The assumption that phosphatic sand and clay are, for practical commercial purposes, the same commodity, appears to be in error. While the sand continues to be used as an aggregate, moving almost exclusively to intrastate destinations, the clay moves in long hauls, mostly to destinations outside of southern territory, some as far away as the State of Washington. This wide movement would indicate that phosphatic clay has qualities as a soil conditioner which are not available in locally produced ground limestone fertilizers with which the protestants claim it competes. Moreover, the clay has uses in the chemical trade, and consignees include a mineral company, a yeast company, and various feed and grain mills. No showing has been made that phosphatic sand, on the other hand, can be used for the same purposes as clay. From the foregoing, we are persuaded that there is a significant difference in the characteristics of the two commodities and that under the circumstances there is no good reason for requiring the respondents to treat phosphatic clay as if it were basically an aggregate competing with other aggregates, such as, phosphatic sand.

The 10-cent per net ton flat increase sought by the protestants on phosphatic clay is the same as that now in effect on phosphate rock. However, it is not claimed that these two commodities compete with each other. Furthermore, while phosphate rock is subject to substantial water and truck competition, the respondents appear to encounter no competition in the handling of phosphatic clay. Another important consideration as to why the increase on phosphate rock has no bearing on the reasonableness of the increase on clay is the fact that while the average loading of the rock is about 66 tons per car, that of the clay is only 40 tons per car.

Clay. Clay producers in Georgia and South Carolina have protested the increase on their commodity of 3 percent, with a 2 cent per 100 pounds maximum. While they do not question respondents' need for additional revenues, they claim that the selective increase on clay is unfair and that if this product is not exempted from increase their ability to meet the competition of imported clay will be impaired.

The protestants show that as a result of various ex parte proceedings since 1946, the cost of shipping clay by rail has increased 200 percent or more in some cases, over 100 percent in a few cases, and 70 percent or more in many cases. However, the significance of this showing is not clear since there has been no attempt to compare these increases with the trend of increases in rates generally or with the increases in the operating costs of the railroads. Although they claim that there has been discrimination against clay in the manner in which the increase thereon was allocated, e. g., increases have not been published on commodities susceptible to truck competition, the protestants have not shown what alternative is open to the rail carriers for obtaining the additional revenue needed by them. Presumably the rates on traffic susceptible to truck competition could be increased only at the risk of diversion, which would make the respondents' plight even worse, and which would make necessary even greater increases in the rates of other commodities, including clay. Thus, the allocation of of increases only to commodities which at present move largely by rail is the only practical source of additional revenue.

If an adjustment of rates on this commodity is deemed necessary later to meet the problem of particular competitive situations, that can and should be handled in connection with the specific fact situations that may arise and not in connection with the present general rate increase proceeding. In the face of the need of the carriers for additional revenues, the increase on clay is not excessive.

Conclusion. We conclude that the rates in this category may justly and reasonably be increased as proposed.

IV. Products of Forests

In the prior report herein, we considered respondents' proposals to increase rates on resin, turpentine, lumber, and related articles by 2 percent; logs, butts, bolts, fuel wood and specified products of forests by 10 percent, maximum 3 cents; and to make no increase on pulpwood. We found that the 2-percent increase would not adversely affect the lumber industry and that there was no probable cause for suspension of any of the respondents' proposed rate increases on products of the forests, but ordered an investigation of the entire adjustment and particularly the problem of whether a holddown or maximum increase of 2 cents per 100 pounds should be authorized on lumber and related articles.

Lumber.-Southern and southwestern lumber shippers do not oppose the 2percent increase on lumber, but vigorously object to any holddown, while the western lumber producers oppose the rate increase and strenuously urge that a holddown of 2 cents per 100 pounds is necessary to prevent widening the present market disadvantage of the west coast producer. A 2-percent increase in the rate on lumber from Spokane, Wash., to Chicago, Ill., amounts to but 75 cents per 1,000 board-feet (Mbf). In the first 4 months of 1958, the f. o. b. mill price of Ponderosa Pine, including the 2-percent increase plus the freight charges Spokane to Chicago, amounted to $116.73 per Mbf. The rate increase is only 0.6 percent of the delivered price. Similarly, on a shipment of lumber from Alexandria, La., to Chicago, the 2-percent increase is 50 cents per Mbf, representing only 0.42 percent of the 1957 delivered price of southern pine, which was $119.15 per Mbf.

On brief, the western lumber interests refer to the fact that we have authorized holddowns on lumber in the past and cite in part Ex Parte No. 206 (300 I. C. C. at page 686) as follows:

"Considering this impact of certain adjustments upon others, and mindful of the Hoch-Smith Resolution and the legislative mandate, we shall authorize lower increases or apply holddowns where the evidence warrants."

We affirm that principle but a thorough analysis of all the pertinent evidence in this proceeding will not support the requirement of a holddown on the modest 2-percent rate increase on lumber and related articles.

Logs. Further investigation of the movement of logs, butts, and bolts confirms the fact that those articles move for short distances at low rates, mostly in intrastate commerce. The level of railroad rates appears to have very little effect on the diversion of logs to trucks; it is the flexibility of truck movements, both regulated and not regulated, that has increased the volume of truck carriage of forest products. Some shippers argue that the increase in rates on logs in all territories but the South, constitutes prejudicial treatment and destroys rate relationships. The answer is that there has never been any prescribed relationship between the rates on logs within southern territory and within other rate territories. Another contention is that the failure of respondents to increase rates on pulpwood is prejudicial to saw log shippers. Saw logs are substantially more valuable than pulpwood. Timber too small. and too poor to be manufactured into lumber is designated pulpwood which is converted into pulp for papermaking. Saw logs are not in market competition with pulpwood; therefore, to increase rates on one and not on the other, does not result in unlawful discrimination.

The assumption that phosphatic sand and clay are, for practical commercial purposes, the same commodity, appears to be in error. While the sand continues to be used as an aggregate, moving almost exclusively to intrastate destinations, the clay moves in long hauls, mostly to destinations outside of southern territory, some as far away as the State of Washington. This wide movement would indicate that phosphatic clay has qualities as a soil conditioner which are not available in locally produced ground limestone fertilizers with which the protestants claim it competes. Moreover, the clay has uses in the chemical trade, and consignees include a mineral company, a yeast company, and various feed and grain mills. No showing has been made that phosphatic sand, on the other hand, can be used for the same purposes as clay. From the foregoing, we are persuaded that there is a significant difference in the characteristics of the two commodities and that under the circumstances there is no good reason for requiring the respondents to treat phosphatic clay as if it were basically an aggregate competing with other aggregates, such as, phosphatic sand.

The 10-cent per net ton flat increase sought by the protestants on phosphatic clay is the same as that now in effect on phosphate rock. However, it is not claimed that these two commodities compete with each other. Furthermore, while phosphate rock is subject to substantial water and truck competition, the respondents appear to encounter no competition in the handling of phosphatic clay. Another important consideration as to why the increase on phosphate rock has no bearing on the reasonableness of the increase on clay is the fact that while the average loading of the rock is about 66 tons per car, that of the clay is only 40 tons per car.

Clay. Clay producers in Georgia and South Carolina have protested the increase on their commodity of 3 percent, with a 2 cent per 100 pounds maximum. While they do not question respondents' need for additional revenues, they claim that the selective increase on clay is unfair and that if this product is not exempted from increase their ability to meet the competition of imported clay will be impaired.

The protestants show that as a result of various ex parte proceedings since 1946, the cost of shipping clay by rail has increased 200 percent or more in some cases, over 100 percent in a few cases, and 70 percent or more in many cases. However, the significance of this showing is not clear since there has been no attempt to compare these increases with the trend of increases in rates generally or with the increases in the operating costs of the railroads. Although they claim that there has been discrimination against clay in the manner in which the increase thereon was allocated, e. g., increases have not been published on commodities susceptible to truck competition, the protestants have not shown what alternative is open to the rail carriers for obtaining the additional revenue needed by them. Presumably the rates on traffic susceptible to truck competition could be increased only at the risk of diversion, which would make the respondents' plight even worse, and which would make necessary even greater increases in the rates of other commodities, including clay. Thus, the allocation of of increases only to commodities which at present move largely by rail is the only practical source of additional revenue.

If an adjustment of rates on this commodity is deemed necessary later to meet the problem of particular competitive situations, that can and should be handled in connection with the specific fact situations that may arise and not in connection with the present general rate increase proceeding. In the face of the need of the carriers for additional revenues, the increase on clay is not excessive.

Conclusion.—We conclude that the rates in this category may justly and reasonably be increased as proposed.

IV. Products of Forests

In the prior report herein, we considered respondents' proposals to increase rates on resin, turpentine, lumber, and related articles by 2 percent; logs, butts, bolts, fuel wood and specified products of forests by 10 percent, maximum 3 cents; and to make no increase on pulpwood. We found that the 2-percent increase would not adversely affect the lumber industry and that there was no probable cause for suspension of any of the respondents' proposed rate increases on products of the forests, but ordered an investigation of the entire adjustment and particularly the problem of whether a holddown or maximum increase of 2 cents per 100 pounds should be authorized on lumber and related articles.

Lumber.—Southern and southwestern lumber shippers do not oppose the 2percent increase on lumber, but vigorously object to any holddown, while the western lumber producers oppose the rate increase and strenuously urge that a holddown of 2 cents per 100 pounds is necessary to prevent widening the present market disadvantage of the west coast producer. A 2-percent increase in the rate on lumber from Spokane, Wash., to Chicago, Ill., amounts to but 75 cents per 1,000 board-feet (Mbf). In the first 4 months of 1958, the f. o. b. mill price of Ponderosa Pine, including the 2-percent increase plus the freight charges Spokane to Chicago, amounted to $116.73 per Mbf. The rate increase is only 0.6 percent of the delivered price. Similarly, on a shipment of lumber from Alexandria, La., to Chicago, the 2-percent increase is 50 cents per Mbf, representing only 0.42 percent of the 1957 delivered price of southern pine, which was $119.15 per Mbf.

On brief, the western lumber interests refer to the fact that we have authorized holddowns on lumber in the past and cite in part Ex Parte No. 206 (300 I. C. C. at page 686) as follows:

"Considering this impact of certain adjustments upon others, and mindful of the Hoch-Smith Resolution and the legislative mandate, we shall authorize lower increases or apply holddowns where the evidence warrants."

We affirm that principle but a thorough analysis of all the pertinent evidence in this proceeding will not support the requirement of a holddown on the modest 2-percent rate increase on lumber and related articles.

Logs. Further investigation of the movement of logs, butts, and bolts confirms the fact that those articles move for short distances at low rates, mostly in intrastate commerce. The level of railroad rates appears to have very little effect on the diversion of logs to trucks; it is the flexibility of truck movements, both regulated and not regulated, that has increased the volume of truck carriage of forest products. Some shippers argue that the increase in rates on logs in all territories but the South, constitutes prejudicial treatment and destroys rate relationships. The answer is that there has never been any prescribed relationship between the rates on logs within southern territory and within other rate territories. Another contention is that the failure of respondents to increase rates on pulpwood is prejudicial to saw log shippers. Saw logs are substantially more valuable than pulpwood. Timber too small. and too poor to be manufactured into lumber is designated pulpwood which is converted into pulp for papermaking. Saw logs are not in market competition with pulpwood; therefore, to increase rates on one and not on the other, does not result in unlawful discrimination.

Mahogany shippers contend that mahogany (foreign wood) should be subject to the same basis as native lumber, that is, 2 percent, instead of 10 percent, maximum 3 cents per 100 pounds. Respondents indicate that they will amend their tariffs to reflect the 2-percent basis when mahogany is provided therein as taking lumber rates. When not so provided, the higher increase will apply. Since Ex Parte No. 123, we have recognized that higher rates may be applied to mahogany lumber than the basis applicable to native lumber. This record does not warrant our interference with respondents' determination to apply the native lumber rate under some circumstances and a higher basis because of other conditions in different territories.

Chemical wood is accorded the same increase as saw logs. It, like saw logs, is short-haul traffic generally moving over branch lines at relatively low rates which can fairly contribute proprotionately to the railroads' obvious need for increased revenue.

Conclusion.-Consideration of all the evidence, with the benefit of oral argument, leads us to the conclusion that the moderate increases in rates on forest products established by the respondents will not adversely affect the industry; that such increases are necessary in the interest of the public and national defense in an adequate transportation system; and that those increases are just and reasonable and otherwise lawful.

V. Manufactures and Miscellaneous

Revenuewise the manufactures and miscellaneous commodity group is the most important to the rail carriers throughout the United States. The original rate increases proposed on this traffic were expected to produce $57.2 million additional revenue. By our prior report of February 11, 1958, increases tentatively authorized would produce $56.6 million additional revenue annually, or $600,000 less than sought by the carriers.

Principal opposition to the increases stems from shippers and receivers of 16 articles in this group, most of whom are opposed to any increase, some of whom accede to the necessity for a rate increase but oppose a higher increase on their product than on alleged competitive commodities, while others are against a percentage increase without any holddown because it favors the short-haul shipper versus those who oppose a flat increase or holddown because it favors the long-haul shipper.

Candy and confectionery.—On these articles, the respondents proposed, and we originally approved an increase of 3 percent, maximum 3 cents per 100 pounds. The principal argument of the Confectioners Traffic Association is that candy and confectionery are food products, and that any increase in rates thereon should be limited to the 1-cent increase applied on food products in group No. 763 of X-212 tariff. We find no justification for a relationship of rate increases on candy and confectionery with ordinary food products. Furthermore, as pointed out by the rail respondents, with total sales on candy and confectionery, thus far averaging in 1958 about 3 percent higher than in 1957, the increase authorized by our prior report appears to be having no adverse effect on the rail movement and sales of these articles.

Chemicals, et cetera.-Certain shippers have protested the following increases: 1 percent, maximum 2 cents, on methonol, et cetera; 3 percent on commodity rates on aluminum chloride and aluminum sulphate; 10 percent, maximum 1 cent, on sulphuric, muriatic and hydrofluoric acids; and 10 percent, maximum 3 cents, on charcoal and charcoal briquets.

Opposition to these rate increases are bottomed on the following grounds: (1) They will cause a diversion of traffic from the rails to other modes of