The NRA Reveals Who's to Blame for Ammo Shortage: You
If you own a gun -- and surveys say that somewhere between 24% and 45% of you do -- it will come as no surprise when I say that the price of ammunition is on the rise.
How much ammo costs have risen is hard to say precisely, because prices vary from place to place, brand to brand, and caliber to caliber. But by way of illustration, the price of Brown Bear 7.62x39mm rifle rounds (standard for an AK-47) on the popular guns 'n' ammo website AIM Surplus has risen from about $85 for a box of 500 rounds in 2007 to $120 near the end of 2013 to "sold out" today. Cheap .22 long-rifle caliber rifle rounds and 9mm pistol ammunition are both said to have more than tripled in price over the past five years, while .40 Smith & Wesson rounds have doubled and .45 ACP costs nearly twice what it did five years ago.
In short, prices have gone through the roof -- if you're lucky. If you're not lucky, you may have trouble finding ammunition for sale at all. Bare shelves are a common encounter at ammo retailers these days. The situation has gotten so bad that Wal-Mart, one of the cheapest sources of ammunition, instituted a policy early last year limiting customers to buying no more than three boxes of ammo per person, per day.
And this is your first clue to why prices have been shooting up. If prices are sky-high, yet shoppers are still buying -- and not just buying, but sweeping the shelves clean, there's only one logical conclusion:
Credit is due to the National Rifle Association for debunking conspiracy theories about "the government" causing this crisis. Last month's issue of American Rifleman, the "official journal of the NRA," lays out the case for why American gun owners have only themselves to blame for the steep rise in ammunition prices (and the steep fall in ammunition supply).
From 2000 to 2012, the NRA reported, excise taxes received by the federal government on ammunition sales (a proxy for ammo sales per se) roughly tripled in size. The dollar value of actual ammunition sales increased nearly 100% from 2007 to 2012. In real life, the NRA explained this means that ammunition sales "started to climb fast as gun sales began surging" in the run-up to the 2008 presidential election.
High prices, low supply
Conspiracy theorists will dispute this simple explanation, no doubt. But it jibes with what manufacturers of ammunition are saying. ATK subsidiary Federal Cartridge, for example, has a statement on its website advising, "We are currently experiencing high demand for our products." In an interview with American Rifleman, Federal confirmed, too, that "the current increase in demand," (and by implication, the increase in prices) "is attributed to the civilian market" (this means you).
Olin's Winchester Ammunition said on its website it is also "experiencing an extremely high demand." And privately held Freedom Group, which manufactures Remington cartridges, said "it's clear to us that any lack of supply in the marketplace has been from consumer demand."
Probably the clearest explanation of what's going on, though, comes from privately held Hornady Manufacturing, where President Steve Hornady painted this picture: "People walk into the store, they don't see as much as they want so they take everything they can get. The next guy who comes in can't get anything, so he panics."
Note that at no point does price even become a consideration here. And if price is no object -- then yes, of course, these companies are going to raise prices to maximize profits.
Time for some good news
The NRA doesn't exactly bring clean hands to this debate, of course. The association's incessant drumbeat of panic-talk about President Barack Obama wanting to "come and take your guns" was arguably the firing pin that ignited the wave of panic-buying in 2007-2008. Still, the NRA deserves some credit for finally explaining the cause.
And now that we do know the cause of high ammunition prices, and low ammunition supply, we can predict with some confidence that the days of ever-increasing ammo prices may finally be at an end. Last week, Cabela's CEO Thomas Millner noted in an earnings conference call that he's seen a "significant deceleration in ammunition sales" over the past three months, and said "the surge in firearms and ammunition is clearly winding down." Dick's Sporting Goods , another big ammunition retailer, hasn't reported its fourth-quarter numbers yet. But back in November CEO told investors to expect "softer" ammunition sales in the fourth quarter as well.
This won't be great news for ammunition manufacturers ATK and Olin, of course. But for gun owners, a respite from the endless cycle of high demand begetting high prices and low supply -- begetting even higher demand -- will be a welcome bit of good news.
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The article The NRA Reveals Who's to Blame for Ammo Shortage: You originally appeared on Fool.com.Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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