Commodity bulls have enjoyed a different kind of hot chocolate lately, as cocoa futures are up more than 12 percent in the last two months, and holdings of the futures are near all-time highs.
The broader bullish cocoa story is the growing taste for chocolate around the world. But in the shorter term, supply concerns in major producer Ghana have heated up the commodity. A cocoa-pod-killing fungus has dampened the supply outlook, leading to a price spike.
"Demand had grown quite a bit into 2014, but demand recently has been a little bit softer. The recent move up has been all supply-driven," commented Jonathan Feeney, who follows food and beverage stocks with Athlos Research.
With prices rising and a clear bullish catalyst in traders' sights, it is little surprise that positions in the commodity have risen. As of Thursday's close, the ICE futures exchange recorded open interest of 223,162 contracts, the highest since October 2013, and nearly a record high.
Of course, the move may or may not continue.
"I've loved it for a while, but I took profits last week," Andy Hecht, author of "How to Make Money with Commodities," told CNBC on Friday. "These days, any market that looks like it's extended generally gets clocked—and cocoa looks extended. I'm hoping to buy it on a pullback."
A pullback may be a welcome sight for Hershey as well. Feeney explains: "Not only are they the largest buyer [of cocoa], but they are the most concentrated. Chocolates are the vast majority of what they do."
Over the past two months, Hershey shares have dropped nearly 9 percent. That may speak more to the decline in demand than the rise in wholesale prices.
Either way, technician Craig Johnson of Piper Jaffray isn't too sweet on the stock.
"Hershey shares have been making a series of lower lows and lower highs all year long," Johnson said Friday on CNBC's "Trading Nation." "The trend is lower and there's poor relative strength—there has got to be a better place to be."
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