Its official! This week, two indications of looming wheat shortfall were finally confirmed by official quarters. First, a press release by FinMin confirmed that wheat sowing was achieved only at 8.98 million hectares, 2.2 percent lower than last year. Later, ministry’s official spox took to Twitter to confirm that “wheat stocks in the country stand at 3.3 million tons”, barely enough to last through end of April given annual demand of 30 million tons.

Although an earlier announcement by the PM last week to import two million tons of wheat from Russia reverberated a similar sentiment, the announcement did not accompany a proposed timeline, and was interpreted as a move to buttress country’s strategic reserves. Now, only a bumper yield of over 3.2 tons per ha can help save the day and protect the country from an exorbitant import bill in the midst of a global price spiral.

But will wheat imports really going to burn a gigantic hole in country’s trade balance? While it is true that wheat prices in the international commodity market are witnessing extreme volatility due to ongoing conflict in the Black Sea region, it is unlikely that prices will stay within this range for more than six months. Historically, international prices bottom out post-April on a seasonal basis, as production estimates from major producing regions – especially India – begin to trickle in during the post-harvest period.

According to BR Research’s in-house estimates, Pakistan’s wheat import bill in the worst-case scenario may climb up to $4.25 billion during FY23, with likely import bill clocking between $2.5 - $3.5 billion (see illustration). Although this represents tremendous year-on-year increase over estimated import bill of $0.75 billion during FY22 (and nearly $1 billion in FY21), coughing up an additional $2 - $3 billion is not impossible for an economy of Pakistan’s size. Consider that Pakistan’s cotton import bill doubled from $0.75 billion to $1.5 billion between FY19 and FY21. In 7MFY22, Pakistan has already added $3 billion in incremental export earnings over the previous year. The trick will be to not squander the reserves on other imports.

But import pricing will hardly be the greatest challenge facing policymakers between now and June-22. Beginning mid-April, the real test will be of sentiment management, as news of output shortfall - coupled with low carryover stocks – may risk sending market into frenzy. Provincial governments have done the right thing by announcing a high base price. They must now take the next crucial step, and get out of the way of private sector buyers during procurement season. GoP must ensure that the market is not cornered with an oversized procurement target from public sector between April and June, especially at a time when perception of shortage is already rife.

Which brings us to an even harder question: timing of import. Given the tight position of public sector stocks, “theoretically” it would be wise if GoP were to use available fiscal space right now to build strategic reserves through imports. However, the foremost angst of a volatile commodity market is not that prices are too high or too low. Instead, when a sovereign enters the market with a buying order equal to country’s three months requirement, there are no willing sellers on those extreme price levels to meet demand for orders of those sizes.

Instead of waiting for G2G consignments to arrive, GoP could start off with placing small orders through commercial traders. But if the market crashes post-April, it risks inviting unnecessary scrutiny for importing at excessively higher prices. A politically secure government may have taken that bet, but given PTI’s recent travails, it is hard to imagine it will take that risk right now.

Regrettably, it appears that the political circus in Islamabad risks stymieing decision-making in the bureaucracy between now and June. Rest assured, if domestic production falls short of 26 million tons and no import orders are placed by June-22, secondary market will go crazy like a bull in a china shop. And for that, every political player must share blame.