3/4 cup water
2 teaspoons granulated sugar
1/2 cup evaporated milk
1 package active dry yeast (about 1 tablespoon)
3 to 3 1/2 cups flour
1/3 cup granulated sugar
1 egg
2 tablespoons shortening
1 teaspoon salt
1/2 teaspoon nutmeg
Vegetable oil
Confectioners' sugar

In a medium saucepan over low heat, combine water, 2 teaspoons sugar and evaporated milk; heat to 110 degrees F. Pour into a 2-cup glass measuring cup. Stir in yeast. Let stand until foamy, 5 to 10 minutes.

In a food processor fitted with the steel blade, combine 3 cups of flour and all remaining ingredients except oil and confectioners sugar. Turn on and off 3 or 4 times to blend ingredients. Add yeast mixture. Turn on and off 4 or 5 times to bring dough together. Check consistency of dough. It should be fairly smooth and non-sticky. If additional flour is needed, add 1 to 2 tablespoons at a time; process just until blended. Process 15 seconds to knead dough. Turn out dough on a lightly floured surface; form into a smooth ball. Lightly oil a large bowl. Place dough in oiled bowl, turning to coat all sides. Cover with plastic wrap. Let rise in a warm, draft-free place until doubled in bulk, about 1 1/2 hours.

Punch down dough. Turn out onto a lightly floured surface. Roll out dough into a rectangle about 1/2 inch thick. Working at a diagonal to rectangle, with a sharp knife, cut dough into 2-inch wide strips, moving from left to right. Starting at top left and moving toward bottom of rectangle, cut dough diagonally into 2-inch wide strips to form diamond shapes. Carefully place all completed diamonds 1/2 inch apart on ungreasedbaking sheets. Cover loosely with plastic wrap. Gather up remaining dough scraps; knead together. Cover loosely with plastic wrap; let rest 15 minutes to relax dough. Roll out and cut as before. Repeat until all dough has been used. Cover beignets loosely with plastic wrap; let rise in warm, draft-free place until almost doubled in bulk, 45 minutes.

In a large saucepan, heat 3 inches oil to 365 degrees F or until a 1-inch bread cube turns golden brown in 60 seconds. Carefully slide beignets into hot oil, 3 or 4 at a time; do not crowd. Fry until puffy and golden brown on both sides, turning once with tongs. Cooking times is about 2 to 3 minutes per side. Remove with a slotted spoon; drain on paper towels. Sift powdered sugar over hot beignets; serve hot.

Makes about 36.