by Jon Draper - Tuesday, September 10, 2013

The NRA is regularly inundated with letters from members requesting an explanation of the nationwide ammo shortage. Some folks merely vent their frustration over the amount of ammo they are able to acquire for range sessions. Some complain about the jump in prices; they insist it can’t all be explained by supply and demand. Others are sure the government is buying up all the ammo so average Americans can’t get their hands on it. Everyone wants to know if we have any inside information.

Whatever you believe to be the cause for the shortage, the fact is ammo continues to be difficult to find. Store shelves are empty. If you’re lucky enough to find a few boxes, chances are either you or the person behind you in line will buy all that either of you can carry and stash it away like Private Pyle hides a jelly doughnut. So, is this the future of ammunition, or is there an end to the madness? I did my homework, and while my conclusions may not be the answers you’re looking for, they are at least based on fact.

Government Purchases

Let’s start at the rumor mill. The Internet is awash with reports of large acquisitions of ammunition by government agencies, and the pot-stirrers ran with it: They insist “the government took it all.”

But as reported on the NRA Institute for Legislative Action website (nraila.org), much of the concern over these government purchases stems from a lack of understanding of federal law enforcement functions and the agencies tasked with performing them.

For instance, the Social Security Administration (SSA) employs 295 special agents tasked with combating fraud; this is a law enforcement function. These agents have the power to execute warrants and make arrests; they are required to carry firearms. The 174,000 rounds of pistol ammunition recently solicited by the SSA works out to roughly 590 rounds for each of the 295 agents for periodic training, mandatory quarterly qualifications and duty use.

At first blush, the 46,000 rounds of .40 caliber ammo requested by the National Oceanic and Atmospheric Administration (NOAA) seems like a waste of money for a bunch of lab coats arguing about the rain. But the reality is that ammo is going to the NOAA Fisheries Office of Law Enforcement, a small outfit of 63 personnel who enforce marine importation and fishing laws. They carry firearms. It works out to about 730 rounds per officer per year.

But that’s only a drop in the bucket compared to the solicitation by the Department of Homeland Security (DHS) for 450 million rounds of .40 caliber jacketed hollow-points over the next five years. At least one politician thought such an open-ended contract stunk enough to look a bit further. After receiving numerous questions from his constituents regarding the contract, pro-Second Amendment U.S. Rep. Lynn Westmoreland (R-Ga.) got some answers. He issued them in a press release, explaining that the DHS contract covers the DHS Police Force as well as Customs and Border Protection, Federal Emergency Management Administration, Immigration & Customs Enforcement, the U.S. Secret Service, Transportation Security Administration, Citizenship and Immigration Service and more-roughly 65,000 law enforcement personnel combined. Crunch the numbers: 1,384 rounds per officer, per year.

So, while it’s true the government has purchased a lot of ammo, is it enough to empty store shelves? That leads us to existing supply and production, data for which ammo manufacturers hold close to the vest based on concerns regarding market competition. American Rifleman Editor in Chief Mark Keefe spoke with representatives of major ammo makers during the NRA Annual Meetings in May and was able to delve a bit deeper, albeit “off the record.” What he tells me mirrors the official responses I have received: “All of them reported they have their plants working full out, and all of them are shipping more ammunition than ever.” The percentage of law enforcement and military sales is down largely across the board due to increased production of consumer ammunition. “They are not making less ammunition for the government,” explains Keefe. “They’re making more for consumers.” One manufacturer told Keefe that his company’s production is up 33 percent. And with the most sought after rounds being 9mm and .22 LR, it doesn’t make sense to dedicate machines and tooling time to produce small runs of cartridges like the 7x57 Mauser. There are more than a billion rounds of .22 LR produced in this country every year. “I’d be willing to bet that the federal government has not purchased over a billion rounds of .22 LR,” says Keefe.

Consumer Demand

So if production is up, where are our beloved plinking rounds? You might ask your neighbor.

According to Eric Wallace, owner and general manager of Georgia-based Adventure Outdoors, whose annual sales of ammunition top $2.5 million, people are buying more ammunition than ever before.

“The average customer used to buy two or three boxes,” he says. “Now they’re buying 10 to even 15.” And that’s not just hard-core shooters like you and me, he says-that’s first-timers buying cases of ammo. According to a recent study commissioned by the National Shooting Sports Foundation (NSSF), the majority of first-time buyers (60.3 percent) use their guns once per month or even more. One in five use their guns once a week or more. In fact target shooting is the most popular activity for first-time buyers; 84.3 percent say they use their guns for this purpose. Any way you cut it that’s a lot of ammo going downrange.

Amid this, price-gouging has increased, at least among private sellers. Wallace offers a firsthand account of actions that quite possibly are being played out across the country. He overheard some guys “bragging” about riding to 10 or 12 Walmarts to buy all the .22 LR they could find then posting it for sale on social media sites and selling 50-round boxes for $10 apiece.

Entrepreneurs noticed the surge in gun and ammo sales, and so they opened many new ranges and gun shops across the country the last few years. The result: The increase in retail points of purchase has thinned out the ammo supply from distributors among a now greater number of outlets. “Hardware stores or pawn shops that maybe weren’t even in the gun and ammunition business three years ago all of the sudden want to be in the ammo business because they’re doubling their money on any bit they can get,” Wallace says.

In Manassas, Va., Bernie Conatser, owner of Virginia Arms Co., says at one point his distributors were sending him large cardboard boxes that contained only a single box of ammo. “That happened often enough to where it really stopped being funny,” he says.

The increased competition forces shops to look to smaller manufacturers and distributors for their ammo needs, albeit at a higher cost to be able to offer at least something to their customers.

The Economic Truth

Roiling commodities markets don’t help matters. Annually, every major ammunition maker forecasts demand then forecasts sales based on projected production set against projected supplies of necessary raw materials. But worldwide competition-from China mainly, where until recently new factories seemed to open every month-increases demand for materials needed by every industry.

As a hedge against future price increases for raw materials, ammo makers buy futures contracts in commodities markets. The contracts are essentially lots of raw materials purchased at fixed prices for a given period of time, which allows makers to stay within budget throughout a production year because they can count on fixed costs. But until recently prices in many commodities markets rose more than they fell.

Increased consumer demand leads to increased production, which depletes existing supplies of materials, which forces makers to return to commodities markets to buy more supplies sooner than expected. In recent years, some makers have been forced to raise prices mid-year.

The economic lesson: When demand exceeds supply, supply dwindles and prices rise. Prices won’t fall until supply exceeds demand.

An End in Sight?

None of this goes over well with American consumers used to finding and buying what they want. Still, Bernie Conatser has hope for the future.

He recalled a similar run in 2008: Then he noticed the first things to disappear from his shelves were firearms; magazines went next, and finally ammo. “They typically come back in the same order,” he says: “Guns first, then magazines, then ammo.” Conatser now has AR rifles and magazines to sell. And more ammo, he says, is starting to trickle into his shop in Manassas, Va.

In the meantime, until Americans are assured the Second Amendment is safe, the “get-it-while-you-can” mentality keeps shelves bare.