The world’s chocolate makers are coming together to fight the Ebola outbreak in Liberia, Guinea and Sierra Leone. As part of the World Cocoa Foundation, Mondelez International Inc., Nestlé SA, Starbucks Corporation, and others recently announced a $700,000 donation to combat the virus, which has already infected more than 9,000 people and killed at least 4,500 with no signs of slowing.
The effort is more than philanthropic, as the outbreak could have a major impact on the chocolate industry. The vast majority of the world’s cocoa is produced in West Africa. And though it comes mainly from Ivory Coast and Ghana, which have not been affected, that hasn’t stopped a ripple effect of price increases that could have a long-term impact.
“The market is watching the situation very, very closely,” said Jack Scoville, senior market analyst at Price Futures Group in Chicago, who focuses on commodities.
The World Bank and IMF predict massive economic fallout for the affected countries, whose fragile economies had just started making positive gains after years of instability. Experts have also warned of an impending food crisis, and even neighboring countries with no reported cases have felt the impact of trade and travel restrictions.
“It is impossible to know how the outbreak will develop,” said Ecobank commodities economist Victoria Crandall, who is based in Ivory Coast. “But even in the best-case scenario, it will take until the middle of next year before Ebola is brought under control, so the effects will be lingering.”
In many cases, fear has been more powerful than the disease itself.
“Fears over Ebola have disrupted pod-counting teams at major cocoa exporters, which have affected production outlooks for the 2014/2015 season,” Crandall said.
Cocoa prices are up 15 percent in 2014. And as the industry approaches the main harvest seasons, the price has hit a three-year high. Before the outbreak, 2014 was shaping up to be a good year for cocoa, with promising weather conditions and high expectations for output. But in recent months observers have become more concerned amid growing travel restrictions and a dwindling workforce.
“It’s not in Ivory Coast. It’s not in Ghana, either. But the thing is that a lot of temporary workers …coming in to pick the cocoa would be coming from some of the affected countries,” Scoville said, adding that it’s also been difficult for analysts, many of whom are based in Europe, to get into the region. “Who’s going to go down there just to count a few cocoa pods?”
Nestlé, the world’s largest food company, with operations in Ghana, Ivory Coast and Nigeria, has restricted employee travel to the region and prepared contingency plans in case of an outbreak.
“If it hits the Ivory Coast, we’re going to have a standstill,” Nestlé chief executive Paul Bulcke said earlier this week, according to Bloomberg. “We have a system where we fix certain prices for certain times, but not too long, because we’re not speculators, but to have stability in our cost.”
“It has a potential to be a huge economic disaster for that part of the world,” Scoville said. “It’s an important source of export earnings, and for the average worker it could be their [livelihood].”