Short sellers have been getting their teeth into Swiss chocolatiers amid the surging price of cocoa and the Switzerland's decision to scrap its currency ceiling.
Cocoa has risen more than 10 per cent since January on the Dow Jones UBS Commodity index, as prices surged after the world's second largest producer Ghana cut its production forecast for the year by a quarter.
“Although analysts are expecting Ghana’s production to bounce back, the current shortfall could see confectioners scramble to find enough cocoa to meet demand,” said Markit's research analyst Simon Colvin.
“A number of confectioners are trying to limit their consumption by taking steps such as lowering the chocolate content in recipes and making bars smaller. But some are questioning whether the industry will be able to weather the shortfall without passing on price increases to customers. This has in turn seen short sellers hone in on chocolate producers.”
On top of this, the Swiss central bank abandoned its euro exchange rate cap back in January, leading the Swiss franc to leap against the euro.
All that means the country's chocolate makers have been looking extra sweet to short sellers.
Shorting of Barry Callebaut has shot up since the start of the year, from less than two per cent of total shares to 3.6 per cent.
Shorting of Chocoladefabriken Lindt meanwhile has climbed above the 1.4 per cent mark for the first time since last year and is now at twice the level seen at the start of the year.
Where shorters have gone outside of the Swiss family, however, things have got more bitter.
British firm Thornton's had more than 3.5 per cent of available shares out on loan when it emerged it was being bought out by Italian rival Ferrero Rocher at a 40 per cent premium to its share price, prompting a massive spike in its price.
Colvin notes that US firms Hershey and Mondelez International have not had the same level of short interest – in fact both companies have experienced below-average short interest.