Respondents conclude that this data shows an actual decline in tonnage of only 14 percent; they stress that there was actually an increase in revenue over the 4-year period.

Furthermore, respondents attribute the decrease in tonnage to factors other than rail rates. In this regard, they cite motor carriers' ability to make off-track deliveries and the receivers' insistence upon small-lot consignments.

On this record, we conclude that the evidence of possible diversion is not sufficiently persuasive to warrant denial of the moderate increase authorized on commodities generally. As increased, we note that the rail rates on package salt will for the most part remain below motor carrier levels. While some diversion may possibly occur at low minima where the motor rates will be less, we nevertheless believe that any revenue loss from the smaller shipments will be more than offset by the revenue gain realized on the volume shipments where the rail rates will continue to be more favorable.

(2) Bulk rock salt.-The Independent Salt Company alleges that prior general increases have resulted in diversion of rock salt, particularly bulk ice control salt, from rail to other transportation modes including barge and private carriage. Protestant urges suspension of the proposed increases until such time as the Commission's investigation of the railroads' freight rate structure is completed in Ex Parte No. 270.

In reply, respondents point out the absence of data supporting protestant's allegation of diversion. Respondents also submitted the following statistics comparing rock salt tonnage and revenue for 1966 with corresponding data for 1971:

These figures indicate substantial increases in rock salt tonnag and revenues despite prior general increases. No basis appears fo exempting this commodity from the 3-percent increase herei authorized.

Salt cake (sodium sulfate).-Increases sought on this commodit are those generally proposed. Salt cake is produced as a primar product in California and Texas and as a byproduct at variou locations in the Southeast. Because it is sold on a freigh equalization basis, distant processors absorb any difference i transportation charges in order to remain competitive with close

sources.

Protestant Kerr-McGee Corporation is the world's larges producer of natural brine salt cake. Its plant at Trona, Calif. produces approximately 250,000 tons of salt cake annually, of thi total, approximately 50,000 tons per year are shipped to souther territory where it is used almost exclusively in the bleaching proces at Kraft pulping mills. For this usage, it is asserted that salt cake is i direct competition with caustic soda. Protestant assails the proposed increase as disruptive of existing marketing relationships. It show that, for 15 representative locations in southern territory, it absorptions increased an average of $2.65 per ton between the Ex Parte No. 259 and Ex Parte No. 281 level of rates; the proposec general increase would add approximately 87 cents per ton to the freight equalization necessary for this product to remair competitive in southern territory.

Protestant Ozark-Mahoning Company produces approximately 150,000 tons of salt cake per year at Brownfield and Seagraves, Tex., and it ships a substantial portion of this production into southern territory. This protestant shows that its absorption of freight to 15 representative locations has increased by an average of $1.68 per ton between rates at the Ex Parte No. 259 and Ex Parte No. 281 levels, and that the 5-percent general increase proposed on shipments from its origins to southern territory would add 53 cents per net ton to this sum.

Since salt cake and caustic soda are competing products in southern territory, both protestants argue that the proposed increases on salt cake without holddowns will unduly harm them in their competition with southern producers of caustic soda who will benefit from the 25 cents per ton holddown proposed within southern territory.

In reply, respondents state that about 600,000 tons of salt cake are consumed annually in the Southeast by the paper and pulp industry

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in that area. Salt cake is used by that industry to remove lignin from pulpwood chips. However, where caustic soda is used in the pulp as a replacement for salt cake, respondents assert that sulfur has to be added as a separate ingredient. To this extent, respondents urge that caustic soda is not a direct replacement for salt cake.

Respondents further argue that the freight equalization on salt cake is with competitive salt cake producers rather than with southeastern caustic soda producers. In this regard, it is noted that the tariff proposal does not accord a holddown on salt cake in the Southeast.

Based on this record, we are satisfied that salt cake and caustic soda are sufficiently competitive in southern territory so that any disparate treatment of the two commodities would unduly disrupt existing competitive relationships. Consequently, we find the general basis, namely, 3 percent, will be just and reasonable except that, on movements to and within southern territory, the increase on salt cake shall not exceed the maxima proposed for caustic soda within the South.

Chlorine, caustic soda, and sulphuric acid.-The suspended tariff provides the same increases on these commodities as on commodities generally, except in southern territory where the following limitations are proposed: (1) the increase on chlorine would be subject to a maximum of 2 cents per hundred pounds or 40 cents per net ton; (2) the increase on caustic soda would be subject to a maximum of 1 1/4 cents per hundred pounds or 25 cents per net ton; and (3) the increase on sulphuric acid would be only 2 percent. Dow Chemical, U.S.A., manufactures caustic soda and chlorine at plants in Michigan, California, Texas, and Louisiana, with its plants in the latter two States serving the Southwest and the Southeast. It assails the railroads' proposal as discriminatory to processors of these two chemicals situated outside southern territory and competing for markets therein. Protestant requests that the maxima proposed for chlorine and caustic soda within southern territory be made applicable on traffic into that territory.

Also opposing the proposed disparate treatment of these two chemicals, as well as sulphuric acid, are various producers of paper and paper products, including the Nekoosa Edwards Paper Company and its subsidiary, the Butler Paper Company, and producers represented by the Southwestern Paper Traffic Conference, and the Wisconsin Paper & Pulp Manufacturers Association. In general, these protestants state they are in direct competition with producers

of paper and paper products situated in the South. They assert that these chemicals are essential raw materials used in the paper production process, and that any holddowns or lesser increases thereon in southern territory would, therefore, give southern paper producers a competitive advantage. Protestants request that the same increases be authorized on these chemicals in and between all territories.

In reply, respondents point out an absence of specific evidence illustrating competitive situations or the extent to which marketing relationships will be distorted. If such specific situations exist, respondents believe the matter can more properly and adequately be handled by specific rate adjustments rather than through a general holddown in this proceeding.

We believe the considered traffic can and should contribute to the railroads' general revenue requirements. The 3-percent limitation already imposed should lessen the impact on protestants of the lesser increases proposed within southern territory. Under the circumstances, we conclude that a prescribed holddown is not warranted, and that the general basis authorized, as applied to the commodities, is not discriminatory or unduly prejudicial. Respondents will be expected to make individual adjustments as necessary to meet particular competitive situations.

Grain and grain products, in general.-Replies, verified statements, and protests in opposition to the proposed increases on these commodities were received from various grain exchanges, boards of trade, shippers of grain, and manufacturers of grain products. Initially, these responses will be discussed insofar as they pertain to grains in general; several specific grain or grain products will hereinafter be separately discussed. Some grain protestants did not question the carriers' assertion that additional revenue was needed, but they argue that the increase should be conditioned on a requirement that the revenues resulting from the increased rates be applied to improving the railroads' physical plant and acquiring additional rolling stock. These protestants complain of severe car shortages, unreliable scheduling, and unnecessary delays in transit Service considerations have been discussed earlier in the report and will not be treated in detail here. While we have noted that more consistent rail service is essential, it should also be emphasized that grain movements have presented a special situation in view of record harvests and unprecedented export movements as a result of the sale of wheat to Russia. The respondents have increased their

ownership of covered hopper cars to provide better service to grain shippers. For example, an additional 6,868 covered hopper cars were acquired between January 1, 1972 and May of 1973.

Various protestants state that the present grain rates are already highly compensatory to the carriers, and that any additional increases would be unjust and unreasonable. It is alleged by the Montana Wheat Research & Marketing Committee that data filed in Ex Parte No. 270, Investigation of Railroad Freight Rate Structure, establishes the compensativeness of present grain rates, particularly wheat and barley. Examples of specific cost evidence with regard to certain present grain rates are set forth in our discussion, infra, of Barley, Wheat, Westbound, Domestic, and Wheat, Westbound, Export.

Other protestants argue that the increased volume of grain moving by rail provides the carriers with sufficient additional revenues to offset any increased costs incurred in connection with grain movements. Producers Grain Corporation, for instance, points out that 644,033 carloads of revenue grain were loaded during the 26week period ending June 30, 1973, compared with 449,438 carloads for a similar period in 1972.

A number of protestants contend that the proposed increases on grain and grain products23 will have an inflationary impact on the economy and should be denied for this reason alone. In reply, respondents assert that the increases sought are comparatively small and will not by themselves have a significant effect on the price of grain and grain products in the market.

To illustrate that transportation charges are not a major factor in soaring grain prices, respondents compare the prices of various grains at representative primary markets on July 5, 1973, with prices at those markets on a comparable date in 1972. This evidence is excerpted in the table below:

"Where increases are not specified in connection with our discussion of a particular commodity, that commodity is subject to the increases proposed on commodities generally as previously described. See Tariff X-295, item 100.

344 I.C.C.