May circulation production registers a loss

Production costs result in negative seigniorage
Published : 06/14/12
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Circulation coin production in May at the Denver and Philadelphia Mints resulted in negative seigniorage of more than $1.77 million, based on production costs cited in the Mint’s 2011 Annual Report.

The Mint struck cents, 5-cent coins, dimes and quarter dollars for circulation during the month. Profits that were made in the production of dimes and quarter dollars were offset by losses incurred for the production of cents and 5-cent coins.

The two Mint facilities also struck circulation-quality Presidential dollars for numismatic sales. When production of the Presidential dollars is considered, the U.S. Mint realized positive seigniorage of just over $15.9 million in May.

Seigniorage is the profit generated by the difference between a coin’s face value and the cost to produce and distribute each coin.

For years, it has cost the U.S. Mint more than face value to produce and distribute Lincoln copper-plated zinc cents and Jefferson copper-nickel 5-cent coins. According to the U.S. Mint’s 2011 Annual Report, it costs the Mint 2.41 cents for each cent, a loss in seigniorage of 1.41 cents per coin, and 11.18 cents for each 5-cent coin, a seigniorage loss of 6.18 cents per coin.

Based on the production of 538.8 million Lincoln cents and 103.92 million of the 5-cent coins in May, the cents generated negative seigniorage of $7,597,080, and the 5-cent coins, $6,422,256 in negative seigniorage.

The cost to produce and distribute each Roosevelt copper-nickel clad dime is 5.65 cents, based on the 2011 Annual Report figures, representing positive seigniorage of 4.35 cents per coin. Total positive seigniorage for May for the dime reached $5,089,500.

The America the Beautiful copper-nickel clad quarter dollars cost 11.14 cents each to produce and distribute into circulation, generating positive seigniorage of 13.86 cents per coin. During May, quarter dollar production generated positive seigniorage of $7,151,760.

The largest profit in May, $17,689,126, was generated by the output of Presidential dollars. The coins are being struck in circulation quality only for numismatic sales above face value. They are not distributed into circulation by the Federal Reserve.

U.S. Treasury Secretary Timothy F. Geithner on Dec. 13, 2011, suspended Presidential dollar production for circulation. The suspension was based on Federal Reserve concerns over the expanding inventory of more than 1.3 billion in Presidential dollars already housed in Federal Reserve Banks and contracted coin terminals. That quantity is believed to be more than enough to handle commerce needs for the next 12 years without additional Presidential dollar production.

While the suspension of Presidential dollar production for circulation is saving the U.S. Mint a reported $50 million to $75 million annually in production costs, reduced sales to the Federal Reserve have resulted in reduction in the positive seigniorage by tens of millions of dollars. Production of Presidential dollars in 2012 through the end of May totaled 42.3 million pieces; the total for the first five months of 2011 was 148.68 million Presidential dollars.

No Native American dollars or Kennedy half dollars were struck in May. Both coins, like Presidential dollars, are struck in circulation quality only for numismatic sales.

Cumulative circulation-quality coin production figures are posted monthly on the U.S. Mint website at Click on the “About Us” link on the top of the website’s Home Page and then click on the link “Coin Production” on the left side of the second page.

In an effort to reduce production costs for U.S. coinage, the U.S. Mint for the past two years has pursued composition alternatives as called for under provisions of the Coin Modernization, Oversight, and Continuity Act of 2010, Public Law 111-302.

The Mint has until Dec. 14, 2012, to submit to Congress its findings and recommendations for composition changes. ■

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