The U.S. Mint’s increased production of coins for general circulation is struggling to keep pace with public demand, forcing the Federal Reserve to limit orders from its customers, especially for dimes and quarter dollars.

The Federal Reserve is monitoring its inventories to determine whether order limits will be extended to cents and 5-cent coins as well.

The Federal Reserve is the U.S. Mint’s lone customer for coins to be released into general circulation from the Philadelphia and Denver Mints’ production.

The two Mint facilities have struck two quarter dollars in 2021 for use in commerce — the 2021 Tuskegee Airmen National Historic Site quarter dollar (the 56th and final release under the America the Beautiful Quarters Program) and the 2021 Gen. George Washington Crossing the Delaware quarter dollar.

The Federal Reserve first placed depository institutions on allocation in June 2020, because not enough coinage was flowing back to banks from retail establishments, whose business was impacted by COVID-19 pandemic restrictions.

The Federal Reserve’s Cash Product Office then partnered with the U.S. Mint to alleviate the perceived circulating U.S. coin shortages and distribution problems caused by the COVID-19 restrictions. After several months, the coin shortfalls and distribution channels appeared to be stabilized, and allocations were lifted.

However, “After a relatively stable first quarter of 2021, coin orders from depository institutions began to increase in March, with the most dramatic increase seen in the first two weeks of April,” according to the Federal Reserve’s Cash Product Office. “In addition, coin deposits to the reserve banks have been on a slow decline since January.

For this reason, the Federal Reserve issued notice that, beginning with circulating coinage orders set for pickup by depository institutions on May 3, the number of dimes and quarter dollars would be restricted.

The Cash Product Office’s notice explained further, “What initially appeared to be the normal seasonal increase in coin orders typical in the spring has developed into a sustained trend that significantly exceeds typical seasonal patterns.

“The U.S. Mint continues to produce new coins at increased production levels; however, increased demand from depository institutions is outpacing U.S. Mint production and resupply available from low rates of deposits, resulting in the Federal Reserve’s coin inventory being reduced to below normal levels.”

How allocation works

According to the Federal Reserve’s Cash Product Office, its coin allocation methodology takes into account recent order volume by coin denomination and depository institution end user, current U.S. Mint coin production levels and deposit levels.

“All endpoints [that is, customers requesting coins] are placed into Small, Medium, Large, Extra-large, and Extra-extra-large endpoint groups,” the office stated. “These endpoint assignments remain the same as they were at the end of 2020, and the reserve banks will continue to honor the adjusted assignments from 2020.

“For endpoints that were not assigned groupings in 2020 because they are new endpoints or did not order a particular denomination, we will use the latest available order data set to identify the appropriate endpoint assignment for each denomination.

“Coin order limits are unique by coin denomination and are based on available inventory.

“At this time, order limits are applied to dimes and quarters only. While no order limits are placed on pennies and nickels, we are paying close attention to our inventories and to order and deposit activity for these denominations.”

On April 28, the Federal Reserve sent a detailed notice to all depository institution customers explaining allocation amounts and how to determine their respective ordering limits.

The U.S. Mint has not disclosed whether it is considering requiring the San Francisco and West Point Mints to begin producing more coinage for circulation.

The San Francisco Mint has been striking circulation quality quarter dollars for numismatic sales above face value, but not for release into commerce.

The West Point Mint produced a combined 10 million of the five America the Beautiful quarter dollars of 2019 for circulation release, to stimulate the collecting community and raise interest in U.S. coins, but those 2019-W coins were expected to be pulled from circulation as collectibles.

West Point Mint output in 2020 included another 10 million of that year’s five quarter dollars, for the same purpose.

The U.S. Mint has so far chosen not to resume circulating quarter dollar production at West Point.

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