American chocolate maker Hershey Co. (HSY) is seeking permission from regulators to buy a record amount of cocoa as global shortages of the commodity worsen.
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Hershey, which makes Reese Peanut Butter Cups and Hershey Kisses, is asking the top U.S. derivatives regulator for permission to buy large amounts of cocoa through the New York Stock Exchange. Specifically, Hershey is seeking permission from the U.S. Commodity Futures Trading Commission (CFTC) to buy more than 90,000 metric tons of cocoa.
The request by Hershey is more than nine times the amount the exchange currently allows. The move by the Pennsylvania-based chocolate maker comes as the global market for cocoa, the active ingredient in chocolate, is forecast to face a fourth year of dire supply shortages.
Global Shortage
Cocoa prices hit multiple record highs in 2024 after disease and poor weather wiped out cocoa crops in Ivory Coast and Ghana, which account for more than 60% of global supplies. Cocoa is now in such short supply that Hershey, one of the world’s largest chocolate makers, is petitioning for an exemption to buy as much of the commodity as possible.
The amount of cocoa the company wants to purchase exceeds a U.S. federal limit of 49,000 tons. Hershey’s move comes as cocoa stockpiles in warehouses around the world decline, having dropped more than 70% since May 2023. The amount of cocoa Hershey now wants to buy is equivalent to roughly all of the beans currently in warehouses around the world.
This isn’t the first time Hershey has upended the cocoa market. In 2020, at the height of the Covid-19 pandemic, the company took such a big position in cocoa that it sent prices to their then highest level on record. HSY stock has declined 12% in the last year.
Is HSY Stock a Buy?
The stock of Hershey Co. has a consensus Moderate Sell rating among 18 Wall Street analysts. That rating is based on 13 Hold and five Sell recommendations issued in the last three months. The average HSY price target of $174.13 implies 7.34% upside from current levels.
