1919. Seats are now (1922) worth about $6,000.

The Exchange includes in its membership 323 brokers, importers, dealers, and roasters. Membership is passed upon by a committee on membership; but any one twenty-one years old, resident or non-resident, of good character and commercial standing, is eligible when proposed and seconded by Exchange members. The committee refers the application with its recommendation to the board of managers, which takes a ballot. The adverse vote of one-third of all votes cast rejects. The Exchange elects annually a president, a vice-president, and a treasurer, who perform the usual duties of Exchange officers. The real governing body is the board of managers, consisting of the president, vice-president, treasurer, and twelve other members. This governing board, meeting monthly, appoints the necessary subordinate officers and employees, and fixes their compensation, and may "summon before them any officer or member for any purpose whatsoever." It appoints the secretary of the Exchange from among its own number, a superintendent of the Exchange, and the numerous committees which are in active charge of specified activities. It also licenses the necessary coffee graders, warehousemen, weighmasters, and samplers of the Exchange. A brief discussion of the duties of the superintendent and the various committees will help to explain the methods of the Exchange market. The superintendent, under the direction of the board of managers, has charge of the details of its work and of that of the various committees. He keeps all the books and documents of the Exchange; collects and pays over to the treasurer all moneys due the Exchange not otherwise provided for; receives, deposits, and pays over all margins on coffee contracts; has active charge of the Exchange rooms and the bulletin board; and manages and appoints, with the consent of the board of managers, the assistants needed to perform the details of the work under his charge. One of the functions of the Exchange is to grade and to classify coffee, in which it takes every possible precaution. The rules provide for eight standard grades; and only licensed graders are permitted to pass upon the product handled on the Exchange. There are twenty-five of these graders; one of whom is appointed as a supervisor of types, to provide fresh standards and to "maintain them as nearly as possible on an equality." When these standards are approved by the board and the Exchange, they remain in force for a year. When coffee is received at a licensed warehouse, two official graders are chosen, one by the buyer and one by the seller. These graders receive four cents a bag if employed by a member; and eight cents a bag, if employed by a non-member. If the graders disagree, their differences are referred to the board of coffee arbitrators, consisting of ten experts appointed by the board of managers. The superintendent selects by lot three of these arbitrators, who decide on the basis of the samples submitted, but will not make a decision lowering the grade below that of the lowest submitted nor higher than the highest. If the disputants do not change the grading to come within the arbitrators' findings, the samples are sent to the entire board of arbitrators, exclusive of those who may have been the original graders, and final decision is made by majority vote. As soon as the coffee is graded, a certificate is issued stating the grades, and bearing the signatures of the superintendent and graders. This certificate is conclusive evidence of the grade as far as the parties involved are concerned, for the subsequent twelve months. The buyer receives the original, and the seller a duplicate. The rules provide that weights decided upon at the initial delivery are good during the life of the grading certificate for re-delivery, with definite allowances to the receiver, on re-delivery, of a quarter of a pound a bag a month, instead of having to re-weigh and re-sample for every separate delivery, as formerly. As claims and trade controversies occasionally arise, the Exchange has provided means for their peaceful settlement. The board of managers elects annually an arbitration committee of five members, who swear to decide disputes fairly. This is the only committee on the Exchange that has power to adjudicate disputes between members and non-members; and its services must be sought by the disputants, who must agree to abide by its decision. An adjudication committee of seven is annually chosen from the membership by the managers, to adjust all claims and controversies between members arising out of any merchandise transaction, "if notice in writing of such claim or controversy, and of the intention to demand an adjudication thereon, be served by either party thereto within ten days from the ascertainment thereof." Within three days of the serving of this notice, each disputant selects an Exchange member as his adjudicator; and these two name the third, who must be a member of the adjudicating committee. Even this decision may be appealed to the board of managers, which, if it finds the grounds of appeal good (as decided by majority vote), appoints an appeal committee of five, of whom three must be members of the board. This last committee's decision is final. No new testimony bearing on the case may be introduced after the case has been closed by the adjudicators. Arbitration is voluntary with both parties; while adjudication is compulsory upon the application of either. Another committee of trade importance is the spot quotation committee of five Exchange members. Each day at two o'clock, except on Saturday, when it meets at 11:45, this committee by a majority vote establishes the official daily market quotation of No. 7 coffee. There is likewise a committee on quotations of futures. This committee of five meets daily "immediately after the first call and at the close of the Exchange and reports to the superintendent the tone and price of the contract market, to be posted on the blackboard and transmitted to other Exchanges and commercial bodies." A committee of five on trade and statistics has the important function of reporting to the board as to regulations for the "purchase, sale, transportation and custody of merchandise," and it attempts to establish uniformity in such matters between different markets. It has charge also of "all matters pertaining to the supply of newspapers, market reports, telegraphic and statistical information for the use of the Exchange. In the early 80's the Exchange abolished the old method of keeping coffee statistics, and the basis then adopted has since been accepted by all the large coffee markets of the world." The minimum rates of commission on coffee "per contract of 250 bags, for members of the Exchange residing in the United States, are based upon a price" as follows, quoting from the Exchange bylaws adopted June 8, 1920: COFFEE EXCHANGE COMMISSION RATES (Per contract of 250 bags) Floor Commission brokerage for buying for buying or selling or selling Below 10 cents $6.25 $1.50 10 cents up to 19.99 cents 7.50 1.75 20 cents and above 10.00 2.00 For non-members residing within the United States, double the above rates of commission shall be charged. For members and non-members residing outside of the United States a commission of $2.50 shall be charged in addition to the above rates. Whenever before thirty minutes after the close of the exchange a member gives to another member for clearance purchases and sales of contracts corresponding in all respects except as to price, made during the day by himself or for his account _when present on the floor_ of the Exchange, a charge for each contract shall be made equal to the corresponding floor brokerage rate for buying and selling, in addition to any floor brokerage incurred. Members procuring business for other members may, by agreement, be entitled to one-half the commission rates for non-members prescribed in this Section, less the corresponding brokerage charge, whether paid or not. When a transferable notice is given or received by a customer in fulfillment of a contract the brokerage in that case shall be not less than one-half of the corresponding buying or selling commission prescribed in Section 103. Other committees are the finance committee (two) to audit bills and claims against the Exchange, to direct deposits and investments, and to audit the monthly and yearly accounts of the treasurer; a law committee (three), to deal with matters of legislation; a membership and floor committee (five); and a nominating committee (five). Organized as above outlined, and with a well established code of trade rules, the Exchange annually transacts a large number of sales in a business-like way. There is considerable trading in future contracts; and a standard form has been adopted by the Exchange. No future contracts are valid unless they are made in the following form: BRAZILIAN COFFEE--NOT SANTOS Office of _____________ New York__________ 19__ Sold for M_______________________ To M_______________________ Thirty-two thousand five hundred pounds in about 250 bags coffee, growth of North, South or Central America, West Indies or East Indies, excepting coffee known as "Robusta," and also any coffee of new or unknown growth, deliverable from licensed warehouse in the port of New York, between the first and last days of ________ next, inclusive. The delivery within such time to be at seller's option, upon a notice to buyer of either five, six or seven days, as may be prescribed by the trade rules. The coffee to be of any grade, from No. 8 to No. 1 inclusive (no coffee to grade below No. 8) provided the average grade of Brazilian coffees shall not be above No. 3. Nothing in this contract, however, shall be construed as prohibiting a delivery averaging above No. 3 at the No. 3 grade. At the rate of __________ cents per pound for No. 7, with additions or deductions for other grades according to the rates of the New York Coffee and Sugar Exchange, Inc., existing on the afternoon of the day previous to the date of the notice of delivery. Either party to have the right to call for margins as the variations of the market for like deliveries may warrant, which margins shall be kept good. This contract is made in view of, and in all respect subject to the rules and conditions established by the New York Coffee and Sugar Exchange, Inc., and in full accordance with section 102 of the bylaws. _____________________________ Brokers Across the face is the following: For and in consideration of one dollar to __________________ in hand paid, receipt whereof is hereby acknowledged, ______________ accept this contract with all its obligations and conditions. All deliveries on such future contracts must be made from licensed warehouses. There is a separate "to arrive contract"; but this likewise requires delivery at a licensed warehouse, unless the buyer and the seller have a mutual understanding to deliver the coffee from dock or ex-ship. Margins to protect the contract may be called for by either party. The largest deposit for margins was made in 1904, when $22,661,710 was deposited with the superintendent as required by the Exchange rules. The basic grade in a future sale is No. 7; but variations are provided as follows: 30 points for Rio, Victoria, and Bahia of all grades between 7 and 1, and of 50 points between 7 and 8; 50 points is allowed on Santos and all other coffees except between grades 1 and 2 and 2 and 3 Santos, which are allowed 30 points. Thus the buyer and the seller when entering upon a transaction know exactly what the difference will be between the standard No. 7 and the coffee that can be delivered. The right to deliver any grade in a future transaction has done much to lessen the probability of corners in coffee; but this protection is further given by the stringent rule that the maximum fluctuations on the Exchange can be only two cents a pound on coffee in one day and one cent on sugar. If greater changes should threaten, the Exchange operations would automatically cease. False or fictitious sales are prohibited, and all contracts must be reported to the superintendent. All contracts are binding and call for actual delivery. The future contract, besides being used for the delivery of coffee during stated months in the future at a given price, is also used for hedging purposes. As in the grain and cotton markets, dealers protect themselves against price fluctuations by hedging in the future market. Importers, for instance, when purchasing coffee abroad, frequently sell an equal amount for future delivery on the Exchange. When the time for delivery arrives, it is simply a question of calculation of the market conditions whether it is more advantageous to repurchase the sales made as a hedge, or as a kind of insurance to protect themselves against loss, and free the coffee so engaged, or to make delivery of the coffee as it comes in. The board of managers has power to close the Exchange or to suspend trading on such days or parts of days as would in their judgment be for the Exchange's best interest. The Clearing Association is a recent outgrowth of the Exchange, and is composed exclusively of Exchange members. Every member has to bring his contracts up to market closing every night, either by making a deposit with the Association to cover his balances, or by withdrawing in case he should be over. Members deposit $15,000 at the time of joining as a guaranty fund; and if the surplus is not sufficient to take care of balances, the bylaws provide for the levying of assessments. The daily quotations on the coffee exchanges of New York, Havre, and (before the war) of Hamburg, determined to a large extent the price of green coffee the world over. The prices prevailing on the New York Coffee and Sugar Exchange are studied by coffee traders in all countries, the fluctuations being reflected in foreign markets as the reports come from the United States. Quotations are cabled from one great market to another; and as each must heed those of the others to some extent, the coffee trade thus obtains a world price, and the effect on supply and demand is universal rather than local, as would be the case if quotations were not exchanged. In 1921 the Exchange adopted an amendment to the trade rules, and abolished the one day transferable notice for both coffee and sugar. _Foreign Coffee Quotations_ Brazil coffee cable quotations are the market prices, in Rio or Santos, of ten kilograms of coffee, the price being stated in milreis, the monetary unit of Brazil money. The basic grade of coffee at Rio is the No. 7 of the New York Coffee Exchange; and at Santos, the international standard of good average ("g. a.") Santos. One kilogram (often written kilo, or abbreviated to K.) is equal to two and one-fifth pounds; and the ten-kilogram standard of quantity is, therefore, equivalent to twenty-two pounds, or just one-sixth of a standard Brazil bag. The money value is not so simple, since Brazilian paper currency is unstable; and the milreis quotation means nothing unless it is considered in connection with the rate of exchange for the same day, i.e., the current gold value of the milreis. This gold value is always given with the daily quotations from Brazil, and is expressed in British pence. The par value of the milreis (1000 reis) is 54.6 cents (gold) of United States money; but its present actual value is only about 15 cents, and it has been as low as 11-1/4 cents. Our dollar sign is used to denote milreis, placing it after the whole number, and before the fractional part expressed in one-thousandths. Thus, 8-1/4 milreis would be written 8$250 RS. Suppose, for example, a Rio quotation is given at 8$400, with exchange at 7-1/2 d. This means that 22 pounds of coffee have a gold value of 63 British pence (8.4 × 7-1/2 = 63.0), or 5/3, as the Englishman would write it, which is equal to $1.27-1/2, making the coffee worth 5.8 cents per pound. Of course the person familiar with Brazil quotations will not need to make this reduction to the pound-cent term in order to understand the figures. They will have a proper relative meaning to him in their original form; and it must not be overlooked that it is in this form only that they express correctly the value of the coffee in Brazil. It may make a great difference to the Brazilian planter or exporter whether an increased gold value of his coffee arises through a higher milreis bid or an appreciated exchange, simply on account of local currency considerations. That is to say, the purchasing power of a milreis in Brazil will not necessarily vary exactly as the rate of exchange on London. London quotations are made in shillings and pence, on one hundred-weight (cwt) of coffee. This "cwt" is not 100 pounds but 112 pounds, one twentieth of the English ton (our long ton) of 2,240 pounds. And in all English coffee statistics the coffee quantities are expressed in this ton. A London quotation of 30/9 (30 shillings and 9 pence) for example, is equivalent to $7.44 for 112 pounds of coffee, or 6.64 cents per pound at the normal rate of exchange, $4.80 to $4.86 the pound sterling. At Havre, the coffee price is given in francs, on a quantity of 50 kilograms. This is 110 pounds and almost as much, therefore, as the British cwt. In normal times the franc is equal to 19.3 cents. A French quotation of 37-1/2, for instance, means, therefore, $7.19 for 110 pounds of coffee, or 6.53 cents per pound. The Hamburg quotation (formerly from Brazil per fifty kilos) is made on one pound German, equal to 1/2 kilogram, and is expressed in pfennigs. One pfennig is one-hundredth of a mark, and the mark once was equal to 23.8 cents. A German quotation of, say, 31, means, therefore, 7.38 cents (31 × .238 = 7.378) for 1.1 pounds, or 6.71 cents per pound. _Three Kinds of Brokers_ In the coffee trade there are three kinds of brokers--floor, spot, and cost and freight. Floor brokers are those who buy and sell options on the Coffee Exchange for a fixed consideration per lot of 250 bags. The coffee commission rate put into effect June 8, 1920, for round term (buying and selling) by the New York Coffee Exchange was as follows: COMMISSION RATE ON 250 BAGS (For Round Term--Buying and Selling) Up to 10¢ to 9.99c 19.99c 20c & up per lb. per lb. per lb. Members $12.50 $15.00 $20.00 Non-members 25.00 30.00 40.00 Foreign members 17.50 20.00 25.00 Foreign non-members 30.00 35.00 45.00 Floor brokerage-- Buying or selling 1.50 1.75 2.00 There is at present (1922) a stamp tax of two cents on each hundred dollars value, or fraction thereof, figured on each separate lot. [Illustration: SUN-CURING THE WASHED GREEN BEANS ON CEMENT DRYING PATIOS] [Illustration: NEAR VIEW OF HEAVILY LADEN TREES READY FOR THE PICKERS] [Illustration: TYPICAL COFFEE SCENES IN COSTA RICA] Spot brokers are those who deal in actual coffee, selling from jobber to jobber, or representing out-of-town houses; the seller paying a commission of about fifteen cents a bag in small lots, and half of one percent in large lots. Cost and freight brokers represent Brazilian accounts, and generally receive a brokerage of one and one-quarter percent. On out-of-town business, they usually split the commission with the out-of-town or "local" brokers. The out-of-town brokers sometimes, however, deal direct with the importer. All brokers except floor brokers are sometimes called "street brokers." Most of the large New York, New Orleans, and San Francisco brokerage houses also do a commission business, handling one or more Brazilian or other coffee-producing-country accounts. _Important Rulings Affecting Coffee Trading_ The United States have no coffee law as they have a tea law--prescribing "purity, quality and fitness for consumption"--but buyers and sellers of green coffees are required to observe certain well defined federal rules and regulations relating specifically to coffee. Up to the year 1906, when the Pure Food and Drugs Act became law, the green coffee trade was practically unhampered; and several irregularities developed, calling into existence federal laws that were designed to protect the consumer against trade abuses, and at the same time to raise the standards of coffee trading. Under these regulations it is illegal to import into this country a coffee that grades below a No. 8 Exchange type, which generally contains a large proportion of sour or damaged beans, known in the trade as "black jack," or damaged coffee, as found in "skimmings." "Black jack" is a term applied to coffee that has turned black during the process of curing, or in the hold of a ship during transportation; or it may be due to a blighting disease. Another ruling is intended to prevent the sale of artificially "sweated" coffee, which has been submitted to a steaming process to give the beans the extra-brown appearance of high grade East Indian and Mocha coffees which have been naturally "sweated" in the holds of sailing vessels during the long journey to American ports. Up to the time that the Pure Food and Drugs Act went into effect, artificial "sweating" was resorted to by some coffee firms; and out of that practise grew a suit[320] that resulted in a federal court decision sustaining the Pure Food Act, and classifying the practise as adulteration and misbranding. The Act also is intended to prevent the sale of coffees under trade names that do not properly belong to them. For example, only coffees grown on the island of Java can properly be labeled and sold as Javas; coffees from Sumatra, Timor, etc., must be sold under their respective names. Food Inspection Decision No. 82, which limited the use of the term Java to coffee grown on the island of Java, was sustained in a service and regulatory announcement issued in January, 1916. Likewise the name Mocha may be used only for coffees of Arabia. Before the pure-food law was enacted, it was frequently the custom to mix Bourbon Santos with Mocha and to sell the blend as Mocha. Also, Abyssinian coffees were generally known in the trade as Longberry Mocha, or just straight Mocha; and Sumatra growths were practically always sold as Javas. Traders used the names of Mocha and Java because of the high value placed upon these coffees by consumers, who, before Brazil dominated the market, had practically no other names for coffee. One of the most celebrated coffee cases under the Pure Food Act was tried in Chicago, February, 1912. The question was, whether in view of the long-standing trade custom, it was still proper to call an Abyssinian coffee (Longberry Mocha) Mocha. The defendant was charged with misbranding, because he sold as Java and Mocha a coffee containing Abyssinian coffee. The court decided that the product should be called Abyssinian Mocha;[321] but since then, general acceptance has obtained of the government's viewpoint as expressed in F.I.D. No. 91, which was that only coffee grown in the province of Yemen in Arabia could properly be known as Mocha coffee. Another important ruling, concerning coffee buyers and sellers, prohibits the importation of green coffees coated with lead chromate, Prussian blue, and other substances, to give the beans a more stylish appearance than they have normally. Such "polished" coffees find great favor in the European markets, but are now denied admittance here. The Board of Food and Drug Inspection decided in 1910 against a trade custom that had prevailed until then of calling Minãs coffee Santos when shipped through Santos, instead of Rio.[322] For years a practise obtained of rebagging certain Central American growths in New York. In this way Bucaramangas frequently were transformed into Bogotas, Rios became Santos, Bahias and Victorias were sold as Rios, and the misbranding of peaberry was quite common. A celebrated case grew out of an attempt by a New York coffee importer and broker to continue one of these practises after the Pure Food Act made it a criminal offense. The defendants, who were found guilty of conspiracy, and who were fined three thousand dollars each, mixed, re-packed and sold under the name P.A.L. Bogota, a well known Colombian mark, eighty-four bags of washed Caracas coffee.[323] After an exchange of views with the United States Board of Food and Drug Inspection, the New York Coffee Exchange decided that, after June 1, 1912, it would abolish all grades of coffee under the Exchange type No. 8. The practise in Holland of grading Santos coffees--by selecting beans most like Java beans, and polishing and coloring them to add verisimilitude--known as "manipulated Java," became such a nuisance in 1912 that United States consuls refused to certify invoices to the United States unless accompanied by a declaration that the produce was "pure Java, neither mixed with other kinds nor counterfeited." The United States Bureau of Chemistry ruled in February, 1921, that _Coffea robusta_ could not be sold as Java coffee, or under any form of labeling which tended either directly or indirectly to create the impression that it was _Coffea arabica_, so long and favorably known as Java coffee. This was in line with the Department of Agriculture's previous definition that coffee was the seed of the _Coffea arabica_ or _Coffea liberica_, and that Java coffee was _Coffea arabica_ from Java. _Coffea robusta_ was barred from deliveries on the New York Coffee Exchange in 1912. During the greater part of the year 1918, the United States government assumed virtually full control of coffee trading. It was a war-time measure, and was intended to prevent speculation in coffee contracts and freight rates, to cut down the number of vessels carrying coffee to this country so as to provide more ships for transporting food and soldiers to Europe, and to put the coffee merchants on rations during the stress of war. On February 4, 1918, importers and dealers were placed under license; and two days later, rules were issued through the Food Administration fixing the maximum price for coffee for the spot month in the "futures" markets at eight and a half cents, prohibiting dealers from taking more than normal pre-war profits, or holding supplies in excess of ninety days' requirements, and greatly limiting resales. On May 8, the United States Shipping Board fixed the "official" freight rate from Rio de Janeiro to New York at one dollar and fifty cents per bag, which, without control, had risen to as high as four dollars and more, as compared with the ordinary rate of thirty-five cents before the war. On January 12, 1919, two months after the armistice was signed, the rules were withdrawn, and the coffee trade was left to carry on its business under its own direction. _Some Well Known Green Coffee Marks_ Practically every bag of good quality green coffee is imprinted with a brand which indicates by whom it was shipped. These imprints are known in the trade as "green coffee marks." Many of them, through long usage, have become celebrated in international trade. One of the most famous was HLOG. This stood for "Heaven's Light Our Guide," and was owned by John O'Donohue's Sons. For many years it was used on Mocha coffee, but it is now out of existence. Other well-known Mocha marks are M R (Maurice Ries) with the figure of a camel, a star, or deer's head between the letters; L F or L B (Livierato Frères); C F or C B (Caracanda Frères). Bogota marks includes PAL (in triangle) Bogota (P.A. Lopez & Co.); Camelia; Pinzon & Co.; Salazar; AOL (in triangle) Bogota; and Carmencita Manizales Excelso (Steinwender, Stoffregen & Co.). [Illustration: SOME WELL KNOWN GREEN-COFFEE MARKS] Among the best known Medellin marks are FAC & H (F.A. Correa & Sons): PEC & C (Pedro Estrado Co.); LMT & C (Louis M. Torro & Co.); A & C (A. Angel & Co.); E C S Medellin Excelso (Eppens, Smith Co.); Balzacbro Medellin Excelso (Balzac Bros.); La Rambla (Banco Lopez); and Don Carlos Medellin Excelso (Steinwender, Stoffregen & Co.). Caracas marks show J P P & H (Juan Pablo Perez & Sons); HLB & C (H.L. Boulton & Co.); FST & C (Filipe S. Toledo & Co.); JLG (J.L. Garrondona); and many others. Kolster (Kolster & Co.) is a well known Puerto Cabello mark. Maracaibos bear numerous marks, chief among which are: M & C (Menda & Co.); Cogollo (Cogollo & Co.); Fossi (Fossi & Co.); B M & C (Breur. Moller & Co.); B & C (Blohm & Co.); FST & C (Filipe S. Toledo & Co.); V D R & C (Van Dessel, Rodo & Co.); and J E C & C over R G E (J.E. Carret & Co.). A prominent Mexican mark is P A N (Rafael del Castillo & Co.). Brazil coffee is usually marked merely with the initials of the firm or bank financing the shipment. Some representative Brazilian marks are: Aronco (in rectangle) Brazil; J A & Co (in rectangle) Brazil Rosebud; J A & Co (in rectangle) Brazil Bourbona--all used by J. Aron & Company; S S C (in circle) Rio; S S C (in triangle) Santos; both used by Steinwender, Stoffregen & Co.; Sions M/M Bourbns (Sion & Co.); and Nossack V S S C (in swastika), used by Nossack & Co. There are hundreds of other marks. In most countries they change so often that one rarely stands out above the rest. [Illustration]