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.
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.
Storing Coffee by Marks and Chops
Hoisting Coffee into the Storage Warehouses Adjoining the Brooklyn Piers
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.
 Tester at Work, Bush Terminal, New York |  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.
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.
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 Cents per bag (132 lbs.) | Present prices Cents per bag (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 |
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.
Unloading a Coffee Ship by Block and Tackle at the Port of New Orleans
In Foreground—Loading Coffee by Means of an Automatic Traveling-Belt Conveyor, on Government Barges for St. Louis
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.
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.
Discharging Coffee From a Steamer Just Arrived From Central America
How a Large Cargo of Coffee Is Handled on the Pier As It Is Unloaded From the Ship
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
One of the Modern Devices Used in San Francisco for Handling Green Coffee
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 Auction Samples on Display at Amsterdam
Green Coffee Stored on the Docks at Havre, France
HANDLING GREEN COFFEE AT TWO EUROPEAN PORTS
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.
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.
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 | " | " |
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—Not Santos | Santos Coffee | Other Kinds—Not 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.
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.
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.
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 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) | ||
| Commission for buying or selling | Floor brokerage for buying 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:
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