In January 2020, a deadly virus of unknown origin made it to American shores and caused the knee-jerk reaction of statewide shutdowns where every home became a self-imposed prison and any amenity to make life bearable became scarce.
The strain of job losses, self-imposed isolation, the removal of our public faces, and blatant opportunism caused violent crime to spike in ways not seen since the early 1990s. Locked in our homes for much of the time, we watched a world outside fall from the orderly. We saw assaults in the queues outside of grocery stores and a summer of love not dissimilar from 1968. Hardened criminals were released from prisons to roam the streets once again.
With the chaos of a pandemic not seen in years, Americans armed up in record numbers and the Great Ammo Shortage of 2020 began and would continue well into 2022. The panic during the first half of 2020 seems to explain this scarcity, but as we came to terms with the new state of affairs, the shortage continued. Why? Follow along as we dissect the Great Ammo Shortage of 2020.
A Brief Take on Gun and Ammo Runs
Those of us who have been around guns and ammo for a while know that shortages happen from time to time. The last great disruption was in the run up to the 2012 American Presidential election. The tragedy at Sandy Hook taken together with an executive in President Barack Obama, who had abandoned his previous populist message for a sectarian campaign against any opposition and against gun rights, created an atmosphere in which many believed that semi-auto rifles would soon be banned.
From 2011-2013, autoloading rifles like the AR and AK platforms became scarce and higher in price when available. The ammunition for these rifles likewise skyrocketed. What went for $0.10 a round now went for $2. Some ammunition, like the popular 22 Long Rifle cartridge, was next to impossible to get as it was sold the moment it got into the shelves. Runs like this do happen from time to time, but they are inevitably the result of political problems that translate into supply problems. 2020 was different. It was the first true supply shortage in modern times and it happened due to a combination of high demand, supply chain disruptions, and inflation.
High Demand
If there are shortages, chances are good that the reason behind it is increased demand for an existing limited supply. After a brief period of falling demand as news of the pandemic took hold, demand returned with a vengeance over the spring and summer of 2020. At existing prices, guns and ammunition were snatched off the shelves. First, ARs, AKs, pump shotguns, and duty-sized handguns. Eventually, lever actions, bolt-action scout rifles, and double-action revolvers followed suit. But the self-protection frenzy was matched by a growing number of Americans becoming connected with the outdoors in response to the disease.
Vista Outdoors’ 2021 Annual Report indicated that despite early losses from trade-show shutdowns in early 2020, demand for outdoor equipment surged because, among other reasons, consumers adopted an increasingly outdoor lifestyle. Buyers were anxious to escape home but were left with few options. Movie theaters, gyms, restaurants, and other places of hospitality and belonging were shut down. Essential businesses lacked that atmosphere, required uncomfortable masks, and invited danger. So Americans simply went outside.
As more hunkered down at home, national park attendance in the United States grew to all-time highs. Home gym equipment and bicycles were just as scarce as guns and ammo. Vista has a toe in both worlds. The firm owns such gun-related brands as Federal Premium and Bushnell, as well as general outdoor accessory brands like Bell and Camelbak. From March 2020 to March 2021, Vista reported a 27.7% increase in sales volume in its shooting sports division and an additional 24.8% increase in outdoor sports. In that same period of time, gross profit in shooting sports rose 102.4% (38% for outdoor sports). That is quite a jump and one that cannot be fully explained by demand alone. From the onset, gun and ammunition manufacturers and distributors were plagued by supply chain disruptions.
Supply Chain Disruptions
There were initial problems as domestic factories tooled down to make space for social distancing requirements in the spring of 2020, thus lowering output. Likewise, import traffic was suppressed. When it comes to guns and ammo, imports are particularly important.
The most obvious disruptions would come from known foreign gun and ammunition manufacturers. Italy has Beretta. Turkey is the home of Canik, Girsan, and Titsas. Stevens shotguns hail from China. Brownings and Winchesters are coming out of Japan. Aguila and Eley ammunition is made in Mexico. PMC produces the bulk of its ammunition in South Korea. All of these countries had varied pandemic restrictions that restricted production and complicated distribution from port to port.
These disruptions also affected American manufacturers from works-in-progress inventory to raw materials. Let’s take primers as an example. Without primers, there are no useable cartridges. Two of the most common materials needed to produce primers are lead nitrates and copper.
It is not cost-effective to manufacture lead nitrate explosives in the United States due to EPA regulations. The EPA likewise governs the importation of lead nitrates, much of which come from India and China—nations that continue to reel from pandemic restrictions. Copper is easier to source domestically and imports of the metal was in decline since 2018. In 2020, copper imports fell precipitously then shot up again in 2021. (Trading Economics) The Nasdaq’s price index on copper fell to $2.15 per pound in March 2020 even as production slowed. The Lundin Mining Corporation reported waning production through its copper, zinc, and lead mines in Argentina, Peru, and Sweden. In the fiscal year 2021, production rebounded to pre-pandemic levels but prices rose steadily. In March 2022, spot prices reached their peak at $4.75 per pound.
This takes into account the price and availability of the raw good, not what it would take to turn it into the finished product. America imported over $16 billion in copper in 2021, compared to $9 billion the previous year. But increases in value does not mean an increase in quantity. American importers received 19,775,800 kilograms of copper in 2021. In 2020, the US imported 12,392,400 kilograms. Value increased by approximately 78% but quantity rose less than 60%. In a bid to increase supply, more money was pumped in and inflation became baked into the cake.
While Vista earned an impressive gross profit in their shooting sports division, it was eaten away as company-wide cost of goods sold rose 14% and operating expenses increased 76%. Keeping factory lines open and fully supplied was becoming more expensive and it had to be passed on to the consumer. Rising prices did not start or stop with guns and ammo. In the spring of 2021, the public began to sound the alarm on inflation—another contributing factor to the Great Ammo Shortage.
Inflation
Although high demand and supply chain disruptions are factors, the economists among you will point to inflation as another factor. Since the spring of 2021, commodity prices jumped a year-over-year average of over eight percent—the highest since the waning days of stagflation in 1981. From eggs to gasoline, prices are higher than pre-pandemic levels and only seem to be rising. Surely, inflation has hit guns and ammo. Right? To get a clearer picture, some myth-busting is in order.
Measuring the rise in prices of a set number of commodities is a useful tool to understand the downstream effects of inflation but there is no direct correlation between rising prices and inflation. Inflation is the expansion of the money supply. Rising prices are a reaction, not a cause of inflation. Some goods stagnate in price, others rise to varying degrees. Gun and ammunition companies like Vista saw rising expenses simply to get product in the door and employees safely away from one another. Operating budgets were stretched thin by things as mundane as increased shipping insurance rates to disinfecting equipment. As time went on, inflation did come into play and it compounded demand and the ongoing supply chain kinks.
In February 2020, the M2 money supply stood at $15.5 trillion. Pandemic relief checks, generous unemployment benefits, child tax credits, and low-interest loans intended to keep the economy running created an inflation. The money supply continued to expand until March 2022 when it peaked at $21.7 trillion. That is a 40% increase in the money supply.
Did the American economy expand by 40%? The answer is no. For a time, that inflation was contained to assets—or anything you would lend money on instead of paying cash in full. Tuition, housing, stocks, and the like. American gun and ammunition makers likewise took out loans to expand operations because of increased demand. These new liabilities, combined with all else considered, require higher prices to remain a going concern. Further down the supply chain, workers still in employment had to be compensated. Wages increased even as employment fell.
When guns and ammo got onto the shelf, the sticker price was higher. But an inflationary environment causes consumers to react. Those with the cash will spend now because prices are assumed to continue to climb. Why put off buying those steaks when you are only going to pay more next month? Buy the steaks. In fact, buy double of what you need. As restrictions waned, spending of hoarded cash caused shortages at fixed prices, so prices had to continue to rise to ration supply.
Alternatively, limits on such items as boxes of ammunition remain in place at lower prices. On the other hand, as reserves of cash are spent and more Americans find themselves with dwindling savings, there is going to be sheepishness to buy. In the classic business cycle, refusal to buy at the end of inflationary cycles leads to a deflation where money sits idle, and prices fall to entice those to buy.
The inflation that began in 2020 played off of and compounded prices that were rising for legitimate reasons and inevitably business decisions around the phenomenon take an immeasurable life of their own. The picture is more clear on the consumer side of the equation post-2020 with inflation playing a larger role as factories were forced to expand and consumers arrived at stores with more cash in their wallets than there was production. Inflation always produces shortages and those closest to the press reap the benefits, although that position is often through no fault of their own.
Return to Normal?
Given demand, supply chain problems, and inflationary pressures, is there ever going to be a return to normal for gun and ammunition makers and consumers? In truth, just like with anything post-pandemic related, we are living in a new normal. As much as I hate that turn-of-phrase, it is true. Supply has mostly returned. In fact, supply has expanded.
The virus of unknown origin could not completely kill the introduction of new releases to the market and both guns and ammunition of all flavors are on shelves. The prices, however, are much higher. Although demand might fall to normal levels and the last supply chain bottlenecks will, in my view, be ironed out, the persistent policies of inflation will ensure that the pricing of your Second Amendment rights will remain in question.
