Yeah, pretty much what the title says. I heard some relative about it, and while it could be true, it seems slightly… fantastical. Snopes has nothing, so I turn to the dope. Cite?
You’ve got strange relatives.
According to Unca Cecil, No
“Lice blood” sounds to me like an overdramatic way of saying “cochineal” (or carmine), rather than anything to do with the shellac.
Unfortunately the vending machine is out of M&M’s so I can’t check on this, but Googling suggests that they do contain cochineal in the UK - see http://www.ciao.co.uk/M_M_s_Crispy__Review_5281783
It also appears that in the US, they use a dye called Red 40 to replace cochineal, but a US Doper would have to check the ingredients panel for that one.
Some red dyes, however, are indeed made from squished bugs.
Yes, as my mother once said to me to point out that “natural” is not always such a good selling point: “Hmm, no artificial colours. So it’ll be beetle juice then - 100% natural!”
M&M’s don’t contain cochineal, or any other bug product, at least in the US. They’re kosher, and kosher food can’t have bugs or bug bits in them. They only became kosher about 12-13 years ago, and may have had cochineal in them before that.
If you do have problems with lice in your M&Ms, I suggest you call these people.
Wait, don’t lice drink human blood? So wouldn’t lice blood actually be human blood?
SOYLENT RED IS PEOPLE!!!
Cochineal insects are also sometimes called “wood lice.”
Hence, “lice” blood.
The answer is therefore: Yes…sort of…for one definition of “lice”…not in the US, at least, anymore.
Note that plenty of non-M&M foods do contain cochineal extract.
Sailboat
I still don’t have any M&M’s to hand, but I do have a tube of Smarties (the UK chocolates similar to M&M’s, not the fruit flavour candy sold in the US under that name), and the ingredients do include carminic acid, which is the colouring extracted from cochineal. The packaging also states “No artifical colours”, so it is presumably actually extracted from the insects, rather than made synthetically.
I am fairly sure that M&M’s also contain the same colouring in the UK, there not being a particularly big market for kosher food in the UK compared to the US.
One of my jobs was in 1993, with the world’s biggest cochineal producer, and IIRC at the time MnM’s did not include cochineal. It was already Red40, which is an artificial coloring.
We sort of kept track of “red foodstuffs that contain Red40 vs our stuff” and why was that in each case (one of the RnD projects we had was coming up with a form of cochineal that would be stable in acidic drinks, for example).
Cochineal bugs eat cacti.
I was about to leap in and say this was wrong, but it’s not. You’re right.
Wood lice, however are not to be confused with woodlice, which is a common name for the isopod crustaceans also known as sowbugs or pillbugs.
Yup. I’ve seen a cochineal farm up in the hills of Lanzarote. When your topsoil is mostly sand and volcanic ash, you grow what you can.
“When you eat your Smarties, do you eat the red ones last?” Ummmm… I may just skip the red ones altogether now. (Do any Canadian dopers know if their red Smarties have carminic acid?)
By the way, when hiking in Peru, our guide scraped a handful of bugs off a cactus, crushed them, and showed us the red dye. Kind of cool, really, just not particularly appetizing.
So, can you get a job as a louse wrangler?
Tris
I love the SDMB.
Sure, but the pay is … well, you know. 
How long ago did they start making the red M&Ms again? For a number of years they stopped making them because there was a scare about the health hazards of the some red food dye. The alleged health hazard was debunked, or something, and they started making the red ones again. Seems that it wasn’t all that many years ago.