Is it time to short cocoa?
It’s probably a sweet time for speculators to punt on falling cocoa prices
You might have noticed that your chocolate bars are smaller than they used to be. For example, Swiss chocolatier Nestlé cut the weight of its fun-sized Kit Kats by a fifth. They’re now just 14g each. Shrinkflation, a portmanteau of shrink and inflation, where companies reduce the size of products instead of increasing the price, has gripped the chocolate world. Higher cocoa prices are to blame. Cocoa prices have risen three-fold this year to over $11,000 a tonne.
These high prices have irked confectioners but attracted speculators. And some have even jumped in to start shorting cocoa. So, should you join them? Given the extreme pessimism about cocoa supplies, the current price has probably overlooked how cyclical markets can be. The payoff when prices normalise would be decent for those adventurous souls who time a short sale right. And for the risk-seekers, WisdomTree, a global exchange-traded fund provider, have some leveraged cocoa indexes that could juice the upside but also the do…