How bad is the ammo situation? This bad: even the feds in the Department of Homeland Security are complaining that their training and duty ammo supply has been cut way back.
So yeah, it’s bad. And while some previous shortage items seem to be easing as supply catches up with demand — generic AR-15s, for example — ammunition in popular calibers continues to be hard to find.
A recent visit to Kittery Trading Post, an excellent outdoors megaseller that in normal times never ran out of ammo, found no 9mm, nearly no .40, no M193 or equivalent 5.56 (and very limited M855, unless you wanted to buy a barrel of it for $6,995.00), and most bizarrely, no .22LR.
This wasn’t even the ultra low supply of .22LR that we saw there six weeks or so ago, where the only rounds left were oddball imports, nosebleed-expensive match ammo, and shorts. There was no .22LR. Hell, there was no .22 Short or even CB caps, as far as we could see.
The supply of components is really bad, too. Manufacturers that don’t make all their own components (which is most of them) are therefore in a jam. Their customers are screaming for more supply, but the makers are as flat-out as they dare go. The easy ways to add capacity (overtime or a second shift, for example) add wear and tear on machinery, and risk leaving you with a room full of workers and no feedstocks. Primers are a particularly unreliable stock right now.
There are strong incentives for manufacturers to increase production in this market, but their ability to do so is under many constraints. If you hire more workers, you are on the hook to pay them, or get whacked by unemployment insurance. The “Affordable Care Act” has increased the cost of full-time employees, and who are you going to get to work a part-time third shift? And the theoretical capacity of a Camdex machine and its actual potential on a real production floor aren’t remotely the same thing. (You could buy more machines, but guess who also has a backlog?)
So how bad is the ammo situation? A few of us are looking at buying into an ammo company. But our concern is: what happens when the market finally does equilibrate and start clearing normally? Prices will probably be sticky initially, but a lot of ammo makers will be grinding out commodity ammo, and if demand slackens they’ll be unable to resist cutting prices to sustain sales and production.
In our opinion, that must happen at some time for centerfire ammunition. The ammo producers are making more and more of it, and shooters aren’t necessarily shooting more. In fact, they seem to be shooting less, as they stockpile against the proverbial rainy day, and a supply of replacement ammo is not assured. Before 2012, most shooters operated on a near-just-in-time basis: they maintained a small operational “float” of ammo at home, but they replaced fired training and proficiency ammo as they went. Now, nobody feels secure doing that. Where you might have been comfortable with 1000 or even 500 rounds at home in case of a week’s interruption of supply, we’ve now seen eight months of unreliable supply at retail.
While shooters are puzzled, economists aren’t
Shooters are puzzled; they’ve never seen this before. Economists, though, aren’t puzzled at all. They’ve seen it all before, although not in the case of ammunition. Instead, it’s been shortages of other items, like gasoline after the Arab oil embargo of late 1973 or the Iranian collapse into lawless Islamism in 1978.
People behave in predictable ways when shortages loom, and these ways, while rational from the point of view of individual actors, are disastrous for the economy as a whole.
What about the manufacturers?
Again, the manufacturers are running flat out, or as nearly so as their feedstocks allow. Hodgdon, the powder manufacturer, is hearing from angry customers, or would-be customers, who can’t find the company’s reloading powders. It has an outstanding FAQ on this issue. Here’s a couple of the questions, but we suggest you Read The Whole Thing™ (pdf).
Q: Are you still making powders?
A: We are shipping more powder this year than we shipped last year. We are shipping as fast as the powder is available. The real problem why you are seeing empty shelves is demand. The demand for powder (and all ammunition and components) is far greater than the supply from the manufacturers. We just cannot make enough to feed this demand right now. No one wants to ship more during this time than we do.
Q: Are you still in business?
A: Yes, Hodgdon is here for the long haul. We are doing everything we can to supply our powders. Dealer’s shelves are empty because powders are being purchased as soon as they arrive at the Dealer’s stores.
Q: What is causing this high demand?
A: The current political climate can have the regulatory consequence of impacting law abiding, hard working shooters and hunters. This has caused extremely high demand on all shooting industry products resulting in empty shelves, long back-orders, and on-line auction sites asking exaggerated prices.
We especially like one comment Hodgdon makes:
Q: I have seen/heard many rumors and conjecture on the cause of this powder shortage. A: If you do not hear it from Hodgdon Powder Company please don’t believe it.
A very similar comment was made by Hornady some months ago, including the plea for shooters to believe the company’s statements, not gunshop rumors or internet forum bloviating. Remember, these companies do not want to cut off sport shooters and self-defense shooters who practice a lot. They are their primary market. Hornady, for instance, sells less than 5% of their production to government at all levels — the other nineteen twentieths they sell to you and me.
But I heard DHS bought all the ammo?
So we agree this shortage is not the result of manufacturer cutbacks. After all, what sane manufacturer would cut back when he can sell every unit he makes at almost any reasonable price? But it is also not the result of DHS purchases. Seriously, if you’re a shooter, you probably know someone who’s a DHS agent: Border Patrol, Coast Guard, Customs (same agency as BP now), ICE and Secret Service are the big armed agencies within the sprawling department, and all the IGs have armed agents as well. If you know somebody from one of those outfits (or many somebodies), if you have a business card in your desk, call up and ask him or her. You’ll get an earful. All these agents have gone in the same period from having, essentially, all the training and qual ammo they want, to being very, very restricted on training ammo. (They do burn a lot of ammo on quals, compared to local PDs. The typical 1811 / Criminal Investigator shoots the table twice every every time for record and has to qualify semiannually or quarterly, and that’s the same deal in DHS and DOJ). The stories they hear from their higher on the tightness of ammo supply vary: some say this is a reaction to DHS’s bad press on the ammo purchases, some say it’s that even DHS, with its contracts for billions of rounds in place, can’t get the ammo it actually needs in the here-and-now beyond the bare basics of maintaining armed agent proficiency. But they’re all restricted on bullets, right now, in summer 2013.
So here’s what we think is happening with .22 in particular
Rimfire ammunition is a special case. Billions and billions of rounds are made, but there’s none on the shelves. Customers are buying as much as they can get, even though prices have ballooned. Retailers are ordering it but can’t get as much as they would like (and they, in turn, restrict sales to their customers). Ammo manufacturers are running at capacity. So where’s it all going? We think there are four prominent contributing factors.
- There’s a ton of new shooters, and shooters with new guns. Tens of millions have new guns have found new owners, and retailers tell us a high percentage of them are first-time buyers, and another large segment is people long away from shooting or gun ownership that are coming back to it. The entire demographics of shooting is changing, as a visit to a range will show you. These new shooters need ammo, and their mentors and trainers need ammo to train them with. That’s not all of it, but it’s one factor.
- Economists know that when the price or availability of a desired good rises, one predictable effect is the consumption of an alternative good in its place. The .22 rimfire is the long-standing alternative to expensive and scarce centerfire calibers like 5.56, 7.62, 9mm and .40. As a result, the shortage of any one of these calibers becomes, in time, a shortage of .22; and to a lesser extent it becomes a shortage of all of these calibers.
- People who were comfortable buying shooting and hunting ammo day-of or day-before have been spooked by the shortage into carrying an inventory. The longer the shortage continues, the more of these guys there are, the more of an inventory they feel they need. Exercise for the reader: if you shoot 500 rounds a week, how many rounds do you need to weather six months’ disruption in supply? Before you say we’ll never have six months’ disruption, stop and think: we’re in about month eight of a shortage right now. People who never stored ammo before are hoarding it now, and people who hoarded it already are hoarding more. This is probably the single biggest factor.
- People who concentrate on preparedness, for example the readers of Jim Rawles’s website and novels, have realized that .22LR ammo is a lasting store of value that has more stability in good times and bad than currency or even gold. (If the rule of law collapses, gold may still have value but may be difficult and risky to exchange). We think this is a larger factor. A lot of people who aren’t going to get fully on board with preparedness and move to the mountains like Jim recommends, will still take incremental actions like storing necessities: food, drinking water, and .22 ammo.
Note that except for #3, these effects are on all popular ammunition calibers and loads. Ammo’s not unobtainium, but it’s more difficult than it’s been in living memory of any but the very old who recall the Depression and wartime rationing and suspension of civilian ammo production. In the modern case, a more prosperous shooting public than existed in the 1930s and 40s are quickly snapping up the ammo that gets to retailers as soon as it arrives, regardless of attempts by retailers to ration ammo.
The one conspiracy theory that may have something to it, given that ATF management has been working with Democrats in Congress on drafting new gun restrictions, is that ATF is slow-walking import documents. But while we’re hearing that from the Congressional side, we haven’t heard the complaints of importers. We might not, though: whether it’s true or not, many importers seem to believe that being quoted “bad-mouthing ATF” (and that is how ATF classifies any criticism, however legitimate, by a licensee) brings about import document death by bureaucracy. But even if rimfire ammo imports went to zero, the domestic producers make vast quantities. CCI alone makes 4 million rounds of rimfire a day on a one-shift cycle.
The bottom line: you can’t find ammo to buy because everyone else is looking at the same time, and every damned one of us is buying whatever we find. The problem will ease when the market is saturated, and not before. It must ease at some time, because every dollar spent by an individual consumer on ammo is not spent on anything else. The ammo market has already absorbed more of those dollars than anyone could have predicted. So we know the end of the shortage is coming, we just don’t know when.