If consumers are spooked by candy prices this Halloween, it’s for good reason. Shoppers are paying 7 percent more for chocolate and hard candy than they were just two years ago, according to the American Sugar Alliance, which noted that the cost of the sugar in those products has fallen by 35 percent over the same period.
“We’re getting a lot less for our sugar, and like other Americans, we are paying a lot more for Halloween candy at the checkout line,” said Dale Murden, a sugar farmer from Texas. “That’s why U.S. sugar farmers today are challenging the candy industry to lower its prices.”
Murden admitted cheaper candy is unlikely since confectioners are currently pocketing the windfall to boost profits instead of sharing savings with consumers.
“History has shown that when sugar prices fall, sweetened food costs continue to climb right along with confectioner revenues,” he noted.
For more, see: Big Candy profit margins under microscope
And according to Yahoo!Finance figures, this recipe for profitability is really paying off. Net profit margins are 10.7 percent for confectioners, which are surprisingly higher than profit margins for major oil companies, aerospace and defense manufacturers, and casinos.
Unfortunately for sugar producers, the downward trend in sugar prices is unlikely to change any time soon. Sugar surpluses are growing because of a strong domestic crop and trade agreements that guarantee imports of unneeded sugar, much of which is subsidized by foreign governments.
U.S. Department of Agriculture data show 1.7 million tons of sugar surpluses currently overhanging the U.S. market.
“Our cost of doing business keeps going up, even though our sugar prices are headed the opposite direction,” explained Alan Welp, a Colorado sugar grower who was hit hard by the drought this summer. “That’s why we are working hard on Capitol Hill to secure a new Farm Bill with a strong policy that helps us weather low-price periods.”
Sugar policy operates at no cost to taxpayers because growers don’t get subsidy checks. Under the current policy passed in 2008, confectioners have increased domestic production and excelled during the economic recession, yet they continue to claim that sugar policy has harmed them.
A recent study by the National Retail Federation found that 96 percent of Americans will buy Halloween candy this year and will spend, on average, $24.25. That's up from an average of about $22 last year and $20 in 2010.