MKC 2022 Annual Report

Shaping the future together.

2022 ANNUAL REPORT

Forward OUR MISSION

To create customer, employee and partner success to provide a safe and sustainable food supply.

“The only way to predict the future is to have power to shape the future ”

-Eric Hoffer

OUR VISION

Partner with customers to successfully navigate the complexity of modern agriculture and industry.

OUR VALUES

The success of our business will be determined by our ability to focus on safety, courtesy, image and innovation.

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2022 ANNUAL REPORT

The only thing certain in agriculture is that each year will bring its own new challenges. In recent years, we have seen unprecedented change and disruption.

This has impacted every part of our personal and professional lives. One thing that remains firm is our commitment to Shared Growth. Shared Success.

As your cooperative, we are prepared to serve you through these challenges and shape the future together.

Reflections

MKC continues to perform well in all business units, including grain, agronomy, energy and feed. This year’s volumes outpaced last year’s record. End user demand for grain, and producer needs for both crop and livestock production inputs were nearly unprecedented.

Past investments have allowed your cooperative to be well-positioned to meet these demands.

On May 16, 2022, MKC completed the unification with Progressive Ag Cooperative (PAC). This strategically grows the MKC footprint an additional 12 locations in south central Kansas. These locations surround the Sumner County Grain Terminal. This unification allows us to better service the existing MKC market in that area and our new memberowners. Over the years, MKC has proven the value unification can bring and will continue to look for additional merger opportunities in strategic markets.

On January 1, 2022, Producer Ag, replaced TMA as MKC’s grain marketing and risk management division. While the name on the door has changed, the number-one focus is still on the producer. The same team is in place to provide the high level of service and partnership you have received in the past. The future of the MKC grain business is strong.

A third grain terminal is being built in Rice County. This continues to build on our strategy to align Kansas producer’s grain with global market access.

This year, in person events returned. We were thrilled to host our member-owners at events such as Ag Symposium and the Emerging Producers Program. While we have found

efficiency and cost savings through virtual meetings and events, nothing can replace the value of an in-person connection with our member-owners.

Investments

Consistent financial performance over time enables MKC to invest back into assets and growth. As our member-owners’ operations continue to grow and face unique challenges, our team is working to offer the latest technology, programs, and products that support your operation’s success. MKC invested in a new customer portal, MKC Connect and Mid-West Fertilizer Connect. This has created an improved online and mobile experience for member-owners to easily access their account information at their fingertips while in the field.

You can do business on your terms with 24/7 access to your account information. This new portal also allows easier access to customer information for our strategic account managers to provide faster service and insights to their customers.

MKC has invested in logistics software. This spring we launched a pilot for our Optimal Dispatch program. This is the next step in our logistics strategy. Optimal Dispatch routes equipment more efficiently, traveling less miles, using less diesel, and allowing us to maximize the time spent by our employees and our machines while covering more acres.

In turn, this will create a better customer experience through faster response times, more predictable application time, and providing a more cost-effective application for the producer.

As mentioned previously, a third grain terminal is being built in Rice County. We plan to break ground later in 2022. Since its opening in 2014, the Canton Terminal has shipped 443 trains and the Sumner County Terminal has fulfilled 106 trains since 2017.

Leadership letter

Over the past 2 years, everywhere we look we can see change and disruption. All parts of business and our personal lives have been impacted by a global supply chain that has been upended. Our cooperative’s vision statement very simply states: Partner with customers to successfully navigate the complexity of modern agriculture and industry. The necessity for MKC to deliver on that statement is more relevant and clearer today than ever before. Your cooperative is ready for the accelerated pace of change, and we look forward to shaping the future with you.

Safety

MKC has a safety-first culture. Every internal meeting begins with a topic on safety. Each location begins the morning with a tail gate talk to discuss the plan for the day, safety topic of the day and what challenges the team may face. Agriculture is ranked number six on the list of most dangerous industries.

SHAPING THE FUTURE TOGETHER.

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Our focus is to get everyone home safe at the end of the day.

In addition to daily safety talks, MKC provides more extensive training opportunities for team members.

We have further invested in the Training Center to have the ability to host more in-house hands-on training. Often, MKC team members are subject matter experts and lead the trainings. We also partner with other resources such as Hutchinson Community College and University of Kansas Fire and Rescue team for more advanced training.

Vision for the Future

A challenge in our industry is aging infrastructure.

Alignment opportunities with other industry leaders can provide MKC access to resources that enable our investments to be more effective. This allows us to provide greater value back to the producer. One example of this kind of alignment is our three rail loader assets with our strategic partner, CHS. Ultimately these alignments should provide MKC and our member-owners more predictable access to markets, products, and resources. We always look for partnerships that provide reliable supply. This has even more value during a difficult time in the supply chain. In addition to these items, it is critical that all partners share an aligned vision.

If done right, there is stakeholder value created for our member-owners, MKC and the aligned

partner(s). This model is important as we continue to drive for better efficiency. This efficiency can help us in areas of ongoing labor issues and technology integration. As the labor shortage continues, we can use the efficiencies gained by technology to alleviate some of these gaps. These partnerships push us forward. They challenge us to do things differently than the way we have in the past and make us stronger for the future. This perfectly describes the cooperative model and why it is so critical to the agricultural industry.

We sincerely appreciate the trust you place in MKC as we strive to earn your business every day. We understand the obligation we have to our member-owners to continue evolving our business model to add value to your ever-changing operation. As internet pioneer, Steve Case, said: “The pace of change and the threat of disruption creates tremendous opportunities”. We know our adaptability is key to long term success. We are committed and excited about how the fast pace of change will allow us to work together to shape the future of your cooperative.

ALLAN WEGNER CHAIRMAN BOARD OF DIRECTORS

BRAD STEDMAN PRESIDENT AND CHIEF EXECUTIVE OFFICER

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2022 ANNUAL REPORT

E i B t D

DISTRICT 1

DISTRICT 3 DAVID MILLS SECRETARY

JASON GAEDDERT VICE CHAIRMAN

AT-LARGE

JAMES MOSIMAN

DUANE JOHNSON

ALLAN WEGNER CHAIRMAN

HAL MAYER

BEN SCHRAG

J. DANIEL EAKES

APPOINTED

AT-LARGE

C.J. BLEW

Board of directors

DISTRICT 2

Elected by their peers, these individuals collectively leverage their expertise to provide important direction and ensure the safety and soundness of the finances of the cooperative.

Board members are farmers and ranchers themselves and have a deep understanding of the challenges their fellow member-owners face each and every day.

Detailed biographical information on the MKC Board of Directors is available at mkcoop.com.

JOHN BORTH

BRAD STEDMAN PRESIDENT & CEO

SHAPING THE FUTURE TOGETHER.

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The past shapes the future Rice County Terminal

MKC and CHS announced plans in February to build and operate a grain shuttle loader near Sterling, KS. Full operations at this new grain shuttle loader are expected to begin by late 2023.

MKC and CHS officials note that final construction decisions and timeline are contingent on negotiations with state and local officials. Located in Rice County, the facility will include a highspeed shuttle loader with access to rail on the K&O Railroad. Upon completion, on-site storage will be approximately 5.2 million bushels.

Food Drive

Review of year

Greenfield Robotics Partnership

MKC and Greenfield Robotics are pleased to announce a new partnership.

This partnership will provide early access to Weedbot robotic systems for customers in the growing MKC footprint. This partnership will allow Greenfield Robotics and MKC the opportunity to work together on field trials and learn more about the logistics, marketing, and efficacy of these efforts.

MKC presented $31,000 to food banks in 23 different Kansas counties in 2021. These monetary donations are supported through a matching funds program with the Land O’ Lakes Foundation. Since its first annual food drive nearly 10 years ago, MKC has donated over 40,000 pounds of non-perishable food items and $194,500 to local food banks. The 2022 goal is to donate 2,500 pounds to local food banks.

Pictured: Lamont Turcotte with Buhler’s food drive donations, ready to be delivered to the local food bank.

PAC Merger

Progressive Ag Cooperative membership voted to approve unification with MKC. After a series of informational meetings, the owners of Progressive Ag Cooperative approved the merger with MKC by an overwhelming majority of 85% at a special vote meeting on March 10, 2022.

Initial merger discussions between the cooperatives began prior to the respective boards approving a plan and merger agreement on February 15, 2022. PAC and MKC were officially united on May 16.

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Producer Ag replaced TMA as MKC’s grain marketing and risk management division. While the name on the door has changed, the number one focus is still on the producer. The future of the MKC grain business is strong.

Attending the 2022 Legislative Action Day at the Capitol: Spencer Reames, Senior Location Manager, Mike Zacharias, Strategic Account Manager, Adam Butler, Senior Location Manager, Scotty Yerges, Producer Ag Crop Insurance Manager and Shane Slief, Grain Operations Manager.

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MKC Advocating For You

Agriculture advocacy is an important way that MKC supports their member- owners, employees and the industry. Through the dedication of our member-owners and employees, MKC has been on the forefront of agriculture advocacy at the state and national levels for years.

Introducing MKC and Mid-West Fertilizer Connect

Scan to sign-up for MKC Connect!

By investing in this new online portal, we’re investing in you, our member-owners. When you’re in the field this season, you’ll need quick access to your account. The new customer portal is a mobile first platform. You can easily access and navigate your account information right from your mobile device in our MKC Connect app.

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Quickly access your account information in one place.

View + pay statements and account balances.

Easily check your remaining balances on prepay.

Review and download past season’s purchase history.

Review of year Rantizo Drone Partnership

MKC has made an investment in drone application technology using stateof-the-art Rantizo drones to apply products to our customers fields with precision accuracy.

“MKC continues to search for and experiment with innovative technology.

Drones can potentially garner greater value for our members and cooperative in the future,” says Erik Lange, MKC Chief Operating Officer. “We are exploring a drones ability to perform applications at times it is too wet to Scan to see our apply with traditional ground rigs and in areas that are hard to access with drone’s first flight! traditional aerial application equipment. We see the opportunity over time for drones to do much more and possibly disrupt other current standard practices as technology matures and regulations adapt to the new technology.”

Grain Safety

Grain safety is crucial because everyone deserves to go home to their families at the end of the day. Hundreds of people die or are injured each year due to preventable hazards in grain storage and handling facilities. We take part in Grain Safety Week every year because MKC is committed to the safety of our employees and member-owners. In addition to Grain Safety Week, MKC actively preforms preventative maintenance to our equipment and facilities, regularly provide safety training to employees, farmers and emergency personnel, including Hands On Training (HOT) at the MKC Training Center. For more advanced trainings, we lean on our partnerships with safety experts.

Scan for safety tips!

NGFA Safety Tips: Preparing Bins For Harvest NGFA Safety Video: Bin Entry Safety OSHA Overview: Grain Handling Safety

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Financial Overview The 2022 fiscal year, although challenging, gave us opportunities to share the successes of MKC with its’ member-owners. Here is a quick list of key successes that impacted our member-owners and your cooperative this past fiscal year.

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Our grain business unit which includes Producer Ag (formerly Team Marketing Alliance) shipped 90 million bushels of grain, a significant amount of that grain was shipped through our shuttle loaders in Canton and Sumner County Kansas.

These shuttle loaders continue to add value through enhanced marketing opportunities for our member-owner’s grain. In the end, our grain business unit finished well ahead of financial plan.

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Our agronomy business unit continues to grow, ending with record volumes for fertilizer sales, custom application and crop protection sales.

The earlier acquisition of Mid-West Fertilizer, which is included in our agronomy business unit, continues to provide financial uplift to the overall agronomy business unit as it completed another strong fiscal year. Our aligned relationships with suppliers and manufacturers continue to provide value for our member-owners through access to allocated products and other needed crop inputs.

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Our energy business unit completed another strong financial performance, finishing ahead of financial plan. This fiscal year, the energy business unit sold 27 million gallons of fuel.

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Our feed business unit had another good financial year and continues to transition with our investment in Countryside Feed, LLC, as well as our feed mills in the Manhattan area.

Three years ago, we identified three financial metrics that we use to measure success of our financial performance: net earnings, net fixed assets and working capital. We also measure the value brought to our member-owners with two primary metrics: customer satisfaction and customer retention.

Net earnings measure the level of success or profitability achieved, net fixed assets measure MKC’s commitment to growing and upgrading the infrastructure of the cooperative for future generations and working capital measures the strength and stability of the cooperative’s balance sheet and overall financial position.

MKC is committed to performing at a strong financial level. Our net earnings for the 2022 fiscal year were

$16.6 million, a significant increase over prior years.

MKC’s net fixed assets of the organization have grown from $39 million to $182 million in the past ten years.

We are often reminded DANNY POSCH that the cooperative has no EXECUTIVE VICE end date and that we must PRESIDENT & CHIEF provide future generations FINANCIAL OFFICER with a company that can serve them as well as it has served previous generations. Our commitment to future generations is demonstrated in the growth of our net fixed assets.

At fiscal year-end, our cooperative has a strong working capital position of over $70 million, an increase of $2 million over 2021. A strong working capital position is critical to our organization because it provides a platform for growth and allows the cooperative to execute its’ strategic goals, strengthens relationships with creditors and allows the cooperative to maintain adequate lines of credit with lenders.

We continue down the path of issuing non-qualified patronage (NQ) to our members because we believe it has significant tax savings for our member-owners and MKC. We are pleased that we were able to allocate patronage in all of our business units again this year. In addition to patronage, our pass-through of the section 199A deduction offers significant value to our member-owners because the allocated 199A deduction can be utilized on the tax return of the member-owner.

A customer satisfaction metric measures how well our products and services meet or exceed our member-owners’ expectations, while a customer retention metric measures the ability of a business to retain customers. We are proud to report our customer satisfaction and customer retention metrics for this past year were 84.7% and 99%, respectively. Both of those metrics are considered extraordinarily strong in any industry.

We are pleased to share our success with our member-owners, as well as our commitment to be a financially sound company that adds value for our member-owners today, and for future generations to follow.

Shared Growth. Shared Success.

SHAPING THE FUTURE TOGETHER.

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CONSOLIDATED STATEMENTS OF OPERATIONS

FOR YEARS ENDED FEBRUARY 28, 2022 AND 2021

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2022 ANNUAL REPORT

CONSOLIDATED BALANCE SHEETS

FEBRUARY 28, 2022 AND 2021

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NET EARNINGS

WORKING CAPITAL

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2022 ANNUAL REPORT

Net earnings for FYE2022 were $16,655,342. Net earnings are important to the organization because it allows the company to attract talented employees, redeem past patronage, retire debt and reinvest in infrastructure.

MKC’s working capital position is at $69,737,423. Working capital provides a platform for growth and is a good indicator of a company’s ability to meet upcoming financial obligations.

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TOTAL ASSETS

Total assets of the company are $696,416,683. Total assets of the company are items of economic value, which are expanded over time to yield a benefit for the company. Total assets include inventories, receivables, cash, fixed assets and investments of the company.

GROWTH IN OVERALL NET FIXED ASSETS

Net overall fixed assets reflect the ending balances of cumulative investments in property, plant and equipment of MKC and its affiliates – Mid-West Fertilizer, Producer Ag, FarmKan, A+ Aviation Services and Countryside Feed.

SHAPING THE FUTURE TOGETHER.

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PATRONAGE AND DPAD

COMMUNITY INVESTMENT

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2022 ANNUAL REPORT

MKC strives to bring additional value to its owners by passing through NQ patronage and a DPAD (199A) deduction.

NQ patronage allocation and DPAD pass through were $4,946,002 and $2,300,000, respectfully for this past year.

MKC provides benefits to over 150 communities across Kansas, Missouri, Arkansas and Oklahoma in the form of personnel costs, local taxes and other expenses. These payments have a significant impact on communities and help support the businesses and services we utilize.

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Customer Stats In February of 2022, MKC surveyed a segment of our customers to understand if we are meeting their needs. We have done this annually for the last five years. The results have continued to improve year over year, reaffirming that we are hitting the mark on shared success.

Customer Satisfaction Results

• Just shy of target, satisfaction increased 1.7% over last year.

• Customers stated service standards, relationships, and trust were reasons for overall satisfaction in survey comments.

84.7%

Actual 85%

FY22 Target

Customer Retention Results

• Record high retention with our top 800 accounts.

• Product availability and preparation were driving forces in customer retention.

99%

Actual 95%

FY22 Target

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