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Posted:  6/27/2013 3:50 PM #38245
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Joined: 7/14/2009
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Last Post: 8/20/2014
Subject: G&A Perspective: Panic Purchases and the Volatile Ammo Market
(www.gunsandammo.com) By Kyle Wintersteen- Within weeks of President Obama’s 2008 election, my grandfather purchased an extra 100 rounds of .45 Colt and .357 Mag. I thought he was silly, and maybe even a little paranoid. “I just don’t like the uncertainty of having him in power,” the retired law enforcement officer and Korean War veteran told me. “[Obama] hasn’t shown an interest in gun control yet, but who knows? I want to have the ammo I need on hand, just in case.” Months later, I wish I’d followed grandpa’s lead. Supplies of popular calibers such as .223 Rem., .45 ACP, 9mm and .22 LR dried up. Twelve-gauge soon followed. In 2013, nearly all calibers—even the most obscure—are in frighteningly short supply.

 

My grandfather was partially correct. Walking into a big-box retailer and buying all the rounds you want has become a distant memory under the Obama administration. However, the president has not made a direct, legislative impact on the shortage. Instead, a variety of factors are at play, all of which are delaying the ability of ammunition makers to meet consumer demand. Let’s take a look at the volatile ammo market, including what it will take to get us out of this mess, and how long it may take for better days to arrive.

Unprecedented Demand
Industry experts believe the issue boils down to overwhelming supply and demand. The U.S. civilian market has never felt a more insatiable appetite for ammunition.

“There is unprecedented demand for ammunition occurring all across the United States, and there are several contributing factors,” said Larry Keane, senior vice president of the National Shooting Sports Foundation. “One is there are simply more guns in civilian possession in the United States than ever before. There are now more than 300 million firearms in civilian possession and 100 million civilian firearm owners. According to one of our surveys, 20-25 percent of purchases are by first-time buyers of firearms.”

Based on those estimates, there are approximately 20 million more gun owners in America today than during the George W. Bush administration. When people purchase firearms—guess what—they also buy ammunition. Should it be a surprise that the supply chain is strained?

The economy may also factor into the surging demand.

“We also think part of what’s driving the demand is the general economy, which—to be fair to this administration—is poor at best,” Keane said. “In tough economic times, there’s a fear of crime and instability, which leads many people to purchase firearms and in turn ammunition.”

Certainly, the political climate also plays a role. Spikes in firearm and ammunition sales occurred following Obama’s election in 2008, his subsequent reelection in 2012, the political response to recent events and pretty much anytime Joe Biden opens his mouth.

“People buy firearms when they fear restrictions on their Second Amendment rights,” Keane said. “Following the Newtown tragedy, we’ve seen even more heightened concern about gun control at the federal and state levels. Particularly at the state levels, that’s become reality in Colorado, New York, Maryland, Connecticut and elsewhere. There’s definitely a consumer reaction when politicians discuss erecting barriers to the exercise of the Second Amendment.”

Can’t We Just Make More Ammo?
The frustration of empty ammo shelves has caused some gun owners to search for someone to blame. Oftentimes, ammunition manufacturers seem to be the common-sense scapegoat.

Many folks wonder why ammo companies can’t just ramp up production.

“All U.S. manufacturers are making ammo 24 hours per day, seven days per week—I’m not sure they can do much more than that,” Keane said. “We get calls from retailers constantly asking why they aren’t making more, and we have to explain that there’s only 24 hours in a day.”

For those who argue manufacturers should expand their production capacity, let’s think realistically for a second. Imagine you’re the CEO of an ammo company—your operation has a high sales volume and low profit margins. Adding production capacity to your factory through building machinery and hiring additional workers is no small investment. As a businessman, will you ever see a return on investment if the current demand subsides?

Like it or not, ammo makers have a business to run, and expanding factories to meet short-term demand doesn’t make sense to their long-term health. If you think manufacturers are enjoying the run on ammunition, you couldn’t be more wrong. They are in full public relations crisis mode, based largely on accusations they aren’t doing everything possible to increase supply.

According to Neal Emery from Hornady, “We are producing as much as we can, much more than last year, which was a lot more than the year before, etc. No one wants to ship more during this time than we do.”

Most companies are directing common queries to press release statements rather than offering specific comment—probably to keep things consistent, but also because they lack sufficient time to individually answer all the ammo queries pouring in.

One of my friends who works for a major ammunition maker is worried sales will plunge as consumers realize they purchased all they’ll need for a while. In that case, companies may have to lay off employees, not just including those hired to keep plants rolling 24/7

Suffice it to say, the blame does not lie with ammunition manufacturers. They want the chaos to end as much as we do.

How Gun Owners are Reacting
Perhaps the most regrettable aspect of the short supply is how it’s forced many people to shoot less.

“Instead of going to the range and shooting a few hundred rounds of .40 S&W, I’ll shoot about 50 rounds,” said Alex Dawes, president of a Penn State student activist group known as Nittany Lions for Concealed Carry. “I have, however, started shooting skeet and trap a lot more because 12-gauge target loads are much easier to come by.”

Ron Lutz, owner of Ron’s Gun Repair in Lemont, Pa., has adjusted his shooting habits as well.

“I don’t have a good supply of .30-06 for my M1 Garand or .223 for my ARs, so I’m worried about shooting them,” Lutz said. “I reload my .357/.38 and my .45 ACP, and have a lot of bullets, primers and powder, so I’m okay there too.”

Another common question is regarding the rate by which consumers are stockpiling more ammunition than they need. We’ve all heard incidences of consumers buying cases of ammo and attempting to gouge prices. However, a larger driver likely results from consumers who fear if they see ammo and don’t buy it, it may be more expensive next time—or it won’t be there at all.

“That’s a normal economic reaction when supply is tight,” Keane said. “And it becomes sort of this self-fulfilling prophecy. Consumers are buying more ammunition than they need, because they’re afraid they won’t be able to get it later. In doing so they further increase the supply/demand disparity we’re experiencing.”

Some suppliers have sought to slow this process by rationing ammo. At many big-box retailers, for instance, purchases are limited to 75-100 rounds per consumer.

“The strategy [of limiting purchases] does keep ammunition on the shelves longer, which helps clamp down on the idea that I better buy now or it won’t be there later,” Keane said.

However, that solution hasn’t been convenient for high-volume shooters.

“I bought most of my shells at the local Wal-Mart until they began limiting me to three boxes,” said professional gun dog trainer Mike Wallace, who owns Salmy Acres Kennel in Kearneysville, W.V. “I can go through [75-100 rounds] in a single day, so I’ve started ordering a month’s supply of shells online every two weeks to avoid back orders. Cabela’s has been my favorite in terms of price and convenience.”

Is There a Government Conspiracy?
Another driving factor of consumer fear is the theory that the government is trying to assert de facto gun control by snatching up all our ammo. Many conservative bloggers have alleged the Department of Homeland Security’s purchase of 1.6 billion rounds is all the proof we need. Several news outlets falsely suggested the ammo buys would occur in a single year, when in fact it’s over the course of five years. Still, that’s a lot of bullets for a single government agency.

“All ammunition manufacturers say that purchases by law enforcement and the federal government have not been atypical,” Keane said. “Nevertheless that rumor is out there and a lot of people are concerned, which has driven a lot of purchasing.”

Predicting the Future
We’re stuck in a vicious cycle in which supply is limited because consumers snatch up ammo when they see it. Consumers continue to ask how much longer this cycle can keep going on.

“If I could accurately predict that, we’d be having this discussion from my yacht,” Keane chuckled. “I don’t know more than anybody else, but one of the factors is how much gun control continues to be discussed in the media. If anti-gun politicians take to the airwaves, it certainly won’t help demand subside.”

Whether supply has slowly begun to improve seems to depend who you ask. Low-brass shotshells are in fairly decent supply, but good luck finding high-brass. Same for the most popular handgun and rifle cartridges. Some consumers claim they’re in somewhat better supply than months ago, but others argue the shortage has never been worse. Unfortunately, the supply and demand disparity is difficult to measure.

“This is the sort of thing that drops off over time,” Keane said. “It’s not like flipping a switch, but things will get back to normal. Manufacturers are constantly finding ways to improve efficiency. So either they’ll boost capacity—demand will go down—or as often happens we’ll see a little bit of both. Regardless, surges in demand for ammunition have happened before, and we will get back to economic equilibrium.”



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