The biggest squeeze in the cocoa market in more than a decade has pushed prices of the commodity to record highs in recent sessions as hedge funds have piled into cocoa futures since the start of the year.

This has been great news for the speculative investors and funds at the heart of this trade, but bad news for chocolate consumers and manufacturers, such asHershey Co. (NYSE:HSY).

In speculative positioning across commodity markets in New York and London, traders — including hedge funds — have built up a massive $8.7 billion position, the largest ever in dollar terms, according to data...