Ammo Shortage...

[Don Ro]

A bit of insomnia - reading gun forums - found this:
.
Ammo Supply 101, Supply and Demand
BY M. L. MCPHERSON

A DEFINITION, AS APPLIED IN THIS ARTICLE EXTRA: Above normal product demand, usually for something intended to be stockpiled for that proverbial rainy day.


... Similarly, in the early nineties, some government thug wondered if it would be possible to manufacture ammunition with a limited shelf life. They asked someone in the industry to consider that possibility. Even though doing so was impossible, a rumor spread that shelf-life-limited primers were coming. Shooters and handloaders wanting to stockpile EXTRA supplies created a shortage.

DBI Books asked me to investigate that shortage. I spoke with representatives of every free-world primer manufacturer. Those conversations were most enlightening. Many of those revelations are basic to understanding the current shortages of ammunition, components, and related items.

One of those conversations revealed a fact that will surprise many readers: One of the largest primer producers in the US told me in confidence that his company was making less quarterly profit on primers during the primer shortage than it had made before the panic-driven shortage began.

While it had stepped up production to the extent feasible, its production costs had increased so much that both profit margin and absolute profit had decreased. This really surprised me because retail primer prices had doubled.

Last fall, the obamination occurred. This event created a panic-driven run on guns and all related items. Unlike the previous panic-driven runs, this run is not based upon rumor or perceived threat; every real American should intuitively understand that this threat is very much, very real.

If you do not believe this, you are part of the problem — one of those who would sacrifice freedom for the illusion of a little temporary safety and, as Benjamin Franklin noted so acutely, you deserve neither.

When will this shortage end? In 2007, short of a total economic catastrophe, few would have considered selling a family heirloom; in 2009, many viewed that family heirloom as a source of money with which they could buy something perceived as being far more important (e.g., primers, ammunition, etc.).

When will this panic driven shortage end? Not until panicked people run out of money.

Why does demand-side panic lead to such an obvious and startling shortage of guns, ammunition, handloading components, and handloading tools and why does it increase costs? The answer falls directly from analysis of free-market supply and demand.

Here is the critical fact: Before the obamination, no related manufacturer had the facilities to increase production more than about 40%. Moreover, even if a company did have such capacity, it could not expect to be able to affordably obtain raw materials needed to do so — companies that supply raw materials cannot increase capacity more than about 40%!

Moreover, spending money to add facilities in order to increase production beyond 40% — in response to a special situation that could end any time (one way or another) — is economically foolish. It would not work unless the entire supply chain could support that increase, which is far from certain.

For example, a primer manufacturer ideally runs two production shifts at eight hours per day, five days per week. The remaining time would be used to clean, maintain, and repair equipment, and to do associated work necessary to maintain production throughput.

This situation holds true for all related manufacturers, and applies to manufacturers providing raw materials as well. No glaring supply-side exceptions or variations exist, but variations in degree of EXTRA demand do exist (shortages vary accordingly).

Because practically no stockpile ever exists and because the supply pipeline contains so little of anything, just a few percent EXTRA demand results in an immediate supply-side shortage — exactly what happened three decades ago with the toilet-paper fiasco. If EXTRA demand increases more than about 40%, supply-side shortage will continue indefinitely.

Annual production worldwide for centerfire metallic-cartridge primers is about ten billion. In the US, about five million people have handloading equipment. If each of those persons decides to buy a mere 2000 EXTRA primers “just in case,” EXTRA demand instantly equals worldwide annual production.

Ammunition manufacturers will not stop making ammunition just to coddle handloaders. Therefore, eight of the ten billion primers produced each year will never be available to handloaders. This leaves two billion primers to fill the standing annual demand, which leaves a supply-side shortage of ten billion EXTRA primers.

If manufacturers can increase annual production by 40% up to fourteen billion, then they can produce about four billion of the needed ten billion EXTRA primers. All things being equal, demand-side need for EXTRA primers would disappear in about 2½ years.

However, nothing else is ever equal. Two issues prevent this result. First, demand for EXTRA ammunition exceeds demand for EXTRA primers by twenty times because twenty times as many people in the US own guns as handload ammunition. So, of the four billion EXTRA primers produced each year, not one will become available as a component primer. As a matter of fact, primer manufacturers have twenty times as many customers wanting EXTRA ammunition as customers wanting EXTRA primers. Therefore, as a matter of maximizing goodwill among customers, manufacturers have a twenty-to-one incentive to use all EXTRA primers to produce EXTRA ammunition.

Similarly, if we look at this situation strictly from an economic standpoint: Because the manufacturer can make more profit from ammunition than from primers, any primer it could use to produce ammunition but instead offers as a component represents a money losing goodwill measure.

Keep in mind that a manufacturer is constrained in production of other components, so it might not be able to use all primers in ammunition. However, if it can do so, using all primers to make ammunition is the most profitable approach. This is not a conspiracy; this is a natural consequence of free market economics.

Even if every one of the four billion EXTRA primers produced were offered as a handloading component, it would not matter because most handloaders are not interested in 2000 EXTRA primers — we want 20,000 EXTRA primers. (Really, we do.) And if we had 20,000 EXTRA primers, we would want more.

So when will the EXTRA demand be met so that primer availability will return to normal? My belief is that until the motivation behind the demand for EXTRA primers ends, the answer is likely NEVER.

Consider economics: $10,000 invested in the Stock Market in mid-2008 is now worth maybe $5000; $10,000 cashed out before the obamination and invested in guns, ammunition, and related products is now worth about $30,000. Many have made such an investment for lack of anything nearly as good.

Cost of production has increased but that is not why primer and ammunition prices have increased so markedly since the obamination. Many manufacturers and customers in the chain are engaging in free-market profiteering. Just last month, for example, a friend of mine sold 10,000 primers for eleven cents apiece!

For the foreseeable future, we will continue to face difficult times when it comes to simply continuing to enjoy the freedom to pursue our hobbies.

Similarly, any shortage of any particular component or type of cartridge requires no conspiracy. During a demand-side run, manufacturers that are selling every cartridge they can make of any given type have a significant negative incentive to shut down production long enough to gear up to make some other type of cartridge. Doing so can cost more than $25,000 in lost profits. The best economic approach is to gear up to manufacture the most profitable cartridge types and to continue to produce those until either:
• The market is saturated (which will never happen under present demand), or

• Something breaks and requires retooling.
If you were running Remington’s centerfire metallic ammunition factories, and if standing orders for 9mm Luger and 5.56mm NATO (223 Remington) rounds exceeded production capacity, what ammunition types would you produce? So, the next time you cannot find a box of 380 ACP, remember the law of supply and demand. Conspiracies need not apply.

Whose fault was the first primer shortage? A foolish rumormonger.

Whose fault was the gun and magazine shortage? Politicians and those who voted for them.

Whose fault is the current shortage? We–the–People — for continuing to support those who conspire to take our freedom. We–the–People got exactly what we wanted, and We–the–People got exactly what we deserve.

Never forget that any vote for the lesser of two evils is also an explicit endorsement of evil — consider how Jesus would view such behavior.

Mic McPherson is author of the best selling gunsmithing manual “Accurizing the Factory Rifle”, an avid shooter and instructor, and regular firearms writer. He lives in Southwestern Colorado.

[m21sniper]

I use GI .30 cal ammo cans with desiccant bags.

[masraum]

THat was interesting until I fell asleep. loooooooong

But thanks for posting, some interesting info.

[Don Ro]

Originally Posted by masraum

THat was interesting until I fell asleep. loooooooong

Yeah, it ended my insomnia.

[m21sniper]

Clearly by my response i saw "ammo STORAGE" in the thread title. LOL...

[Don Ro]

Originally Posted by m21sniper

Clearly by my response i saw "ammo STORAGE" in the thread title. LOL...

Ha! I was thinking the article put you to sleep, as well.

[m21sniper]

It did when i read it just now....

[legion]

The author's math is sound, but he ignores the psychological aspect of such shortages. I'll try to summarize at a high level.

When there was plenty ammo and reloading components, no one was stocking up on them because they knew they could get them at the store if needed. When an external threat created a shortage, suddenly people who maybe didn't buy into the cause of the shortage were stocking up to ensure their own, personal supply. Suddenly people (like myself) were buying everything they could get their hands on whenever they found it available.

The author states that the shortage will never end. I think he is dead wrong. I think it has already ended for rifle and handgun ammunition, and will soon end for reloading components. Why has it ended? People have accumulated enough of a stockpile that they feel personally comfortable, and have stopped feeling the need to add to the stockpile. People are noticing that ammo is staying on store shelves for days or weeks instead of hours, and that leads to the feeling that it is available again, which decreases the impulse to buy all you see when you can find it.

[m21sniper]

I agree with legion.

[Rot 911]

Originally Posted by m21sniper

I agree with legion.

As do I. I try to keep 1000 rounds of each caliber I use on hand. I have that amount stock piled so now I only buy what I shoot up at any given time. I think most others have also reached their comfort level stock pile.

[Joeaksa]

Originally Posted by Rot 911

As do I. I try to keep 1000 rounds of each caliber I use on hand. I have that amount stock piled so now I only buy what I shoot up at any given time. I think most others have also reached their comfort level stock pile.

Not a bad idea and as long as people buy only what they need to use while shooting the factories can catch up.

On a parallel subject really hope and wish that people would stop putting photos of their collection of "spoons" and cases of ammo that they are stockpiling on the internet.

Anyone who shoots for fun, hobby and so on know that this is usually not a large amount of ammo to keep handy but others (read most liberals) see this as a cache and pretty much feel that only survivalists or kooks have this and feel the need to crack down. Am really concerned at some of the libs trying to regulate or close down gun shows and such where many people buy things like this. Less publicity the better IMHO.

[m21sniper]

I have 1100rds for my AR, 250rds for my 9mm and 200rds for my .32acp.

That's plenty for me.

[gtc]

The ammo shelves around here have been full since last fall. I was actually surprised... everyone had been very low on ammo for six months or more, then all of a sudden everything was in stock again.

[Tim Hancock]

Primers and bullets are still a bit difficult to find in large quantities (unless you want to pay a fortune). My reloader comes Monday and I really struggled to find 147gr FMJ 9mm bullets for it. I luckily ended up finding a guy that had just received a large backorder shipment and scored 4000 Zero brand bullets for $360. Local gun shop supposedly has small pistol primers in stock but will only sell 200 per person a day. All the big internet suppliers (Grafs, Natchez, Midway etc) still show no primer availability.

[Joeaksa]

Tim,

What kind of press did you end up getting?

Joe A

[Tim Hancock]

Originally Posted by Joeaksa

Tim,

What kind of press did you end up getting?

Joe A

I don't want to tell you.

[Joeaksa]

Originally Posted by Tim Hancock

I don't want to tell you.

Figured so. Hope it works...

Several years down the road, give a Dillon a try and you will see what you missed!

[flatbutt]

so what is the long term storage limit for factory rounds? I've stored some stuff for years with no problem but may just have been lucky.

[legion]

I have factory rounds from the 50's that are still safe to fire.

[Tim Hancock]

Originally Posted by Joeaksa

Figured so. Hope it works...

I am very confident that it will work very well once I get some time to fiddle with it. I have a bunch of improvements planned for it and in all likely hood will end up with not only the stock case loader, but also a bullet feeder and electronic powder level check. If all goes well, this will be much faster than a 550 when I am done with it for half the cost. My day job of 20 years of automated machine design makes the thought of fiddling/improving/automating/idiotproofing this thing seem like no big deal.

I always have been and always will be a tinkerer at heart. I am the odd type that typically gets more pleasure/satisfaction from restoring/building/tinkering with my hobbies than I do with using the finished product.