India, the world’s second-largest supplier of wheat, recently announced it be placing a temporary ban on the export of the grain. Suketu Gandhi, a supply chain partner at consulting firm Kearney, joined Cheddar News to talk about why and how this will affect the food supply chain. "As inflation continues to rise rapidly, you do not want to have a population that is affected, especially again, at the lower end of the income stream, around basic necessities like food," he said about what's behind India's policy. "It's primarily internally focused. you've got to make sure that people are fed." 

Closing Bell

 Why India Is Temporarily Banning Wheat Exports Amid Spiraling Inflation

Welcome back to cheddar news is closing bell. Everyone, I'm kristen schueler down here on the floor of the stock exchange and let's talk about this story India, the world's second biggest wheat producer announcing a ban on exports over the weekend. Days after saying it was targeting record shipments this year. Well, a scorching heat wave is affecting crops, causing domestic prices to hit a record high. Global buyers were banking on indian supplies after exports from the Black Sea region plunged following Russia's invasion of Ukraine. Now, exports warning India's ban could drive global prices to new peaks hitting poor consumers in Asia and Africa, the hardest joining me now is to cater to Gandhi supply chain partner at consulting firm Kearney, Asi que tu thanks so much for coming on the show. I know global wheat prices already up by more than 40% since the start of the year. What does this move by India mean for the global supply chain? Well, it's already an incredibly tense situation that gets worse. Uh, you know, 30% of the production is out as you very correctly identified in, in parts of the regions where it's impossible to get it out right because of logistics delays and conflicts. Now this further adds to it and wheat as you know, is a core part of everything from as simple as bread, to beer, to pet food and it is used all over the place. The next thing that happens is inflation. Um, this hits the consumer at the lower end of the income spectrum significantly. Hence now trade also happened. Do I buy bread or do I buy something else? And then the last thing that comes into play is the logistics networks, they were really tight. Now you have to decide do I carry wheat or do I carry semiconductors? What do I do? And how do I move these things along? So all these things together are really tough. Sasuke to how high do you think wheat prices could rise given the fact that India is now scaling back? Well, um, to be transparent, I am not a crater on the open market, but what we have seen is things can go really high for a short period of time. Um, and then substitutes come into play. So places where you could do a little bit of more foreign versus wheat that's gonna come into play. So it's gonna start affecting the second order effect. And this is something we are seeing and you have seen for the last 2.5 years from area to area, right wheat prices go up. Something else comes in, maybe corn. Um, that if semiconductors are not available in one category, it goes into another category. Iron is difficult. What else do we trade? Copper goes out? What other choices we have? Right. And so the substitution effects are playing out really wildly. Um, and one of the things that our clients that we talked to are focused on now understanding every ingredient in what they make. So if you're a food producer, you've got to know everything you that goes into the product. So when one supply falls short, you can immediately trade off what are the major factors leading to India's export ban? Primarily those are internal because as inflation continues to rise rapidly, you do not want to have a population that is affected especially again at the lower end of the income stream around basic necessities like food. Um And as you pointed out now this can have impact in other parts of the global, so but it's primarily internally focused, you've got to make sure that people are fed this of course adds to already high prices for the wheat market and disruptions to the global supply chain because europe spread basket i. E. Production of wheat and exporting of wheat um in Ukraine and in Russia as well, already impacted by Russia's ongoing invasion of Ukraine. What sort of position does this put the world and when it comes to now a double whammy in a scale back in wheat exports? Well, I wish it was a double whammy christian, right, because this is just one on top of another, whether it was oil prices or the impact of the ability to move goods around. So what has happened now is that the the 10th supply chain or you know in a prior show with you have called it the Jenga supply chain, things are getting pulled out, the bricks are getting pulled out at such a rapid rate that things fall down quite quickly. Um which prices going up. That would be a logical thing. But what are the second order effects is where uh, C. O S right now are thinking through and then the last thing is impact on labor, because if it's more expensive to eat, then the price of making things is gonna go up. So the person who eats wheat in a country like India or Bangladesh or Pakistan will have to be paid more. And then you'll certainly start seeing that in clothing. You start seeing that in other means that are produced or the products that are produced there. I want to get in one more question, We are a bit tight on timing. I want to show this graphic in terms of the top importers of wheat from India as India has now put in place this export ban. We're talking about countries like Bangladesh Nepal, the United Arab Emirates, sri Lanka, Yemen, Afghanistan. Well, countries like Yemen, they're already in the midst of a food crisis, relying heavily on India for wheat imports, what could this mean for that country? And others like Afghanistan as well? Risk of turmoil, significant turmoil. And if you look at the global largest importer of wheat, it's Egypt, which is another critical country. So the risk you run is in turmoil. All right, we got to leave it there. It's okay to Gandhi's supply chain partner at consulting firm Kearney, thank you so much to K2 for joining.