Tag Archives: economics

Ammo Prices Will Continue To Fall

Okay, I’m a closet economist – I admit it. When I look at the current ammo shortage, you can tell it is predictably coming to an end provided nothing crazy comes out of the Senate, White House and ATFE that is lasting.

Not Our First Panic

For those old enough to remember past panic buying such as with President Obama, the same thing happened. People got worried about not being able to buy firearms or ammo in the future so they started buying everything in sight. When this happens, an interesting and predictable tug of war happens between the demand for ammo and the willingness of businesses to sell ammo. Let’s look at it in terms of three time frames – immediate, medium and longer-term.

Short-term – less than 6 months

When a panic hits, there is very little the manufacturers, importers, whole salers and gun shops can do in the short-term other than sell what they have. What do I mean by short-term? Within about a six month window in the case of ammo. They can only produce so much ammo so fast given their labor, component availability and machine capacity. In addition, importers only have so many import orders in the pipeline so the ammo supply starts to dry up. As supply dries up, prices start to go up – you see ammo that was going for $249/1000 rounds start to push almost $1,000/1000 rounds if not more plus it can get pretty hard to find.

In the mean time, as the supply gets limited, people tend to panic even more and buy whenever they can afford, sometimes even if they can’t with credit cards, keeping the prices elevated. Making life even more colorful this time around were COVID causing supply chain problems and the stimulus checks.

The stimulus checks have caused a number of issues. First and foremost, a lot of people don’t see the point in working when they can stay home, collect unemployment and get the stimulus checks. This means that firms who are trying to make equipment, supplies and ammo itself plus firms who distribute and sell it are frequently short staffed limiting what they can produce.

Another impact is that quite a few people take the checks and buy more guns and ammo that further adds to the shortage. I’m less worried about this than I am about otherwise able people getting money paid for by taxpayers – nothing is ever free folks – we the people who pay taxes will pay and probably for years to come.

Now the rush of new gun buyers is also a factor – people are scared. How will they defend their families in an era where violent protests and assaults are deemed acceptably while politicians and activists talk about defunding the police? I applaud law abiding citizens buying firearms for self defense, hunting, target shooting, or whatever their desire is. The fact of the matter is that these firearms reflect a sizable investment for most people and losing them due to gun control will not sit well with anyone — especially when you look at the violence that is taking place. Politicians – representatives, senators and governors – know this because they worry about re-election. The gun control zealots and elites don’t care but that is a different story.

An interesting thing that happened this time around was that ammo never completely disappeared. You might not have found it at local gun stores but you could find it online with a lot of searching and paying some astronomically high prices. Gunbroker sellers were typically an option for almost any type of ammo through the whole ordeal. I’m not criticizing- it’s an observation. People will go to extra lengths to make money.

Another observation is that shooters also investigated alternative brands of ammo as well as methods of training. For example, the training systems that were either a bullet-shaped laser that would trigger when the pistol’s firing pin hit it or even complete subsitute pistols.

People moved to reloading very early on and supplies, notably primers, became next to impossible to find. This created a lesson for many new reloaders – start it when things aren’t nuts and stock up because it is not a guaranteed backup plan.

Medium-term – 6 months to one year

Getting back to the ammo shortage, as time goes on manufacturers continue to output all that they can. More and more import orders are placed drawing ammo from all over the planet including known and unknown brands. Some small ammo producers appear as they can make money but may not survive as prices fall.

At the same time, panicked consumers both run out of money to buy ammo and they begin to calm down. Demand contracts.

The first signs that the shortage is coming to the end is that you will notice more and more websites have ammo available for sale and it isn’t disappearing within minutes of going online. Breadth and depth of options slowly increases but the prices are typically still far higher than before the panic.

Next, the vendors (gun stores, wholesalers and websites) begin to realize that they have a ton of money invested in ammo and better get it sold. This when you start to see tons of emails stating “We have ammo!”. The emails and alerts do generate some sales but not enough. Vendors start having to compete again and prices begin to come down. Ammo that was $1,000/1,000 rounds drops to $749/1,000 rounds and continues to drop.

Somewhere in this timeframe, buyers also started trying substitute brands they would not normally go for. For example, some guys who always declared they would never shoot steel cased ammo started buying TulAmmo and Wolf. In most guns, steel case runs just fine – you never know for sure with any combination of firearm and ammo until you test it. In other words, order in a smaller amount for testing before you go and invest in a case(s).

Longer-term – After about a year

The price drop will continue as vendors attempt to sell the ammo to finance the loans they took out to buy it or to free up working capital to invest elsewhere. At the same time, stores and website have more and more ammo available for sale and compeitition based on pricing starts to heat up again further causing prices to drop until some form of equilibrium is reached – in other words some price that is agreeable to buyers and sellers is reached.

Lessons Learned Thus Far

  1. It was predictable. We knew if Trump lost the panic would set in so people hedging their risks started stocking up starting in earnest in the Summer of 2020.
  2. It’s better to stock up before a panic than during a panic. Buying a little here and there and saving it adds up.
  3. Don’t add calibers during a panic. Finding ammo might be surprisingly hard.
  4. Subscribe to as many vendor sales emails as you can. They would regularly send emails when they got shipments in and are now sending even more emails to move what they have: Brownells, Pametto State Armory, Natchez, SGAmmo, Midway USA, Sportsman’s Guide and more.
  5. Most ammo could be found on Gunbroker in a pinch albeit at high prices.
  6. A lot of brands showed up that people knew nothing about but was actually really good so be sure to search around on the web – you might be in for a pleasant surprise. For example: Aguila, Fiocchi, MagTech, PMC, S&B, and ZQI are all good brands that you may not have previously encountered.

Conclusion

Where are we right now? As of this writing, we are seeing more ammo on the websites and prices have just started to come down off their highs so we are somewhere in the medium time frame. How fast prices will fall is hard to say due to COVID and anti-second ammendment stance by some politicians. I actually think President Biden has limited options because politicians usually follow their own logic but staying in power and making money are certainly drivers for them. People have a ton of money invested in their firearms and ammunition and aren’t going to give them up lightly.

My guidance to you is to buy what you need but hold off on more panic buying. I don’t have a magic crystal ball mind you but I am holding off big ammo purchases. It’s hard to say what will happen past the next 90 days but you ought to take note that the Biden administration is almost five months into power and has accomplished little on their gun control agenda.

My last comment is a big ask for all of you – stay active. Keep reading what is going on, support your favorite pro-2A special interest groups (I like Firearm Policy Coalition and Gun Owners of America) and be sure to reach out to politicans to make your opinion known on hot topics — the liberals are trying to push tons of absurd gun control proposals and we cant let those happen.

5/1/21 Update: It seems like I am getting several emails a day from vendors saying they have ammo in stock. I saw my first 20% off sale this past week so we will watch the prices start to drop. I’ve already seen steel cased 9mm at $500/1000 well off it’s peak high. The new round of stimulus checks may prop sales up a bit but not enough to fund all the ammo entering the distribution channels.


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