Uncommon Grounds Part 4

On the final day of the conference, J. F. de a.s.sis-Brasil, the Brazilian representative, offered an astute summary of the coffee boom-bust cycle. "It seems that each ten years a climax of too high or too low prices must manifest itself," he observed, predicting that prices would peak again in 1912. The reason? "Too high prices are inducements for extending unreasonably the plantations; as a consequence there comes an overproduction." With supply outstripping demand, prices fall. "Many plantations are abandoned; the harvests begin to shrink, while consumption follows its regular expansion." A new shortage prompts new growth, and the cycle repeats itself. The cycle could only be broken through "the combined efforts of the interested governments."

The conference ended with plans for a second, more definitive meeting the next year in So Paulo, but the meeting never occurred.

So Paulo Goes It Alone The international coffee conference had accomplished nothing and the So Paulo planters vented their frustration. At a January 1903 meeting they denounced the Brazilian government for its indifference to their plight. In response the Brazilian president imposed on any new coffee plantations a tax of $180 an acre, which amounted to a ban on new planting for the next five years. The effect of the law would not be felt until 1907 or 1908, however, since trees planted prior to 1902 would not be coming into production until then.

Though the plight of plantation owners was bad, the effect on workers was worse, as owners reduced fringe benefits, took over land previously allotted to laborers for subsistence plots, and cut wages. As a result, one Brazilian paper reported, "The exodus of the Italians is critical. They return to their homeland poor and disillusioned." The Italian foreign minister responded by banning subsidized emigration after March 1902.

A late 1902 Brazilian frost reduced production for the next three years, and the visible supply shrank accordingly. Still, low prices persisted and the crisis continued. Growers who had lost trees to the frost replaced them with new seedlings. Meanwhile, the milreis continued to strengthen, which hurt the coffee farmer's pocketbook.

Rather than blaming overproduction, many Brazilian planters pointed the finger at foreign coffee monopolies, a.s.serting that short sellers (those betting on declining prices) and speculators were conniving to depress green bean prices. While the foreign firms could not be held responsible for the crisis, there was some truth to the allegations of price manipulation. The twenty biggest firms exported nearly 90 percent of the coffee, and the five largest accounted for over 50 percent. Theodor Wille & Company of Hamburg, at the top of the heap, exported nearly a fifth of Santos's coffee.

In 1903 Alexandre Siciliano, a wealthy Italian immigrant to Brazil, suggested a valorization scheme (the term valorizacao valorizacao came to mean maintaining the price of a commodity) in which the government would enter into a long-term contract with a private syndicate of merchants and financiers to buy up surplus Brazilian coffee and store it until prices rose. The success of the plan relied on the utter dominion of Brazilian coffee, however. If So Paulo held back its surplus coffee, would the other coffee-growing countries simply rush in to fill the gap? Would Brazil then lose its dominant position in the world market? came to mean maintaining the price of a commodity) in which the government would enter into a long-term contract with a private syndicate of merchants and financiers to buy up surplus Brazilian coffee and store it until prices rose. The success of the plan relied on the utter dominion of Brazilian coffee, however. If So Paulo held back its surplus coffee, would the other coffee-growing countries simply rush in to fill the gap? Would Brazil then lose its dominant position in the world market?

To answer these questions, the So Paulo secretary of agriculture sent Augusto Ramos on a 1904-1905 fact-finding mission to other Latin American coffee-producing countries. In his extensive report, Ramos concluded that these countries were simply no match for So Paulo in terms of capitalization, efficiency, and productivity. They too were hit hard by low coffee prices and were in no position to expand their production to offset any surplus held back by So Paulo.

In August 1905 representatives of Brazil's major coffee states-So Paulo, Rio de Janeiro, and Minas Gerais-met with federal officials to discuss valorization. As the fall progressed, it became clear that the upcoming crop would be of unprecedented size. The three presidents of the coffee-growing states met in Taubate, So Paulo, on February 25, 1906. They produced a signed doc.u.ment, agreeing on a valorization scheme to buy surplus coffee and keep it off the market, asking for federal aid, and requesting that the government stabilize the milreis exchange rate.

The federal government refused to become involved, other than voting to stabilize the exchange rate. On August 1, 1906, the Disconto Gesellschaft Bank of Berlin, through its Brazilian subsidiary, loaned So Paulo 1 million for a year. To finance the purchase of a decent amount of coffee, So Paulo needed much more capital, and quickly. The state sped a special delegation to Europe to drum up support. But when the London Rothschilds refused, the Paulistas realized that no major bank was liable to help them. The huge 1906 crop loomed, threatening to bring the price of coffee down to a few pennies a pound.

Hermann Sielcken to the Rescue The desperate Paulistas found help from an unexpected source: Hermann Sielcken, noted for his ruthless treatment of compet.i.tors, market manipulation, and attempts to corner coffee.

Sielcken, a ham-faced business t.i.tan, spoke excellent English with a slight German accent and not the slightest trace of humor or humility. A graying mustache slightly turned up at the ends sat atop lips set in a grim line. As a contemporary article observed, he was "one of the most feared and hated men in the Coffee Exchange." Sielcken was enormously powerful. "Hermann Sielcken is a monarch of commerce and his rule extends the world over."

Sielcken left Germany in 1868 before he was twenty-one to work for a German firm in Costa Rica. A year later he went to California, where he worked as a s.h.i.+pping clerk. Having learned English, he secured a job as an itinerant wool buyer. During his travels he was nearly killed in a train wreck, which left him with a slight stoop.

In 1876, thanks to the Spanish he had picked up in Costa Rica, Sielcken found employment at W. H. Crossman & Son, an import-export firm that dealt in coffee on a commission basis. Venturing to South America, he proved to be a wonderful salesman of "axes and shovels and spades and silverware and everything else," while soliciting commission products for the house. For half a year every mail brought new Sielcken business.

Then suddenly all communication ceased. Months pa.s.sed with no word from Sielcken. Crossman feared his star South American salesman had caught a tropical fever and died. Then one day Sielcken appeared with a large package under his arm. "Gentlemen," he said, "I have given a large amount of business to you, far more than you expected, as the result of my trip." He went on to explain that he had a great many more orders in the package. "I think any person who has worked as hard as I have . . . deserves a partners.h.i.+p in this firm." So he was made a junior partner, then senior, and in 1894 the name was changed to Crossman & Sielcken.

Eventually the coffee king also ventured into steel and railroads and bought a sumptuous estate in Baden-Baden that included four villas, a bathhouse for guests, a rose garden with 168 varieties on 20,000 bushes, an orchid greenhouse, and elaborately landscaped grounds kept manicured by six professional gardeners and forty a.s.sistants.

The Brazilians turned to Sielcken because early in August 1906 he had written an open letter to Brazilian newspapers defending valorization. As a result, a mission made a pilgrimage to Sielcken's Baden-Baden estate. Sielcken admonished the Brazilian delegation that "if you raise another crop like this there is no financial a.s.sistance coming from anywhere. . . . The rest of the world is not going to sit up all night drinking coffee just because So Paulo raises it all day." a.s.sured that smaller crops would be forthcoming owing to the ban on new plantings, Sielcken promised to do what he could.

Hermann Sielcken put together a consortium of German and British banks and coffee merchants. In the first week of October 1906, the So Paulo government and the syndicate authorized the syndicate to begin buying green beans in the Santos export market at an average price of 7 cents a pound. The financiers agreed to pay for 80 percent, with the State of So Paulo providing the other 20 percent. If the free-market price of coffee rose above 7 cents, valorization purchases would suspend. This arrangement meant that syndicate members never paid more than 5.6 cents a pound (80 percent of 7 cents) for coffee, and often considerably less. Not only that, the money advanced by the syndicate was technically a loan charging the Brazilians 6 percent interest, with the coffee itself serving as security. The beans were s.h.i.+pped to syndicate warehouses in Europe and New York. So Paulo, still nominally the legal owner, was to pay annual storage costs as well as a 3 percent commission for initial handling.

By the end of 1906 the syndicate had purchased about 2 million bags, each holding 132 pounds of coffee. Since the year's b.u.mper crop amounted to 20 million bags, taking such a small amount off the market had relatively little effect. But So Paulo had run out of money and couldn't come up with its 20 percent for more. In addition, the 1 million loan would come due in August 1907.

On December 14 the Paulistas were bailed out by a new 3 million loan from J. Henry Schroeder & Company of London and the National City Bank of New York. Hermann Sielcken represented the U.S. bank and reputedly covered $250,000 of its loan with his own money. After paying off the million-pound loan, So Paulo now had 2 million to continue buying valorized coffee. By the end of 1907 over a million bags of valorized coffee had been warehoused in the ports of Hamburg, Antwerp, Havre, and New York, with lesser amounts in minor ports such as Bremen, London, and Rotterdam. There the beans remained, waiting for prices to rise sufficiently so that the syndicate could get rid of them at a profit. In the meantime the State of So Paulo continued to owe interest and storage charges. The small 1907-1908 crop allowed some of the valorized coffee to be sold off, but So Paulo remained in dire financial condition.

Late in 1908 Sielcken helped to arrange a mammoth 15 million ($75 million) consolidation loan. By this time the syndicate had sold off some million bags of valorized stock, leaving nearly 7 million bags still in the warehouses. These were placed under the control of a committee of seven, only one of whom represented the So Paulo government. Not surprisingly, Sielcken was one of the committee members. Thus, So Paulo lost control of the valorization coffee without ending its financial obligations. By manipulating the stocks and selling them quietly, the syndicate members had managed a virtual corner on the market. It was, as Sielcken candidly admitted at a congressional hearing a few years later, "the best loan I have ever known."

At first, after the committee took over the valorized coffee, the price per pound remained relatively stagnant at 6 or 7 cents a pound. But in the fall of 1910 the coffee price began to rise. By December it had run up to nearly 11 cents a pound. Throughout 1911 it continued to rise, jumping to over 14 cents.

The United States Howls over Coffee Prices A howl went up from American consumers and politicians. Never particularly concerned about the plight of the Brazilian farmer during the coffee crisis years, suddenly U.S. citizens were indignant that their morning-coffee price had risen a few pennies.

Buried in the U.S. National Archives outside Was.h.i.+ngton, D.C., is a thick file of correspondence kept by the Department of Justice covering valorization. It provides a fascinating chronology from the end of 1910 to the spring of 1913 showing how and why U.S. Attorney General George Wickersham gradually built a legal case against Hermann Sielcken and his valorized coffee. It also includes Wickersham's polite battle with Philander C. Knox, the secretary of state, over the matter, and an occasional memo to and from President William Howard Taft.

"Brazil has simply mortgaged herself to this syndicate," a small U.S. roaster wrote to Wickersham in December 1910, "and they in return are holding back this coffee to allow the syndicate to sell the 600,000 bags at 4 cents a pound more than they got last year."

A few months later, in March 1911, Nebraska Representative George W. Norris sponsored a congressional resolution asking the attorney general to investigate "a monopoly in the coffee industry." Wickersham replied that he indeed was conducting an ongoing investigation.

In April, Norris lambasted the coffee trust from the floor of the House, summarizing the valorization loan process. He concluded that "this gigantic combination [has been able] to control the supply and the sale of coffee throughout the civilized world. [They] sold only in such quant.i.ties as would not break the market." Frustrated by Brazil's involvement, he observed that when a conspiracy to monopolize a product involved a domestic corporation, it was termed a trust and could be broken. "But if the combination has behind it the power and influence of a great nation, it is dignified with the new term 'valorization.' Reduced to common language, it is simply a hold-up of the people by a combination."

Norris suggested that the United States put a duty on all Brazilian importations-about $70 million in 1910-"until she should cease giving her support to the valorization scheme." He wanted to allow coffee from other countries to enter freely, however. Though Norris regarded himself as a crusading idealist, he often antagonized party regulars. As a consequence, his denunciations of the coffee trust did not immediately produce legislation.

In the meantime the newspapers had taken up the cause. "It would be far better to go without coffee than to be openly fleeced by the Government of Brazil," stormed the Albany, New York, Argus Argus. "It is about time for the Department of Justice at Was.h.i.+ngton to take a look at this interesting band of robbers," another New York editorial intoned. By June 1911 Wickersham was getting rafts of personal letters. "The coffee that is used to make [the poor's] miserable slop," wrote an Ohio businessman, "has been raised in price more than 100 percent." The famed naturalist John Muir wrote to express his "indignation upon this coffee imposition." He referred to "this iniquitous conspiracy between a foreign nation and an American citizen [Hermann Sielcken]" and asked, "Why should not this Trust be broken up?"

Restrictive sales were indeed the mechanism used by Sielcken and Arbuckle Brothers, which had joined the profit-making scheme. Together the two firms controlled the majority of the valorized coffee. To keep prices high they sold the coffee directly to roasters, often in the South or West, with the stipulation that none be resold on the exchange. Since they sold the coffee at a slight discount to the exchange price, the deal appealed to roasters. However, it circ.u.mvented the natural functioning of the Coffee Exchange. In addition, Arbuckle Brothers bought enormous quant.i.ties of coffee from the exchange to raise the price and then sold it, along with the valorized coffee, in secret private sales, insisting that it not be resold on the exchange. The old antagonists, Sielcken and Arbuckle, thus found common cause in making money from valorization.

The attorney general appointed William T. Chantland as his special a.s.sistant to look into coffee valorization. Chantland quickly proved himself a dogged opponent of the coffee trust and in July 1911 suggested prosecuting Sielcken. In a September memo he noted that the United States consumed nearly half of the world's coffee and 80 percent of the Brazilian crop. Americans consequently were more affected by valorization than any other nationality. "In plain English," he wrote, "this whole thing looks like a plan devised in the apparent interest of So Paulo and Brazil, but, in fact, carried out to the great glory and financial profit" of bankers and coffee merchants such as Hermann Sielcken, "the financiers and the committee members who now seem to be juggling the supply to suit themselves and to enhance their fortunes."

Chantland singled out Sielcken. "He is the illegitimate trustee of the operations in this country of the illegal agreement or its results. . . . His acts must stand by themselves as misdemeanors." He recommended "seizure and condemnation proceedings on the first valorization coffee to move in interstate commerce."

Goaded by George Norris and Chantland, Attorney General Wickersham gradually came to the conclusion that he should prosecute Sielcken and the coffee trust, and he leaked such rumors to the press. The affair split the new National Coffee Roasters a.s.sociation at its first convention in November 1911, where roaster Thomas J. Webb excoriated valorization as "the greatest grafting scheme the world has ever seen." Keynote speaker Hermann Sielcken defended valorization, a.s.serting that there was no coffee trust, no corner. He claimed that he had only bought goods with his own capital, then resold them legitimately. "The newspapers never consider anything to be natural; they must make it mysterious, and they love to talk about millions and millions, and impress upon your mind the wicked New Yorkers and the capitalists."

Sielcken Snaps His Fingers On May 16, 1912, Hermann Sielcken appeared as the first witness before the "Money Trust Investigation" congressional subcommittee. Arrogant and unrepentant, he did not back down an inch, claiming that the valorized coffee had no effect whatsoever on the price.

During these hearings Sielcken and committee lawyer Samuel Untermyer crossed swords repeatedly. Untermyer asked Sielcken, "The idea was to keep that surplus [of coffee] off the market, was it not?" Sielcken answered, incredibly: "No; I was always trying to sell it. It was not kept off the market." When the coffee baron made such brazenly false statements, it was obvious that Untermyer could barely keep his lawyerly composure. He elicited from Sielcken that there were some 4 million bags of valorized coffee sitting in warehouses in the United States and Europe.

UNTERMYER: And coffee is selling at nearly 14 cents a pound, is it not?SIELCKEN: Yes.UNTERMYER: More than twice what it was selling at when the scheme went into effect?SIELCKEN: Yes.UNTERMYER: And you gentlemen were so anxious to sell that coffee that you have still got it, have you not?SIELCKEN: We are anxious to sell it.

"I suppose the purpose of making these elaborate provisions [to valorize coffee] had nothing to do with an attempt to limit the supply of coffee, had it?" the lawyer asked. "It had only to do with the equalization of the supply; not with the control," Sielcken parried. He meant that it would "equalize" the supply by transferring the large surplus of one crop into the next, but he was clearly engaging in semantic subterfuge.

Sielcken then made an outrageous statement: "If the amount of coffee held by this valorization in the United States today was sold tomorrow, it would not make that that much difference in the market," he said, snapping his fingers. much difference in the market," he said, snapping his fingers.

"Then the fact that the price of coffee has gone from 5 cents a pound to 14 cents a pound has not anything to do with the fact that you gentlemen kept these millions of bags off the market?"

"Not that that much," Sielcken replied, snapping his fingers again. much," Sielcken replied, snapping his fingers again.

Later the coffee king actually lectured the committee. "I will not criticize or give an opinion upon what the Brazilian Government did, nor do I think it proper that this committee should . . . express themselves upon the action of another government, upon which we have no right to express an opinion." Untermyer replied between clenched teeth, "I think this committee will take care of itself, and so will the Government."

Despite his prevarications, Sielcken ultimately appeared much more knowledgeable and reasonable than his interrogator. He explained that without the valorization scheme "there would have been a revolution in So Paulo." Untermyer responded with astounding insensitivity: "Do you think that would have been a worse condition than that we should pay 14 cents a pound for coffee?"

Sielcken finally was allowed to make a long statement. His review of Brazilian coffee prices and history was cogent and convincing. Historically, coffee had cost over 20 cents a pound back in the 1870s and averaged 15 cents from 1886 to 1896, before the years of overproduction. He pointed out that even with valorization the price had not materially risen for nearly four years, until 1910. Then, he a.s.serted, the price went up due to smaller crops, not valorized coffee. (The price indeed went up precisely when a.s.sis-Brasil had predicted back in 1902; it peaked in 1912.) Sielcken a.s.serted that without valorization the price of coffee would have been higher higher in 1912. He reasoned that in 1906 and 1907 the prices would have dropped to such disastrous levels that planters would have been driven out of business, and subsequent crops would have been smaller and smaller. "In case the plantations had been neglected, we might have had crops of two, three, and four million bags, and a price for coffee of 25 cents." in 1912. He reasoned that in 1906 and 1907 the prices would have dropped to such disastrous levels that planters would have been driven out of business, and subsequent crops would have been smaller and smaller. "In case the plantations had been neglected, we might have had crops of two, three, and four million bags, and a price for coffee of 25 cents."

The government's att.i.tude was unfair and ethnocentric, Sielcken a.s.serted. "I question the propriety of the United States criticizing or going into the details of the action of another country. Supposing that in this country we had a deal on cotton in the South, and Brazil should say, 'Well, we want to look into that.'" As he pointed out, "Any foreign government or any foreign party that would act in that way would be thrown out of this country." He said that the American att.i.tude amounted to saying to the Brazilians, "You shall sell your products always at the lowest, and we ours at the highest [price]. You must not make any combination of any nature or form. That is a conspiracy if you try to protect yourselves. . . . I challenge the Attorney General in this country and every lawyer in this country to tell me that as a coffee merchant it is illegal for me to accept consignments."

In the end Sielcken emerged virtually unscathed from the hearings. It was clear that he had made fabulous amounts of money from the valorized coffee, however. As a broker he could buy it himself, then resell it, making a profit at every stage. When coffee was at its highest point in April 1911, at 12.75 cents, he said, "I bought it and sold it." Untermyer asked, "Do you mean that you sold it for the committee or bought it yourself?" Sielcken refused to divulge the details, answering simply: "I made a profit on that deal."

The Lawsuit Against Sielcken On May 17, 1912, the day after Sielcken's testimony, Attorney General George Wickersham proceeded with his plans for a lawsuit. Shortly thereafter the attorney general pet.i.tioned for a temporary restraining order, enjoining the removal of the 900,000 bags of valorized coffee held in New York, and levying formal charges against Sielcken, the New York Dock Company, and the foreign members of the valorization committee.

The U.S. secretary of state, Philander Knox, found himself caught between the attorney general and the Brazilian government, which protested that the coffee warehoused in New York was the property of the State of So Paulo, security for a loan, and that the United States had no right to confiscate it. On May 29 William Chantland wrote to an a.s.sistant U.S. attorney that "the Attorney General is very much interested and [is] in the fight to the finish." Two days later Wickersham wrote a not-for-publication letter to a New York newspaper editor, stating his case. He objected to "a foreign government [going] into partners.h.i.+p with a group of international bankers," noting that "an increase of one cent a pound in the price of coffee means ten million dollars on the amount used in the United States. . . . They practically took from seventy to eighty million dollars out of the pockets of the American people." Wickersham also wrote a long memo to President Taft justifying the case.

The court nevertheless refused to sanction a preliminary injunction to confiscate the coffee. The government then narrowed its suit, focusing on Hermann Sielcken. Negotiations between Sielcken, his lawyer, Crammond Kennedy, and Attorney General Wickersham commenced. Wickersham wanted Sielcken to release all 900,000 bags of coffee in return for dropping the suit; Sielcken promised to release only 700,000 bags, the amount held in the United States at the beginning of the suit. In a telegram to his lawyer the coffee king pointed out that it was in his own best interest to sell as much as possible-he was only trying to protect the Brazilian government's interest by limiting the amount sold. In June, Sielcken warned that if a settlement were delayed, it "may force Brazil to measures totally destroying all good will and commerce between the two countries."

The fight over 700,000 versus 900,000 bags continued throughout the summer of 1912. Sielcken promised to sell the 700,000 bags by April 1913. Apparently some compromise was reached, but when Wickersham returned from a September camping vacation, he exploded when he found that "the Brazilians are unwilling to enter into the arrangement suggested." He insisted that "the Department is prepared to submit the facts in the case to a grand jury, and I have no doubt that the indictment of Mr. Sielcken, and possibly some others, would follow."

The secretary of state's office tried to convince Wickersham to moderate or delay his case in the interests of smoothing over international relations. Wickersham repeatedly delayed the hearing. As 1912 wound to a close, George Norris introduced a bill to force the sale of valorized coffee. In response the National Coffee Roasters a.s.sociation (NCRA) pa.s.sed a resolution denouncing the bill, which would create "an element of uncertainty and danger." Other coffee men wrote to Wickersham to a.s.sure him that the meeting was "packed by Green Coffee interests" and did not represent the true feelings of the roasters.

William Ukers, the influential and well-informed editor of the Tea & Coffee Trade Journal Tea & Coffee Trade Journal (a compet.i.tor of the (a compet.i.tor of the Spice Mill Spice Mill since 1901), wrote Wickersham to say that "the valorization interests organized the Coffee Roasters a.s.sociation for the express purpose of throttling any movement calculated to interfere with their plans." In his journal, Ukers editorialized that "just because the Brazilians were so stupid as to keep on year after year producing more coffee than the world needed," why should the American consumer foot the bill? He added that Representative Norris might be jeopardizing his political future by fighting the big-money interests and "the Great Hermannus." since 1901), wrote Wickersham to say that "the valorization interests organized the Coffee Roasters a.s.sociation for the express purpose of throttling any movement calculated to interfere with their plans." In his journal, Ukers editorialized that "just because the Brazilians were so stupid as to keep on year after year producing more coffee than the world needed," why should the American consumer foot the bill? He added that Representative Norris might be jeopardizing his political future by fighting the big-money interests and "the Great Hermannus."

After coffee spread from Ethiopia to Yemen, the Arabs adopted it as a way of life. This early-eighteenth-century engraving shows a cross-legged Arab sipping coffee that he poured from the ibrik on the floor.

By 1674, London coffeehouses had become such a craze that women-who where excluded from imbibing there-protested in this pamphlet, claiming that coffee made their men impotent. The men defended their drink, saying it made "the erection more vigorous."

Nature has protected the coffee seed with several layers: the red outer skin, the sweet mucilage, sticky paper-like parchment, and fine silverskin. In the "wet method," the mucilage is allowed to ferment in vats so that it washes off easily.

Entire families have always harvested coffee. This picture was taken in Guatemala in 1915.

French lieutenant Gabriel Mathieu de Clieu nursed his coffee seedling, sharing his own water ration, to bring it to Martinique in 1723. From that single plant, much of the world's current coffee supply probably derives.

Sweating in a factory along the row of Carter Pull-Outs (invented in 1846) resembled labor in the lower range of Dante's Inferno amidst smoke, stress, and burned beans.

In a marketing war, Lion Coffee claimed that its coffee imparted the strength of a lion, but an Arbuckle salesman insisted that angels were stronger.

Arbuckles' Ariosa package and its floating angel became a universally recognized trademark in the late 19th century.

"Help us drive out of the market the poisonous Coffees that are now being so largely sold," the text below this Arbuckle ad read, referring to the widespread use of poisonous coloring agents used on other coffees.

Pittsburgh grocer John Arbuckle revolutionized the nascent coffee industry by showing how branding and marketing could sell cheap goods. Gruff but good-hearted, Arbuckle funded philanthropies such as his "floating hotels."

An ill.u.s.tration from the 1904 novel The Corner in Coffee The Corner in Coffee: "The crowd of brokers heaved and surged and swayed like a human wave. The place was like a battle-field in the tense emotions in the air, the awful pa.s.sions it evoked."

The dreaded coffee leaf rust, hemileia vastatrix hemileia vastatrix, appeared in Ceylon in 1870 and virtually wiped out the coffee industry of the East Indies within a few years. A hundred years later, it appeared in Latin America.

The Brazilian coffee industry was built on the backs of slaves imported from Africa.

This 1875 photograph of bare-breasted Mayan coffee workers revealed sullen aquiescence to forced labor.

Hermann Sielcken, the arrogant Coffee King who made millions through the Brazilian valorization scheme.

Joel Cheek, creator of Maxwell House, understood the virtues of sn.o.b appeal and advertising. He also treated his employees decently. "Put your arms around them and talk to them like you were not simply interested in them for the dollar you get out of them."

In the United States, women performed the menial tasks in this 1911 coffee factory (top), just as Central American women sorted processed coffee beans in 1913 (bottom). Similar photographs could still be taken today throughout Asia, Africa, and Latin America.

Since the late nineteenth century, coffee "cuppers" have slurped, savored, and spat their favorite brew all day long-as in this 1909 scene-in an important ritual to a.s.sess body, aroma, and acidity.

U.S. Senator George Norris took on what he called the "Coffee Trust," attacking Hermann Sielcken and the valorization scheme. Here, a contemporary cartoonist depicts Norris as a David against the coffee Goliath.

C. W. Post, the brilliant, irascible inventor of Postum, was a marketing genius who called coffee a "drug drink" and ended his ads with the slogan, "There's a Reason." After claiming that his products were cure-alls, Post committed suicide when in poor health.

Postum ads such as this 1910 effort, with its dramatic claim that "coffee wrecks some persons," should have alerted coffee men to effective advertising techniques. Instead, they simply fumed.

Postum's negative ads drove the coffee men wild. In this 1910 satirical cartoon, they fought back.

To combat health worries, coffee men loved to find consumers such as Mrs. Melinda P. Kyle, shown here in 1912 at 114 years old. She drank three cups of coffee every day, beginning at age fourteen.

Teddy Roosevelt supposedly proclaimed Maxwell House Coffee to be "good to the last drop"-used here in a 1921 ad-though Coca-Cola used the phrase first. It is likely that ad men made it up.

This cartoon from a Jewel Tea newsletter ill.u.s.trates the lure of the "gift" percolator, a premium offered for coffee sales.

The "wagon men" of the Jewel Tea Company delivered coffee door-to-door, giving out "advanced premiums" to lock housewives into purchase plans.

Sielcken attacked the Norris bill as being "so ambiguous that I personally cannot understand it." He scoffed at the politician's interference with a legitimate business transaction. "If Mr. Norris means that he wishes to prevent the price of coffee from ever advancing, he must make laws to prevent droughts, frosts, and unseasonable weather of any kind."

As the new year turned, Sielcken and the Brazilian government suddenly changed their proposed settlement. Rather than selling the valorized coffee by April, they now wanted the entire year. Wickersham accused them of "entirely lacking in good faith." In a letter to Knox he proposed going forward with his lawsuit immediately. Knox once again wrote to beg that he accommodate the Brazilians.

Then, on January 21, Knox wrote that the minister of foreign affairs for Brazil had informed him that all of the valorized coffee in the United States had been sold to some eighty purchasers in several different states. Wickersham did not believe it. "I should be inclined to think that there was no truth in the statement, and that it was simply made for the purpose of diverting attention from the operations of the syndicate." The attorney general could be forgiven for being skeptical, since the Brazilians refused to reveal who had bought the coffee. It is likely, however, that most of it truly had been sold.

On February 27 a very frustrated Wickersham wrote to George Norris at the House of Representatives. "I have several times felt very much like ordering a criminal prosecution of Hermann Sielcken, but the international questions involved have prevented [it], and I fear I shall not be able to do anything about it before I go out of office."

In the meantime the Brazilians retaliated against the pending lawsuit by rescinding a 30 percent tariff preference for American flour, causing flour exporters to write their senators, complaining about the valorization suit. William Jennings Bryan also weighed in on the side of the Brazilian government.

By April the United States had a new attorney general, J. C. McReynolds. William Chantland, Wickersham's special a.s.sistant, wrote a strong memo to McReynolds informing him that Hermann Sielcken was "manipulating the coffee situation to suit himself," and urging McReynolds not to dismiss the suit until Sielcken or the Brazilian government provided details of precisely who had bought the valorized coffee. McReynolds ignored Chantland and wasted no time in dropping the controversial valorization suit in April. Sielcken was finally off the hook.

The first phase of valorization was nearly complete. Some 3.1 million bags of coffee remained in European warehouses, the last of which was sold in 1916. Nearly 2 million bags were sold after World War I commenced, the proceeds deposited with a Berlin banking house as the German government embargoed the funds. In the Versailles Treaty ending the war, the Brazilians successfully lobbied for rest.i.tution. In 1921 the Germans paid over 125 million marks to Brazil, and the books were finally closed on a highly effective price manipulation.

There is no question that the valorization scheme benefited Hermann Sielcken and his a.s.sociates more than the farmers or government of Brazil. It did prevent ma.s.s bankruptcies, foreclosures, and possible revolution, however. Unfortunately, its perceived success encouraged Brazil to pursue further valorization schemes of one sort or another for the next few decades. In the euphoria of 1912, with coffee prices going up, the Brazilian politicians abandoned the tax on new plantings, allowing overproduction a few years later. Over time it also became clear that Brazil was not immune to compet.i.tion from other coffee-growing countries. The result: Brazil's domination of the world coffee industry (nearly 80 percent in the early twentieth century) would slowly erode.

Hermann Sielcken's Final Years For septuagenarian Hermann Sielcken everything seemed to be going well. As the valorization suit finally was dismissed early in 1913, his partner George Crossman died, leaving him a million-dollar bequest. It turned out that Crossman and Sielcken, about the same age, had made a kind of bet on who would live longer: each had included the other for $1 million in his will. (Crossman's son received only $300,000.) Soon afterward the seventy-three-year-old Sielcken, widowed seven years previously, married Clara Wendroth, forty years his junior. They sailed for Germany in October 1914, just before the outbreak of World War I. Sielcken, the astute internationalist who could predict Brazilian harvests so well, apparently refused to believe that war actually would transpire.

In 1915 the New York Times New York Times reported a rumor that Sielcken was being detained in Germany, where the government was extorting large amounts of money from him. However, as the article reported, Sielcken had in fact always been "very pro-German in his opinions." The money he donated to German war relief was purely voluntary. In 1915 he secretly furnished $750,000 to purchase the New York reported a rumor that Sielcken was being detained in Germany, where the government was extorting large amounts of money from him. However, as the article reported, Sielcken had in fact always been "very pro-German in his opinions." The money he donated to German war relief was purely voluntary. In 1915 he secretly furnished $750,000 to purchase the New York Evening Sun Evening Sun, which promptly supported the German cause.

As Sielcken's health failed in 1917, so did his fortunes. Only days before his death in October, his U.S. property, worth over $3 million, was seized under the Alien Property Act. It took four years for Sielcken's widow to prove that he had been a naturalized American citizen. The government then returned the money.

Litigation over Sielcken's estate, valued at over $4 million, continued to keep his name alive for years. After his death two women with whom he apparently had been romantically involved came forward. The Woolson Spice Company, controlled by Sielcken at his death, pa.s.sed into other hands. After examining the books the new managers sued the estate for $800,000. It seems that in 1913, when the government suit had pressured Sielcken into selling the valorized coffee, he had dumped some 23 million pounds of Brazilian coffee into the warehouses of the Woolson Spice Company, for which he had charged the company the prevailing high prices. Shortly thereafter, when the valorized coffee was sold, the price dropped substantially. Sielcken's executor settled the case out of court for around $250,000.

The Caffeine Kicker By the turn of the twentieth century many reformers were convinced that coffee was an evil drug whose immoderate use could lead to insanity or even death. As a result, pure food faddists such as John Harvey Kellogg and C. W. Post produced "healthy" coffee subst.i.tutes, and another aspect of the coffee wars commenced.

6.

The Drug Drink The drug, caffeine, in coffee keeps many persons awake nights when they ought to be asleep. If you've found only that one annoying fault with coffee (there are others) isn't it time to quit it and use POSTUM? . . . "There's a Reason"

-1912 advertis.e.m.e.nt for Postum

The high prices that accompanied valorization delighted Charles William Post. As the inventor of Postum, America's favorite coffee subst.i.tute, Charley Post, or C.W. (as he preferred to be addressed formally), profited handsomely whenever green bean prices soared and people sought cheaper alternatives. Taking advantage of a new national health consciousness and adopting a scientific patter, Post promised that by drinking Postum, his coffee subst.i.tute, consumers would be on the "road to Wellville." His folksy but negative approach to advertising revolutionized modern marketing while appalling the coffee industry by calling their beverage a "drug drink."

With his ubiquitous advertising, self-righteousness, posturing grandiosity, and propaganda against "coffee nerves," Post was the opponent coffee men loved to hate. And they did, vilifying him in the pages of the Tea & Coffee Trade Journal Tea & Coffee Trade Journal as "the cereal slush king" and worse. By 1900 there were half a dozen other Battle Creek, Michigan, firms producing "healthy" coffee subst.i.tutes. During the valorization period, several other cereal firms marketed coffee subst.i.tutes or extenders. Postum, however, was by far the most successful. With Grape-Nuts cereal, it had made Post a multimillionaire even before the valorization scheme. as "the cereal slush king" and worse. By 1900 there were half a dozen other Battle Creek, Michigan, firms producing "healthy" coffee subst.i.tutes. During the valorization period, several other cereal firms marketed coffee subst.i.tutes or extenders. Postum, however, was by far the most successful. With Grape-Nuts cereal, it had made Post a multimillionaire even before the valorization scheme.

Born in 1854 in Springfield, Illinois, Charley Post quit school at fifteen. He made up for his short attention span with inventive fervor and entrepreneurial energy. While still in his teens he started a hardware store in Independence, Kansas, selling it a year later for a profit. He worked as a traveling salesman of farm implements, then invented and manufactured farm equipment on his own, obtaining patents for a seed planter, sulky plow, harrow, hay stacker, and various cultivators. He also invented a smokeless cooker and a water-powered electric generator.