The Economics of the Shortage, Explained

[cfullgraf]

The present period of shortages seems to be lasting longer than in the past. One point not discussed is that the cause of the panic buying lasted several months beginning with the election of 2012, then Sandy Hook and ending with the down vote in April/May, 2013 on the gun control measures introduced by Ms Feinstein, et al.

Adding in the similar buying frenzy after the 2008 election and the consumer forces on the firearms and ammunition markets has been greater than ever.

 

[tipoc]

The Jan. 2014 issue of American Rifleman has a fairly objective and useful article on the ammo shortage. Though I think it neglects to deal with two factors that contribute to the shortage, maybe out of political correctness. This discussion maybe misses the same things.

The first is the accumulative effect of over a decade of war on the availability and price of ammo components. It isn't only that U.S. manufacturers provide ammo for the civilian market in the U.S. and the military and law enforcement needs. They also produce ammo for American allies in the mid east and globally. Literally billions of rounds, cases, bullets, powder have been expended in mountains, deserts and valleys with no one collecting and recycling spent brass. This factor is usually omitted in considerations of why new ammo is slow to hit the shelves.

The second is the rapid and massive growth of law enforcement and private security outfits in the last decade.

Charging more for ammo will not "cure" the shortage in my opinion.

tipoc

 

[Queen_of_Thunder]

The Jan. 2014 issue of American Rifleman has a fairly objective and useful article on the ammo shortage. Though I think it neglects to deal with two factors that contribute to the shortage, maybe out of political correctness. This discussion maybe misses the same things.

The first is the accumulative effect of over a decade of war on the availability and price of ammo components. It isn't only that U.S. manufacturers provide ammo for the civilian market in the U.S. and the military and law enforcement needs. They also produce ammo for American allies in the mid east and globally. Literally billions of rounds, cases, bullets, powder have been expended in mountains, deserts and valleys with no one collecting and recycling spent brass. This factor is usually omitted in considerations of why new ammo is slow to hit the shelves.

The second is the rapid and massive growth of law enforcement and private security outfits in the last decade.

Charging more for ammo will not "cure" the shortage in my opinion.

tipoc

Neither of the two reasons you offered are valid..

 

[Pilot]

I don't know if our military expenditure due to Afghanistan, Iraq and others have anything to do with the shortages. I am not at all familiar with the ammo supply chain for the U.S. military. However, these wars are winding down from what I can tell, thank goodness, and that demand should subside unless we do get into another conflict somewhere.

 

[tipoc]

Neither of the two reasons you offered are valid..

As contributing factors, why not?

tipoc

 

[BlisteringSilence]

Why not?

tipoc

To your first point, it's not that simple. Ammunition manufactured in the United States is rarely sold or gifted overseas, because we don't manufacture the calibers necessary in any kind of quantity. Our allies overseas, if they don't have their own ammunition manufacturing capacity, aren't shooting nato rounds. They're shooting ex Soviet bloc ammo, which we simply buy at International market rates for them. Traditionally we bought from Egypt. With the current turmoil there, I don't know where the new source is, if there is one.

To your second point, there hasn't been expansion of law enforcement and private security to any significant degree that would impact ammunition manufacturers. Private security companies are, despite rumor and innuendo, generally unarmed. And sworn law enforcement as a profession is growing at about the same rate as the population.

If anything, the budgets of law enforcement agencies shrank from 2008 to 2012, and the first place to get cut is the training budget. I can certainly speak to that from experience. We've cut back from around 2K rounds per officer per year to less than a thousand, and our budget for sim rounds disappeared until fiscal 2013.

 

[Queen_of_Thunder]

To your first point, it's not that simple. Ammunition manufactured in the United States is rarely sold or gifted overseas, because we don't manufacture the calibers necessary in any kind of quantity. Our allies overseas, if they don't have their own ammunition manufacturing capacity, aren't shooting nato rounds. They're shooting ex Soviet bloc ammo, which we simply buy at International market rates for them. Traditionally we bought from Egypt. With the current turmoil there, I don't know where the new source is, if there is one.

To your second point, there hasn't been expansion of law enforcement and private security to any significant degree that would impact ammunition manufacturers. Private security companies are, despite rumor and innuendo, generally unarmed. And sworn law enforcement as a profession is growing at about the same rate as the population.

If anything, the budgets of law enforcement agencies shrank from 2008 to 2012, and the first place to get cut is the training budget. I can certainly speak to that from experience. We've cut back from around 2K rounds per officer per year to less than a thousand, and our budget for sim rounds disappeared until fiscal 2013.

tipoc the above goes a long way to explain it but lets not forget that one war is over and the other is winding down then add to that budget cuts which means less training time for military and that alone eliminates any military impact on the ammo supply. Security companies were in existence and still are so their demand is already accounted for plus I doubt they use 22lr. Now lets add in the reduction in budgets for local and state LE agencies since 2008 which means more ammo for the civilian market.

 

[tipoc]

I've been busy so I forgot about this discussion.

First off over a decade of war, the growth of law enforcement and private security firms all had the ammunition industry running at near capacity for close to 12 years. This left the industry more vulnerable to the succession of "runs" on ammunition that began a month before Obama's first election.

That 2008 run caused a shortage of ammo and in increase in ammo prices that has not returned to pre-Obama price levels and likely never will. It also was the first time there was a shortage of .22 ammo. This was because the temporary run caused a shortage of components and production lines were tied up.

There have been 3 other runs since then all causing shortages.

During this same time period there has been an unprecedented growth in the number of new shooters and increased demand for ammo in general.

While local law enforcement has seen some shrinkage since the recession of 2008 began (budget cuts, etc.) there has been a net increase in other areas. The Border Patrol for instance has more than quadrupled in size since 2004. The increased militarization of law enforcement has also meant an increase in expended ammo for training. The growth of prisons and prison guards both public and private continues. These things have been factors in keeping ammo production at or near capacity for over a decade.

A feature of the current wars has been the wide scale use of private contractors for everything from construction of barracks and kitchens, to protection for facilities, convoys and private protection of VIPs and others (these are not mall cops). Blackwater and similar outfits became household names over this period and continue to play a role internationally. Ammo there too.

Right now it is expected that "only" 10,000 or so troops will remain in Afghanistan for an unforeseeable future. As well as a good many contractors.

To your first point, it's not that simple. Ammunition manufactured in the United States is rarely sold or gifted overseas, because we don't manufacture the calibers necessary in any kind of quantity.

This is not accurate. The U.S. ammunition industry regularly produces and sells for the international market as does the firearms industry. This is not only for sporting cartridges but for military ammo as well. 9mm, 5.56x45, 7.62x51 and other rounds are widely used internationally.

All of these things and others had the industry running at close to near capacity for years now. The panic buying runs (maybe panic ain't the right word, buying sprees then) have caused the shortages, including of 22. But the industry was stretched before then.

tipoc

 

[TomJones]

I have read this entire thread and learned a lot on Economics and Politics. However, it brings me to one conclusion. The primary reason, other than its fun, that people shoot 22LR is that is is cheap. If it is no longer Cheap there is little incentive for me personally to shoot it over my .357, 454 cassull, 45 colt or 9mm. I can get components for all of those and reload. So I have decided to sell my 22LR weapons on Gunbroker.com for the usual exorbitant price they list all of their guns at. Then I can focus on enjoying my other calibers and forget about all this madness. Rest assured the Political stressers are just resting currently and will soon do everything they can to make our sport difficult if not impossible to enjoy. Thanks for the education. And my opinion is that to some extent you all make valid arguments for the reasons we have a 22LR shortage.

 

[rodregier]

Not to muddy the waters any further, but just keep in mind that US ammunition manufacturers have been selling .22LR to Canadian distribution for decades.

We continue to see Remington, CCI, Federal, Winchester etc .22LR on Canadian retail shelves in addition to overseas manufacturers.

Canada *used* to have a domestic .22LR manufacturer (CIL), but that was shutdown when most of their commercial Canadian ammunition production operations were closed down after an acquisition in 1976. (Imperial and Dominion headstamps).

http://iaaforum.org/forum3/viewtopic.php?f=1&t=5890

 

[gdcpony]

No matter the reason for the shortage, I have already witnessed some of the effects. Many are actually positive effects that may seem small. Others may be negative and grow to be larger.

1. Shooters are more focused on the shots they fire. My kids are going to be used as examples allot here, but they are just examples of what I have witnessed among other shooters as well. When I took them out with a full brick they shot fast and aimed little. Now, they get a 50rd box to share. Every shot is careful. Every shot must be worth the cost of the round.

2. More centerfire shooting and less rimfire. As the prices of .22 rise or availability drops below acceptable more people are joining me for shooting of .223, .45, and even .308. The ammo for those is for the first time ever easier to find than .22 at any price. So shooters are turning to their centerfires more easily than in the past.

3. Reloading is picking up. I used to think reloading was dying. However, it has received a much needed boost as the components were on the shelves before the ammo was. That made it easier to consider.

a. You can stockpile a single powder good for all your rifles much more easily than the ammo itself. Varget (extremely versatile powder), 2 types of CCI primers, a few types of bullets, and the casings you used to throw away set you up for rifles rather well.

b. The price difference mentioned before (par 2) is even less when you reload. My .223 loads are comparable to the best premium bullets if you look at the components. Yet, I am still loading them for 1/2 of the cheap plinking ammo price. Expand that to other calibers or cheap components and the price difference grows more. So now you stop searching for .22 rounds and shoot for only twice the cost of some the inflated .22 out there.

4. Shooters are getting out of the sport. Granted this is not keeping up with the influx of new shooters, but it is happening. With cheap practice and fun taken away many are actually giving up. I have seen four guys sell their rifles/pistols and the first to go were the .22's because they are too short sighted to see the end of the shortage. I picked up a .243 because a guy thought it was too pricey anymore and he had "other things" he could do for fun that weren't the hassle that shooting was. His .22 was already gone.

5. Many of us are blaming everything for anything to do with the shortage. Fact is this entire thread is full of the reasons for it, and the solutions too. Each valid, if different, depending on your point of view. We can sit and say it is his fault for buying too much, hers for flipping ammo for profit, theirs for not raising prices to curb demand, but in reality each has an input into it and none- from their own point of view- is wrong. We could stop buying, they could raise prices, and people could be banned (I really don't like this one) from profiting from the demand. However, each comes with a price other than money to pay and that price may seem too high for another to wish.

So here we sit wondering how to fix it. I could suggest my ideas (already spelled out in many posts here by others), and you could hate them. In the end, we are all at the mercy of the big circle of contributors to the crisis; producers, end users, hoarders, profiteers, and distributors. This problem will not be fixed by just one of them.

 

[Ignition Override]

gdcpony:
In order to conserve my 3-4 bricks of .22LR ammo, the pair of SKS (Yugo 59) have taken up much more of the plinking. The Romanian .22 rifles are used primarily on hot summer days, when it is too sweaty to wear hearing protectors, needed for my centerfire guns. And I only take one small 50-rd. box of .22 per session.

This prevents the need to Alter One's Lifestyle, in order to frequently park, walk into a store, hoping just to spot .22LR.
Or even lose chunks of sleep to do so? Beyond ridiculous.

 

[mboylan]

...,..

 

[mboylan]

Okay, 10 years ago, ammo was more than 60% less expensive than today. Compared to wages and such, ammo was considerably less expensive (actual and relative) and we were not having shortages.

30 years ago the price was more than 60% higher adjusted for inflation. Demand and capacity increased as mail and later internet sales became legal. Global competition also brought prices down. Demand is not the sole driver of price.

 

[The_Next_Generation]

Sorry I haven't been active in this discussion yet. Other things got in the way and I forgot about it. I'd love to address everyone individually and debate, but I really don't have the motivation for that lol.

gdcpony, I agree with pretty much 100%. Two days ago I reloaded my first round (in the venerable 45ACP, no less ).

Lately, I've stopped flagging Armslist listings for 22 ammo at $.10/rd as overpriced. I think that by leaving them up there the sellers (hopefully) will realize they can't sell them at that price, and will adjust accordingly.

Honestly, I'm surprised we haven't seen any new ammunition manufacturers emerge as a result of this whole thing. You'd think that someone with a spare $10 million or so would get a small plant up and running. My economics class taught me that during a shortage like this, if current companies don't increase production that competitors begin to enter the market. I'm baffled as to why this hasn't happened yet. Yes, I am aware of the time it takes, the overhead, the insurance, etc. etc. but you'd think that someone would have at least come out and said, "Hey, we're gonna start making a bunch of .22lr ammo!" Just simply saying that would seemingly reduce prices as folks would stop buying at today's higher prices to wait for the supply of cheaper stuff to arrive.