Chapter XXIII: How Green Coffees Are Bought and Sold (1)

_Buying coffee in the producing countries--Transporting coffee to
the consuming markets--Some record coffee cargoes shipped to the
United States--Transport over seas--Java coffee "ex-sailing
vessels"--Handling coffee at New York, New Orleans, and San
Francisco--The coffee exchanges of Europe and the United
States--Commission men and brokers--Trade and exchange contracts
for delivery--Important rulings affecting coffee trading--Some well
known green coffee marks_

In moving green coffee from the plantations to the consuming countries, the shipments pass through much the same trade channels as other foreign-grown food products. In general, the coffee goes from planter to trader in the shipping ports; thence to the exporter, who sells it to an importer in the consuming country; he in turn passing it on, to a roaster, to be prepared for consumption. The system varies in some respects in the different countries, according to the development of economic and transportation methods; but, broadly considered, this is the general method.

_Buying Coffee in the Producing Countries_

The marketing of coffee begins when the berries are swept up from the drying patios, put in gunny sacks, and sent to the ports of export to be sampled and shipped. In Brazil, four-wheeled wagons drawn by six mules, or two-wheeled carts carry it to the nearest railroad or river.

Brazil, as the world's largest producer of coffee, has the most highly developed buying system. Coffee cultivation has been the chief agricultural pursuit in that country for many years; and large amounts of government and private capital have been invested in growing, transportation, storage, and ship-loading facilities, particularly in the state of São Paulo.

The usual method in Brazil is for the _fazendeiro_ (coffee-grower) or the _commisario_ (commission merchant) to load his shipments of coffee at an interior railroad station. If his consignee is in Santos, he generally deposits the bill of lading with a bank and draws a draft, usually payable after thirty days, against the consignee. When the consignee accepts the draft, he receives the bill of lading, and is then permitted to put the coffee in a warehouse.

_Storing at Santos_

At Santos most of the storing is done in the steel warehouses of the City Dock Company, a private corporation whose warehouses extend for three miles along the waterfront at one end of the town. Railroad switches lead to these warehouses, so that the coffee is brought to storage in the same cars in which it was originally loaded up-country. The warehouses are leased by _commisarios_. There are also many old warehouses, built of wood, still operated in Santos, and to these the coffee is transferred from the railroad station either by mule carts or by automobile trucks.

At the receiving warehouses, samples of each bag are taken; the tester, or sampler, standing at the door with a sharp tool, resembling a cheese-tester, which he thrusts into the center of the bag as the men pass him with the bags of coffee on their heads, removing a double handful of the contents. The samples are divided into two parts; one for the seller, and one that the _commisario_ retains until he has sold the consignment of coffee covered by that particular lot of samples.

_The Disappearing Ensaccador_

In the old days it was the custom every morning for the _ensaccadores_, or baggers, and the exporters or their brokers, to visit the _commisarios'_ warehouses and to bargain for lots of coffee made up by the _commisario_.

In the Santos market, until recent years, the _ensaccador_, or coffee-bagger, often stood between the _commisario_ and exporter. When American importing houses began to establish their own buying offices in the Brazilian ports (about 1910) to deal direct with the _fazendeiro_ and the _commisario_, the gradual elimination of the _ensaccador_ was begun. Today he has entirely disappeared from the Santos market, and is disappearing from Rio de Janeiro, Bahia, and Victoria.

Coffee reaches Santos in a mixed condition; that is, it has not been graded, or separated according to its various qualities. This is the work of the _commisario_, who puts each shipment into "lots" in new "official" bags, each of which bears a mark stating that the contents are São Paulo growth. If the coffee is offered for sale by the owner, the _commisario_ will then put it on the "street," the section of Santos given over to coffee trading.

The _commisario_ works with samples of the coffee he has to offer and only puts out one set at a time. He names his "asking" price, known locally as the _pedido_, which is the maximum rate he expects to get, but seldom receives. A set of samples may be shown to twenty-five or thirty exporting houses in a day, one at a time. When the sample is in the hands of a firm for consideration, no other exporter has the right to buy the lot even at the _pedido_ price, and the _commisario_ can not accept other offers until he has refused the bid. On the other hand, if a house refuses to give up the samples, it is understood that it is willing to pay the _pedido_ price. The firm first offering a price acceptable to the _commisario's_ broker gets the lot, even though other houses have offered the same price.

When a lot is sold, the samples are turned over to the successful bidder, and he then asks the _commisario_ for larger samples for comparison with the first set.

_Commisarios Make as High as Nine Percent_

Having sold the coffee of a given planter, the _commisario_ often gets as much as nine percent for his share of the transaction. Unless the bags have been furnished to the planter at a good rental, the coffee must be transferred to the _commisario's_ bags; and for this the planter pays a commission.

Formerly the coffee, being rebagged by the _ensaccador_, was manipulated in what is called ligas; that is, mixing several neutral grades from various lots to create an artificial grade; or, more properly speaking, a "type," desirable for trading on the New York market.

_Grading and Testing in Brazil_

Having bought a lot of coffee, the exporter's next step is to grade and to test it. Grading is generally done in the morning and late afternoon, the hours from one to half-past four being devoted to making offers. The afternoon grading is done by sight. The morning examinations are more thorough, some progressive exporting houses even cup-testing the samples. Samples are compared with house standards, and with the requirements that have been cabled from the home office in the consuming country. Some of the coffee is roasted to obtain a standard by which all "chops" (varieties) are then graded and marked according to quality--fine, good, fair, or poor. Quality is further classified by the numerals from two to eight, which standards have been established on the New York Coffee and Sugar Exchange, and are described farther on in this chapter. Some traders also use the terms large or small bean; fair, good, or poor roasters; soft or hard bean; light or dark; and similar descriptive terms.

When a lot is ready for shipment overseas, the _commisario_ stamps each bag with his identifying mark, to which the buyer or exporter adds his brand. If the _commisario_ is ordered before eleven in the morning to ship a lot of coffee, he must be paid before three in the afternoon of the same day; if he receives the order after eleven, payment need not be made before three in the afternoon of the following day. Generally the terms of sale are full settlement in thirty days, less discount at the rate of six percent per annum for the unexpired time, if paid before the period of grace is up.

_Dispatching and Capitazias_

The exporter collects his money by drawing a draft against his client on deposit of bill of lading, cashing the draft through an exchange broker who deducts his brokerage fee. The exporter must obtain a consular invoice, a shipping permit from both federal and state authorities, and pay an export tax, before the coffee goes aboard the ship. This process is known as "dispatching," while the dock company's charges are known as _capitazias_.

In practically all coffee-growing sections the small planter is helped financially by the owners of processing plants or by the exporting firms. The larger planters may even obtain advances on their crops from the importing houses in New York, Havre, Hamburg, or other foreign centers.

_The Exchange at Santos_

A new coffee exchange began business at Santos on May 1, 1917, sitting with the Coffee Brokers Board of Control. This Board consists of five coffee brokers, four elected annually at a general meeting of the brokers of Santos, and one chosen annually by the president of the state of São Paulo. Among the duties of the Board are the classification and valuation of coffee, adjustment of differences, etc.

_Transporting Coffee to Points of Export_

Transportation methods from plantation to shipside naturally vary with local topographical and economic conditions. In Venezuela, the bulk of the coffee is transported by pack-mule from the plantations and shipping towns to the head of the railroad system, and thence by rail to the Catatumbo River, where it is carried in small steamers down the river and across Lake Maracaibo to the city of Maracaibo. In Colombia, coffee is sent down the Magdalena River aboard small steamers direct to the seaboard. In Central America, transportation is one of the most serious problems facing the grower. The roads are poor, and in the rainy season are sometimes deep with mud; so much so that it may require a week to drive a wagon-load of coffee to the railroad or the river shipping point.

_Buying Coffee in Abyssinia_

Coffee is generally grown in Abyssinia by small farmers, who mostly finance themselves and sell the crop to native brokers, who in turn sell it to representatives of foreign houses in the larger trading centers. Trading methods between farmer and broker are not much more than the old system of barter. In the southwestern section, where the Abyssinian coffee grows wild, transport to the nearest trading center is by mule train, and not infrequently by camel back. In the Harar district, the women of the farmers living near Harar the market center, carry the coffee in long shallow baskets on their heads to the native brokers. In the more remote places the coffee farmer waits for the broker to call on him. From the town of Harar the coffee is transported by mule or camel train to Dire-Daoua, whence it is shipped by rail to Jibuti, to be sent by direct steamers to Europe, or across the Gulf of Aden to Aden in Arabia.

Ten different languages are spoken in Harar. In order successfully to engage in the coffee business there, it is necessary either to become proficient in all these tongues, or to engage some one who is.

When the coffee is brought, partially cleaned, into Harar by donkey or mule train, it is first taken to the open air custom-house (coffee exchange) in the center of the town, where a ten-percent duty (in coffee) is exacted by the local government, and one Abyssinian dollar (fifty cents) is added for every thirty-seven and a half pounds, this latter being Ras Makonnen's share. As soon as the native dealer has released to him what remains of his shipment, he takes it out of the custom-house enclosure and disposes of it through the native brokers, who have their little "office" booths stretching in a long line up the street just outside the custom-house entrance.

There, a brokerage charge of one piaster per bag is paid by the buyer, and the coffee then becomes the property of the European merchant. In some cases it is put through a further cleaning process; but usually it is shipped to Jibuti or Aden uncleaned. Arriving at Jibuti, there is a one-percent ad valorem duty to pay. At Aden, there is another tax of one anna (two cents) to be paid to the British authorities.

Since 1914, however, Abyssinian coffee has been exported largely through the Sudan, a much shorter and less expensive trip than that to Adis Abeba and Jibuti. Now the coffee is carried by pack-train to Gambela on the Sobat River; and thence by river steamer to Khartoum, where it is loaded on railroad trains and sent to Port Sudan on the Red Sea.

_Buying Coffee in Arabia_

Most of the coffee in Arabia is grown in almost inaccessible mountain valleys by native Arabs, and is transported by camel caravan to Aden or Hodeida, where it is sold to agents of foreign importing houses. Mocha, once the principal exporting city for coffee, was abandoned as a coffee port early in the nineteenth century, chiefly because of the difficulty of keeping the roadstead of the harbor free from sandbars.

In Aden there is a kind of open-air coffee "exchange" (as in Harar) where the camel trains unload their coffee from the interior. The European coffee merchant does not frequent it, but is represented by native brokers, through whom all coffee business is transacted. This native broker is an important person, and one of the most picturesque characters in Aden. He receives a commission of one and a half percent from both buyer and seller. Certain grades of coffee are purchasable only in Maria Theresa dollars; so a knowledge of exchange values is essential to the broker's calling.

In making coffee sales, the negotiations between buyer and seller are carried on by means of finger taps under a handkerchief. The would-be purchaser reaches out his hand to the seller under cover of the cloth and makes his bid in the palm of the seller's hand by tapping his fingers. The code is well understood by both. Its advantage lies in the fact that a possible purchaser is enabled to make his bid in the presence of other buyers without the latter knowing what he is offering.

_Buying Coffee in Netherlands India_

In the Dutch East Indies cultivation of _Coffea arabica_ has diminished, the decay of the industry beginning when Brazil and Central America became the dominant factors in the green market. Not so many years ago coffee growing and coffee trading were virtually government monopolies. Under government control each native family was required to keep from six hundred to a thousand coffee trees in bearing, and to sell two-fifths of the crop to the government. It was also compulsory to deliver the coffee cleaned and sorted to the official godowns, and to sell the crop at fixed prices--nine to twelve florins per picul previous to 1874, although forty to fifty florins were offered in the open market. Later, the price was advanced; until about 1900 the government paid fifteen florins per picul for coffee in parchment. All government coffee was sold at public auction in Batavia and Padang, these sales being held four times a year in Batavia and three times a year in Padang.

Coffee from private estates, not under government control and operated by European corporations or individuals, has now succeeded the government monopoly coffee. Private-estate crops are sold by public tender, usually on or about January 28 of each year. If the owners do not get the price they desire in Batavia or Padang, the coffee is sent to Amsterdam for disposal. Some coffees always are sent to Holland; because the directors of the company get a commission on all sales there, and also because the coffees are prepared especially for the Dutch market. The Hollander wants his coffee blue-green in color.

_Loading Coffee at Santos_

In Brazil, when the coffee has been rebagged and marked by both the _commisario_ and the exporter, the coffee is again sampled. These samples are compared with those by which the purchase was made; and if right, the bags are turned over to the dock-master, who sets his laborers to work loading ship. Two methods are used at Santos. The old familiar style of hand labor is still in evidence--men of all nationalities, but largely Spaniards and Portuguese, take the bags on their heads and carry them in single file up the gangplanks and into the hold of the ship. The dock company, however, operates a huge automatic loading machine, or belt, which saves a great deal of time and labor. In other Brazilian ports all loading is done by manual labor.

Recently, at the suggestion of the Commercial Association of Santos, the minister of transport of São Paulo ordered that coffees destined for legitimate traders should be transported during four days of the week, and those of a speculative nature during the remaining two days. A premium of as much as five milreis a bag has been paid by speculators in order to obtain immediate transport.

_Shipping Coffee from Colombia_

As Colombia ranks next to Brazil in coffee, a brief description of its transportation methods, which are unique, should be of interest to coffee shippers. A goodly portion of Colombia's coffee exports comes from the district around the little city of Cucuta, whose official name is San José de Cucuta. It is the capital of North Santander, is situated in a beautiful valley of the Colombian Andes mountains that is watered by several rivers, and is only about a half-hour's ride by motor from the Venezuelan frontier.

Due to its geographical position, Cucuta serves as the most convenient inland port and commercial center for most of the department of North Santander. For the same reason, it is forced to depend on Maracaibo as its seaport, even though the Venezuelan government has a number of annoying laws controlling the commerce thus conducted. The Colombian ports of Baranquilla and Cartagena on the Atlantic are too distant from Cucuta to be available; and a large part of the traffic would have to be done on mule-back across one of the most formidable ranges of the Colombian Andes, involving high cost and delay in transportation. Yet its frontier position makes it possible for Cucuta to have important commercial relations with the neighboring republic of Venezuela, and to enjoy exceptional privileges from the Colombian central government.

A cargo of coffee leaving Cucuta has to go through the following steps on its way to a foreign market:

1. From Cucuta, it travels thirty-five miles by railroad to Puerto Villamizar, a Colombian river port on the Zulia river.

2. At Puerto Villamizar it is loaded into small, flat-bottomed, steel lighters that are taken to Puerto Encontrados by man power. Puerto Encontrados, belonging to Venezuela, is on the Catatumbo river; and the trip from Villamizar takes from two to four days, depending on the depth of water in the river. During high water, river steamers are also used, and make the trip in less than a day.

3. At Encontrados the cargo is loaded on river steamboats more or less of the Mississippi river type, which take it to Maracaibo, Venezuela. Coffee is also carried to Maracaibo by small sailing vessels.

4. At Maracaibo it is taken by ocean vessel, which either carries it direct to New York or to Curaçao, Dutch West Indies, where it is transhipped to steamers plying between New York and Curaçao. It is obvious that the many transhipments that coffee coming from Cucuta has to undergo greatly retard its arrival at a foreign port; and a cargo sometimes takes a month or more to reach New York.

Coffee from Cucuta is stored in the Venezuelan custom-house, from which it must be shipped for export within forty-five days, or the shipper runs the risk of having it declared by the Venezuelan government for _consumo_ (home consumption) at a prohibitory tariff. Arrangements can be made at considerable cost to have the coffee taken to a private warehouse; but it is no longer possible to make up the chops in Maracaibo, as was done formerly with all the Cucutas. The Venezuelan customs will not even allow the Maracaibo forwarding agent the same chops, as a general rule. Special permission must be obtained to change any bags that are stained or damaged. Schooners from Curaçao have, in the past, carried a great deal of the Colombian coffee to Curaçao.

_Port Handling Charges in Brazil_

It is almost impossible to list all the various charges for the handling of coffee at the port of shipment in Brazil, the figures not being accessible to outsiders. Some figures, such as warehouse charges and various forms of tax, are obtainable, however. For every bag of coffee which is in warehouse over forty-eight hours from the time of its arrival from the railroad there is a charge of two hundred reis (about five cents). In São Paulo there is an export tax of nine percent ad valorem levied by the state, and in Rio the state tax is eight and a half percent. Then there is a surtax of five francs per bag in Santos, and of three francs in Rio, which goes toward defraying the expenses of valorization. For every bag of coffee that passes over the dock the dock company charges one hundred reis (about two and a half cents).

_Some Record Coffee Cargoes_

With its superior loading and shipping facilities Brazil has been able to send extraordinarily large cargoes of coffee to the United States since the development of large modern freight-carrying steamships. While 75,000 or 90,000 bag cargoes were of common occurrence just prior to the outbreak of the World War, several shipments of more than 100,000 bags were made in the years 1915, 1916, and 1917. Up to January, 1919, the record was held by the steamship Bjornstjerne Bjornson which unloaded 136,424 bags at New York on November 17, 1915. Other shipments of more than 100,000 bags were by the Rossetti (December, 1900), 125,918 bags; the Wascana (March 3, 1915), 108,781 bags; the Wagama (October, 1916), 105,650 bags; the American (October 23, 1916), 124,212 bags; the Santa Cecilia (November 2, 1916), 105,500 bags, and the Dakotan (January 6, 1917), which carried 136,387 bags.

_Transport Overseas_

To bring green coffee to the consuming markets, both steamships and sailing vessels are used, although the latter have almost wholly given way to the speedier and more capacious modern steamers. Because of its large consumption, a constant stream of vessels is always on the way to the markets of the United States. The majority of these unload at New York, which in 1920 received about fifty-nine percent of all the coffee imported into this country. New Orleans came next, with about twenty-five percent; and San Francisco third, with about twelve percent.

The approximate time consumed in transporting green coffee overseas from the principal producing countries to the United States by freight steamships is shown in the table in the next column.

In some cases, that of Guadeloupe, for instance, the vessels stop at a number of ports, and this lengthens the time. This is also true of vessels running on the west coast of Central America and of those from Aden.

During the World War, one shipment of Timor coffee consumed three and a half years coming from Java to New York. It was aboard the German steamship Brisbane, which cleared from Batavia, July 4, 1914, and fearing capture, took refuge in Goa, Portuguese India, where it lay until Portugal joined the Allies. Then the Portuguese seized the vessel, and turned it over to the British, who moved it to Bombay. Here the cargo was finally transhipped to the City of Adelaide, reaching New York in January, 1918, three and a half years after the coffee left Batavia.

TRANSPORTATION TIME FOR COFFEE[J]

Rio de Janeiro to New York 11 to 16 days Santos " " " 14 to 18 " Bahia " " " 17 " Victoria " " " 19 " Maracaibo " " " 10 " Puerto Cabello " " " 10 " La Guaira " " " 8 " Costa Rica " " " 10 " Salvador " " " 18 " Mexico " " " 9 " Guatemala " " " 11 " (Puerto Barrios) Colombia " " " 10 " Haiti " " " 7 " Porto Rico " " " 5 " Guadeloupe " " " 10 " Hawaii " " " 28 " (via P.C.) Java " " " 30 " (via Suez) Sumatra " " " 30 " (via Suez) Singapore " " " 35 " (via Suez) India " " " 35 " (via Suez) Aden " " " 45 " (via Suez) Porto Rico " New Orleans 7 " Guadeloupe " " " 10 " Haiti " " " 7 " Guatemala " " " 8 " Costa Rica " " " 7 " Colombia " " " 6 " Mexico " " " 4 " Salvador " " " 15 " Guatemala " San Francisco 10 " Costa Rica " " " 18 " Salvador " " " 14 " Mexico " " " 8 " Hawaii " " " 8 " Singapore " " " 30 " India " " " 33 "

[J] The American Legion and the Southern Cross, of the Munson Line, make the journey from Rio de Janeiro to New York in eleven days. These are freight-and-passenger vessels, and have carried as many as 5,000 bags of coffee at one time.

_Java Coffee "Ex-Sailing Ships"_

Up to 1915 it was the custom to ship considerable Java coffee to New York in slow-going sailing vessels of the type in favor a hundred years ago. Java coffees "ex-sailing ships" always commanded a premium because of the natural sweating they experienced in transit. Attempts to imitate this natural sweating process by steam-heating the coffees that reached New York by the faster-going steamship lines, and interference therewith by the pure-food authorities, caused a falling off in the demand for "light," "brown," or "extra brown" Dutch East Indian growths; and gradually the picturesque sailing vessels were seen no more in New York harbor. At the end they were mostly Norwegian barks of the type of the Gaa Paa.

It usually took from four to five months to make the trip from Padang or Batavia to New York. Crossing the Equator twice, first in the Indian Ocean, then in the South Atlantic, the trip was more than equal to circumnavigating the earth in our latitude. In the hold of the vessel the cargo underwent a sweating that gave to the coffee a rare shade of color and that, in the opinion of coffee experts, greatly enhanced its flavor and body. The captain always received a handsome gratuity if the coffee turned "extra brown."

The ship is the Gaa Paa, which made the voyage from Padang in five months in 1912]

The demand for sweated, or brown, Javas probably had its origin in the good old days when the American housewife bought her coffee green and roasted it herself in a skillet over a quick fire. Coffee slightly brown was looked upon with favor; for every good housewife in those days knew that green coffee changed its color in aging, and that of course aged coffee was best.

And so it came about that Java coffees were preferably shipped in slow-going Dutch sailing vessels, because it was desirable to have a long voyage under the hot tropical sun suitably to sweat the coffee on its way to market and to have it a handsome brown on arrival. The sweating frequently produced a musty flavor which, if not too pronounced, was highly prized by experts. When the ship left Padang or Batavia the hatches were battened down, not to be opened again until New York harbor was reached.

Many of the old-style Dutch sailing vessels were built somewhat after the pattern of the Goed Vrouw, which Irving tells us was a hundred feet long, a hundred feet wide, and a hundred feet high. Sometimes she sailed forward, sometimes backward, and sometimes sideways. After dark, the lights were put out, all sail was taken in, and all hands turned in for the night.

The last of the coffee-carrying sailing vessels to reach the United States was the bark Padang, which arrived in New York on Christmas day, 1914.

Much of the green coffee received in New York is discharged and stored here, at one of the most modern waterfront and terminal developments in the world]

This is the Fulton Street section of the Brooklyn waterfront, where more than half the coffee received in New York is unloaded. The storage warehouses are to be seen back of the piers]

_Handling Coffee at New York_

The handling of the cargoes of coffee when they arrive at their destination is a source of wonder to the layman. There is probably no better place to study the handling of coffee than in New York City--the world's largest coffee center. Millions of bags of coffee pass into consumption every year through its docks, and scarcely a day goes by when there are not one or more ships discharging coffee upon the docks lining the Brooklyn shore, the center of the coffee-warehouse district for New York. In 1921, the New York Dock Company alone had 159 bonded warehouses with a storage capacity of some 65,000,000 cubic feet; and 34 piers, the longest measuring 1,193 feet and containing more than 175,000 square feet. These piers have a total deck space of sixty-one and a half acres. The wharfage distance is more than nine and a third miles. More than twenty steamship lines berth their vessels there regularly, and many of them are coffee ships. The warehouses have direct connections with all the principal railway trunk lines running into the New York district; and the whole property of the company stretches along the waterfront opposite lower Manhattan for about two and one-half miles.

Although coffee is admitted to the United States free of duty, it is subject to practically the same formalities as dutiable goods. Before the cargo can be "broken out," a government permit to "land and deliver" must be placed in the hands of the customs inspector on the dock. This done, the ship's samples, which consist of the samples sent by the exporter to the importer, are taken to the United States appraiser's office for inspection, and are then delivered to the importer's representative. Meanwhile the shipping documents covering the cargo, including bills of lading and consular invoices, have been sent to the post office for delivery to banks and bankers' agents, who check and deliver them to the customs officers for entry. The government requires that this entry shall be made within forty-eight hours of the vessel's arrival, else the cargo will be stored in a United States bonded warehouse under what is known as "general order" which makes the consignee liable for storage and cartage charges.

When a coffee ship arrives in New York, not much time is lost in discharging the cargo. As soon as the vessel is securely moored to the pier, and the government's permission to "land and deliver" is secured, the hatches are removed, the coffee is hauled out of the hold by block and tackle and swung off in slings to the pier, where dock laborers carry the bags to their proper places. If each cargo consisted of one consignment to a single importer, and contained only one variety of coffee, unloading would be a comparatively simple affair. In general practise, however, the cargoes consist of a large number of consignments and a variety of grades, necessitating a careful sorting as unloading progresses. Accordingly, even before the unloading begins, the dock is chalked off into squares, each square having a number, or symbol, representing a particular consignment. As the bags come up out of the hold, the foreman of the laborers, who has a key to the brand marks on the bags, indicates where each bag is to be placed. Coffee to be reshipped, either by lighter or rail, is heaped in piles by itself until loaded on to the lighters or freight cars.

The next step is to transfer the cargo to the warehouse, and to separate each consignment according to the various kinds of coffee making up the invoices. When the importer gives his orders to store, he sends also a list of the different kinds of coffees in his consignment, called "chops" by the trade, with directions how to divide the shipment. To do this, the floor of the warehouse is chalked off into squares, as was done on the dock; but now the numbers, or symbols, in each space indicate the chops in each invoice, or consignment.

The importer naturally is eager to sample the newly arrived coffee. Sampling is generally done by trained warehouse employees, who are equipped with coffee triers, sampling instruments resembling apple-corers, which they thrust into the bags. The instrument is hollow, and the coffee flows into the hand of the sampler, who places each sample in a paper bag which is marked to indicate the chop. The total sample of each chop usually consists of about ten pounds of coffee, which the importer compares with the exporter's sample.

When sampling for trade delivery, about two-thirds of the bags in a chop are tried. But when sampling for delivery on Coffee Exchange contract, every bag must be tested, and care taken that each chop is uniform in color, kind, and quality. Coffee for Exchange delivery must be stored in a warehouse licensed by the Exchange; and the warehouseman is responsible for the uniformity of grade of each chop.

When approximately ninety percent of the cargo has been unloaded and stored, the warehouse issues what has become known as the "last bag notice." In the majority of cases the coffee has been sold before arrival; and on receipt of the last bag notice, the importer can transfer ownership of the coffee and save interest.

In a cargo of 75,000 to 100,000 bags of coffee that have been hurriedly loaded in the producing country and unloaded at destination in equal haste, a small portion of the cargo is almost certain to be damaged. Generally the damage is slight. If a bag is torn or stained, the coffee is placed in a new bag. If the contents have become mildewed, the damaged portion is taken to a warehouse for reconditioning; while the sound coffee is thoroughly aired to remove the odor and is then placed in a clean bag. The reconditioned lot is put into a separate package and forwarded to the buyer with a "reconditioning statement" that shows what has been done.

On the left are three piers of the Pouch Terminal at Clifton; on the right, four of the American Dock Terminal at Tompkinsville; and between these are thirteen piers of the new Municipal Terminal]

Bags that have become torn in transit, and parts of their contents spilled, are called "slacks." These are weighed as they arrive on the dock by a licensed public weigher; and a sufficient quantity of the coffee remaining on the floor of the ship's hold is put into the bag to make it of the proper weight. The expense of reconditioning and rebagging is generally borne by the marine insurance companies. When the entire cargo is unloaded, and the slacks and bad-order bags are weighed and marked, the warehouseman tallies up the records of his clerks, and renders a corrected chop list to the consignee.

_Electric Tractors and Trailers_

Another district along the water front of Brooklyn where coffee is discharged in large quantities is that between Thirty-third and Forty-fourth Streets, south Brooklyn, occupied by the Bush Terminal Stores. This plant is laid out with railroad spurs on every pier, so that its own transfer cars, or the cars of the railroads running out of New York, can be run into the sheds of the docks where coffee is being discharged from the ships. The methods employed by the Bush Terminal are similar to those just described, except that all the coffee is handled by electrically-manipulated cars or trucks, in some instances the powerful little tractors hauling many "trailers" to various parts of the yards.

_Handling Charges at New York_

Before the World War, it cost approximately one-half cent a bag to handle green coffee from the vessel to warehouse and in storage in New York. The rate advanced nearly one hundred percent in the latter part of 1919, then dropped slightly, although it is still (1922) above the pre-war price. Other handling charges are shown in the following tabulation:

COFFEE HANDLING CHARGES AT NEW YORK

Pre-war prices Present prices Cents per bag Cents per bag (132 lbs.) (132 lbs.) Storage 3 to 4 5 to 8 Labor 3 to 4 5 to 8 Sampling for damage 1 1 Cleaning 35 20 Dumping and mixing 10 15 Dumping and airing 10 15 Shoveling and airing 10 15 Transferring coffee from floor to floor 4 8 Marking 1 1 Labor at vessel $9 per M $12.50 to $15 per M

The warehousemen in 1919 charged four cents per bag for loading into railroad cars. This charge was discontinued in 1921. The cost of weighing increased from two and one-half cents per bag in 1914 to four and one-half cents in 1919, and then dropped to the present price of three to three and one-half cents. Other handling charges at the port of New York are:

OTHER HANDLING CHARGES, 1922 Cents per bag (132 lbs.) Drawing samples, each 10 lbs 17 to 20 Grading for variation 4 Matching in 12 Reducing or evening off slack 9 Transferring to new bag 10 Trucking to weigher in store 3 Collecting and preparing sweepings 25 Delivering sample below Canal Street 75 Each additional sample 10 to 15 New bags 15 Old bags 6

A plan intended to cut down handling costs in New York, and to expedite deliveries, was inaugurated by the National Coffee Roasters Association at the beginning of 1920. The Association formed a freight-forwarding bureau, and invited members to have their coffee shipments handled through the bureau. The charges for forwarding direct importations are two cents per bag. Cartage charges vary from six to eighteen cents per hundred pounds. Claims are handled without charge.

_The Seven Stages of Transportation_

The foregoing story has taken the reader through the seven most direct routes that lead from the plantation to the roaster: first, from the patio to the railroad or river; then to the city of export; into the warehouses there; then into the steamers; out of them, and upon the wharf at the port of destination; from the wharf into the warehouses; and, finally, from the warehouses to the roasting rooms. It will be understood that in some instances where the plantation is hidden away in the mountains, it is necessary to relay the coffee; and again, at this end, the coffee is very often transhipped. In such cases, more handlings are required.

_Handling Coffee at New Orleans_

Coffee ships are unloaded in New Orleans, the second coffee port in the United States, in about the same general manner as in New York, with the important exception that the block-and-tackle system for transferring the bags from the ship to the dock has been largely supplanted by the automatic traveling-belt conveyor system. Another notable feature is New Orleans' steel-roofed piers, whereon the coffee can be stored until ready for shipment to the interior. Because of the class of labor--mostly negro--employed in unloading ships, New Orleans has found it expedient to retain the old flag system to indicate the part of the pier where each mark of coffee is to be piled as taken from the vessel. These little flags vary in shape, color and printed pattern, each representing a particular lot of coffee, and they are firmly fixed at the part of the pier where those bags should be stacked. Trained checkers read the marks on the bags as the laborers carry them past, and tell the carrier where the bag should be placed. To the illiterate laborers the checker's cries of "blue check," "green ball," "red heart," "black hand," and the like, are more understandable than such indications as letters or numbers.

_Handling Coffee at San Francisco_

San Francisco ranks third in the list of United States coffee ports, having received its greatest development in the four years of the World War, when the flow of Central American coffees was largely diverted from Hamburg to the Californian port. In the course of these four years, the annual volume of coffee imports increased from some 380,000 bags to more than 1,000,000 bags in 1918. The bulk of these importations came from Central America, though some came from Hawaii, India, and Brazil and other South American countries. Because of its improved unloading and distributing facilities, San Francisco claims to be able to handle a cargo of coffee more rapidly than either New York or New Orleans.

Handling Central American coffees in San Francisco is distinctly different from the business in Brazil. In order to secure the Central American planter's crops, the importers find it necessary to finance his operations to a large extent. Consequently, the Central American trade is not a simple matter of buying and selling, but an intricate financial operation on the part of the San Francisco importers. Practically all the coffee coming in is either on consignment, or is already sold to established coffee-importing houses. Brokers do not deal direct with the exporters; and practically none of the roasters now import direct.

In recent years San Francisco has adopted the practise of buying a large part of her coffee on the "to arrive" basis; that is the purchase has been made before the coffee is shipped from the producing country, or while in transit. This practise applies, of course, only to well known marks and standard grades. Coffee that has not been sold before arrival in San Francisco is generally sampled on the docks during unloading, although this is sometimes postponed until the consignment is in the warehouse. It is then graded and priced, and is offered for sale by samples through brokers.

San Francisco is better equipped with modern unloading machinery and other apparatus than either New Orleans or New York, even more liberal use being made there than in New Orleans of the automatic-belt conveyors both for transferring the bags from the ships to the docks and for stacking them in high tiers on the pier. Another notable feature of the modern coffee docks is that the newer ones are of steel and concrete and, as in New Orleans, are covered to protect the coffee from wind and storm.

_Europe's Great Coffee Markets_

Europe has three great coffee-trading markets--Havre, Hamburg, and Antwerp. Rotterdam and Amsterdam are also important coffee centers, but rank far below the others named. In point of volume of stocks, Havre led the world before the war; while in respect to commercial transactions, it ranked second, with New York first. In pre-war days, the largest part of the world's visible supply of coffee was stored in the Havre bonded warehouses, being available for shipment to any part of Europe on short notice, or even to the United States in emergencies. Even during the World War, this French port remained a powerful factor in international coffee trading. Coffee trading in Havre, both exchange and "spot" transactions, follows about the same general lines as in New York and the other great coffee markets. Coffee "futures" are dealt in on the Havre Bourse.

Green coffee is sold in London by auction in Mincing Lane. On arrival, it is stored in bonded warehouses, and is released for domestic use only when customs duty at the rate of four and one-half pence per pound has been paid. The bulk of the coffee comes in parchment on consignment; and before sale, it must be hulled and sorted in the milling establishments, most of which are on the banks of the Thames.

The auctions are held four times a week, usually on Tuesday, Wednesday, Thursday, and Friday. The sales are advertised in the market papers--chief among which is the _Public Ledger_--and also by the auctioneers, who issue catalogs of their offerings. A few hours before the beginning of the sale, samples are laid out for inspection by prospective buyers, who may cup-test them if they desire. The actual selling is done by competitive cash bidding, the highest bidder becoming the owner. Two classes of brokers do the bidding, one for home trade and the other for exporters.

Home trade takes about a tenth of the coffee, the remainder being sold for export. If the coffee is bought for re-export, it can be transferred to the shipping port, still in bond, and shipped out of the country without paying duty. During the World War, auctions were held about twice a week; but after the signing of the armistice in November 1918, the London traders resumed the four times a week practise.

_Coffee Exchanges and Trading Methods_

Green-coffee buyers in the large importing centers of the United States and Europe recognize two distinct markets in their operations. One of these is called the "spot" market; because the importers, brokers, jobbers, and roasters trading there deal in actual coffee in warehouses in the consuming country. In New York the spot market is located in the district of lower Wall Street, which includes a block or two each side on Front and Water Streets. Here, coffee importers, coffee roasters, coffee dealers, and coffee brokers conduct their "street" sales.

The other market is designated as the "futures" market; and the trading is not concerned with actual coffee, but with the purchase or sale of contracts for future delivery of coffee that may still be on the trees in the producing country. Futures, or "options" as they are frequently called, are dealt in only on a coffee exchange. The principal exchanges are in New York, Havre, and Hamburg. New Orleans and San Francisco exchange dealers trade on their local boards of trade.

Coffee-exchange contracts are dealt in just like stocks and bonds. They are settled by the payment of the difference, or "margin"; and the option of delivering actual coffee is seldom exercised. Generally, the operations are either in the nature of ordinary speculation on margin or for the legitimate purpose of effecting "hedges" against holdings or short sales of actual coffees.

The New York Coffee and Sugar Exchange--the most important in the world, because of the volume of its business--deals in all coffees from North, South, and Central America, the West Indies and the East Indies (except those of the Robusta variety) and uses Type No. 7 as the basis for all Exchange quotations. All other types are judged in relation to it. In determining the number of a type, the coffee is graded by the number of imperfections contained in it.

The building fronts on Hanover Square and extends through to Beaver Street. The exchange rooms are indicated by the arched windows on the second floor. The rest of the building is devoted to offices. The exchange was founded in 1881, and was the first national coffee trading organization in the world.]

These imperfections are black beans, broken beans, shells, immature beans ("quakers"), stones, and pods. For counting the imperfections, the black bean has been taken as the basis unit, and all imperfections, no matter what they may be, are calculated in terms of black beans, according to a scale, which is practically as follows:

BLACK-BEAN SCALE

3 shells equal 1 black bean 5 "quakers" equal 1 " " 5 broken beans equal 1 " " 1 pod equals 1 " " 1 medium size stone equals 1 " " 2 small stones equal 1 " " 1 large stone equals 2 to 3 " "

By this scale a coffee containing no imperfections would be classified as Type No. 1. The test is made on one-pound samples. If a sample shows six black beans, or equivalent imperfections, it is graded as No. 2; if thirteen black beans, as No. 3; if twenty-nine black beans, as No. 4; if sixty black beans, as No. 5; if one hundred and ten black beans, as No. 6, and if more than one hundred and ten black beans, as No. 7 or No. 8. These two are graded by comparison with recognized exchange types. Coffees grading lower than No. 8 are not admissible to this country.

The quotation relationship of other types with the basic Rio No. 7 is shown in the table below.

By this scale one can determine that when Rio No. 7 is quoted at 17.10, Rio No. 2 is 18.60, Santos No. 3, 19.10, and Bogota No. 5, 18.10. The quotations are on the pound and cents basis.

SCALE OF QUOTATION RELATIONSHIP

BRAZILIAN COFFEE-- SANTOS COFFEE OTHER KINDS--NOT NOT SANTOS BRAZILIAN Type Type Type No. 1--180 points above No. 1--260 points above No. 1--300 points above No. 2--150 points above No. 2--230 points above No. 2--250 points above No. 3--120 points above No. 3--200 points above No. 3--200 points above No. 4---90 points above No. 4--150 points above No. 4--150 points above No. 5---60 points above No. 5--100 points above No. 5--100 points above No. 6---30 points above No. 6-- 50 points above No. 6--50 points above No. 7---Basis No. 7--Basis No. 7--Basis No. 8---50 points below No. 8--50 points below No. 8--50 points below

A point is the hundredth part of a cent

In the spot market, a trader may also buy or sell coffee "to arrive"; that is, a consignment that is aboard ship on the way to the market. Coffee is shipped to New York either on a consignment basis and sold for a commission, or it may have been bought in the shipping port and be already the property of an importer. When shipped on consignment, a wholesaler usually buys on the in-store contract, which provides that the purchaser must take delivery at the warehouse, though he is generally given a month's storage privilege before removal of the coffee. The practise among New York importers at present is to buy coffee on either the basis of F.O.B. delivery steamer at loading port, or delivery C. & F. (cost and freight), or C.I.F. (cost, insurance, and freight), port of destination. Payment is made by letter of credit drawn on a New York or London bank, entitling the exporter to draw at ninety days' sight against the shipping documents, so that the shipment will be in the hands of the purchaser long before the draft is made. Frequently a jobber acts as his own importer of Brazil coffee, buying direct from the exporter without utilizing the agency of a broker or a regular importing firm.

Brazil coffee is bought with the stipulation that differences between samples and the coffee actually delivered may be adjusted either on "Brazil grading," "half difference," or "full difference"; and with the further provision that, if the delivery is a full type higher or lower than specified in the contract, the entire shipment may be rejected. Under the "Brazil grading" provision, the buyer must accept delivery if the coffee is better than the next lower type, even though not up to the type ordered; and if the coffee is of a higher type than contracted for, he need not pay premium for it. In buying on the "half difference" or "full difference" basis, the buyer is entitled to payment for half the difference or the full difference, respectively, for any undergrading, or must pay the seller accordingly if there is any overgrading. When a buyer specifies special features of description, in addition to type, some sellers protect themselves against claims for difference on this score by inserting in the contract a clause to the effect that the description is given in good faith, but is not guaranteed by the seller.

The one on the right is a record of transactions in the coffee pit. As soon as a trade is made, it is noted in the proper column on the lower part, the entry showing the time of the transaction, the number of "250-pound bag lots," and the price. The left-hand board gives Santos and Rio future quotations. For a detailed description of these and other exchange quotation boards, see page 457]

_How the New York Exchange Functions_

When the New York Coffee Exchange was incorporated in 1881, its charter stated its purposes to be "to provide, regulate and maintain a suitable building, room or rooms for the purchase and sales of coffees and other similar grocery articles in the city of New York, to adjust controversies between members, to inculcate and establish just and equitable principles in the trade, to establish and maintain uniformity in its rules, regulations and usages, to adopt standards of classification, to acquire, preserve and disseminate useful and valuable business information, and generally to promote the above mentioned trade in the city of New York, increase its amount, and augment the facilities with which it may be conducted."

In the promotion of trade at New York the Exchange has been highly successful. From time to time it has been criticized; and, more than once, coffee traders in the East and in the West have raised a question as to its value to non-speculating members. There are those who believe it serves a useful purpose, and others who call it a huge pool room. To say that, on the whole, it is not of benefit to the trade would be untrue. As one of its champions pointed out in 1914, when it shut down for a period of four months on account of the World War:

The ability to discount the future is a necessity, and demands the
facilities that a unit of centralization like the Exchange affords.
There is no difference between a purchase of coffee and one of a
future month on options.