BUYING COFFEE IN THE PRODUCING COUNTRIES
_How green coffee is bought and sold in the countries of origin._
Buying coffee in the producing countries and shipping it to the
consuming countries is an important branch of the coffee industry and
one for which many years of constant study and application are required
in order to achieve success.
Consider Brazil,—here is a country where a knowledge of Portuguese is
the first essential for a foreigner seeking to do business in coffee.
Many English, German, French, and American houses have branch offices
in Rio and Santos, with resident buyers who have had long experience
in the coffee business, an intimate knowledge of Brazil manners and
customs, and are, moreover, able to converse fluently in the native
tongue.
Buying coffee in Aden or Harar requires a knowledge of 10 different
languages or dialects. Buyers in Java and Sumatra must understand
Dutch and be able to speak the Sudanese tongues. One must have a good
acquaintance with Spanish if he is to buy coffee successfully in Mexico
and Central America.
The marketing begins when the dried coffee beans are swept up from the
drying grounds or collected from the grading machines on the coffee
estates and started on the way to the port of shipment.
_In Brazil_
In Brazil, the _fazendeiro_ (grower) usually sends his crop to his
_commissario_ (commission merchant) at Santos, Rio, Victoria, Bahia,
etc. Here the coffee is cleaned and stored in private and public
warehouses. At these warehouses samples of each bag are taken; the
tester or sampler, standing at the door with a sharp tool, resembling
a cheese tester, which he thrusts into the center of the bag as the
men pass him with the bags of coffee on their heads, removing a double
handful of the contents. The samples are divided into two parts; one
for the seller, and one that the _commissario_ retains until he has
sold the consignment of coffee covered by that particular lot of
samples.
The _commissario_ puts his samples on the Street, one set at a time. He
names his “asking” price, known locally as the _pedido_, which is the
maximum rate he expects to get, but seldom receives. A set of samples
may be shown to 25 or 30 exporting houses in a day, one at a time.
When the sample is in the hands of a firm for consideration, no other
exporter has the right to buy the lot even at the _pedido_ price, and
the _commissario_ cannot accept other offers until he has refused the
bid. On the other hand, if a house refuses to give up the samples, it
is understood that it is willing to pay the _pedido_ price. The firm
first offering a price acceptable to the _commissario’s_ broker gets
the lot, even though other houses have offered the same price.
Having bought a lot of coffee, the Brazil buyer grades and tests it
and ships it overseas. Where the exporter is Brazilian, he collects
his money by drawing a draft against his American or European customer
on deposit of bill of lading, cashing the draft through an exchange
broker. The exporter must obtain a consular invoice, a shipping permit
from both federal and state authorities, and pay several state and
export taxes before the coffee is permitted to be sent aboard the
ship. This process is known as “dispatching,” while the dock company’s
charges are known as _capitazias_.
[Illustration: WEIGHING AND SACKING COFFEE IN A SANTOS WAREHOUSE]
In practically all coffee-growing sections the small planter is helped
financially by the owners of processing plants or by the exporting
firms. The larger planters may even obtain advances on their crops from
the importing houses in New York, Havre, Hamburg, or other foreign
centers.
In Santos, there is a coffee exchange known as the Bolsa de Café, to
which coffee brokers of Brazilian citizenship may belong, but they
must be indorsed by three reputable commission men or exporters, and
may not themselves be a partner in any mercantile firm nor deal for
their own account in spot or future coffees. Street transactions are
permitted here, unlike the New York Exchange, and, as a matter of fact,
the bulk of the business is done in the street, but the exchange must
be informed of all transactions. Spot coffee is actual coffee in the
warehouse; future coffee may still be on the trees. Rio also has an
exchange, the Centro do Commercio de Café, which serves the Rio trade
in similar fashion.
Under the Brazil government’s recent plan of permanent valorization,
the regulation of coffee shipments in the state of São Paulo includes
10 government _armazems_, or storage warehouses, at strategic points
throughout the coffee-growing districts. There is also one in the state
of Rio. All coffee produced in the interior must pass through these
warehouses. In this way the government regulates the arrival of coffee
at ports of shipment. The _fazendeiros_ are given negotiable warehouse
receipts. These warehouses can handle a crop of 11,500,000 bags a year;
Santos entries are restricted to 35,000 bags a day; Rio, to 12,000 bags
daily.
_In Arabia and Abyssinia_
In Abyssinia, coffee is grown by small farmers, who mostly finance
themselves and sell the crop to native brokers, who in turn sell it
to representatives of foreign houses in the larger trading centers.
Trading methods between farmer and broker are not much more than the
old system of barter. In the southwestern section, where Abyssinian
coffee grows wild, transport to the nearest trading center is by mule
train, and not infrequently by camel back. In the Harar district, the
women of the farmers living near Harar, the market center, carry the
coffee in long shallow baskets on their heads to the native brokers. In
the more remote places the coffee farmer waits for the broker to call
upon him. From the town of Harar the coffee is transported by mule or
camel train to Dire-Daoua, whence it is shipped by rail to Jibuti, to
be sent by direct steamers to Europe, or across the Gulf of Aden to
Aden in Arabia.
In Harar, the native dealer takes the coffee to the custom house;
whence, after the government has been paid its tax, he sells it through
brokers to European merchants. It may be cleaned at Harar or at Aden.
Most of the coffee in Arabia is grown in almost inaccessible mountain
valleys by native Arabs, and is transported by camel caravan to Aden or
Hodeida, where it is sold to agents of foreign importing houses. Mocha,
once the principal exporting city for coffee, was abandoned as a coffee
port early in the 19th century, chiefly because of the difficulty of
keeping the roadstead of the harbor free from sand bars.
Mocha coffee, grown in the Yemen district of Arabia, comes from there
to Aden by either sea or overland. Fully 60 percent comes by boat from
Hodeida, 10 percent from other Red Sea ports, and 30 percent by camel
caravan. Before the World War, many of the importing and exporting
houses had agencies in Hodeida, where the finest qualities were bought
on the spot; but since the war few of these agencies have again been
opened, although the installations are in many cases there awaiting the
developments of the market.
At present most of the coffee is bought in Aden from native merchants
or brokers. These send around samples to exporting houses, which set
the price they are willing to give, depending upon the amount of
probable loss from impurities.
The coffee is generally packed 10 maunds. The maund is 28 pounds, and
there are four to the cwt. The coffee is usually repacked for export
into bags of six to 6.4 maunds.
The methods of cleaning in Arabia are primitive. The principal work
is done by Indian women and children, who sift and sort out the dirt,
stones, and dead beans, leaving only beans of best quality. These are
paid about one rupee for 10 maunds, and each can clean about a bag a
day. In some houses the coffee is then put through a cleaning machine,
which adds a finish to the process.
It costs about 25 cents a pound to buy coffee in 100-bag lots in Aden
from a native broker. Harar coffee bought in Jubuti costs about 18
cents a pound in 300-bag lots.
_Java and Sumatra_
In Java and Sumatra, coffee from private estates, not under government
control and operated by European corporations or individuals, has now
succeeded the government-monopoly coffee. Private estate crops are
sold by public tender, usually on or about January 28 of each year. If
the owners do not get the price they desire in Batavia or Padang, the
coffee is sent to Amsterdam for disposal.
_In Colombia_
In Colombia before the World War, the coffee trade was in the hands
of the larger exporters of the country, who were also the larger
importing merchants. They made loans to their clients on the security
of future crops. Such loans were usually represented by small stocks
of merchandise and supplies, together with some cash. These accounts
were taken up at the end of the picking season with coffee delivered to
the merchant, who had the beans cleaned in the local coffee-cleaning
plants, sacked, and shipped for export for his own account, the small
planter really receiving a small part of the profit.
During the speculative period in 1919, which was induced by the high
prices in New York for Colombian coffee, there was active competition
in coffee buying, intensified by the activity of a large American
export and import concern, with the result that the producer received a
much larger margin of profit for his coffee and more actual cash than
ever before.
This situation has meant a revolution in the coffee trade and industry
of Colombia. Instead of coming into town (the nearest large commercial
center) about twice a year, at the end of the November-December and
April-May-June picking seasons, to solicit goods and a small loan from
his dealer, the small producer has been sought out for his product with
cash offers. He has escaped from the prevailing high interest rates
charged him, and has been able to buy where and how it has best suited
his interests. He is no longer controlled by the local merchants, and
has money in hand with which to enlarge his plantations, purchase
better equipment, and improve his living conditions.
To understand fully the far-reaching effect of this situation, it
should be borne in mind that, with the exception of the plantations of
Cundinamarca, nearly all the coffee in the country is produced on small
plantations owned and worked by individual planters of the poorer class.
Importing merchants of the coast cities of Barranquilla and Cartagena
are large buyers of coffee in the interior, which they export for their
own account, investing their surplus every year in coffee and hides for
export.
Formerly most exports from Colombia to the United States were financed
by 30-, 60-, and 90-day drafts drawn by the exporter (by arrangement
with the American consignee), generally for two-thirds the market
value of the merchandise at time of shipment, but during recent
years American banks established in Colombia have handled a growing
proportion of the export business to the United States. The producer
turns over his coffee or hides to the bank for export, the bank
recognizes a credit in his favor for two-thirds the market value, and
when the goods are sold credits him with the balance, less expenses,
interest, commission, and exchange. The terms on which these credits
are generally arranged, both locally and in New York, are 2½ percent
commission plus interest, the latter item 12 percent for local
transactions.
After the coffee is purchased in the producing countries, there are
still to be reckoned the factors of additional expenses and time in
shipment overseas before the consuming markets are reached. The freight
rates are not constant, and the time required varies from four days for
Mexicans to New Orleans, 11 to 18 days for Brazils to New York, 30 days
for Javas to New York, and 20 to 40 days for Mochas from Aden to New
York, depending on whether the ship comes direct or not.
[Illustration]
[Illustration: THE COFFEE PIT IN THE NEW YORK COFFEE & SUGAR EXCHANGE]