The Coming Crash in Ammunition Prices

The Obama-caused bubble in ammunition prices seems ready to bust. Over the last few years gun owners have seen ammunition prices double or even triple. Handgun and rifle ammunition has been hard to find at times and .22 long rifle ammunition tripled in price over the last 18 months. People would line up to buy ammunition at prices two and three times the level that they were just two years ago. But all of that is about to change . . .

Ammunition supply looks as though it is ready to catch up with demand.  Centerfire pistol and rifle cartridges are available on most store shelves. When I walked into a local Wal-Mart this morning, their were over 30 signs on the ammunition case indicating a rollback of prices by 10-15%.

In classic economic fashion, the bubble was fueled by actions of the federal government. Many federal agencies bought enormous quantities of ammunition. The Obama administration’s actions fueled fear of coming shortages, gun bans, registration of ammunition sales, even potential low level warfare. All of this led to the current bubble of ammunition sales.

In response, the economy reacted the way free markets are supposed to work. Ammunition suppliers started running their manufacturing plants day and night, adding additional shifts. Importers scoured the world markets, trying to buy everything they could to satisfy the insatiable demand. Foreign manufacturers bumped up their production to try to fill the desire for more and more ammunition. Ammunition production was at the highest level ever for small arms, short of war.

But unlike during wartime, this ammunition wasn’t being fired in combat. Most of it wasn’t being fired at all. It was being stored against future need. Very little was actually being used.

There are limits to this sort of demand. I gave away a couple of thousand .22 rounds to make a point. A person who only had 37 .22 rounds out of a box of 50 is well justified in wanting a thousand or two, or a case of 5,000 “just because”.  Once they have the 5,000, their desire for more is reduced. Ultimately, demand drops.

In the meantime, manufacturers can’t stop production on a dime. They have orders in the pipeline. They have raw materials coming in that they may have no storage space for. They have employees that they have trained and who they do not want to lay off.  For all these reasons, when demand drops, supply can’t drop as quickly. Just as supply took a while to spin up, production will take a while to spin down.

This means retailers and wholesalers will be saddled with a glut of merchandise that they can’t sell at the current high prices.  They will have to put product on sale. Lower prices bring about the expectation that prices will fall even further. The prices crash.

That’s when a prudent person buys what they want, at very good prices. Demand won’t stay at the artificially low prices of the crash. The new crop of young urban shooters will want to feed their equipment, and overall demand will be higher than it was before the bubble. But it will take a while to settle out.

Metal prices have already fallen from the highs of the bubble. Copper and lead prices are far lower than they were. You will know that the bubble is close to the bottom when you see .22 LR on sale for below four cents per round. At their lowest, we might just see .22 cartridges below $10 for 500 again.

©2014 by Dean Weingarten: Permission to share is granted when this notice is included.
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