85. Main tobacco growing areas: Dandong, Tieling, Fuxin and Chaoyang.

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Tobacco Crop Review 2010

Pricing Levels for 2010

Pre-season discussions with CTI suggest that pricing levels will remain on a par with last year, owing to existing market conditions pertaining to supply and demand. CTI consider market stability to be of paramount importance and a pricing collapse as seen recently in various world markets would not be accepted in China. In view of the above CTI has kept the purchase price from farmers consistent with 2009 levels. Punitive price increases for the 2010 crop will be given to dealers and customers who have failed to honor 2009 contracts and shipping schedules.

General Crop Overview

Three of Chinas top producing provinces i.e. Yunnan, Guizhou and Sichuan, which account for approximately 1.48 billion kilos or approximately 60% of nation-wide production, have experienced some of the most extreme growing conditions on record for the last 100 years. STMA in conjunction with CNCDR (China National Committee for Disaster Reduction, MOF (Ministry of Finance) and MCA (Ministry of Civil Affairs) reacted swiftly and to date contributions of over US$100 million have been applied to the worst affected areas. CTI approved a substantial increase in seedling production and distribution as a result of the high seedling morbidity throughout each of the regions; as a result all three regions are expected to meet their quotas. In responding to the severe situation of protracted droughts, STMA is planning to allocate RMB 3.5 billion (US$530 million) between the regions for the construction of infrastructure facilities for tobacco fields. Whilst extreme climatic conditions have had a negative impact on quality, the worst effects have been largely negated thanks to the responsive efforts made by STMA and its subsidiaries.

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Tobacco Crop Review 2010

Points of Interest

China has over 20 million tobacco farmers growing tobacco on 15,910,000 Mu (1,060,667 Ha) of land. China cigarette consumption in 2009 was approximately 2.3 trillion sticks. China tobacco industry paid 513.11 billion Yuan (US$76.24 billion) in state taxes in 2009. CTI plans to invest 10 billion Yuan (US$1.49 billion) nationwide, for 3 consecutive years, commencing in 2010 on the modernization and mechanization of the tobacco industry infrastructure. The China government is planning on raising taxes by as much as 10%. This is currently under review and is yet to be passed into law. The tobacco industry of southwest China's tobacco-producing Yunnan Province - known as the kingdom of tobacco in China - generated 37.1 billion Yuan (US$5.46 billion) in taxes and profits in the first half of 2010, an increase of 3.7 billion Yuan (US$545 million), or 11 percent, over the same period of 2009, according to a statement released by the provincial tobacco industry.

END

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