The Truth Behind the Great Ammo Crisis

Discussion in 'General Gun Discussions' started by Alte Schule, Feb 10, 2021.

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  1. Alte Schule

    Alte Schule Member

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    From WWW.ShootingIllustrated.com

    The Truth Behind The Great Ammo Crisis
    by Caleb Giddings - Friday, February 5, 2021

    Everyone is aware of the ammunition crisis. Major media outlets have covered it, it's all over what little of your social media feed hasn't been censored, and I've been covering in detail since July. The ammo crisis has been constantly evolving, starting as a mere shortage in the early days of the COVID-19 lockdowns, and progressing to a full-blown crisis as I write this 321 days after March 13th.

    What caused it?

    The simple explanation is that demand exceeded the supply, then continued to exceed the supply. But to understand how that happened you have to go a little deeper. According to Jason Vanderbrink, President of Federal, CCI, Speer and Remington, before the COVID-19 pandemic, there was considerable excess capacity in the ammunition market.

    Manufacturers could make more than they could sell, so supply was abundant and prices were low. You could order a case of 9 mm off the Internet for $200. Manufacturers were prepared for an uptick in sales that normally accompanies a presidential election, but the excess capacity would have been enough to cover that.

    2020 had other ideas. The first was the COVID-19 pandemic. Then a summer of civil unrest that sometimes turned violent. A hotly contested presidential election, and then the party of gun control having control of both houses of Congress and the Presidency.

    Any single one of those would have spiked demand, but all these factors happening in rapid succession was more than the market could bear. Partly because the NSSF estimates that 7 million new gun owners entered the market in 2020. As Vanderbrink pointed out, if those 7 million new gun owners each bought 100 rounds of ammo, that's 700 million rounds that the market needs to produce.

    To put that in context, the entire commercial market in 2018 made approximately 8 billion rounds. An 8.75 increase in demand wouldn't shut everything down, but when it's added on top of the demand created by all the other factors, it becomes too much.

    How high is demand?

    During a media presentation at Virtual SHOT Show 2021, Winchester said that if they stopped taking orders for .22 LR right now, it would take 2 years to fill all the back-orders. In December, the Vista family of companies, which comprises Federal, CCI, Speer, and Remington, announced they had a $1 billion backlog in orders. In the first 3 months of the COVID-19 lockdown, Winchester experienced a 17-percent surge in orders, which hasn't tapered off.

    Why can't they build more factories?

    The first question on people's minds is "Why don't these companies expand capacity?" That's much easier said than done. Vista, for example, is already running three shifts a day, and operating 24/7. The same is true for Magtech in Brazil. For one of these companies to add capacity, they'd have to build a new space, and buy new machines, and train and staff the new machines.

    All that while hoping that the bottom doesn't fall out of the ammo market like it did in 2017. That investment in extra space costs millions of dollars and takes years to pay off, and if you look at past trends in the ammo market, not even this surge will last forever.

    Why are prices so high at the consumer level?

    Vista, Winchester, and Magtech/S&B announced a 15-percent price increase to distributors. Distributors have already raised prices, and of course at the retail level prices are coming up. Prices have to come up to create equilibrium. Eventually the cost to the consumer will be high enough that people won't panic buy 9 mm FMJ. Retailers will start to have more stock than they can sell and prices will start to come down.

    The manufacturer price increase helps as well. In a letter to distributors, Vista announced that all back orders would ship with the higher price. If this causes people to cancel their back order, that frees up theoretical capacity to go into the market. Using AmmoSeek to track historical 9 mm prices, the online price for 9 mm seems to have plateaued at between $0.80 and $0.90 per round for quality new manufactured 9 mm, which is actually a good sign.

    Why can't I get primers?

    Only two domestic companies make primers, Vista and Winchester. All their primers are going into their production ammo for retail. Normally, the primer market is fed by companies being able to make more primers than they'd ever need to make loaded ammo. In 2020 and now 2021, that's not been the case, so every primer that rolls off the line is going into a loaded piece of ammunition so the consumers can have something to immediately shoot. It's a tough situation for reloaders, but the priority will always be the commercial shooting market.

    What about the government?

    To answer the question right off the bat, no, the government is not buying ammo and stockpiling it in a warehouse somewhere to keep it off the market. The largest government consumer of ammunition is the Department of Defense, and the majority of their ammo comes from the Lake City plant, which is currently administered by Winchester. Lake City is owned entirely by the governmentall the machines, all the land, etc. The government then contracts its operation to private companies, with Winchester taking over for Northrop Grumman in 2020.

    Other federal agencies and local LE agencies do source from private manufacturers, but they're getting squeezed too. Federal contracts are public record, and there has been no unusual ammo related purchasing activity since the shortage began in March. Local LE agencies don't have the purchasing power to cause a shortage like this, unless there was some secret meeting of all the police chiefs in the country to secretly buy all the ammo (there wasn't). While it might feel good to believe there's some sinister force behind the ammo crisis, the answer is a slightly more complicated version of "supply and demand."

    What are the companies doing about it?

    As noted above, everything they can. Mike Fisher, the VP of Sales and Marketing at Magtech, said in a phone call, "We're doing everything we can to get product to our loyal customers. We've worked hard to build these relationships and getting them ammo, so they can get it to the consumer, is our first priority."

    In a video statement, Jason Hornady said that they have made a third more ammo this year than they did in the previous year, and also pointed out that there is no government conspiracy to make ammo scarce. As noted above, the price increases across the board will eventually have a stabilizing effect on the supply of ammo, as it will eventually reach a point where most people won't feel the need to buy.

    You can help as well. The most important thing you can do as a consumer is don't panic. Ammo is available. AmmoSeek shows a daily inventory of what its bots find in stock. There's ammo for sale on GunBroker and ArmsList. It's more expensive than any of us would want, but it's better to have it available than to have empty shelves. The second most important thing you can do is "don't be that guy."

    You know that guythe one who finds 55-grain .223 at a great price and cleans the whole place out. That guy sucks. Buy what you need and maybe a little more, but don't buy 10,000 rounds of ammo you're going to end up trying to flip to make a car payment in 6 months.

    Last, stop repeating conspiracy theories. Contrary to what your favorite YouTube entertainer told you, there's no government or industry conspiracy to drive up the price of ammo.

    When will it get better?

    In my first article about this, I optimistically thought that if Republicans retained control of the Senate, we'd be back to normal supply levels with slightly increased pricing by July. Given the state of the back orders, I don't think we'll see a return to regular levels of supply now until early 2022.

    As far as pricing? Sometime after supply gets back to normal level, and that's assuming that nothing weird happens in 2021 (everyone knock on wood right now). Right now the best thing to do is stay calm, don't panic buy, and let the ammo industry do everything they can to get caught up.
     
  2. Phaedrus/69

    Phaedrus/69 Member

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    I doubt this will satisfy the conspiracy theorists and Q-types but I think you hit the nail on the head.
     
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  3. Ignition Override

    Ignition Override Member

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    Simple demand...

    ... including the inability or unwillingness of many of them (not the new shooters) to use their own “critical thinking” abilities.

    Or only focusing on fears about a new Big Brother and apparently magically unlimited support. Even his “tutor” from 2008-2016, who was Far more popular, had clear limitations.
     
    Last edited: Feb 10, 2021
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  4. 5whiskey

    5whiskey Member

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    Sums it up nicely. Talk about law enforcement getting squeezed, I can’t find any duty ammo less than $1.20 per round to qualify with an off duty weapon (need a hundred rounds to qualify plus enough to carry, so ~$150). I refuse to try and conceal a sig p227 (our policy says off duty carry of department issued weapons/ammo must be concealed). On top of that, the CCH permit process is about a 6 months wait at this time. So... I’ve been open carrying where feasible as this is the only legal way for me to carry.

    You think all of this is crazy, I’m just praying my CMP order I mailed off in September!!! gets filled before they run out of Garands. I just got the first confirmation email like 2 weeks ago. I suppose I should just be glad I stocked up on reloading components before this craziness kicked off. Crazy times my friends.
     
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  5. Carl N. Brown

    Carl N. Brown Member

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    A current gun owner who buys another gun very often buys a gun in a caliber they have found useful and which they have in personal inventory.*

    If the figure of seven million new first-time gun owners is even close, that means the same number of new first-time ammo buyers.

    What was behind the big gun and ammo run of 2020? I will blame the Democrats for openly running as the party supporting and promising new bans on this or that and more restrictions on what they might allow to stay legal, for the time being.



    __________
    *Couple years ago I bought a .22 revolver to use a variety of ammo I use in my .22 rifles (from CB shorts thru hypervelocity long rifle) largely because my .22 automatics were best used with only standard or high velocity long rifle. I did not buy ammo when I bought the revolver.

    A first time gun owner is very likely to also buy ammo, if not the day of the gun buy, but very soon after. Maybe even multiple buys, to try out the gun, then to have ammo for next time.
     
  6. BigBore44

    BigBore44 Member

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    I don’t really care about the ammo shortage. I’m a reloader and am well stocked for the next several years. But something about this doesn’t add up. Vista has $1 Billion with a “B in back orders as of right now. That doesn’t include normal production numbers. But says will take millions to build a new facility, and train staff. It better take a whole lot of millions to build and train employees. But, how much is a billion dollars in back orders....in time? I don’t know. They don’t say.

    Winchester says it’s on a 2 year back log on just 22lr. Doesn’t mention anything else. The US Market for 22lr produced each year is around 5 Billion rounds. I can’t seem to find how many rounds Winchester produced, but I bet it’s somewhere in the neighborhood of a billion. Possibly more. So I’m trying to math but it’s late and I’m tired. So somebody correct me. I’m sure I’ll need corrected. A 2 year back log means they are, if my yearly estimate (uneducated guess) is correct, 4 billion rounds behind schedule right now. Or is it 2 billion? I don’t know. Regardless, it’s a lot. And that’s if they stop taking orders now. I’m sure they won’t. Why would they? So they’re this far behind and we’re less than a month into this administration. We got 3 years and 11 months left to go.

    Vista has raised its prices to the distributors by 20% and have increased production. Now I’m not saying that materials haven’t gone up in cost due to decreased production from the China virus. I’m quite sure they have. And I’m not faulting Vista for making a profit off this. Because we all know they are. Even if it’s 1%-2%. When you’re talking about total rounds produced in the US per year we’re looking at around 9 billion rounds total. 5 billion rimfire. 4 billion centerfire handgun, rifle, and shotgun. Again, can’t find how many rounds Vista actually produces. But if it’s only a 1%-2% profit margin increase, that’s a whole lot of money. It might end up being more. Nobody really knows. Guess we can find out at the end of this year how much money they made. But hey, that’s capitalism. And I’m cool with it. They could be doing us a LOT worse.

    Lake City produces around 1.6 Billion rounds of ammunition per year. That’s really just an FYI in case anyone was wondering. Nothing else to add to that.

    But I do know this. The virus isn’t going away anytime soon. And people are still contracting it after the vaccine. I know because I’m a CoVid Nurse. And nurses that I work with that took the vaccine are still testing positive and getting sick. My sister in law and her husband both got the vaccine a month ago. And they are both at home right now with CoVid. She’s a CoVid nurse also and he’s a police officer. And yes, I know several others that the same thing has happened to. Hopefully the new J&J vaccine will do a better job than the Pfizer. But there is good news. The more this virus mutates, the less likely it will be to be severely debilitating or deadly. We’re on our 7th mutation so far that I know of. So keep your head up.

    But this is what I see. And feel free to contradict me. I see 3 years and 11 months left of an anti-firearms administration (that’s not speculation). I see a virus that isn’t going away (not speculation). I see at least a 2 year backlog on rimfire ammunition orders from Winchester (not speculation). And a $1 Billion backlog on ammunition from Vista (not speculation). If it took 6 months to build, tool, and train employees for a new ammunition facility, at a cost of say, $25 Million dollars with another $5 million to operate it for a year, it seems like Vista could be putting a whole lot of that remaining $970 million dollars (as of now) in their pocket, faster, in case the administration decided to do something crazy. I mean, just with the new gun owners this year (technically last year), they need to plan to produce an extra 700 million rounds. Possibly a lot more.

    Flame suit on. Let me have it.
     
  7. Carl N. Brown

    Carl N. Brown Member

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    At times I have wonder if the Just In Time policy promoted by efficiency experts has lead distributers, wholesalers and dealers just to keep a limited inventory on hand, expecting the supply line to always be full to replenish the inventory as it is consumed. No cushion for unusual conditions.

    Since the last two decades have shown unusual is the new normal, you'd expect the supply line would have cushions for bounces.
     
  8. BCR#1

    BCR#1 Member

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    I say that things won't be back to normal until at least mid 2022, if then. I'm also amazed that people still drop and leave perfectly good loaded ammo laying on the ground. I have over 100 pistol/rifle rounds to tear down for components this W/E if I get time.

    Bill
     
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  9. JONWILL

    JONWILL Member

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    Not sure if it’s true but Glenn Beck talked about an open ended ammunition contract for the US government. Might be pure Glenn beck BS but it could be a way to choke off ammo supply for us civilians. It would kind of like being taking the gas away from cars making them worthless
     
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  10. FFGColorado

    FFGColorado Member

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    When me or my son finds ammo, we buy some..not a ton(most resellers have limits), but mostly because it's hard to find and we like to shoot a lot..
    Not sure why anybody has a TON of ammo..I guess, 'just in case'...?? I donno...I don't see needing 10,000 rounds of 223 to defend my little square of the 'republic'...

    IMHO and all that.
     
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  11. Steve S.

    Steve S. Member

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    A quintessential example of the base human behavior drivers at work - fear and greed.
     
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  12. jmorris

    jmorris Member

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    Wow, not only correct but concise as well.

    Didn’t read the other 4 pages though. :)
     
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  13. huntsman

    huntsman Member

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    Ok so if we accept the premise that AmmoSeek is where the real market price is(sans flippers) then 90 cent ammo is about to go up 15% more I don’t see that as salvation, more like a painful death.
     
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  14. BigBore44

    BigBore44 Member

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    Wonder if Glen Beck has ever heard of Lake City ammunition plant.
     
  15. 460Shooter

    460Shooter Member

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    Yep, you can't fix stupid.
     
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  16. GEM

    GEM Moderator Staff Member

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    When thread turns to Glen Beck and conspiracies, the evil forces on the moon, comply me to close the thread.
     
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