FEDERAL RESERVE BANK OF KANSAS CITY Riding the Waves in Agriculture! • Demand Drives the Market • Government Policy is Key . Good and Bad • Cash is King • Equity Pays No Bills • Wash and Repeat! FEDERAL RESERVE BANK OF KANSAS CITY The End of a Bull Market • 1976/77 Ag was booming! • A real demand driven market! • 1980 Grain embargo from the Carter administration • Paul Volker chaired the Fed • No income = rapidly declining working capital • Operating loans collapsed • Then Land values collapsed FEDERAL RESERVE BANK OF KANSAS CITY Starting Over at the Bottom! • Farmers National Company • Managing mostly acquired properties • Empathy was key • Fortunes were lost and fortunes were made • Change brings opportunity! FEDERAL RESERVE BANK OF KANSAS CITY A New Era • Metlife sold the company • ESOP was formed after the initial leveraged buy out • Over 95% of employees own stock • No debt, no outside investors • Substantial growth in size and profitability since 2000 • The power of employee ownership! FEDERAL RESERVE BANK OF KANSAS CITY Wash and Repeat! • 30 years later – Demand drives a bull market • Land values and rents sky rocket • Supply meets demand and income falls • Working capital declines rapidly • The tariff war impacts the market • The same but different! This is not the 1980’s . FEDERAL RESERVE BANK OF KANSAS CITY A Career Highlight • Joined the Kansas City’s Omaha Branch Bank Board of Directors – served as chairman for 4 years • The bottom of the financial crisis • Able to represent ag on the Board • In January of 2015 joined the Kansas City Head Office Board • I was Vice Chair in 2019, and Chairman of the Board in 2020 FEDERAL RESERVE BANK OF KANSAS CITY FRBKC Overview ASFMRA November 2020 Jim Farrell, Chair – Kansas City Board of Directors FEDERAL RESERVE BANK OF KANSAS CITY Federal Reserve System The Federal Reserve System consists of: • The Board of Governors, Washington, D.C. • 12 Regional Reserve Banks and branch offices 8 FEDERAL RESERVE BANK OF KANSAS CITY Leadership – Board of Governors • 7 members of the Board of Governors (staggered 14-year terms) Jerome H. Powell, Chair Richard H. Clarida, Vice Chair February 5, 2022 – Chair September 17, 2022 – Vice Chair January 31, 2028 – Gov. January 31, 2022 – Gov. • Appointed by the president of the United States, confirmed by Senate Michelle W. Bowman Lael Brainard Randal K. Quarles Vacant Vacant January 31, 2034 January 31, 2026 January 31, 2032 9 Vice Chair of Supervision October 13, 2021 FEDERAL RESERVE BANK OF KANSAS CITY Leadership – Kansas City Board of Directors CLASS C (non-bankers appointed by the Fed’s Board of Governors) Jim Farrell Edmond Johnson Patrick A. Dujakovich (Chair) (Deputy Chair) President President President and Owner Greater Kansas City AFL- Farrell Growth Group LLC Premier Manufacturing, Inc. CIO Kansas City, Missouri Omaha, Nebraska Frederick, Colorado CLASS B (non-bankers elected by member banks in the Tenth District) Brent A. Stewart, Sr. Doug Stussi Lilly Marks VP for Health Affairs President and CEO Executive Vice President and University of Colorado and United Way of Greater Managing Director Anschutz Medical Campus Kansas City Love Family Office Aurora, Colorado Kansas City, Missouri Oklahoma City, Oklahoma CLASS A (bankers elected by members banks in the Tenth District) Gregory Hohl Patricia J. Minard Kyle Heckman Chairman and President Chairman, President & CEO Chairman, President, & CEO Wahoo State Bank Southwest National Bank Flatirons Bank Wahoo, Nebraska Wichita, Kansas Boulder, Colorado FEDERAL RESERVE BANK OF KANSAS CITY Leadership – Reserve Bank Presidents Eric S. Rosengren John C. Williams Patrick T. Harker Loretta Mester Thomas I. Barkin Raphael Bostic 1st District – Boston 2nd District - New York 3rd District – Philadelphia 4th District – Cleveland 5th District – Richmond 6th District – Atlanta Charles L. Evans James Bullard Neel Kashkari Esther L. George Robert S. Kaplan Mary C. Daly 7th District – Chicago 8th District - St. Louis 9th District – Minneapolis 10th District - Kansas City 11th District – Dallas 12th District - San Francisco FEDERAL RESERVE BANK OF KANSAS CITY Monetary Policy – Federal Open Market Committee (FOMC) Structure of the FOMC Functions of the FOMC • FOMC is comprised of 19 members • Oversees open market operations – – 7 members of the Board of Governors the primary tool of monetary policy – 12 Reserve Bank Presidents • Sets target for the Federal Funds rate • 12 FOMC voting members and conducts operations to maintain – 7 members of the Board of Governors that rate – New York Reserve Bank President • Sets reserve requirements – 4 rotating Reserve Bank Presidents • Directs operations by the Federal Reserve in foreign exchange markets 12 FEDERAL RESERVE BANK OF KANSAS CITY Supervision and Regulation • Supervises banks, bank holding companies, and savings and loan holding companies: • Lends to financial institutions: • Discount window operations • Facilitates orderly closures of failing institutions without Reserve Bank loss • Data collection and analysis: • Collect financial and structure data • Surveillance and risk analysis 13 FEDERAL RESERVE BANK OF KANSAS CITY Financial Services Financial Institutions U.S. Treasury • Provides financial institutions across the • Operates as the bank for the U.S. Treasury, country with services and support to access providing systems and operational support in the payments system and to meet the such areas as payments, debt management and public’s demand for currency and coin. information management. Payments System Research • Check Clearing Retail Payments • Automated Clearing House • Provides expertise, knowledge and analysis of payments systems, products and markets to Wholesale • Funds Transfer policy makers to support the Fed’s U.S. Payments • Securities Transfer payments system mission. • Provides executive level support for the • Currency and Coin Cash Services Circulation development of a real-time gross settlement service. 14 FEDERAL RESERVE BANK OF KANSAS CITY Other Assurance Activities Board of Governors U.S. Treasury Office of KPMG Compliance Management Key Control Testing Office of the Government Chief Accountability Information Office Security Officer Office of Inspector General 15 Internal FR FEDERAL RESERVE BANK OF KANSAS CITY About the 10th District • The Kansas City Fed’s central geographic location, high performance, and expertise in technology and customer service, position the District to effectively lead critical functions on behalf of the Federal Reserve System and the U.S. Treasury in a cost-effective manner. • More than 2,000 employees are located at the headquarters in Kansas City and Branch offices in Denver, Oklahoma City and Omaha. • The Omaha Branch employs nearly 170 employees. 16 FEDERAL RESERVE BANK OF KANSAS CITY A Few Observations • Cycles in ag are real - but hard to predict • Cash is still king, equity still pays no bills • Government payments . ? • Ethanol will continue to be under pressure • We have record recorded farm debt today • Good opportunities for exports • Covid will slow development FEDERAL RESERVE BANK OF KANSAS CITY The Most Interesting Developments • The continuing impact on Ag from the 1980’s • Hogs went from individual operations to nearly all corporate contract production, in a few short years • Fortunes were made at the bottom • Overnight from commodity to demand • The Wall Street Investors • Increasing consumer influence FEDERAL RESERVE BANK OF KANSAS CITY Thank You!.