Step 1In a large, heavy-bottom sauce pot, melt the butter over medium heat. Add the marshmallows and cook, stirring constantly, until the marshmallows melt and the mixture is smooth. Remove from heat and stir in the water, powdered milk and vanilla extract.
Step 2Stir in the powdered sugar, 1 cup at a time, until you have a stiff, sticky dough.
Step 3Grease your fingers well with butter. Remove the mixture from the pot and knead the dough until it becomes pliable. Dust a work surface with powdered sugar and continue kneading the dough until it becomes soft and smooth and no longer sticky to the touch. Divide the dough into thirds. Color one of the pieces with yellow food coloring and another piece with orange food coloring (leave the last uncolored). Form each of the pieces into a disk and cover tightly with plastic wrap. Refrigerate overnight to rest the dough.
Step 4The next day, divide each disk into eighths. Roll one portion of each color separately into a thin strip. Line the strips up on a piece of wax or parchment paper so that the colors are white, orange and yellow. Place another sheet of wax or parchment paper over the strips, and roll slightly so the pieces merge to form a triangular ribbon, with the white forming the edge, and the yellow forming the widest part of the candy.
Step 5Slice the ribbon crosswise to create triangles to form the candy corn shapes. Repeat with the remaining pieces to form all of the candy corn candies. Set out at room temperature until the candies harden, then store in an airtight container at room temperature for up to 2 weeks.