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. [Illustration: OLD AND NEW METHODS EMPLOYED IN LOADING HEAVY CARGO ON THE SANTA CECILIA] 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." [Illustration: UNLOADING JAVA COFFEE FROM A SAILING VESSEL AT A BROOKLYN DOCK 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. [Illustration: THE BUSH TERMINAL SYSTEM OF DOCKS AND WAREHOUSES 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] [Illustration: AIRPLANE VIEW OF NEW YORK DOCK COMPANY'S PIERS AND WAREHOUSES 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] [Illustration: RECEIVING PIERS FOR COFFEE AT NEW YORK] _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. [Illustration: UNLOADING COFFEE AT ONE OF THE COVERED PIERS OF THE NEW YORK DOCK COMPANY] 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. [Illustration: STORING COFFEE BY MARKS AND CHOPS] [Illustration: HOISTING COFFEE INTO THE STORAGE WAREHOUSES ADJOINING THE BROOKLYN PIERS] [Illustration: RECEIVING AND STORING COFFEE AT NEW YORK] 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. [Illustration: TESTER AT WORK, BUSH TERMINAL, NEW YORK] [Illustration: LOADING LIGHTERS, BUSH DOCKS, NEW YORK] 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. [Illustration: THE NEW TERMINAL SYSTEM ON STATEN ISLAND 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. [Illustration: MOTOR TRACTOR MOVING COFFEE AT THE BUSH TERMINAL DOCKS, BROOKLYN] _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 [Illustration: UNLOADING COFFEE WITH MODERN CONVEYOR, NEW ORLEANS] 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. [Illustration: UNLOADING A COFFEE SHIP BY BLOCK AND TACKLE AT THE PORT OF NEW ORLEANS] [Illustration: IN FOREGROUND--LOADING COFFEE BY MEANS OF AN AUTOMATIC TRAVELING-BELT CONVEYOR, ON GOVERNMENT BARGES FOR ST. LOUIS] [Illustration: COFFEE-HANDLING SCENES ON THE WHARVES AT NEW ORLEANS] _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. [Illustration: SHOWING HOW COFFEE IS STORED UNDER STEEL-COVERED SHEDS AT NEW ORLEANS] _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. [Illustration: DISCHARGING COFFEE FROM A STEAMER JUST ARRIVED FROM CENTRAL AMERICA] [Illustration: HOW A LARGE CARGO OF COFFEE IS HANDLED ON THE PIER AS IT IS UNLOADED FROM THE SHIP] [Illustration: UNLOADING AND STORING COFFEE AT SAN FRANCISCO] 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. [Illustration: ONE OF THE MODERN DEVICES USED IN SAN FRANCISCO FOR HANDLING GREEN COFFEE] 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. [Illustration: COFFEE AUCTION SAMPLES ON DISPLAY AT AMSTERDAM] [Illustration: GREEN COFFEE STORED ON THE DOCKS AT HAVRE, FRANCE] [Illustration: HANDLING GREEN COFFEE AT TWO EUROPEAN PORTS] _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. [Illustration: NEW YORK COFFEE AND SUGAR EXCHANGE 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 " " [Illustration: THE COFFEE PIT IN THE NEW YORK COFFEE AND SUGAR EXCHANGE] 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. [Illustration: TWO OF THE COFFEE EXCHANGE BLACKBOARDS 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. The experience gained here and abroad demonstrates that any check placed upon such dealings is detrimental, with far-reaching effects upon the whole body of the trade. Unquestionably the Exchange is a powerful factor as a regulator of extremes in the market. The experience gained in Germany, where an embargo was placed upon transactions in futures, is illuminating. The disastrous effects were so plain that the authorities were forced to abandon their objections and permit a resumption of the business along the old lines. But a good thing can be abused, and the opportunity to gamble in options availed of by so many is the increment that disturbs the legitimacy of the market and creates the opposition to the whole proposition. When the Exchange is ready to insist that every transaction in futures must be a legitimate one, and that every trader under its jurisdiction using the facilities of the Exchange is made to realize that any operations that are purely of a gambling nature will subject him to severe discipline, then the Coffee Exchange will begin to stem the tide of an ever-growing opposition by the general public. [Illustration: THE "COFFEE AFLOAT" BLACKBOARD] The New York State legislative committee on speculations in securities and commodities had the following to say on the Coffee Exchange in its report to Governor Charles E. Hughes in 1909: It [the Coffee Exchange] was established in order to supply a daily market where coffee could be bought and sold and to fix quotations therefor, in distinction from the former method of alternate glut and scarcity, with wide variations in price--in short, to create stability and certainty in trading in an important article of commerce. This it has accomplished; and it has made New York the most important primary coffee market in the United States. But there has been recently introduced a non-commercial factor known as "valorization," a governmental scheme of Brazil, by which the public treasury has assumed to purchase and hold a certain percentage of the coffee grown there, in order to prevent a decline of the price. This has created abnormal conditions in the coffee trade. All transactions must be reported by the seller to the superintendent of the Exchange, with an exact statement of the time and terms of delivery. The record shows that the average annual sales in the past five years have been in excess of 16,000,000 bags of 130 pounds each. Contracts may be transferred or offset by voluntary clearings by groups of members. There is no general clearing system.[319] There is a commendable rule providing that, in case of a "corner," the officials may fix a settlement price for contracts to avoid disastrous failures. The original initiation fee was $250. Seats on the Exchange once sold for as low as $110. In January, 1916, there was a sale at $3,000; in October, 1916, there was a sale for $5,000; in April, 1921, three seats were sold for $5,500 each; but the record price of $8,600 was paid in