Gun Economics: Ammo Supply 101


Ammo shortage threat very realA DEFINITION, AS APPLIED IN THIS ARTICLE
EXTRA: Above normal product demand, usually for something intended to be stockpiled for that proverbial rainy day.

In 1973, a US Navy procurement officer asked the Navy’s toilet paper provider what would happen if the Navy needed to simultaneously re-supply all ships. The person he asked made some calls to find out how long it would take industry to supply that much EXTRA demand.

Someone involved told some friends the Navy was actually planning to buy a huge supply of toilet paper, warned that this would lead to a temporary shortage, and suggested that everyone should buy a few EXTRA rolls to avoid running out. Each of those persons told several acquaintances that story, each of those told several others, etc. Within days, that story was a nationwide rumor, and everyone knew a shortage was immanent — the ultimate self-fulfilling prophecy.

Within days, a panic run on toilet paper occurred. For months, it was impossible to routinely buy toilet paper. Retailers imposed strict purchase limits. Throughout the country, millions stood in line for hours awaiting delivery just to buy any toilet paper.
Similarly, in the early nineties, some government thug wondered if it would be possible to manufacture ammunition with a limited shelf life. They asked someone in the industry to consider that possibility. Even though doing so was impossible, a rumor spread that shelf-life-limited primers were coming. Shooters and handloaders wanting to stockpile EXTRA supplies created a shortage.

DBI Books asked me to investigate that shortage. I spoke with representatives of every free-world primer manufacturer. Those conversations were most enlightening. Many of those revelations are basic to understanding the current shortages of ammunition, components, and related items.

One of those conversations revealed a fact that will surprise many readers: One of the largest primer producers in the US told me in confidence that his company was making less quarterly profit on primers during the primer shortage than it had made before the panic-driven shortage began.

While it had stepped up production to the extent feasible, its production costs had increased so much that both profit margin and absolute profit had decreased. This really surprised me because retail primer prices had doubled.

Recently, we had a situation that created a similar run on certain guns and magazines. That panic-driven run fizzled out when it became obvious that the underlying, unconstitutional law would expire.

Last fall, the obamination occurred. This event created a panic-driven run on guns and all related items. Unlike the previous panic-driven runs, this run is not based upon rumor or perceived threat; every real American should intuitively understand that this threat is very much, very real.

If you do not believe this, you are part of the problem — one of those who would sacrifice freedom for the illusion of a little temporary safety and, as Benjamin Franklin noted so acutely, you deserve neither.

When will this shortage end? Before I offer a pessimistic partial answer, consider that in 2007 and 2009 the Cortez Rifle and Pistol Club held Gun Shows. In each of those events, we had a similar number of vendors who, in total, displayed a similar number of rifles. In 2007, two M-99 Savages were exhibited; in 2009, I counted 26 before loosing interest. Why such a difference?

In 2007, short of a total economic catastrophe, few would have considered selling a family heirloom; in 2009, many viewed that family heirloom as a source of money with which they could buy something perceived as being far more important (e.g., primers, ammunition, etc.).

When will this panic driven shortage end? Not until panicked people run out of money.

Why does demand-side panic lead to such an obvious and startling shortage of guns, ammunition, handloading components, and handloading tools and why does it increase costs? The answer falls directly from analysis of free-market supply and demand.

Here is the critical fact: Before the obamination, no related manufacturer had the facilities to increase production more than about 40%. Moreover, even if a company did have such capacity, it could not expect to be able to affordably obtain raw materials needed to do so — companies that supply raw materials cannot increase capacity more than about 40%!

Moreover, spending money to add facilities in order to increase production beyond 40% — in response to a special situation that could end any time (one way or another) — is economically foolish. It would not work unless the entire supply chain could support that increase, which is far from certain.

For example, a primer manufacturer ideally runs two production shifts at eight hours per day, five days per week. The remaining time would be used to clean, maintain, and repair equipment, and to do associated work necessary to maintain production throughput.

This situation holds true for all related manufacturers, and applies to manufacturers providing raw materials as well. No glaring supply-side exceptions or variations exist, but variations in degree of EXTRA demand do exist (shortages vary accordingly). Read more



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