Michelle W Bowman: Welcoming remarks - National Agricultural
Credit Conference
Welcoming remarks by Ms Michelle W Bowman, Member of the Board of Governors of the
Federal Reserve System, at the National Agricultural Credit Conference, Washington DC, 25
March 2019.
* * *
Good afternoon. It is a great pleasure for me to join the Federal Reserve Bank of Kansas City in
welcoming you to the Federal Reserve Board for the 2019 National Agricultural Credit
Conference. For nearly 80 years, these meetings have been at the forefront of important
discussions for those with a stake in agricultural lending, with the first National Agricultural Credit
meeting held in 1941. At that time and with war looming, there was a clear need to ensure that
our nation's farmers had the resources and capability to support the nation in the wake of the
great depression, deflation, and the dust bowl. This meeting provided a vital forum for candid
conversation, to exchange information, and to forge relationships that would enable lenders to
take steps to ensure a sound future for agriculture-a future supported by the efficient and
effective provision of credit.
In the decades since that first meeting, this conference has seen a number of boom and bust
cycles in agriculture, most often the result of volatile swings in commodity prices, land price
valuations, and borrowing costs for agricultural business owners. Through all of these
challenges, this conference has provided an important opportunity to promote a greater
understanding of emerging issues in agricultural finance. Further, the success of these meetings
largely depends on the interactions of everyone here today, so I want to thank you for attending
and for participating. I am honored to welcome you to the first conference meeting to be held at
the Federal Reserve Board. And I'm pleased to support this group's mission to foster discussion
on issues pertaining to ag finance, and I look forward to meeting with you and learning from the
discussion.
Today and tomorrow, we will discuss recent developments in agricultural credit markets. We will
also hear from presenters on topics that connect in various ways to the agricultural sector. I am
especially pleased to see there is a special focus on rural communities at this year's meeting. As
many of you know, this topic holds a special place in my heart. My family has deep roots in rural
Kansas and a long history in farming, ranching, and ag banking. I have spent much of my life and
career living, working, and raising a family in a rural area.
Rural communities are critical for our nation for many reasons including food production and
processing, manufacturing, and leading innovation in these industries. According to the U.S.
Census Bureau, 97 percent of the country's land mass is rural, and about 60 million Americans
1
call a rural community their home. To put that number in perspective, the rural population of the
United States is larger than the combined populations of the New York, Los Angeles, and
Chicago metro areas. If we were talking about the economies of those great cities, we'd stress
their regional differences, the complexities of demographic change, and the distinct challenges
each city faces to remain vibrant and innovative. When the focus shifts to the rural economy,
however, the discussion tends to be overly broad and simplistic. The diversity and complexity of
our vast rural communities too often gets lost-and I think that needs to change.
There are challenges in rural communities. We know them all too well. There is a notable gap in
access to broadband. As of 2016, 31 percent of Americans in rural areas were not able to
2
access broadband compared to just 2 percent of Americans in urban areas. This can have a
significant business impact on ag producers-for example, limiting access to internet-based
cattle auctions or inhibiting the ability of dairies to leverage technology to remotely access animal
nutritionists to formulate feed to maximize milk production.
Many rural schools struggle to attract and keep qualified teachers who can teach STEM and
advanced math classes. These subjects are vital to preparing our children for the opportunities
3
and challenges of a more competitive and technological workplace.
One in five people in rural areas have a bachelor's degree, compared to one in three in urban
4
areas. This educational disparity helps explain why the employment-to-population and labor
5
force participation rates in rural areas are lower than in many urban areas. Another contributing
factor to low rural labor force participation is the opioid crisis, which the entire nation is struggling
to overcome.
Policymakers need to be aware of and be willing to confront these issues. But let me be clear: I
am optimistic about the future of rural America. The narrative of rural decline is too sweeping and
brushes aside the diversity of the rural experience. Just as many cities thrive while others
struggle, there are deteriorating rural communities and rural communities that are thriving and
growing.
So let's build on these successes and highlight a few of the positives.
Following six years of steady population losses, up through 2016, the rural population appears to
have stabilized. And while employment is growing more slowly in rural areas than in urban areas,
6
rural unemployment has recovered and is now 1 percentage point below pre-recession levels.
The rate of poverty in rural areas is also falling. From a peak in 2013, the rural poverty rate has
fallen 2 percentage points to 16.4 percent in 2017.
There are also many creative and innovative rural communities. In manufacturing, innovation
rates are similar for urban and rural manufacturers, although the services sector in rural areas
7
lags its urban counterparts. And, I am greatly encouraged to see younger generations choosing
to live in and return to their roots in rural communities, just as my family and I chose to do. These
younger generations are often seeking a rural lifestyle and a deeper connection to a smaller
community a community where they can have a lasting impact. They are bringing with them the
same innovative spirit they bring to so many industries. For example, some of these young
entrepreneurs and farmers are capitalizing on the recent trend for broader access to locally
produced and sourced food.
Which brings us back to our focus today: agriculture is the foundation for many rural economies
and it is the central topic for this conference. Current conditions in agriculture appear to be
stable, though at a low level of income, following sharp declines for several years from the peak
in 2013. The prices of major agricultural commodities have also remained low in early 2019. For
example, today, the price of corn is about 40 percent less than it was from 2010 to 2013.
As noted in the Federal Reserve's latest Financial Stability Report, farmland values are at
exceptionally high levels, though down from their 2016 peak. And price-to-rent ratios are at
historic highs. At the same time, equity levels at many farms are higher than in the past. We also
see above-trend yields are helping to support many operators, though working capital at many
farms has fallen along with incomes. Although the increase in problem loans associated with
lower incomes has been modest, the Federal Reserve is monitoring the risk that has emerged in
recent years.
One risk that we are actively monitoring is the recent and devastating flooding in the Midwest and
its effect on both agriculture and rural communities across the region. Our thoughts and prayers
are with all those who live in the areas affected by this disaster. I would be especially interested
to hear your thoughts on how the flooding may affect agricultural operations and how lenders are
currently responding.
The topics you are discussing today are integral to my role as governor. On Thursday, I will be
visiting with and speaking to farmers and community bankers in Deming, New Mexico. An
important part of my job is to hear directly from leaders like you and others across this country to
better understand current challenges facing your communities, your companies, and your
industry. My goal is to bring back the knowledge I gain from these discussions to inform and
improve our work to support both the financial sector engaged in agricultural lending and our
mission as the central bank of the United States.
I hope that conferences like this will help generate a richer discussion about the challenges and
unique advantages in rural America so we can develop more creative, effective and direct policy
responses. A deeper debate that, for example, distinguishes between low-density and
higherdensity rural areas, between rural communities that are relatively isolated and those that are
connected and close to thriving cities, will help us develop more durable solutions.
Before I close, I want to thank you again, as well as the many people at the Federal Reserve
Bank of Kansas City and from the Federal Reserve Board who helped organize this year's
conference. Thanks to all of you for your work to ensure continued success for American
agriculture.
1
U.S. Census Bureau, America Counts: Stories Behind the Numbers, "What Is Rural America?" August 9, 2017.
Return to text
2
Federal Communications Commission (FCC), 2018 Broadband Deployment Report (Washington: FCC,
February 2, 2018). Return to text
3
Megan Lavalley, Out of the Loop (PDF) (Alexandria, VA: Center for Public Education, January 2018). Return to text
4
U.S. Census Bureau, "New Census Data Show Differences between Urban and Rural Populations," news
release, December 8, 2016. Return to text
5
Board of Governors of the Federal Reserve System, Monetary Policy Report (PDF) (Washington: Board of
Governors, February 22, 2019), 10-12. Return to text
6
Board of Governors, Monetary Policy Report, 10-12. Return to text
7
Tim Wojan and Timothy Parker, Innovation in the Rural Nonfarm Economy: Its Effect on Job and Earnings
Growth, 2010-14 (PDF) (Washington: USDA, September 2017). Return to text