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The Economics of the Shortage, Explained

Discussion in 'General Gun Discussions' started by The_Next_Generation, Dec 26, 2013.

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  1. 45Badger

    45Badger Member

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    High prices cure high prices, especially in discretionary income markets.

    Very, very few people "need" .22 LR (or any ammunition for that matter). There's a world of "want" and (contrary to the economic gloom and doom crowd)_ we are a rich nation. Since many of our poor can afford cell phones and flat screen TVs, our middle class can easily afford ammunition.

    For the individual, it boils down to choices. Demand will shift when prices get too high (like remote cars vs. guns). I'm astounded that folks pay $20-50 a brick, or $15 for 9mm or $25 for 45acp. I'm cheap and began steadily buying or "hoarding" 10+ years ago, so have not had to eat any of the recent stupidity. I would not buy at these levels.

    Want prices to come down? Don't buy.
     
  2. danez71

    danez71 Member

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    100% agree and I've said it before here.


    The thing is...is that we pretty much only see these threads in regards to 22lr. Most all of the other ammo is available at little to moderate $ increase.

    I even saw on Thursday 3750 rounds of 9mm on the self for $0.30 per round. And 4500 round of brass factory reloads at $0.25 per round.

    There was also 223, 556, 40, 45, 10mm, commie ammo, and many others just sitting there looking all lonely.


    I have said, and others as well, that the stores are NOT getting nearly as much 22lr as they did before. I've had 4 stores tell me they aren't getting as much as before; only about 25% of what they used to get.

    Many posts here have said things like "the store only stocked 10 100 round boxes".

    So even if the hoarders and flippers bought every box, they'd only be able to flip the very limited supply of 22lr they could find at the stores because they aren't buying from the factories direct.


    Unless someone shows compelling evidence, either 22lr is being stock piled at the factories/distributors/stores or it isn't being produced at the same levels. aren't being.



    (side note: there is a guy on another forums that every week on Weds lists ammo for sale; mostly 22lr. From various posts of his, its evident that he has a friend that works at a store that is setting aside ammo for him and then he flips it. They are disrupting the supply chain.

    I'd guess that a small portion of the problem but it certainly isn't helping the market as they are creating a shortage at the store and creating a black market for it.

    It would be the same as if they hi-jacked gas trucks - disrupting the supply chain - and created a black market for gas)
     
  3. Mike1234567

    Mike1234567 member

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    While that's a very logical and viable approach, what happens when your $50K worth of ammo becomes $1M worth of ammo because it just can't be bought anymore (per your scenario)? Are you still going to keep it all and shoot it? If not then how would you adjust your lifetime needs?
     
  4. 444

    444 Member

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    Yes, I would keep it and shoot it.

    Let's say it was worth a million dollars ? What am I going to do with the million dollars ? Spend it to have fun ? Shooting is what is fun to me.

    The only thing money is good for is to buy the things you need and want. Money in and of itself is worthless paper unless someone is willing to exchange it for goods or services that you desire. Some things are essential for survival and other things (most things we spend money on) are luxery items intended to satisfy some need we have. Having fun is one of those needs.

    So why would I exchange my ability to do the thing I enjoy for money ?
     
  5. Mike1234567

    Mike1234567 member

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    ^^^ I'd use the $1M to: 1) Get everything on my property in shape for (nearly) total self-reliance, and 2) Live off the interest of what's left.

    Three years ago all my planning an investing took a dump when I took ill and could no longer work. My savings, investments, 401K... everything I worked for is decimated. I don't mention this to whine or complain. I mention it because most folks just can't hold onto $1M worth of ammo just so they can have it to shoot for fun for the remainder of their lives. I'm happy for those who can though.:)
     
  6. Midwest

    Midwest Member

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    It has been over a year already, this isn't a bubble or a spike. It is a shortage, the manufacturers need to add more production lines, open up new facilities, hire more people, also newer manufacturers need to step in and fill the void.
     
  7. Mike1234567

    Mike1234567 member

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    ^^^ China will do that. :D :(
     
  8. 444

    444 Member

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    You wouldn't live very well off the "interest" of a million dollars. Especially if you dipped into it heavily to start with and then you arn't living off the "interest" of a million dollars: you would be living off the interest of less than a million dollars.
     
  9. Double Naught Spy

    Double Naught Spy Sus Venator

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    Okay, 10 years ago, ammo was more than 60% less expensive than today. Compared to wages and such, ammo was considerably less expensive (actual and relative) and we were not having shortages.
     
  10. gspn

    gspn Member

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    +1. There are plenty of alternatives to shooting .22 rimfire in this world. Anyone "suffering" from this episode is doing so voluntarily. As for me, I'll go fishing, hunting, shoot something else, ride my mountain bike…you name it…millions of alternatives.
     
  11. Jlr2267

    Jlr2267 Member

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    But demand was MUCH lower 10 yrs ago, so the equilibrium price was also lower.
     
  12. Queen_of_Thunder

    Queen_of_Thunder member

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    Your "don't buy" argument is simply wrong.

    If no one buys ammo the ammo manufactures will cut back production or eliminate the caliber that is not selling. Is that what you really want?
     
  13. Mike1234567

    Mike1234567 member

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    Even 3 percent interest on $1M is FAR more than I make now. TG I paid off all my debts and mortgage before I was ill enough to lose my job. BTW, had I been able to continue working/investing I should have had well in excess of $1M plus a fairly healthy pension. And be completely debt free to boot. It just wasn't in the cards.

    I still say China will step in with affordable ammo. They do with everything else. Too bad we can no longer compete in our own market.
     
    Last edited: Dec 28, 2013
  14. TanklessPro

    TanklessPro Member

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    You would think post like this would die down, I guess not. If you want things to calm down, don't buy 22. I have passed up at least 2 dozen chances to buy 22 at less than $40 a brick, but I refuse to feed the hype. Now I haven't seen 22 at Walmart in a couple of months but it can be found at LGS at decent prices with a little work.
    The good thing is I'm still shooting 22 because I have been buying it for years and the stash is still in very good shape. A little planing pays off in the long run. See signature.......¥
     
  15. godale

    godale Member

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    during the shortage i have discovered the joy of shooting my 17hmr:D:D
     
  16. rodregier

    rodregier Member

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  17. Queen_of_Thunder

    Queen_of_Thunder member

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    Rough calculation on the demand for 22lr is between 25 billion rounds a year to 100 billion rounds a year assuming at least 25% of gun owners shoot 22lr.How?

    1,000 rounds per shooter per year
    100 million gun owners
    If 25% shoot 22lr the demand is 25 billion rounds a year
    If everyone shoots 22lr its 100 billion rounds a year.

    If less than 25% shoot 22lr

    If only 5% of gun owners shoot 22lr that is a demand of 5 billion rounds a year @ 1,000 rounds per year per shooter.

    Last thing I read was CCI could produce 4million rounds of 22lr per day, every day of the year (365) would produce 1.46 billion rounds of 22lr.


    Does anybody know how many producers of 22lr exist.

    Ok I did a quick count of the number of brands offered on MidwayUsa and I counted 13. Given that number and using CCI's production number we are looking at a production capacity of 18.98 billion rounds a year available for sale. Since the ammo shelves are bare of 22lr we must conclude that 22lr demand exceedes 18.98 billion rounds a year.
     
    Last edited: Dec 29, 2013
  18. rodregier

    rodregier Member

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    Last edited: Dec 29, 2013
  19. SC Shooter

    SC Shooter Member

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    If the munitions manufactures believed that the demand will stay high, they would invest in new production lines to meet the demand. Apparently, they feel this issues will level out, because they are not fully jumping into expansion. Time will tell
     
  20. 444

    444 Member

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    I would be surprised if more than 25% of gun owners shoot on a regular basis. But among those that do, 1000 rounds a year doesn't seem like much.

    I have said this before, but if you really start to add up how much ammo you shoot, the numbers get surprising. 200 rounds a week add up to 10,400 rounds a year. When I shoot, I try to make every shot count. I don't do any spraying, bump firing, mag dumps or anything like that. Each shot is fairly carefully aimed. But still, you burn through ammo like nothing.

    I was out shooting yesterday. I was at a range with some steel plates at various distances. I was shooting a revolver. Because of this ammo thing I starting thinking out loud with my shooting buddy: we are probably easily shooting 12 rounds a minute, each................. I pointed out that where I used to live, there was a shooting range where people dumped trash illegally. So you were standing there will all kinds of stuff to shoot at at distances from 10 feet out to over 100 yards. I would burn through a brick of .22s in an hour or so. Yesterday I fired easily over 200 rounds and I limited myself because of the ammo shortage. But I also shot on Friday evening and shot another couple hundred rounds. It adds up real fast.
     
  21. docsleepy

    docsleepy Member

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    What surprises ME is that the centerfire ammo has finally come back to the shelves and down in price.

    My assumption is that this is because reloaders like myself function as "added capacity" to the total system, generating vast new supply sources (at least to ourselves).


    .22LR is more difficult to create, so it may take longer to fill up the demand. Just today I took yet another non-shooter out (from **********, no less!) and he shot everything from .22 through .223 .308 7.62x54R -- and now he definitely plans a new hobby! I also had him reload a .308, and a friend who arrived earlier, reloaded several dozen pistol and rifle rounds.

    (And the night before, I taught a 14-year NCO of the Army who had never reloaded a case in his life, how to reload for his newly acquired Mosin Nagant. Now he is planning to put together a 5.56 cache of cases....I think this makes 16 people I have coached or completely taught how to reload.....and I just got into this hobby after a certain presidential election a few years back.....)

    What I really really like about all this (ignoring for a moment my frustrated desires to refill my stocks of .22LR) is that somewhere between 0.5 and 1.0 Billion rounds of cartridges are being purchased monthly by United states Citizens, and a fair chunk of that is NOT being expended, but instead is being STORED.

    The current leadership of this nation has succeeded where many others have failed: they have engendered the most massive accumulation of small arms and ammunition by any people, on any continent, at any time, in the entire history of the world....and they probably have realized that.
     
  22. 22-rimfire

    22-rimfire Member

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    I guess this thread is about Walmart and similar big box stores not raising prices of 22 rimfire ammunition over their standard markup. I personally applaud them!

    You are not the first to propose this theory here.

    To address the OP's assertion about economics, I think you are probably right in the short term. But in the long term it would hurt because prices would never fall again much because small retailers "could get the price" without the big box stores pricing things based on their normal markup. Demand would decrease and manufacturers would begin laying off workers and reducing production eventually. You want that?

    Of course in most cases, buying 22 ammunition is discretionary. I can only address my own discretion and that means I haven't bought ANY 22 ammunition in over a year. I shoot much less and that reduces the amount of centerfire ammunition I might shoot. I simply don't go to the range. It has been months since I fired a single round of any caliber. I may even leave my range membership lapse 2014. Why bother? I loose interest and do other things with my free time. You have to stoke the fires of hobbies or they fad away. That's the price.

    I don't have to do this. I probably have enough promotional 22 ammunition on hand to last me the rest of my life shooting normally. But I don't have that much target grade stuff. The shortage causes me to hold back using my own supply because I can't replace it and I refuse to stand in line some where for a few boxes of 22LR. Fishing is a good substitute for me.

    My sense is to just let things ride as it is and it will slowly change. The difference now is that almost everyone who shoots 22 ammunition will now hoard it. What's your comfort level? 10,000 rounds? 20,000 rounds? 50,000 rounds? 100,000 rounds? That will perpetuate the shortage for a long time without a big influx of foreign ammunition.
     
  23. BlisteringSilence

    BlisteringSilence Member

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    I guess it's time to go through my retelling of "how ammunition gets manufactured" again.

    Source: Me. I know the plant manager at Lake City (who was brought out of retirement), and have friends who currently work for both Olin in Illinois and Remington in Arkansas.

    Let's say that you're a big, full-line ammo manufacturer. We'll ignore the precursors to making ammo (drawing, forming, and annealing brass, extruding and capping shotshells, manufacturing bullets, powder, primer, shot, wad, and buffer, etc) and only focus on the ammunition assembly process.

    Functionally, you have 3 different kinds of ammunition lines: centerfire, rimfire, and shotshell.

    A centerfire line can functionally make any centerfire round. From .25 acp to .50 bmg, changing the caliber of what you manufacture is just a matter of changing the tooling (the dies, if you will). Realistically, there are dedicated lines for straight wall pistol, necked pistol, and then several lines for straight wall and necked rifle, with some machines being optimized for large cartridge sizes, and some designed for small cartridge sizes.

    This is important, because you can convert a .45 acp line to make .40, or .357 sig, or any other similarly sized pistol round by changing out tooling, which takes a few hours, and is typically done overnight by the 3rd shift maintenance crew. Likewise, rifle cartridge lines are (relatively) easily swapped around.

    So, what does this mean in practice?

    The manufacturer forecasts demand, figures out how much of what they need to make based on that forecast, and then churns out the rounds. 10 million .45's, followed by 30 million 9mm's, followed by 500 thousand .380's, so on an so forth.

    Shotgun lines, on the other hand, are dedicated to the bore (or gauge, if you will) for that round. 12 bore lines only make 12 gauge ammo, 20 lines only make 20, etc. Different manufacturers have different policies for making the more esoteric sizes (10, 16, 28, .410), but the only effective changes are in wad, powder type, powder weight, and shot size/weight. They make what they need, and then make whatever's next on the order list (1 oz loads of #9 for skeet, followed by 1 1/8 loads of #7.5 for field, etc).

    Rimfire, however, is a different beast.

    First of all, it's dangerous. Very dangerous. Since you don't have a nice (relatively) stable primer, you have to get your priming compound into the brass. This means you're dealing with a liquid that, by design, will explode if it gets smashed with sufficient force. And you're in a room full of equipment who's only purpose is smashing things. So, the rimfire rounds are made off in their own little world, by machines that are totally different in composition and maintenance from those that make centerfire and shotshell. AND, to do maintenance on some parts of the line, you have to shut the whole thing down, air it out, and let it sit for a defined period of time where it does nothing.

    Moreover, it's dedicated. It can only make what it can make. If you have a ton of demand for 9mm, you can just dedicate more centerfire lines to making 9mm. The same isn't true for your rimfires.

    So, your capacity is your capacity, and can't be expanded without investing literal tons of money (in that if you got it in $1 bills and weighed it, it would weigh WAY more than 2,000 pounds) in space and machinery, and that's all before you get into the people element.

    And then there's the time element. You have to build buildings, order tooling, install and test it, and train new people on how to use it. Plus, you have to beef up your supply lines to feed this new operation.

    How long, you ask? About a year, give or take, if you're really pushing it. Cost? Upwards of $30 million.
     
  24. Ks5shooter
    • Contributing Member

    Ks5shooter Contributing Member

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    If your telling me my $170 per 5000 22 lr pre obama(lower case intended) price will drop back down from the current 450-500 dollars I dont buy the logic.The plant may produce more but the price will settle around $350.You may as well wait for gas to be $1.50 a gallon again.Its corporations gas and ammo taking advantage of a non affecting factor.The ammo supplier will indeed make more 22lr ammo.Its the middleman and retailers doing the price gouging.Also the panic of shooters willing to pay. 22lr is not a must as gas is or I wouldnt buy gas either. People will bitch about 30 dollars more for a washing machine and yet will pay 3x the price for 22lr still produced for the same coast circa 2008. I overheard a woman complaining that gas is 3 bucks a gallon.She was holding a 20 ounce bottle of water costing $1.29 hmmmmm do we recognize the problem here.
     
    Last edited: Dec 30, 2013
  25. 22-rimfire

    22-rimfire Member

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    I read that Remington is in the process of expanding their Lenoke AR plant.
     
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