Evening Report | October 26, 2023

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Ukraine denies Black Sea corridor is closed... Ukrainian Deputy Prime Minister Oleksandr Kubrakov denied reports the new Black Sea export corridor had been suspended. “The information regarding the cancellation or unscheduled stoppage of the temporary #Ukrainian_corridor for the movement of civilian vessels from and to the ports of the Big Odesa (region) is false,” Kubrakov said on X, formerly Twitter. “All available routes established by the Ukrainian Navy are valid and being used by civilian vessels.”

Stabenow calls for one-year extension, hails extra Senate farm bill funding potential... Senate Ag Committee Chair Debbie Stabenow (D-Mich.) added her voice to those calling for a one-year extension of the 2018 Farm Bill to prevent permanent law from kicking in and to allow lawmakers to work out details of the next version of the bill. “It would be irresponsible to allow vital programs and the farm safety net to lapse and revert to Depression-era policies in January. We can’t allow that to happen,” Stabenow said. “Given the chaos in the House, I know we will need an extension.” Stabenow told CQ Roll Call in an interview she would have preferred a three-month extension, but USDA has indicated implementing commodity programs via a short extension or multiple extensions would be difficult. She expressed a hope that both chambers could generate their bills and work out differences by spring.

She also touted a commitment by Senate Majority Leader Chuck Schumer (D-N.Y.) to find spending offsets that will increase funding for crop insurance, dairy, commodities and other areas. “I won’t go into specifics,” she said. “We’re talking several billion dollars. It’s enough to do things.” In a statement, Stabenow said: “I am committed to finding new ways to bring additional resources into the farm bill to meet critical needs for our producers. We should all be grateful that Leader Schumer has committed to finding several billion dollars in additional resources through bipartisan offsets outside the farm bill. It’s almost unheard of to get a commitment to add new money to the farm bill — I remember not long ago when Senate leadership told us to cut $23 billion from the farm bill.”

Winter wheat drought footprint modestly expands... As of Oct. 24, the U.S. Drought Monitor showed 58% of the U.S. was covered by abnormal dryness/drought, unchanged from the previous week. USDA estimated 49% of U.S. winter wheat areas were covered by drought, up one percentage point from the previous week. 

In HRW areas, dryness/drought covered 84% of Kansas (20% D3 or D4), 42% of Colorado (virtually none of the wheat-heavy eastern part of the state), 72% of Oklahoma (13% D3, no D4), 89% of Texas (25% D3 or D4), 61% of Nebraska (11% D3 or D4), 17% of South Dakota (no D3 or D4) and 42% of Montana (1% D3, no D4).

In SRW areas, dryness/drought covered 86% of Missouri (10% D3, no D4), 65% of Illinois (no D3 or D4), 77% of Indiana (no D3 or D4), 68% of Ohio (no D3 or D4), 38% of Michigan (no D3 or D4), 74% of Kentucky (no D3 or D4) and 100% of Tennessee (9% D3, no D4).

Click here to view related maps.

EU cuts wheat export forecast... The European Commission lowered its forecast for EU wheat exports in 2023-24 to 31 MMT from 32 MMT previously. The lower export forecast came despite a 200,000 MT increase to EU wheat production, which is now estimated at 125.5 MMT.

India cuts basmati rice export floor price... India has cut the floor price for basmati rice exports to $950 per metric ton from $1,200, a government source told Reuters. India had imposed the $1,200 per ton minimum export price on basmati rice shipments in August to keep a lid on local prices ahead of key state elections.

U.S. Q3 GDP grows more than expected... U.S. GDP grew at a 4.9% annual pace in the third quarter, according to the initial estimate, up from a 2.1% increase during the previous quarter. That marked the most robust economic growth since the final quarter of 2021.

The third-quarter increase in real GDP was driven by rises in consumer spending, private inventory investment, exports, state and local government spending, federal government spending and residential fixed investment. However, this growth was partially offset by a decrease in nonresidential fixed investment.

Looking forward to the final quarter of the year, economists anticipate a potential slowdown in GDP growth due to factors such as the resumption of student loan repayments in October and UAW strikes (although Ford reached a tentative accord with the UAW as we noted in “First Thing Today”). The Federal Reserve anticipates the U.S. economy to achieve a 2.1% growth rate for the year, reflecting a more tempered outlook compared to the recent robust performance.

ECB keeps rates unchanged... The European Central Bank (ECB) left interest rates unchanged as expected, snapping an unprecedented streak of 10 consecutive rate hikes. ECB said it would follow a “data-dependent” approach and future monetary policy decisions would be based on incoming data. “Future decisions will ensure that its policy rates will be set at sufficiently restrictive levels for as long as necessary,” ECB said.

Current water conservation plans will support Colorado River reservoir levels short-term... The federal government has conducted an analysis indicating the existing plans for reducing water use along the Colorado River should be effective in preventing reservoirs from reaching critically low levels over the next three years. The Biden administration announced these findings, highlighting that the voluntary water use cuts committed by California, Arizona and Nevada earlier this year are likely to mitigate the immediate risk of reservoir depletion. The U.S. Bureau of Reclamation credited a wet year and above-average snowpack in the Rocky Mountains as key factors that have contributed to the reduced risk of water supply crises until the end of 2026 when the current shortage management rules expire.

In May, these three states pledged to reduce water use by 3 million acre-feet over three years, equivalent to a 14% reduction across the Southwest. These conservation efforts, primarily supported by federal funds, provide an opportunity to discuss new long-term river management rules for the next two decades.

Despite improvements, the two largest Colorado River reservoirs, Lake Mead and Lake Powell, remain at low levels. Lake Mead is currently at 34% capacity and Lake Powell is at 37%.

Outlook: While the short-term water-saving measures have helped stabilize reservoir levels, addressing the chronic water-supply deficit, climate change effects will require larger, long-term reductions in water use. Federal officials are also considering options for new long-term river management rules, set to take effect from 2027, as part of a comprehensive strategy to ensure the sustainability of the Colorado River Basin.