Tight Sugar supplies are pushing up candy companies’ costs and, in some cases, cutting into production of sweets, executives said.

Candy producers said the root of the problem lies with U.S. agriculture policy requiring that at least 85% of U.S. sugar purchases come from domestic processors, leading to tight supplies and high prices when demand rises.

Sugar farmers and processors say that policy ensures ample supplies and protects farmers’ livelihoods. They said that U.S. sugar producers compete against subsidized sugar offered by foreign competitors at artificially low rates.

In Bryan, Ohio, Spangler Candy makes around 250 million candy canes in a typical year. In the past year, supplier cutbacks to available sugar disrupted the company’s supply chain, Spangler President Kirk Vashaw said.

Spangler turned down Halloween candy orders it couldn’t fill, Vashaw said, and by June of last year, the company knew it wouldn’t be able to make up the production loss in time for Christmas. Spangler wound up producing about 200 million candy canes for the year.

“It is so much more expensive to manufacture candy in the United States, and sometimes we lose business because of it,” Vashaw said.

U.S. raw cane sugar prices climbed to 42.56 cents a pound in May, the highest since January 2011, according to the U.S. Department of Agriculture. Midwestern refined beet sugar was up to 62 cents a pound in May.

Refined beet sugar prices hit historically high levels in 2022, according to Rabobank, a major agricultural lender. High prices for sugar beets have been driven by concerns over production in the U.S. and Mexico’s inability to fulfill its exporting quota, as Mexico also deals with record sugar prices, according to the USDA.

Major sweets and snack makers Hershey and Mondelez, which produce brands including Reese’s Peanut Butter Cups and Sour Patch Kids, are also dealing with high sugar prices, contributing to rising costs, executives said during company earnings calls in April. Representatives of Hershey and Mondelez declined to comment for this article.

Tight supplies worldwide and weather concerns are expected to keep U.S. sugar prices high, the USDA said. Rabobank said buyers have begun to reserve sugar in advance, which could keep prices elevated.

The overall U.S. sugar supply is expected to decline 2.3% in the next crop year, according to the USDA.

Rabobank said that acquiring sugar supply—particularly beet crops—isn’t easy. Most of the 2023-to-2024 sugar beet crop is already sold out through early contracts. According to the USDA, beet sugar has made up around 56% of U.S. production, with cane sugar as the remainder.

Over the past few months Atkinson Candy in Texas has been struggling to find a sugar supplier that would allow the company to fulfill the year’s remaining orders for its products such as hard candies, caramels and peanut brittle. Eleven suppliers told the company they were out of sugar for the year, said company President Eric Atkinson. Atkinson recently located a supplier who brought in sugar from Colombia.

“We were down to the point where we were about to run out,” Atkinson said. “We would’ve been going to Costco.”

Under U.S. agricultural policy, buyers are able to import about 15% of their annual supply at a tariff rate of 3.66 cents per kilogram for refined sugar. Purchasing foreign-produced refined sugar beyond that threshold pushes the tariff rate up to 35.74 cents per kilogram. Similar tariff rate quotas are in place for raw cane sugar, sugar syrups and sugar-containing products.

The National Confectioners Association, which represents more than 500 sugar-using companies, brokers and suppliers, is pushing for changes to the sugar program that Christopher Gindlesperger, the group’s senior vice president of public affairs, said would help increase supply when demand is high.

He said the group is speaking with House and Senate agriculture committees and stakeholder groups, including sugar growers. The confectioners group aims to implement changes in the next five-year Farm Bill, a sprawling piece of food- and agriculture-related legislation.

The American Sugar Alliance, an organization of sugar cane and sugar beet farmers and processors, said the current policy isn’t to blame for rising prices and shortages. U.S. sugar farmers said that foreign governments subsidize sugar production in their countries, keeping prices artificially low and threatening U.S. farmers.

“It’s insulting that multibillion-dollar corporations are posting high profits while crying poor to Congress as they try to weaken the policy that supports American farmers like my family,” said Nate Hultgren, a fourth-generation Minnesota farmer and president of the American Sugarbeet Growers Association.

California candy company Adams & Brooks has seen sugar as much as double in cost depending on location, grade and type, President John Brooks Jr. said.

“The international market enjoys the freedom of moving supplies to where the demand is and in an effort to achieve equilibrium, but that is not possible in the U.S. market because of federal policy,” Brooks said.

The Sugar Alliance said the existing federal policy enables sugar users to avoid shortages by importing what they need from foreign trading partners. Texas sugar cane farmer Tudor Uhlhorn said the current U.S. sugar policy helps support more than 2,000 jobs in his state, where producers are battling drought.

Candy makers are trying to cope. Spangler, which uses around 30 million pounds of sugar annually, has tried to anticipate the timing of supply shortages and schedule production-line maintenance in its factory during those periods. The company also moved some production to a facility in Mexico, where Vashaw says they haven’t had any sugar issues.

“Once we lose time, you can’t go back and get it,” Vashaw said.

Write to Wendy Guzman at [email protected]