Midday Report: Sugar Subsidies Could Send Candy Prices Higher

The Sugar Act of 1934. The Farm Bill of 2008. They're not on the radar of most consumers, but those laws have a big impact on sugar prices, and right now that could mean higher prices for your favorite candy bars.

Here's what's happening: Sugar prices are under pressure because of a big crop of sugar beets in the Midwest. But according the Wall Street Journal, those arcane laws mentioned above mean the Agriculture Department might have to buy 400,000 tons of sugar. That would keep sugar processors from defaulting on nearly $1 billion worth of loans made under a government price support program.

A Hershey's Milk Chocolate Bar is submerged beneath M&Ms, a Mars product, for an illustration in Cambridge, Massachusetts on Wednesday, January 24th. Hershey Co.'s fourth-quarter profit fell 9.9 percent, trailing analysts' estimates, as smaller rival Mars Inc. took a bigger share of the U.S. market.. PHOTOGRAPHER: JB REED
A Hershey's Milk Chocolate Bar is submerged beneath M&Ms, a Mars product. (JB Reed, Getty Images)

The effect would be prices heading back up, to the benefit of American Crystal Sugar, Amalgamated Sugar and other companies that make sweeteners. But candy makers could be hit with another round of price hikes, and historically, they pass along higher costs to consumers.

The candy industry is up in arms. An industry trade group claims the sugar subsidies hurt consumers and jeopardize lots of jobs. The biggest candy makers are Mars, Hershey (HSY), Nestle and Cadbury (MDLZ).

If there's a silver lining, it's that this won't boost prices for your peeps, chocolate bunnies and other Easter candies, because those items are already on store shelves and won't be affected by the possible swings in sugar prices.

Of course, this is not the only sugar controversy in the news this week. At the last minute, a judge blocked New York Mayor Michael Bloomberg's proposed ban on large sugary drinks from going into effect. Critics say that could have cost consumers money, while proponents maintain the longer-term health benefits would save far more.