Sampling green coffee offloaded from a plastic lined shipping container at Vollers port facility in Bremen, Germany.
In December American coffee ports will finally receive their first bulk deliveries of Intercontinental Exchange (ICE) arabica.
Although robusta has been shipped in lined containers for some time, and arabica is shipped in lined containers when specified in private contracts, the unanimous vote of the ICE Futures Coffee Committee means that there will be a dramatic increase in bulk deliveries over time.
The 2013 loosening of regulations, after a mandatory 24 month wait, will likely also increase the coffee stored in warehouses, adding to stockpiles which impact price.
Currently 15% of all arabica exports are bulk shipments destined for European and Asian ports that have long since modernized handling systems to quickly offload 20-ton containers into giant silos. The coffee is then dumped into reception hoppers and moved in enclosed chutes and by cable and chain conveyors into silos for storage.
Eighty years ago coffee arriving at ICE-certified ports in New York or New Orleans was unloaded by hand. Two hundred and fifty sacks per lot, weighing 60-kilos each were tossed into cargo nets, lifted off the boat and then stacked on pallets to be deposited in a warehouse for delivery to roasters. In the late 1930s it took dozens of men many hours to offload the cargo from the five holds in a 459-foot-long C3-class general purpose cargo ship built to MARCOM (U.S. Maritime Commission) specs.
Coffee arriving from Brazil, Central America, Indonesia, or Africa was delivered directly to warehouses, to roasters who had purchased the “C” contract, or to brokers at auction where buyers bid for it on the open exchange. The green coffee was transported in burlap “gunny” sacks stenciled in code identifying country, exporter and lot.
This is how people still think of coffee shipments to the present day.
With an air of nostalgia, we envision warehouses with rows stacked high with sacks made of ICE mandated sisal, henequen, jute, or burlap.
In many ways not much has changed. To insure traceability and quality most buyers including Starbucks, the nation’s largest roaster, only accept coffee that has traveled from the farm in bags. That is why much of the bulk coffee arriving in lined containers will be sorted and bagged in natural fiber prior to grading and certification. Bags will arrived labeled with originating farm and country of origin.
Many believe this method is optimal. After all, the very thought of roasters knifing open a sack of fresh beans from exotic lands brings to mind centuries of coffee transport. It is a beautiful story that coffee sellers and drinkers recount as they take their morning’s first sip. However bulk delivery in lined containers has many advantages over splintered pallets, water-stained gunny sacks and the propane exhaust from a fleet of forklifts.
Until this year Commodity Futures Trading Commission regulations stated that arabica coffee purchased with an ICE contract could enter North American ports only in bags averaging 132 pounds in lots of 37,500 lbs.
Coffee handling is changing, and as it does it will make a huge difference in the way coffee is stored and delivered. Currently 5% of coffee is transported in lined containers and warehoused in silos before final transport in trucks specially designed to transport dry beans. There are very few green coffee silos in America. Inland roasters for the most part cannot accommodate container deliveries. Switching to lined containers will take time.
European ports, in contrast, have received bulk coffee shipments for years. Coffee still descends the mountain in 60-kilo sacks because it is too costly to drive a container to the farm, but processors loading coffee into containers avoid the cost of filling and sewing thousands of bags. Shippers save up to 18% by reducing the number of containers required and by avoiding the cost of transporting pallets. Warehouses save on labor and truckers loading three 2-ton supersacks on wheels avoid idle time at the dock.
Why it has taken so long in the U.S. is due to Byzantine agreements made long ago — including differing shipping and handling regulations for robusta coffee, which is overseen by the London International Financial Futures and Options Exchange (LIFFE). Arabica shipments are regulated by ICE.
Bulk not always best
Bulk shipping is not ideal. There are drawbacks. Many U.S. roasters see advantages in traditional methods of handling under the ex-dock or ex-warehouse duty paid system in which the buyer is responsible for storage and transport once the coffee is unloaded. Sellers pay to unload the ship. Europeans often ship ex-factory making the seller responsible for transport to the roaster. To better understand why liner bags can be advantageous, it is helpful to review the strengths and weakness of traditional methods of coffee shipping.
Once it is picked and dried coffee must be stored for logistical reasons and to improve the beans. The standard for hundreds of years has been to sew the coffee into 60-70 kg sacks. These were piled high during the harvest, transported from farm and loaded by hand into the ship’s hold. Transport was rife with risks. Traveling from the tropics to northern ports led to condensation in the ship’s hold due to great swings in humidity. Sacks were exposed to pollutants and salt air making the coffee prone to damage by mold, fungus, and mildew.
Manually loading and off-loading pallets is strenuous and time consuming. As Christian Vollers, the general manager of Vollers, headquartered in Bremen, Germany, remarked, “It may not look that strenuous when done well, but if you do that for eight hours, you’re going to feel it in your muscles at the end of the day.”
Once docked the pallets must be off loaded. Removing coffee at the roastery is labor-intensive. Imagine shuttling pallets by forklift or hand cart, then lifting and slitting 4,000 sacks (16 lots) while directing the coffee through grating in the warehouse floor.
The case for containers
Nowadays beans shipped in bulk are loaded directly into shipping containers with inner liners made of virgin polyethylene (film or woven polyolefins). The liners, also called container bags, are attached to hooks in the upper corners of the container. The coffee is then loaded with the aid of a blower which causes the liner to align itself with the walls, roof and floor of the container.
Once filled the liner is sealed and not opened again until it reaches its destination. Cost and coffee quality factor into the decision to use liners. The most obvious advantage is that lined containers hold more coffee than the same container filled with pallets. Shippers can fit only 18 tons of coffee in gunny sacks while loading 21 tons into a lined 20-foot container. It takes fewer containers to ship the same amount of coffee. Not having to dispose of piles of used burlap is another savings.
Coffee arrives in much better condition when shipped in bulk. Moisture and condensation are more easily controlled resulting in less chance of mold. The possibility of insect infestation is also much lower. This is because pallets harbor insects which live in the fiber of the sacks. Liners suffocate bugs. Researchers in 2011 showed that storing grains at origin in large plastic “cocoons” made by GrainPro increased insect mortality by 16% compared to storage in bags under a tarp.
In 2010 ICE adopted more stringent standards due to concerns about the age, color and taste of green coffee stored in traditional warehouses. Transport in containers and storage in coffee silos reduces these concerns.
Despite these advantages liners present logistical issues. Once delivered the coffee is stored in silos with each shipment individually marked. When filled the silos are efficient storage but when half-full a silo holds wasted space.
Why not just pour a new shipment of beans into the half-filled silo?
Pouring new beans on top invalidates ICE certifications for both shipments. The cost of electricity in maintaining the silos is another concern due to rising energy prices.
When an individual sack of coffee is damaged by water or mold, the bags can be isolated or discarded. This is not possible with an entire container. An infestation or mold could potentially damage or destroy the entire shipment.
According to Günter Brockhaus at NKG Kala (Neumann Kaffee Gruppe, Hamburg), such damage to coffee shipped in bulk is almost unheard of unless there is a hole in the container. In his experience, when it comes to shipping in small individual sacks, claims for damages can be as much as five or six times higher.
Based on conversations with American friends and business partners, Brockhaus thinks “many will continue to use (the old-fashioned) bags, because they believe it is better quality,” and he assumes, “it’s a matter of nostalgia.”
He knows that people do not get excited thinking about a silo full of coffee the same way they do when imagining sacks of coffee piled high on the roasting floor.
Dupuy Storage & Forwarding in New Orleans was the first to handle bulk shipments in 1992.
J.M. Smucker (Folgers) and Kraft Foods (Yuban and Maxwell House) currently accept bulk coffee shipments of robusta. They also accept some arabica delivered in bulk under a private contract. European roasters, in contrast, receive as much as 90% of their coffee in bulk shipments.
More critically there is a lack of silo capacity in the United States. Before coffee can be received in bulk, companies will have to upgrade their facilities. Can these firms afford to keep off-loading coffee sacks in the traditional manner?
Brockhaus insists that if his company had not modified their system, he would already have gone out of business. Eighty percent of his coffee arrives in bulk, and when the new regulations come into effect in December 2015, it is only logical that this percentage will increase.
Failing to address efficiencies in logistics by continuing “business as usual” could very well make it difficult for some companies to remain competitive, he said.
Walking into Vollers offices in Bremen, there are paintings on the wall harkening back to an earlier age of shipping. While the sacks of coffee lying on the floor are reminiscent of those times gone by, the coffee in the warehouse downstairs is being transferred from container to silos and then loaded into trucks in the most modern manner available.
Sacks of coffee continue to arrive in the warehouse from various regions but the number grows less each year. Looking over the remaining sacks one can easily imagine a day when they become a thing of the past.
Standard Sack Weights
Kilos Pounds Origin
70 154.32 Colombia and Bolivia
69 152.15 Central America
60 132.30 Brazil, Africa, Asia
59.88 132 Swiss Water Decaf
50 110.23 Yemen, India (Malabar)
45.36 100 Hawaii, Puerto Rico