The United States Howls Over Coffee Prices

Publication Year: 
1999

Image retrieved from web-books.com on September 11th, 2014.
Image retrieved from discussions.mnhs.org on September 11th, 2014.

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 United States citizens were righteously indignant that their morning coffee price had risen a few pennies. Addicted to their caffeine kick, North Americans apparently regarded cheap coffee as their birthright.
Buried in the U.S. National Archives outside Washington, 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 Nebraskan 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 quantities 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 as a solution 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 George 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, arousing general public indignation. “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. “It is about time for the Department of Justice at Washington to take a look at this interesting band of robbers,” another New York editorial intoned. By June 1911 George 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 Seilcken and Arbuckle Brothers, which had joined the profit-making scheme. Together the two firms controlled the majority of the valorized coffee. In order 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. It circumvented, however, the natural functioning of the Coffee Exchange. In addition, Arbuckle Brothers bought enormous quantities of coffee from the exchange to raise the price 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 the valorization scheme.

arbucklebros

The attorney general appointed William T. Chantland as its special assistant to look info coffee valorization. Chantland quickly proved himself a dogged opponent of the coffee trust and in July 1911 suggested prosecuting Hermann 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 valorizaion than any other nationality. “In plain English,” he wrote, “this whole thing looks like a plan devised in the apparent interest of Sao Paulo and Brazil, but, in fact, carried out to the great glory and financial profit” of bankers and coffee merchants such as Hermann Sielken, “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 in particular. “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 William 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 Association 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, asserting 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.”

pp. 85-87 of Uncommon Grounds by Mark Pendergrast (1999)

Hermann Sielken
Arbuckes Ariosa Coffee
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