The Mail Merge feature was originally used to create a spreadsheet for offline snail mailings.  Often today, we use it to see group numbers and members, but the original intent was for mailings. The issue comes up when you have members marked as "Deceased" in the database.  The Mail Merge will automatically filter them out for the Mailing List, as they can not receive any mail. Spot check some of the missing records and look for a "Deceased" tag.  Or run a query on deceased members and see if it fills in the gap.

Review this solution for related information on groups and queries.