All About Coffee Part 97

But Mr. Burns had continued regularly in the employ of coffee and spice firms, and at one time he was bookkeeper for Thomas Reid's Globe Mills.

He advanced slowly, because he lacked real trading talent; but he was learning all about the handling of goods, from purchase to final delivery; and when he quit bookkeeping for the old Globe Mills, and began to build his patent roaster, he could advise clients reliably about every factory detail.

He was soon looked on as an authority. He wrote some articles for the _American Grocer_, a series on "Food Adulteration" being reprinted; and in 1878, he began the quarterly publication of his thirty-two-page _Spice Mill_, which soon became a monthly, and gained the interested attention of practically the entire coffee and spice trade.

Through the columns of this paper, in circulars, by letters, and in a pocket volume called the _Spice Mill Companion_, he distributed information on coffee, spices, and baking powder, and gave valuable advice to beginners in the coffee-roasting business. Not a few coffee roasters were started on the way to fortune by the counsel of Jabez Burns. He died in New York, September 16, 1888.

Jabez Burns founded the business of Jabez Burns & Sons in 1864, beginning the manufacture of his patent coffee roaster at 107 Warren Street, New York. Since then, there have been four removals. In December, 1908, the business moved to its present uptown location, at the northwest corner of Eleventh Avenue and Forty-third Street, occupying a six-story building which was doubled in size in 1917. This Burns factory has been referred to as "the unique coffee-machinery workshop", the greatest establishment of its kind in the United States.

Upon the death of its founder the business was continued; first, as the firm of Jabez Burns & Sons, composed of his sons, Jabez, Robert, and A.

Lincoln Burns; and later, in 1906, incorporated as Jabez Burns & Sons, Inc., with Robert Burns as president, Jabez Burns as vice-president, and A. Lincoln Burns as secretary and treasurer. Jabez Burns died August 6, 1908. The present officers are: Robert Burns, president; A. Lincoln Burns, vice-president; William G. Burns, general manager; and C.H.

Maclachlan, secretary and treasurer.

[Ill.u.s.tration: JABEZ BURNS]

A. Lincoln Burns succeeded his father as editor of the _Spice Mill_.

William H. Ukers was made editor in 1902, and he continued until 1904, when he left to a.s.sume editorial direction of _The Tea and Coffee Trade Journal_.

_Coffee-Trade Booms and Panics_

In the last fifty years there have been many spectacular attempts to corner the coffee market in Europe and the United States. The first notable occurrence of this kind did not originate in the trade itself.

It took place in 1873, and was known as the "Jay Cooke panic", being brought about by the famous panic of that name in the stock market.

As a result of the Jay Cooke failure, it was impossible to obtain money from the banks. Hence buyers were forced to keep out of the coffee market; and as a consequence, the price for Rios dropped from twenty-four cents to fifteen cents in the course of the trading period of one day[349].

Another interesting development during that year was of foreign origin.

A coffee syndicate was organized in Europe, financed by the powerful German Trading Company of Frankfort, with agencies in London, Rotterdam, Antwerp, and Brazil. For more than eight years this proved to be a highly successful undertaking, largely controlling the princ.i.p.al producing and consuming markets.

As far as the American coffee trade is concerned, the first sensational upheaval took place in 1880-81. This period witnessed the collapse of the first great coffee trade combination in this country--the so-called "syndicate", comprising O.G. Kimball, B.G. Arnold, and Bowie Dash, sometimes known as the "trinity".

The period of high coffee prices, commencing in 1870, had greatly stimulated production in many Mild-coffee producing countries, as well as in Brazil, and as a consequence the syndicate found its burden becoming extremely heavy early in 1880. In January of that year our visible supply amounted roughly to 767,000 bags. While this was reduced to about 740,000 bags in July, the latter likewise proved to be decidedly burdensome, especially as another liberal crop was beginning to move in producing countries. The excessive volume of supplies was especially marked, because distributing trade during the summer was strikingly dull, as the majority of buyers were holding off, in view of the prospective liberal new crops. At that time Java coffee was a big item in American markets, whereas Santos was just about beginning to be a factor.

The syndicate found that it had its hands full supporting the Brazil grades, and hence had to let the Javas go. As a result, the latter, which had sold at twenty-four and three-quarters cents in January, 1880, fell to nineteen and one-half cents in July, to eighteen cents in November and to sixteen cents in December. As a matter of fact, the syndicate was practically the only buyer of Brazil coffee during the fall of 1880; and as a consequence, Rios, which had started the year at fourteen and one-half to sixteen and one-quarter cents, were down to twelve and three-quarters cents in December, 1880, and had dropped nine and one-half cents when the break in the market culminated in June, 1881.

The first whispers of financial troubles growing out of these adverse conditions were heard in October, 1880; and on the 27th of that month the first failure was announced--that of C. Risley & Co., with liabilities placed at $800,000 and a.s.sets at $400,000. This firm had been doing business in the local market for about thirty years. The efforts of the receivers to dispose of this company's large stock naturally served to accelerate the decline; and the final impetus came on December 6, when the New York trade heard of the death, two days previously, of O.G. Kimball, of Boston, one of the most prominent merchants there. This precipitated the big crash of December 7, when B.G. Arnold & Co., the largest New York firm, suspended with estimated liabilities of $750,000 to $1,000,000. The official statement later placed the liabilities at $2,157,914, and a.s.sets at $1,400,000, of which $884,198 were secured. Within three days this failure was followed by the suspension of Bowie Dash & Co., with liabilities estimated at $1,400,000.

For weeks thereafter there was virtually no market. With all of these distress holdings pressing for liquidation, buyers, as was natural, were extremely timid. In the meantime, the import arrivals showed further enlargement at various southern ports, as well as at New York. Total arrivals at this port during 1881 were almost 12,400,000 pounds heavier than for the preceding year. The growing importance of Santos as a market factor was demonstrated by the fact that shipments from there in 1881 were 1,198,625 bags, compared with about 628,900 bags in 1876-77.

According to the best informed members of the trade at that time, the losses sustained by the various firms that were forced to the wall aggregated between $5,000,000 and $7,000,000.

The utterly demoralized conditions prevailing while this collapse was in progress, and the practical elimination of a market in the true sense of the word, furnished the princ.i.p.al impetus for the organization of the New York Coffee Exchange. At that time, the Havre market was the only one with an exchange. The local body was organized in December, 1881, and started business in March, 1882.

_The Cable Break of 1884_

The second noteworthy movement, embracing an advance of four to four and one-half cents and a recession of slightly more than three cents, covered a period of about eight months shortly after the Exchange was organized. Various local and out-of-town firms were interested in the bulge which carried Rio coffee in this market from about seven cents in July, 1883, up to eleven and one-half cents late in November. By the middle of December, the price had fallen to nine and one-quarter cents, the final break to eight and one-quarter cents occurring late in March of the following year. At that time, there was no direct cable communication with Brazil; and as a result of a temporary break in the roundabout service by way of Portugal, the New York and Baltimore agents of the Brazilian syndicate were unable to put up additional margins in this market, and their accounts were closed out. This happened on a Sat.u.r.day; and by the following Monday, partial cable remittances arrived and all accounts were settled in full with interest from Sat.u.r.day to Monday.

_The Great Boom_

What is generally described as "the great boom" of the coffee trade occurred in 1886-87, and had its inception in unsatisfactory crop news from Brazil. The crop of 1887-1888, it was estimated, would be extremely small; and it turned out to be only 3,033,000 bags. These advices and low estimates led to the formation of a "bull" clique, comprising operators in New York, Chicago, New Orleans, Brazil, and Europe, who set a price of twenty-five cents for December contracts as their goal.

Toward the end of June, 1886, when this campaign started, No. 7 Rio in New York was worth about seven and one-half cents, with June contracts on the Exchange quoted at seven and sixty-five hundredths cents. With Brazilian crop news still more discouraging, the advance thereafter was almost continuous, and on June 1, 1887, December contracts sold at twenty-two and one-quarter cents--a new high price record, that was not exceeded for thirty-two years, when twenty-four and sixty-five hundredths cents were paid for July contracts in June, 1919. After reaching twenty-two and one-quarter cents, prices suffered an abrupt reversal. Ten days later the closing price for December was twenty-one and four-tenth cents. Then the real crash began. On Sat.u.r.day, June 11, the panic started with another claim of cable trouble; and in the short session, December coffee broke from twenty and fifteen-hundredths to eighteen and sixty-five hundredths cents, closing at a loss for the day of 275 points. The first sale of December on Monday was at seventeen and four-tenths cents, or 125 points lower; and after numerous erratic variations, the price broke to sixteen cents, a drop of six and one-quarter cents in less than two weeks. Business on that day was of enormous volume, in round numbers 412,000 bags; and approximately $1,500,000 was put up in margins. For the next three days the decline was temporarily halted, and December, at one time, was up three and one-quarter cents from the bottom (nineteen and one-quarter cents). On June 17, another battle commenced, December dropping back to seventeen cents. Then came a rally to eighteen and one-tenth cents, a drop to sixteen and one-half cents; another rally to eighteen and one-tenth, and, on June 24, another break to the previous low level of sixteen cents for December. This sharp reversal in less than a month was traceable largely to more favorable news from Brazil, the 1888-89 crop being estimated at 6,827,000 bags.

Following a rally to nineteen and six-tenths cents during the next month (July, 1887), the pendulum again swung downward. The climax came with the culmination of the "European fiasco" of the spring of 1888. Reports were received that various European coffee firms had failed; and future contracts in the American market sold as low as nine cents in March.

_A Famous European Bull Campaign_

The next campaign of interest lasted more than two and a half years. In September, 1891, there was a corner in the local market which forced the September price up to seventeen and one-quarter cents. George Kaltenbach, a wealthy speculator living in Paris, combining with three operators in Havre, Hamburg, and Antwerp, succeeded in breaking the corner, forcing the price down to ten and eight-tenths cents. They then changed to the bull side, buying heavily in all markets of the world.

This was continued until early in 1893, bringing the price back to fifteen cents. Although his a.s.sociates then returned to the bear side, Kaltenbach kept on buying; and aided by bad crop reports from Brazil, he worked the price up as high as seventeen and seven-tenths cents. At one time it was said that his profits were more than one million dollars.

The collapse of this deal occurred in May, 1893, involving thirty firms in Hamburg, Havre, and Rotterdam. As Kaltenbach could not keep his large New York holdings margined, they were thrown on the market, bringing about a sharp break, and causing the failure of his New York agents, T.M. Barr & Co.

The present era of large crops began in 1894, Brazil's production for 1894-95 being placed at 6,695,000 bags. Nevertheless, Guzman Blanco, a former president of Venezuela, then living in Paris, and said to be worth about $20,000,000, attempted to run a corner in April, 1895. He bought 200,000 bags of spot coffee in Havre warehouses and acc.u.mulated a big line of futures in various markets. a.s.sisted by reports of cholera in Rio and some reduction in Brazilian crops, he enjoyed temporary success, the price of Rio 7s in New York rising to fifteen and one-half cents in October, 1895. Thereafter, there was an almost continuous decline. In the spring of 1898, a vigorous bear campaign was conducted, largely in the form of market letters; and by November, Rio 7s here had dropped to four and one-half cents.

_The Bubonic Plague Boom_

The so-called "bubonic plague boom" halted this prolonged downward movement for a time in 1899-1900. The boom derived its name from the outbreak of bubonic plague in Brazil, as a result of which the ports of that country were quarantined. In addition, Brazilian steamers arriving at New York were placed in quarantine; and the impossibility of unloading their cargoes caused a temporary shortage. As a result, prices rose from four and one-quarter cents in September, 1899, to eight and one-quarter cents in July, 1900. The quarantine being lifted, the bears again became aggressive; and by April, 1901, they had forced the price back to five cents.

There was another short-lived attempt to establish a corner in September, 1901. Receipts at Rio and Santos had been running light, encouraging a local clique embracing Skiddy, Minford & Company; W.H.

Crossman & Bro.; and Gruner & Company, to endeavor to gain control. The arrivals at Brazilian ports suddenly increased to the largest volume ever known up to that time; and, with vigorous opposition from operators in Havre, the corner here was speedily broken.

The opening of the new century witnessed the beginning of another new coffee era, Santos permanently displacing Rio as the world's largest source of supply. The figures for 1900-01 were: Santos, 2,945,000 bags; Rio, 2,413,000 bags.

Huge crops then became a regular thing in Brazil. That of 1901-02 was far in excess of estimates, being 15,000,000 bags; while 20,000,000 bags were produced in 1902-03. As a result, the world's coffee trade became completely demoralized for the time being. In August, 1902, contracts for July, 1903, delivery sold at six and one-tenths cents. By June, 1903, they had fallen to three and fifty-five hundredths cents, the lowest price ever recorded for coffee.

_The Southern Boom_

As is invariably the case when prices reach extreme levels, either high or low, the pendulum swung back rapidly in the other direction. Based on the unprecedentedly low prices, the so-called "cotton crowd" started what was generally known as "the southern boom". Various cotton traders in New York and the South, under the leadership of D.J. Sully, the one-time "cotton king", and ably a.s.sisted by prominent local coffee firms, became extremely active on the buying side; and by February, 1904, they had forced the price up to eleven and eighty-five hundredths cents. This figure, the highest since 1896, was reached on February 2, which proved to be another day of enormous speculative dealings, involving roundly 462,000 bags. This marked another turning point; the three succeeding days of record-breaking operations on the Exchange witnessing a break of roughly two cents. Mr. Sully went on a vacation on February 3, and the Sielcken interests sold on a large scale. Business for that day was placed at 555,000 bags, closing prices being about one-half cent lower. This brought on enormous liquidation by western bulls on the following day, approximately 500,000 bags. As a result, prices lost twenty-five to sixty-five points on a turn-over of about 642,000 bags. All records for business were smashed on the following day, February 5. The official record was 689,000 bags, but trade estimates made it more than 1,000,000 bags. On that day, southern interests liquidated heavily, causing net losses of eighty to ninety points. Doubtless the break would have been more severe had it not been for buying by the Sielcken people and several other strong interests at and below seven and one-quarter cents for September contracts.

_The Story of Valorization_

The valorization, or equalization, of coffee originated in Brazil. When the original plan was threatened with disaster, Hermann Sielcken stepped in and saved the Brazil planters from ruin; the Brazil government from possible revolution; and, incidentally, won for himself and those who were his partners in the enterprise much unenviable notoriety.

The principle of valorization is generally conceded to be economically unsound, because it encourages overproduction. And valorization in Brazil would have been a failure, had it not been for a fortuitous combination of short crops, Hermann Sielcken's genius, and the World War. Because of the lessons learned in this experience, Brazil's subsequent valorization enterprises have run more smoothly.

A rapidly increasing world demand, a wonderfully fertile soil, and cheap labor kept the Brazil coffee industry in a flourishing condition nearly to the close of 1889. Coffee consumption was increasing, especially in the United States. By April 1890, the average import price per pound of Rio No. 7 in this country was nineteen cents; and Brazil was supplying only about half our needs. Virgin soil was still available in Brazil, and immigration furnished all the needful labor. Easy profits led to increased investment and careless methods. Her planters were drunk with prosperity. For six years, nearly all the three million inhabitants of So Paulo, Brazil's largest coffee producing state, "entirely gave up planting corn, rice, beans, everything they needed. They bought them because coffee was so immensely profitable that they put all their labor in coffee."

Brazil had been going through a period of low exchange. Paper money fell below par. The exaggerated issues of it, which provoked the collapse of exchange, suddenly endowed Brazil with an abundant circulation of money.

Production was enormously stimulated. New undertakings sprang up on every hand. Armies of agricultural laborers were recruited in Europe and shipped into the coffee districts. And then, to make the story short, supply pa.s.sed demand, surplus stocks began to appear, prices began to fall, and fell until they dropped below the cost of production.

It was in 1896-97, when the new trees came into bearing by the tens and hundreds of thousands, that So Paulo's folly began to tell. By October of that year the price of Rio No. 7 in New York had fallen to about seven cents. The decline continued, until, in 1903, it hung around five cents. Then began the winter of So Paulo's discontent. Too late, the state government tried by taxing new coffee estates, to force the planters to raise crops to supply their own necessities. The times grew harder.

Mortgages held by large coffee houses and bankers were being foreclosed.

The industry was pa.s.sing into European hands. The smaller planters were becoming desperate; and desperation is only a step from revolution. The government of the state of So Paulo knew this; and to save the state, it finally promised it would buy the next coffee crop, and would hold it for the planters at such a price as would be necessary to continue the industry. The protagonists of this plan to valorize coffee were Dr.

Jorge Tibirica, Dr. Augusto Ramos, and Dr. Albuquerque Lins.

During all the period covering So Paulo's rise and fall in coffee, the financial genius who was to lead her again into the land of plenty had been quietly acquiring a knowledge of her problems--also, the ability to make money out of their solution.