The deadly Ebola virus continues to spread throughout West Africa. The Centers for Disease Control and Prevention projects that1.4 million could be infected by January.
That number is jaw-dropping, and this outbreak is definitely one for the history books. But will the epidemic have any real economic effects?
If you are talking stocks, probably not. Participants there only care about how much liquidity the Federal Reserve provides to markets.
But commodities live in the real world and are very much affected by events such as this.
The spread of Ebola promises to impact two commodity sectors in particular…
No Hands to Harvest Cocoa
The commodity that could be affected the most by the outbreak is one that is already on shaky ground: cocoa.
You see, 60% of the world’s cocoa crop is produced in just two West African countries – the Ivory Coast and Ghana.
The good news is that neither country has had any confirmed cases of Ebola yet. Both governments are taking the threat seriously with closed borders to the affected countries, including Liberia and Guinea, and restricted travel to other western African nations.
But even if Ebola doesn’t enter Ghana or the Ivory Coast, the price of cocoa will rise.
That’s because many cocoa pickers are migrant workers from the affected countries. Their absence will delay shipments of the crop.
And if Ebola does spread to the Ivory Coast and Ghana? Look out!
Confectioners and their customers will pay more as cocoa exports from the two countries are completely cut off.
Prices could easily double from the current $3,200-per-metric ton, says Edward George, head of group research for the African banking group, Ecobank. An assessment I agree with.
Contaminated Precious Metals
The other sector that could be affected adversely by the Ebola virus is mining.
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Botswana recently blocked exports of cobalt and copper from the neighboring Democratic Republic of the Congo because of some reported cases of Ebola.
The Congo is the sixth-biggest copper producer in the world. More importantly, it’s the world’s largest producer (about 60%) of the world’s cobalt, which is a key ingredient in rechargeable batteries like the one in your cell phone.
Bottom line: The Ebola virus could significantly impact several commodity markets.
Look for my updates on future developments.
And “the chase” continues,