August 28, 2023 | Supply Chain
Come October 31 and there’s an increasing possibility that trick or treat may result in more tricks than treats.
Thanks to sugar shortages, import restrictions and climate change-related severe weather, stocking your bowls with Halloween candy isn’t going to be easy this year.
Candy makers are blaming the U.S. agricultural policy that requires 85% of sugar to be sourced from domestic processors. While the policy keeps domestic producers afloat, it aggravates the problems of candy manufacturers when domestic production isn’t enough to meet their demand. Tight supplies put pressure on prices.
Also, there is a tariff of 1.66 cents per pound (3.66 cents per kilogram) for the 15% of the annual supply they can import from other countries. And if manufacturers go beyond this threshold to purchase foreign-produced sugar, the tariff goes up to 35.74 cents per kilogram.
The National Confectioners Association (NCA) is pushing for changes to the sugar program to ease supply.
However, the association, which represents more than 500 sugar companies, brokers and suppliers, isn’t very optimistic about the current shortages.
The sugar policy isn’t solely responsible for the crisis.
Extreme weather has also affected sugar supply. El Niño, which has affected global weather patterns by causing heavy rainfall in some regions and droughts in others, has reduced crop production.
Supply chain disruptions, transportation bottlenecks such as logjams at ports and the Russia-Ukraine war have all contributed to the current situation.
According to a USDA report , U.S. raw cane sugar prices increased to more than 42 cents a pound in May 2023, the highest since January 2011. Midwestern refined beet sugar, another type of sugar crop used in confectionery, was priced up to 62 cents a pound at this time.
The USDA forecasts that the national sugar supply is likely to decline by more than 2% during the next crop year, which will put further pressure on prices.
Sugar supply shortages have irked the country’s candy manufacturers for quite a while. Some have begun to stock sugar in advance, which keeps prices elevated.
Because of the sugar shortage, Atkinson Candy in Texas is struggling to fulfil the year’s remaining orders for hard candies, caramels and peanut brittle, according to a Wall Street Journal report. As many as 11 sugar suppliers had earlier turned down the candy manufacturer’s demand.
Another leading manufacturer, Spangler, has turned down Halloween candy orders. Given the current sugar supply shortage, it is not even confident of fulfilling orders during Christmas.
In fact, the NCA had also released a joint statement with the Association of Chocolate, Biscuit and Confectionery Industries of Europe last year. It called for the governments of both regions to take immediate steps to address sugar shortfalls. It also called for relaxation of tariff-rate quotas for additional and faster importation of sugar.
There isn’t a simple solution to address the ongoing sugar shortage. A long-term solution requires the adoption of a multifaceted approach that focuses on technology adoption and agricultural innovation.
The NCA, meanwhile, is in talks with House and Senate agriculture committees and stakeholder groups and is hoping to implement changes in the next five-year Farm Bill.
Amid the looming sugar shortage, the key focus of candy manufacturers should be to streamline supply by building a resilient supply chain.
This, in turn, requires manufacturers to work closely with sugar producers and suppliers. It also requires them to embrace advanced supply chain technology to digitize operations, foresee disruption and adapt quickly to changing market conditions.
Finally, some good news. Not all candy manufacturers anticipate production shortfalls because of tight sugar supply and prices. Hershey’s, for example, believes it is well prepared for the holiday season with busy production and full warehouses. And it does not foresee any disruption.
Atkinson Candy has managed to get its sugar supply from a supplier in Colombia. Likewise, Spangler has moved some of its production to a facility in Mexico where there isn’t a supply shortage.
Many other manufacturers are likely to come up with innovative ways to mitigate the impact of the shortage and meet customer demand for Halloween, which kicks off months of indulgent sweets and snacks.