Characterizing reshipping rates as "proportional rates on agricultural products of low value and heavy average loading", respondents compare the ton-mile and car-mile yields there from on wheat and corn, using the average carload weights given above, with the minimum revenues under local rates determined in certain proceedings, some of which apply in territory rated higher than official territory, in order to demonstrate that the reshipping rates would be compensatory. The probative value of these comparisons is dubious. In 11 of the 12 reports cited, the rates instanced were authorized upon fourthsection applications for publication over circuitous routes, whereas herein the earnings are figured over the shortest possible routes, and, in connection with the former, minimum weights are used, but heavy average weights are used with the latter. All such reports were made prior to the general increase of 1938, whereas these rates were proposed thereafter. If that increase were applied to the earnings instanced, not one of them would be as low as proposed on barley from Chicago to Norfolk. A better showing of earnings is made in respect of the total rates, including the reshipping rates, from country origins via Chicago to the ports, but the comparisons are likewise impaired by some of the infirmities given above.

No attempt was made by respondents to determine actual costs for handling this traffic. They did show, among other data, that for 1938 the averages on the entire business of all class I railroads in the eastern district were: Expense per loaded-car mile 17.629 cents, length of haul 178.26 miles, and load per car 29.29 net tons. However, the average freight revenue was 26.42 cents per car-mile in that year, of which nearly 3 months expired prior to the general increase, contrasted with not much more than half that figure under the proposed reshipping rates but for longer hauls.

The need of respondents, as a whole, for additional revenues is amply proven.

In conclusion respondents declare that their proposal represents the best judgment of themselves and of shippers interested therein that the rates suspended would permit the railroads to share in the important export grain traffic from Chicago and Milwaukee now moving almost entirely over water routes, principally through the St. Lawrence River ports. Their theory is that such rates, regarded as about 2 or 3 cents higher than the all-water rates to Montreal, will induce some movement by railroad of grain needed quickly at the ports to complete a ship's cargo or for ocean-liner ballast. They have immense investments in cars, elevators, and other equipment incidental to the transportation of grain. Their extensive grain-handling facilities at the north Atlantic ports, such as Baltimore, Philadelphia, and New York, are now used to only a fraction of capacity. It is stated

that in the opinion of their traffic executives, the suspended rates would enable the eastern railroads to compete successfully with unregulated water competitors, and the increased traffic expected would help fill unused train tonnage, returning some profit over out-of-pocket

costs.

Although supporting the proposed rates, witness for the Chicago grain dealers frankly states that Chicago will continue using the water routes whenever they are available and there is a demand for grain that can be advantageously shipped over them. While denying that the proposed rates would injure Duluth, he admits that they would help Chicago in competing with Duluth on grain originating in producing territory from which the in-bound rates to these markets are about equal.

The volume of grain exported from the United States varies tremendously. Taking corn, for example, the most important commodity from the standpoint of this proceeding, in some years there is practically no exportation. Only 177,000 bushels were exported in 1935, whereas in 1938 the United States exported more than 147 million bushels. Chicago's witness declared that, compared with 1938, export business in corn was virtually nonexistent in 1939 up to the hearing in July, despite the carry-over of 800 million bushels on July 1, the greatest since 1926. He says that it is difficult to foretell whether any export business will move under the suspended rates or whether there will be any down the lakes, but he perceives some possibilities, if prices are within the export range, in the immense carry-over of corn, and in the July 1 United States Department of Agriculture estimate of corn production in 1939 of approximately 2,500 million bushels, compared with the 10-year average of about 2,300 million. July 1 estimates of 1939 production of different kinds of wheat are somewhat below, and estimates of production of oats about 25 percent below, the 10-year average.

Philadelphia and Baltimore grain and port interests' support of respondents is actuated by the hope that the suspended rates would restore in a measure their former status as substantial exporters of grain grown in the United States, a large proportion of which now finds outlet through the Canadian ports. During the 10-year period ended with 1928 the exports of such grain through the ports of New York, Philadelphia, and Baltimore averaged 98, 35, and 43 million bushels per year, respectively, whereas for the 10-year period ended with 1938 the averages were 4.21, 1.13, and 1.85 million bushels. New York's better showing is attributed to its advantage in using largely the lower-cost lake-canal routes, whereas grain to the other ports moves entirely or partly by rail.

The sharp decline in exports through these and other American north Atlantic ports in relation to the Canadian and Gulf ports is

portrayed by showing United States grain exports for the 12 years ended with 1938, from which the following table is taken. The figures for 1934, 1935, and 1936 are omitted from the table because they are relatively small and are scattered among 8 of the 22 ports, but they aggregate, in millions of bushels, 0.6 through Canadian ports, 3.9 through American north Atlantic ports, and 0.7 through Gulf ports, totaling 5.2 for the 3 years.

United States grain exports, in millions of bushels

1 Early figures for Gulf ports are on the basis of crop years, not calendar years.

Of the grand total for 1938, corn contributed 64.8 percent or 138.7 million bushels, and wheat 28.3 percent or 60.5 million bushels. Oats amounted to only 322,000 bushels, virtually all through New Orleans, La. The balance consisted of rye and barley, 4 and 10.4 million bushels, respectively

Lack of substantial export movement of grain through the ports of Philadelphia and Baltimore during the past 10 years has proven a severe handicap in developing steamship services to Europe. Availability of export grain attracts in-bound ocean tonnage in that it affords out-bound cargoes and desirable bottom loadings or ballast.

Capacities of Philadelphia and Baltimore elevators, all owned by railroads, are 5 and 12.75 million bushels, respectively. They have been 90 percent empty during the past 10 years. Ninety-nine percent of the grain is handled directly from the cars through elevators to

ships alongside, the charge therefor of 0.5 cent per bushel including 20 days' storage.

These interests for many years have called the attention of the eastern railroads to the diversion of United States grain through Canadian ports and have urged reductions in rail rates to the American north Atlantic ports so that the railroads might retrieve at least a portion of this traffic and the ports regain some of their former export business. They succeeded in 1929 in obtaining a reduction in the "at-and-east" rates from Buffalo. The rates herein proposed are said to represent a belated attempt of these railroads to readjust rates to a level calculated to meet the average costs of moving the grain over unregulated water routes from Chicago and other western lake ports to St. Lawrence River ports.

Contradicting protestants' contention that the suspended rates will disrupt market relations, these port interests point out that Duluth still would have available lake-canal rates to New York, which exporters will use on a saving of 1 cent per bushel if time permits, and all-water rates to St. Lawrence River ports, lower than the all-rail reshipping rates proposed. This is based on a comparison of the reshipping rates from Chicago with the average seasonal rates and incidental charges indicated on wheat for the past 16 years from the head of the lakes by lake-rail, lake-canal, and all-water, from which the data for the years given in the table below are taken:

Rates and incidental charges per bushel on wheat

1 Philadelphia 0.3 cent higher; New York 0.9 cent higher. Philadelphia same as Baltimore; New York 0.3 cent higher. Includes average lake rate, marine insurance 0.25 cent, brokerage, 0.25 cent, and "at-and-east" (ex-lake) rail rate, which includes elevation charge of 1 cent per bushel.

♦ Includes average lake rate, marine, insurance 0.25 cent, brokerage 0.25 cent, elevation charge at Buffalo 1 cent (except 1928 to 1936, inclusive, when charge was 0.5 cent), canal insurance 0.2 cent, and average canal rate.

Includes average through water rate, marine insurance 0.25 cent, brokerage 0.25 cent, and a proportion of export elevation charge of 0.6 cent per bushel.

Reflects difference between columns B and C.

7 Reflects difference between columns B and D.

Effective October 21, 1938.

• Includes rate herein suspended.

10 Preliminary for first 2 months of 1939 navigation season.

Regarding Duluth's assumption that the lake freight cost is likely to go much higher than the 5 cents per bushel prevailing early in the 1939 navigation season on wheat, reference is made to the cost in previous seasons, which for the five immediately preceding averaged 5.36 cents. Observing from protestants' exhibits that the lake and allwater rates from Duluth are generally about the same as from Chicago, it is argued for the Atlantic ports that both these lake ports as well as Minneapolis would continue on a practical equality to draw from country points in the competitive grain-growing area, and that the suspended rail rates, being somewhat higher than those over the partwater or all-water routes, would not seriously affect the competitive situation between these markets.

Philadelphia and Baltimore assert that only a share of the grain can be expected to move under the suspended rates if they are permitted to become effective, and that there is no possibility of the water carriers' losing the greater bulk of their tonnage to the railroads. Protestants contend that the proposed rates would be unduly prejudicial to Minneapolis and Duluth and less than reasonable, and would provoke a rate war. They say that these grain markets compete with all others, including Chicago, Milwaukee, Peoria, and St. Louis, and under existing rates draw grain from highly competitive territory which is placed in the export trade by shipping over the Great Lakes from Duluth. The in-bound rail rates, those to Duluth applying via Minneapolis, and the out-bound water rates are now on a basis fairly related to Chicago. However, if the proposed all-rail reshipping rates are permitted to become effective, the competing markets named above and related points will be in position to ship at low water or water-rail transportation costs to Atlantic ports during the season of navigation on the lakes, and by rail during the winter months at practically the same costs. In other words, the advantage of rates adjusted to meet water transportation costs would be available to these competing markets, of which only Chicago and Milwaukee are lake ports, after the close of navigation. That is, rates would be applicable under transit rules on all grain received in transit houses during the effective period of the reshipping rates if reshipped within a year, or 2 years by permissible extension. No similar water-competitive rates are proposed from Minneapolis, Duluth, and Superior.

Abnormally heavy exports of United States corn in 1938, owing to the Argentine crop failure that year, none of which moved by rail to Atlantic ports, is believed by protestants to have induced the eastern railroads to make the 6-cent reduction in reshipping rates on October 21, 1938, and to propose the 4-cent further reduction herein suspended when the expected movement by rail did not materialize. They criticise respondents for accepting 1 year's experience as warranting un