Look at these charts and tell me why ammo is going up in price...

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  • muncie21

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    The first picture (2 charts) is taken from Cabela's web site, telling customers why ammo has increased in price. The blue line is the price.

    The second and third pictures are from today (15Mar2009) showing 1 year historical prices for copper lead commodities, on the London Metal Exchange, same exchange that Cabela's references.

    So the question is, with commodity prices falling, why is ammo going up? If it was simply supply/demand, the commodity price (including futures) would be increasing, not declining.

    Cabelas_copper_lead.gif


    Copper.jpg
    Lead.jpg
     

    melensdad

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    You are making the FALSE assumption that the total cost is very closely related to the costs of the raw materials. What you are failing to take into account is that there are capacity limits in the production of the FINISHED COMPONENTS. A factory running at 100% capacity cannot make more than it can make. Even if raw goods are cheaper, the maximum output of the factory is FIXED at the limit of its maximum production. If customers demand 110% of the output then eventually the supply will fall below the demand as the warehouses slowly drain. But what we seem to have is a situation where supply is running at 50-to-100% BELOW the DEMAND.

    It was uncommon 2 or 3 years ago for the 'average' gun owner to have more than a couple boxes of ammo on hand. It was uncommon for the 'average' gun enthusiast (folks here on INGO) to have more than a couple THOUSAND rounds on hand.

    But from what I can see in the market, the average gun owner has put away a few more extra boxes, so they have increased their demand by 100 to 150% over their prior purchasing habits. And here on INGO and other gun forums it is common to hear people say that they want 5000 rounds PER CALIBER for their rifles, perhaps a bit less for pistols, but its now much more common to hear about people with many many thousands of rounds of ammo and LOOKING FOR MORE.


    BTW, from what I see, the ammo dealers are NOT making tons of money on the sale of ammo. I don't see dealers being GREEDY. Yes, some are screwing customers, but plenty are selling at low margins.

    IF there is GREED, it is because INDIVIDUALS are hoarding ammo. So perhaps GREED to be applied to US here for stocking up. But I think the real word is FEAR. Fear of higher prices. Fear of legislation. Fear of over regulation. Fear of shortages. Fear of bans. Fear of a draconian anti-gun/anti-freedom administration. Fear of uncertain times. Fear of a real SHTF scenario and getting caught without supplies. Fear of crime increases do to the socialist regime in Washington and the economic hardships it will force down our throats.
     

    muncie21

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    melensdad: I agree with you regarding the change in buying habits and fixed output of ammo factories. I had not thought of that when I posted this.

    As for ammo companies not making a killing...maybe I'm missing something there also.

    Raw materials have decreased 75% from the previous year and retail costs have risen 20-50%...where's the money going?
     

    Colt556

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    It's going up b/c you have people running from one Wal Mart to another buying every box of ammo they can find! If the store/dealer/wholesaler and manufacture know that ppl are buying it at ridiculously inflated prices they are going to sell it at those prices. Blame it on your buddies. Look at the ads in our classifieds that show people cleaning out their closets and asking 2-3 times what they paid for old ammo. I never thought I'd see a time where people are willing to trade guns for ammo!!! PLEASE everybody calm down and stop buying every box in sight and the prices will go down. I saw this same thing in 86 and 94. There will be ammo and the price will go down. The gun owners that are buying up all the ammo are to blame. I've found ammo at regular prices at stores that are away from the panic buyers. I know this will pi$$ some people off but that is the way I see it.
     

    clt46910

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    It is called supply and demand. The demand is much higher then the suppy. Prices will climb because some are willing to pay a higher price to get the product instead of doing without.

    Suppose you had only two guns. You have ten people wanting your two guns. Five want to pay you the price you paid for them, the other four are offering you 25% more then you paid. One is offering you 50% more then you paid for both of them. Who would you sell too?

    Greed or taking the best deal?
     

    melensdad

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    melensdad:Raw materials have decreased 75% from the previous year and retail costs have risen 20-50%...where's the money going?
    Paying OVERTIME at time+1/2 the labor rate? Increased utility costs.

    The reality is that with MOST goods the actual cost of the goods mostly affected by labor, regulations, transportation and taxes. You'd probably be shocked to learn what the raw cost of a loaded round really is if you subtracted all those costs/taxes off the cost of the item. I used to own a distribution warehouse that sold regulating/taxed goods. Some of the goods were taxed at roughly 50% of the cost of the item before the item got to the consumer, that does not include shipping and warehousing costs, marketing costs, labor, etc.

    It would not surprise me if the actual cost of a round of ammunition was only 20% of the cost we pay. But I'd seriously doubt if the ammo companies or the retailers are pocketing hoards of cash. If they were making 10% profit a year ago, they are probably making a similar margin today. Granted they are currently selling more, but still probably at similar profit margins. But I ask you, what will they be able to make NEXT YEAR? Heck they may be out of business in a few years if Obama has his way.


    PLEASE everybody calm down and stop buying every box in sight and the prices will go down. I saw this same thing in 86 and 94. There will be ammo and the price will go down. The gun owners that are buying up all the ammo are to blame. I've found ammo at regular prices at stores that are away from the panic buyers. I know this will pi$$ some people off but that is the way I see it.
    Agreed :yesway:
     

    danielocean03

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    It's going up b/c you have people running from one Wal Mart to another buying every box of ammo they can find! If the store/dealer/wholesaler and manufacture know that ppl are buying it at ridiculously inflated prices they are going to sell it at those prices. Blame it on your buddies. Look at the ads in our classifieds that show people cleaning out their closets and asking 2-3 times what they paid for old ammo. I never thought I'd see a time where people are willing to trade guns for ammo!!! PLEASE everybody calm down and stop buying every box in sight and the prices will go down. I saw this same thing in 86 and 94. There will be ammo and the price will go down. The gun owners that are buying up all the ammo are to blame. I've found ammo at regular prices at stores that are away from the panic buyers. I know this will pi$$ some people off but that is the way I see it.


    I agree with you, panic buying of guns and ammo on behalf of those who already owned guns and the first-time gun buyers has made things absolutely crazy. I can't wait for all of these prices to crash and sober up the markets. I understand the current political climate that is driving these sales, I've purchased more guns as of late than I normally would as well, but without paying overinflated prices and going into debt doing so. :twocents:
     

    danielocean03

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    You are making the FALSE assumption that the total cost is very closely related to the costs of the raw materials. What you are failing to take into account is that there are capacity limits in the production of the FINISHED COMPONENTS. A factory running at 100% capacity cannot make more than it can make. Even if raw goods are cheaper, the maximum output of the factory is FIXED at the limit of its maximum production. If customers demand 110% of the output then eventually the supply will fall below the demand as the warehouses slowly drain. But what we seem to have is a situation where supply is running at 50-to-100% BELOW the DEMAND.

    It was uncommon 2 or 3 years ago for the 'average' gun owner to have more than a couple boxes of ammo on hand. It was uncommon for the 'average' gun enthusiast (folks here on INGO) to have more than a couple THOUSAND rounds on hand.

    But from what I can see in the market, the average gun owner has put away a few more extra boxes, so they have increased their demand by 100 to 150% over their prior purchasing habits. And here on INGO and other gun forums it is common to hear people say that they want 5000 rounds PER CALIBER for their rifles, perhaps a bit less for pistols, but its now much more common to hear about people with many many thousands of rounds of ammo and LOOKING FOR MORE.


    BTW, from what I see, the ammo dealers are NOT making tons of money on the sale of ammo. I don't see dealers being GREEDY. Yes, some are screwing customers, but plenty are selling at low margins.

    IF there is GREED, it is because INDIVIDUALS are hoarding ammo. So perhaps GREED to be applied to US here for stocking up. But I think the real word is FEAR. Fear of higher prices. Fear of legislation. Fear of over regulation. Fear of shortages. Fear of bans. Fear of a draconian anti-gun/anti-freedom administration. Fear of uncertain times. Fear of a real SHTF scenario and getting caught without supplies. Fear of crime increases do to the socialist regime in Washington and the economic hardships it will force down our throats.

    Paying OVERTIME at time+1/2 the labor rate? Increased utility costs.

    The reality is that with MOST goods the actual cost of the goods mostly affected by labor, regulations, transportation and taxes. You'd probably be shocked to learn what the raw cost of a loaded round really is if you subtracted all those costs/taxes off the cost of the item. I used to own a distribution warehouse that sold regulating/taxed goods. Some of the goods were taxed at roughly 50% of the cost of the item before the item got to the consumer, that does not include shipping and warehousing costs, marketing costs, labor, etc.

    It would not surprise me if the actual cost of a round of ammunition was only 20% of the cost we pay. But I'd seriously doubt if the ammo companies or the retailers are pocketing hoards of cash. If they were making 10% profit a year ago, they are probably making a similar margin today. Granted they are currently selling more, but still probably at similar profit margins. But I ask you, what will they be able to make NEXT YEAR? Heck they may be out of business in a few years if Obama has his way.



    Agreed :yesway:


    Great points and some uncommonly common sense here, Rep'd.
     

    fireball168

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    From at least 2006-August of 2008, you could walk in and buy UMC 9mm at any Dicks for $6.99 on sale, usually at least one week a month.

    That ammunition was generally about 6 months old based on the date codes on the box.

    So, it was produced when metal prices were at the highest in YEARS.

    But - the raw materials had been bought previous.

    By sheer coincidence, I shared a restaurant table one evening at SHOT with a brass cup salesman for PMC's parent company. He indicated the typical contract/sales cycle was 2-5 years production.

    So, those raw materials were likely purchased when things were dirt cheap.

    Granted - demand has went up dramatically, but - they're now working with raw materials that had a much higher acquisition cost.

    This too shall pass - whether or not the end user price will drop remains to be seen. Based on current demand, I doubt it.
     

    Colt556

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    Yes I'm sure that there are other things that are raising prices, along with everything else, but I firmly believe that the main factor is all of the panic buying that is going on. I'm old enough to have seen it before, albeit not ever this bad.
     

    danielocean03

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    Yes I'm sure that there are other things that are raising prices, along with everything else, but I firmly believe that the main factor is all of the panic buying that is going on. I'm old enough to have seen it before, albeit not ever this bad.

    You're exactly right. Panic buying is the monster that is ruining our fair firearms hobby/obsession/way of life. I'm not old enough to have seen if before myself, but I'm certainly smart enough to listen to those who are, as those who don't understand history are bound to repeat it.
     

    muncie21

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    Federal Cartridge cutting workers this month

    Tuesday, 13 January 2009
    by Mandy Moran Froemming

    Union Editor

    As many as 80 workers are being let go at Anoka’s Federal Cartridge ammunition plant this month.

    Alliant Techsystems (ATK), the parent company of the local ammunitions maker, has announced the cut backs as a result of the ammunitions maker reducing a backlog of orders that started more than two years ago.

    Complete article can be found here: ABC Newspapers - Federal Cartridge cutting workers this month
     

    Bigum1969

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    I believe it is simply a supply-demand issue. Everyone seems to buying ammo. Some people are buying lots of it, and others are buying ammo and storing it for the first time.

    Just yesterday in Gander Mountain, I witnessed a man speaking with a salesman as he loaded up a cart with a bunch of .40 S&W. He tells the salesman, "I've been hearing rumors that they going to start putting serial numbers on this stuff. Figured I should get some now before that happens."

    This is just one example of the many fear-laden reasons all kinds of folks are buying ammo at a rapid pace.

    Again, simple supply and demand.
     

    danielocean03

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    I believe it is simply a supply-demand issue. Everyone seems to buying ammo. Some people are buying lots of it, and others are buying ammo and storing it for the first time.

    Just yesterday in Gander Mountain, I witnessed a man speaking with a salesman as he loaded up a cart with a bunch of .40 S&W. He tells the salesman, "I've been hearing rumors that they going to start putting serial numbers on this stuff. Figured I should get some now before that happens."

    This is just one example of the many fear-laden reasons all kinds of folks are buying ammo at a rapid pace.

    Again, simple supply and demand.


    That's exactly it, so many people are running scared and buying up everything they can right now. Worrying about the new administration, the economic downturn and the crime that comes with it has only increased demand. I can't wait for all of the jackasses just buying with the sole intent of screwing someone else with an overinflated price get stuck with a bunch of merchandise they overpaid for when the prices crash. Then things can begin to get back to "normal" again.
     

    jblomenberg16

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    Lots of good points already made, and I think that simple ecomonic laws are at play.

    What remains to be seen is if there will be a rapid deflation of the price of guns and ammo once production catches up to and exceeds the demand. I don't know if anyone can accurately predict total demand right now. Look for the suppliers to carefully blance expansions to increase capacity with adding temporary workers and OT to meet the current bubble. The last thing anyone wants to have as a business owner right now is excess capacity and workforce.


    There are of course a couple of wildcards here:

    1) Any AWB/Ammo bans that may come from the current administration, which will continue to boost demand prior to such a ban (note that the current bubble is partly due to what we think will be coming, not from any actual legislation at this point).

    2) Any suspension or additional duties levied on imported ammunition and firearms. This could either decrease the supply, or raise the base cost of goods, causing the price to remain higher for both.
     

    amboran

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    Hoarding and panic buying are a part of the problem ,but a lot more people are now genuinely becoming shooting fans. I believe the radical ideas and actions by the current BHO crazies have galvanized a lot of people to become more of a "patriot". Don' expect ammo prices to return very quickly or as low. My family-and a lot of others I know are actually buying targets and USING the ammo we buy to become,hopefully better shooters. Not all-for sure-but a lot of ammo is actually being put to good use. My computer hobby buying has stopped almost completely and now the extra $$$$'s go to a lot of gun related products-not just ammo.
     
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