'Represents over 90 percent of tonnage shipped by rail for sugar beet companies operating factories in Washington, Oregon, Idaho, Utah, Montana, Wyoming, Colorado, Texas, Kansas, Nebraska, North Dakota, Minnesota, and Iowa.

In general, protestants support the nationwide 3-percent increase authorized in our interim order, but they request a holddown of 6 cents per ton similar to that accorded fruits and vegetables.

Respondents disagree with protestants' contentions that sugar beets are entitled to special consideration. They argue that the rates are presently at a very low level, ranging from 2.82 to 7.44 percent of first-class rates. With regard to transportation characteristics, the carriers state that conditions differ considerably in various beet producing areas. For the most part, however, it is claimed that sugar beets are handled in lots of less than 10 cars. Respondents also dispute the assertion that this commodity is moved in old equipment. In some instances, special equipment is utilized to enable heavy loading, and other equipment is removed from revenue service so that it can be cleaned and prepared for the sugar beet movement. Any diversion that may have occurred is attributed by respondents to factors other than rates. They point out that contract and private carriers offer greater flexibility, since trucks can go into the fields, load and deliver directly to refineries. In sum, the carriers contend that the full increase should be authorized on this commodity.

While it is clear that only a low percentage increase is justified on sugar beets, we are satisfied that the 3-percent increase authorized generally may justly and reasonably be applied to this commodity. In our view, such an increase will not result in diversion which would nullify expected additional revenues from this traffic, and we conclude that a holddown, in addition to the overall limitation, is not warranted.

Beet and cane sugar.-The same increase is proposed on beet and cane sugar as on commodities generally, except that no increase will apply on shipments of sugar cane moving on net transit rates in Florida or on shipments of raw cane sugar from origins on the Florida East Coast Railway Company and the Seaboard Coast Line Railroad Company to destinations in southern territory and the State of Georgia, respectively.

Western sugar producers object to the proposal on the ground that a general percentage increase without a holddown increases the spread of rates between the western sugar companies and the gulf refineries. Absent a maximum, these protestants contend there would be a disruption of the rail freight rate structure which has provided the basis for marketing western sugar in the Midwest. For competitive reasons, sugar is sold at a fixed base price, plus the lowest freight rate from the nearest seaboard sugar refining point to the consuming market. Whatever difference exists between the applicable freight rate from the actual refinery and the rate from the closest seaboard refinery must be absorbed by the shipper. Since the sugar market is highly competitive, it is claimed that distant refiners will be priced out of midwest markets if their freight costs increase disproportionally to those of their competitors. In this regard, the key rate has been New Orleans to Chicago. Rates from California have traditionally been 30 cents per hundredweight higher, and protestants oppose any rate proposal which would increase the existing spread. The maladjustments which would result from a percentage increase are alleged to constitute undue preference and prejudice in violation of section 3.

Respondents contend that the proposed increase would not significantly affect rate relationships and that no holddown should be required. If a straight 5-percent increase were authorized, the railroads note that protestants' own evidence shows the additional freight absorption would be only one cent per hundred pounds on the California-Chicago movement. In the past, the 30-cent spread has been maintained at the expense of the carriers. They argue that they can no longer afford to continue absorbing differentials of this nature in the face of increasing costs. Respondents also maintain that a holddown results in a windfall to sugar producers in that it applies on movements to many areas where a holddown is not needed for competitive reasons. They state that individual competitive adjustments will be made where necessary.

In a number of prior proceedings, rate increases on sugar have been subject to holddowns as a result of our decisions or the

voluntary action of the carriers. Here, however, where the nationwide 3-percent increase authorized will result in a change in rate spreads, California to Chicago vis-a-vis New Orleans to Chicago, of only one cent per hundredweight, or less, we conclude that the evidence fails to show that the increase will create a section 3 violation. Under the circumstances, it is our view that this traffic should bear a proportionate share of the respondents' revenue needs, and we find that the rates on sugar may lawfully be increased by 3 percent. No objection has been raised with regard to the lesser increases on certain rates within the South, which are designed to meet special competitive situations, and we find that those rates may reasonably be increased as proposed.

Limerock and sugar cane pith.-Under the proposal, the rates on limerock and sugar cane pith will be subject to the increases requested on commodities generally. The sugar beet industry, Great Western Sugar Company, and McCarthy Sales Company, Inc., oppose the increase primarily on the ground that transportation costs often exceed the value of the involved commodities, a situation which would be aggravated by a further rate increase. Respondents contend, however, that the costs of transporting these materials have increased, as have costs on other commodities. The carriers further note that present rates on limerock and pith are marginal, and that the increases sought are no greater than on competing commodities. With respect to rail rates on cane pith, respondents presented cost data which indicates that present and proposed rates were below out-of-pocket costs for representative

movements.

Sufficient reason has not been shown, in our view, for exempting these commodities from the general increase; accordingly, a 3percent increase will be authorized.

Corn syrup. The general increase proposed on corn syrup and related commodities (starch, gluten, et cetera) is opposed by the Corn Refiners Association, A. E. Staley Manufacturing Company, and Anheuser-Busch, Inc. Protestants contend generally that increases on these commodities, which are used primarily in processing foodstuffs, will be inflationary. Anheuser-Busch further asserts that corn syrup rates are already at high levels, and that the proposed increase will result in loss of traffic. Should any increase be authorized on these commodities, Anheuser-Busch requests that it be limited to 3 percent within all territories and interterritorial. In reply, respondents point out that prior increases have not had a diversionary effect. The Commission's freight commodity statistics indicate that rail tonnage increased between 1967 and 1971:

The railroads also state that rate reductions have been published where necessary to meet motor carrier competition. For example, there have recently been substantial reductions in rates from the plant of Anheuser-Busch at Lafayette, Ind., to specified Ohio destinations.

Upon consideration of the evidence of record, we conclude that a 3-percent increase within and between all territories will be just and reasonable for application to corn syrup and related commodities. Corn syrup competes with other sweeteners, including beet and cane sugar, and no reason appears why it should not be subject to the same increase authorized on competing commodities.

Construction aggregates.-The railroads request an increase on construction aggregage traffic (sand, gravel, lime, limestone, oystershells) of 5 percent generally and 3 percent between points in the East, with several minor exceptions for specific movements involving annual tonnage rates. Shippers of construction aggregates individually and through their respective traffic conferences and trade associations object to the increases as unreasonable. It is their belief that aggregate shippers and receivers are being required to subsidize the transportation of other traffic. Protestants also assert that, despite prior general increases, the carriers still are not providing adequate service to the aggregates industry. Our views on the issue of service are set forth earlier in this report.

It is also contended that aggregates are low-grade traffic which should bear no increase on only a small increase. The National Sand and Gravel Association points out that the 1971 national average price of sand and gravel was $1.18 per ton, an amount which is less in many cases than the cost of transporting the commodity. If any increase is applied on aggregates, Radcliff Materials, Inc., requests that it be limited to 10 cents per net ton. The railroad respondents reply that present rates on aggregates are at an extremely low level, and that the proposed increases will not result in an undue burden upon the industries involved.

Radcliff states that one of its commodities, oystershells, must be shipped long distances from the oysterbeds at seaboard to inland consuming points, whereas competing products such as indigenous limestone are available in practically all areas of the country. The respondents argue in reply that they are not required to readjust geographical advantages or disadvantages by means of freight rates; they point out that the same increases are sought on oystershells and limestone. Thus, the increase will not result in any change in transportation relationships.

Cowan Stone Company, which mines calcium limestone, complains of frequent increases in its shipping charges, pointing out that the rate applicable to movements in covered hopper cars from its plant at Anderson, Tenn., to Atlanta, Ga., has increased from $2.30 per ton in 1967 to a present level of $3.84 per ton. If the proposed increases are approved, the rate would be $4.03 per ton, an increase of more than 75 percent in six years. Respondents observe that the number of increases since 1967 has no relevance herein since the present proposal is necessitated by cost increases sustained by the carriers subsequent to the last general increase. The National Industrial Sand Association points to intense competition between producers. It contends market relationships may be distorted by percentage increases. Like the Sand and Gravel Association, this protestant asserts that average shipments of industrial sand move at rates which exceed the unit value of the commodity. Since the average price of a ton of industrial sand has increased by a smaller percentage than freight rates in recent years, increases in rail freight rates can affect the market area served by a company's operation. The Association also maintains that the increases proposed will result in diversion of industrial sand tonnage from the rails to other modes of transportation. It is stated that, as recently as 1967, 75 percent of the industrial sand industry's tonnage moved by rail. Today, according to protestant, that figure is 65 percent. A maximum of 25 cents per ton is requested to encourage long-haul movements and to maintain competitive relationships within the industry.

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The value and transportation characteristics of these commodities are reflected in the underlying rate structure. Although a 5-percent increase might be unreasonable in view of the low value of the considered aggregates, it cannot be found on this record that percent increase will result in rates in excess of maximum reasonableness. As we have pointed out in our discussion of other commodities, motor carrier rates have also risen, and it appears to