Ask Foghorn: What’s Up With the Ammo Shortage?

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John writes:

How about some Information on why there is NO ammunition available? Is it a Govt. conspiracy? Just a “Normal” shortage? How come Wall mart, Cabalas, On line dealers, etc has NONE? It sure would be nice if TRUTH, gave us some believable answers, you could ask Manufacturers, WHY , WHEN, & HOW MUCH WILL HIT THE SHELVES

No, this isn’t a normal shortage. We’ve seen something close to this before, but it’s never been this bad. Here’s what’s going on . . .

For the last few years, the number of gun owners has been on the rise. Increased gun ownership means more ammunition being fired, and the increased demand meant that the existing supply of ammunition was insufficient. Manufacturers were already producing for the Iraq and Afghanistan wars (which was taking a ton of ammo) and as such, any slack there may have been in the system was taken up by those conflicts. We’ve been seeing the effect of the increased demand as the price of ammo has slowly been climbing, especially during the first Obama election stampede in 2008 when prices went through the roof.

That’s the last time we really saw a run on ammunition remotely as bad as the current state of affairs. With manufacturers busy producing for the war effort, there wasn’t enough slack in the supply chain to allow for the ammunition hoarding that took place. And, as a consequence, ammo became scarce and expensive.

When the wars started slowing down, the extra ammunition flooded the civilian market. Ammunition prices bottomed out, and especially 5.56 ammo was dirt cheap. As demand slackened, the manufacturers responded by slowing down manufacturing as well. Production lines that were running 24/7 went back to 9 to 5 shifts.

When Barack Obama was re-elected, there was a mini panic buying spree. But this time, the gun stores and distributors were ready. Remembering how crazy things were during the last Obama election, they ordered extra ammunition ahead of time and there was plenty available on the shelves. The demand by gun owners was sufficiently satiated by the available supply, and life returned to normal pretty quickly.

Thanks to the mini-panic, the ready reserve of ammunition was completely gone. Manufacturers had nothing in stock, and distributors were sold out. While the lack of ammunition available might be concerning to some, seeing nothing on the horizon, manufacturers continued their slacked production schedule. Since everyone who wanted ammunition had bought it already during the panic, demand was way down and they figured that they could gradually re-fill the reserves.

For a few weeks, life was good. Distributors were starting to build up their ready reserve of ammunition once again, and store shelves had ammunition in stock at normal prices. Then, Sandy Hook happened. Almost overnight, the demand for ammunition shot past the peak of the mini-panic from a month before, completely draining the ammunition reserves of manufacturers and distributors. The shelves were literally empty.

Right now, we’re dealing with the aftermath. Ammunition manufacturers quickly ramped back up to 100% production, running their lines day and night, but that’s proving to be too slow to replenish the supplies of the distributors and gun stores. Ammunition is being sold as fast as it can be manufactured. There is no slack in the distribution system whatsoever.

Normally, there’s a built-in relief valve for panic buying. Namely, people run out of money and then stop buying stuff. People would still want ammo, but they wouldn’t have the money to get it. Unfortunately, this has happened at the absolute worst time — tax refund season. The government is handing people tons of spare cash, which they are dumping immediately on more ammo. Which in turn leads to the ammunition scarcity.

Since ammunition manufacturers are producing at 100% capacity and distributors are selling what they get as soon as they get it, that means that distributors are continuously adding new orders to the queue. And the queue continues to grow, since orders aren’t being filled fast enough.

Let me put it this way. Right now, ATK (manufacturer of Federal ammunition) has an order queue that will take them three years to fill. That’s for orders through today. The line will inevitably grow tomorrow.

(That info about the orders brought to you by TTAG informant El Grande Queso.)

As the demand for ammunition slows down, we’ll see more availability and lower prices. There’s a massive cliff on ammunition prices coming as market saturation (or rather market bankruptcy) is reached, and life will once again be good. But for right now, it’s still insane. And showing no signs of stopping anytime soon.

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