For the fiscal year ending September 30, 2011, the unit volume of United States Mint shipments of circulating coins to Federal Reserve Banks increased by 37%. The seigniorage generated from the shipments increased by 15.96% to $348.8 million. The reported unit costs for producing and manufacturing each denomination changed significantly following a change in accounting method.
The United States Mint produces and issues circulating coins to Federal Reserve Banks in the quantities necessary to replenish inventory and meet demand of commercial banks and financial institutions. In turn, these banks and financial institutions distribute the coins to meet the demand of retailers and the public. In times of excess supply, circulating coins may be returned to Federal Reserve Banks, where they are held in inventory and serve to reduce orders for new coins.
The US Mint recognizes revenue from circulating coins as they are shipped to Federal Reserve Banks. Seigniorage is generated from the difference between the face value of the coins and the cost to manufacture and distribute.
Circulating Coins Shipped to Federal Reserve Banks
|(in millions)||FY 2011||FY 2010||Change|
Following two years of unusually low demand, circulating coin shipments increased across all denominations. The largest increases were experienced for the nickel and dime at 154.60% and 58.17%, respectively. Last year the nickel and dime had also seen a large increase in shipments. During the 2009 fiscal year, shipments had reached extreme lows at 207 million nickels and 358 million dimes. Quantities for the latest fiscal year are about quadruple these amounts.
Shipments of quarters during the fiscal year remain historically low at 323 million. The US Mint previously cited the “more than sufficient” inventory levels of quarter dollars held at Federal Reserve Banks, which limited orders placed for new coins.
Meanwhile, shipments of $1 coins remained high despite an inventory of more than 1.25 billion held at Federal Reserve Banks. The Reserve Banks have been placing orders for each newly released Presidential Dollar in order to make unmixed quantities of the coins available to banks and depository institutions during an introductory period. The Treasury Department recently announced a suspension of production for Presidential Dollars.
Seigniorage from Circulating Coin Shipments
|(dollars in millions)||FY 2011||FY 2010||Change|
|Value of Shipments||$776.9||$618.2||25.67%|
The total value of circulating coin shipments for the 2011 fiscal year was $776.9 million, an increase of 25.67% from the previous year. The gross costs of producing the coins rose by a larger 34.88%. The average market prices for copper, nickel, and zinc increased from the previous year, offsetting lower sales, general, and administrative expenses.
Total Seigniorage increased by 15.96% to $348.8 million. The seigniorage per dollar issued declined to $0.45 in the 2011 fiscal year, compared to $0.49 in the prior year.
Circulating Coin Unit Cost by Denomination
|FY 2011||FY 2010||Change|
The unit cost of producing and distributing the cent and nickel rose during the fiscal year, while the costs of the dime, quarter, and $1 coin declined. These numbers were impacted significantly by a change in the method for allocating sales, general, and administrative expenses. In previous years, the costs were allocated to products based on gross margin. From fiscal year 2011 onwards, the costs are allocated based on the costs to manufacture, market, and distribute each product.
Previously, a large portion of SG&A expenses were allocated to $1 coins, with no allocation made to the cent and nickel. Accordingly, the change in reported unit cost for these denominations was the most significant. For the 2011 fiscal year, the reported unit cost of producing the cent rose by 34.64% to 2.41 cents, the cost of the nickel rose by 21.26% to 11.18 cents, and the unit cost of the dollar coin dropped by 42.89% to 18.03 cents.
This article is part of continuing coverage of the United States Mint’s 2011 financial results.