The Western Freight Rate _ Advance Case SUMMARY OF GENERAL RAILWAY TESTIMONY Presented to the INTERSTATE COMMERCE COMMISSION THE WEQARY OF THE APR 3 1926 le LLIN 26 - 753 LIBRARY OF CONGRESS CARD WESTERN RAILWAYS’ COMMITTEE ON PUBLIC RELATIONS Chicago, Illinois THE WESTERN FREIGHT RATE ADVANCE CASE Herewith is presented a condensed summary of the gen- eral testimony submitted by the Western railways to the Interstate Commerce Commission at Chicago, Illinois, Sep- tember 8th to 16th, 1925, in support of their petition for a general five per cent increase in their freight revenues. THE RAILWAYS’ OPENING STATEMENT Statement of R. N. Van Doren The Western railways’ case was formally opened on September 8th with a brief statement as to the carriers’ position made by R. N. Van Doren, vice-president of the Chicago & Northwestern Railway Company and chair- man of the law committee of the Western lines. Mr. Van Doren said in part: ‘‘I thought that it might be advis- able, to clarify the issues with which we are here con- cerned, if at the outset a very brief statement of the railways’ proposed case be presented to the Interstate Commerce Commission. ‘‘It is, we assume, generally understood, that this pro- ceeding is a revenue case, based upon the exigent neces- sities of the Western railways for increased revenues. ‘To the establishment of such necessities and the method by which they are to be supplied, we shall mainly direct our efforts. ‘‘The proof will, we believe, abundantly sustain the alle- gations of the petition that an eleven per cent increase in revenues is necessary to afford these carriers even the minimum of a fair return prescribed by the Interstate Commerce Commission. It is quite evident that unless some substantial relief be afforded, other railroads than those now in the hands of receivers will probably be in similar financial condition. ‘‘Our testimony will disclose the low level of freight rates in the Western territory—low rates in and of them- selves, yet lower still when contrasted with those in other territories. Notwithstanding our greatly increased oper- ating costs, our freight rates are but 29 per cent higher than in 1911. The most rigid economies have been prac- ticed consistent with adequate service and such efficiencies h 51612 have been enforced as have made possible the performance of this service. In the one matter of increased train loading alone, we have produced economies since 1911 which, had they not been effected, would in 1924 have increased our operating costs nearly half a billion dollars. The public has had the benefit of these economies and efficiencies. The amount of increased freight revenues we shall ask in this case will be but a small percentage of the annual savings to the public as the result of these economies. ‘‘While the proof will establish our need for an eleven per cent increase, we shall not at this time ask for the full measure of relief to which we are entitled. We shall ask, not for an eleven per cent increase in freight revenues, but for five per cent. This we are doing for several rea- sons. First and foremost is the emergency of our neces- sity. We need additional revenue and we need it now. We have hoped that by asking for only a minimum we might more promptly and with less opposition obtain this relief which we must have. Perhaps we have been too hopeful. But nevertheless we shall proceed upon the basis of such hope in the belief that when our case is made the reasonableness and moderation of our demand will recelve quite general approval. We are disposed to look to the future with optimism and not seek greater relief at this time. ‘‘As to the generat rate structure investigation called for under the terms of the Hoch-Smith Resolution, which is being considered at this time jointly with our petition for increased earnings, we shall cooperate with the Inter- state Commerce Commission so far as we are able. We shall comply with the order and request of the Com- mission for data relating to that investigation to the extent to which such data is available or can be secured with reasonable effort. This data is being compiled and tabu- lated, and will be submitted at the proper time for use of the Commission. It is our purpose, furthermore, to in- itiate some studies and to submit the results thereof, dem- onstrating, as we believe, the absence of any basis at this time for any special favor or concession to agriculture. ‘“Whatever may have been the economic status of the agricultural industry at and prior to the time of the passage of the Hoch-Smith Resolution—whatever depres- sion may have occurred in its financial condition—such condition and depression have been substantially, and, we shall aim to prove, completely removed, and agriculture has been restored to its economic equilibrium. In fact, 2 for the Western district as a whole, we maintain that agri- culture as an industry and the farming people as a class are in better financial condition today, and have been for many months, than at any time since the war; and that in truth the actual purchasing power of the Western farmer is greater than in pre-war days. ‘Substantially 25 per cent of the ton-mile traffic of the carriers in the Western district consists of agricultural products and live stock. Upon some of the railways the percentage is much higher. With products of agriculture forming so large a proportion of the traffic, no plan of freight levies can be devised in this district which leaves out this large volume of traffic. No plan for advances in freight rates can be evolved, with any reasonable assur- ance of increased revenues to the needy carriers, which does not provide for corresponding increases in rates upon agricultural products. ‘‘A goodly number of the railroads in the Western dis- trict are in granger territory. Many of the railroads are strictly granger roads. We believe that we are per- forming a valuable service in this territory. For that service we are entitled, both in law and in morals, to a fair return. We could almost hope, under present con- ditions, for cooperation with rather than opposition to the petition which we have filed.’’ | THE PRESENT SITUATION OF THE WESTERN RAILWAYS Testimony of L. E. Wettling Following Mr. Van Doren’s- opening statement, the rail- ways’ detailed case was commenced by L. E. Wettling, manager of the Statistical Bureau of the Western Lines. Mr. Wettling discussed at considerable length the present financial and operating conditions of the railways in the Western district. His statistics cover Class I railways - alone. The first general subject which the witness took up was the rate of return earned by the railways in the various districts since 1921. These figures appear below, covering the Class I railways in the Eastern, Southern and Western districts and the United States as a whole from 1921 to 1924 and for the first six months of 1925. Class I switching and terminal companies are included. 3 Rate of Return Earned on Property Investment as of the Beginning of the Year First six months District 1921 1922 1923 1924 1925 Eastern Vas. oo. 2.85% 3.54% 4.85% 4.53 % 5.10% SOUtHErMA. ie. ea te Zoe 4.33 5.02 HN. 20 5.0D Westernes ivo...05. 38.12 3.45 3.96 3.87 od United States .....2.91 3.60 4.48 4.33 4.46 (Note: The figures for the first six months of 1925 are on an annual basis. ) In 1921, the return earned by the Western roads was higher than that earned in either the Eastern or Southern district. Since 1921, however, the situation has been re- versed. These figures reflect the low relative earnings of the Western lines as compared with the railways in the Eastern and Southern districts and show, further, the effect of the general freight rate reductions made by the Interstate Commerce Commission, the reductions be- ing materially greater in the West than in the other dis- tricts. Comparing the Western district with the remainder of the United States, it appears that in 1921 the Western railways earned 3.12 per cent upon their property invest- ment while the railways for the rest of the country as a whole earned 2.74 per cent. For subsequent years the figures are as follows: Rate of Return Earned on Property Investment as of the Beginning of, the Year 19222) Western railways. -2./)4..00 9: einen oe 3.45% Other: railwHys le 0 tokyo eae eee 3.71% 1925.1... Western -TallWways oa. os ae ees ee 3.96% Other ‘railways’. 2.) eee pers eee ee ae 4.88% 1924." Western railways* 2.0.0: ain. \ ce. aa ol eee 3.87% Other: railways \iai.)e tes Ook eee nee eae ete 4.67% These figures indicate clearly that the Western roads are not permitted, because of the relatively low level of their freight rates, to earn a rate of return as high as that received by the railways in other sections of the country. In 1921, only one Western road or system earned 6 per cent or more upon its property investment. In 1922 only three. roads or systems, in 1923 only seven roads or systems and in 1924 only three roads or systems in the West earned 6 per cent or over on their investment. 4 The following table shows for each year from 1921 to 1924 the number of Western roads or systems earning 6 per cent or more, earning from 5 to 6 per cent, from 4 to 5 per cent, etc., on their property investment as of the beginning of the year. Number of Western Roads or Systems Falling Within Various Earning Classifications { Class 1921 1922 1923 1924 Bepervcent Or Mores: ... os 6.2 1 3 fj 3 PEOROMPCEC CEN ET. oh. 52m ix cy we 3 3 3 Bee Oe OL CONG. 45s on 2. kee, ti 6 6 11 Bree per, Cente sus Piso. ak 3 42 10 9 meee ty eT? COD ti. fess ied 8 7 9 5 Ce OTH CONG. 2./ie/e 6 c's cde 2: 6 5 6 8 Meroe Per ECON ts ¢ Ocrs Wiles Ont 9 5 5 5 PR SAM ee AGN Ct ee SLR, 2 fi 3 5 SOPD SOUS Ss SO Bag A Ae ae 48 48 49 49 These figures show, further, that the Western roads or systems earning 5 per cent or over numbered but three in 1921, six in 1922, ten in 1923 and six in 1924. The aver- age rate of return earned by the roads included in the foregoing table was 2.91 per cent in 1921, 3.42 per cent in 1922, 3.93 per cent in 1923 and 3.86 per cent in 1924. Per mile of line, the property investment of the West- ern railways and the major items in their income account had increased as follows in 1924 as compared with 1911: Taxes had increased 224.93 per cent Operating expenses had increased 95.85 per cent Operating revenues had increased 175.62 per cent | Property investment had increased 25.15 per cent Net railway operating income had increased only 3.48 per cent The present unfortunate financial situation of the West- ern carriers is clearly portrayed by the last two figures just given, wherein it appears that property investment per mile of line had increased more than 25 per cent from 1911 to 1924, while net earnings per mile of line had increased less than 32 per cent. Mr. Wettling next discussed the relative levels of freight rates in the different sections of the country, showing that freight rates in both the Eastern and Southern districts have been increased very much more, relatively, than have West- ern freight rates. For the year 1924 the average receipts 5 per ton mile in the Eastern district were 76 per cent higher than they were in 1911; in the Southern district, 37 per cent higher than in 1911, while in the Western district they were but 29 per cent higher than in 1911. Comparing the first five months of 1925 with the year 1911, it appears that Eastern freight rates have increased 75 per cent, Southern freight rates 36 per cent and Western, freight rates but 26 per cent. | On the basis of 1915, the following increases in freight rates had occurred in 1924: Eastern district 74 per cent Southern district 48 per cent i Western district 38 per cent On the basis of 1917, the following increases in freight rates had occurred in 1924: Eastern district 69 per cent Southern district 49 per cent Western district 47 per cent | On the basis of 1919, the following increases in freight rates had occurred in 1924: Eastern district 23 per cent Southern district 9 per cent Western district 10 per cent That these figures are not affected by disproportionate changes in the average length of haul in the various dis- tricts was shown by the fact that in 1924, as compared with 1911, the average haul per ton of freight had in- creased 14 per cent in the Hastern district, 16 per cent in the Southern district and 18 per cent in the Western district. The Western district, showing the lowest per- centage of increase in average haul, is theoretically en- titled to the highest percentage of increase in the average receipts per ton mile, the general theory being that with the lengthening of the haul, the average receipts per ton mile decrease. Despite the fact that Western rates have relatively fallen far behind rates in the Eastern district, the West- ern carriers have kept pace with the East in the rela- tive increase in tons per loaded car. In 1924, the aver- age tons per loaded car in the Eastern district showed an increase of 22.52 per cent over 1911, while in the Western district the corresponding percentage of increase was 22.47. 6 The increased facilities provided by the Western rail- ways for the service of their patrons were next portrayed briefly by Mr. Wettling in a statement showing the growth in various classes of trackage and in property investment which occurred between 1911 and 1924. Miles of road (first main track) “had in- CCAS BS 4 ek te ree ea iN, Sen tee 11.55 per cent Miles of second main track had increased 90.39 per cent Miles of third main track had increased 60.60 per cent Miles of other main track had increased 66.23 per cent Miles of yard track and sidings had in- BECHECC Fore oN ide Cor Rah ene ek eo te ee 36.53 per cent Miles of all track had increased........ 20.19 per cent Aggregate property investment had in- OLOASOC Dittman inet te ease aks Cue eae 41.38 per cent These figures are striking evidence of the increased facil- ities provided by the railways for the people of the West. Certain traffic averages and operating statistics of the Western roads were next discussed by the witness. Some of the more important of these averages are shown below for the years 1911 and 1924, together with the percentage of increase, 1924 over 1911: Per Cent Item 1911 1924 Increase Freight revenue per freight train PUP Ggee rs Shae’ oni Le ee URN cis Ganens $ 3.16 $ 6.69 111.71 Passenger revenue per passenger PTAC RLS CAs etree eters Fe oh $ a2 ty 1.60 31.15 Passenger train service revenue per passenger train mile........$ 1.48 § 2:13 43.92 Breightscars per ‘trains. ace. ocr 28.74 40.60 41.27 Revenue tons per train........... 336.10 553.54 64.70 Passengers’ per train..a.:..:....5-% 57.41 Bet ee L Passenger train service cars per SEHLIR ANT OLN, seg hae ial aos eee LAY he 5.80 6.43 10.86 Operating expenses per transporta- tion service train mile..........$ 1.63 §$ 3.44 111.04 Taxes per transportation service Ca iite LOM otis.» He ee acds eee $ .09 §$ OU eab.oo All expenses per transportation Berviceqirain “Mile. ee oe ee, $ 1.74 §$ 3.05, 120/12 Wages per transportation service FERATOD NOs ets es Sees a eee 98 § 2.16 120.41 Transportation service car miles Pete COTIPLOVEE ML: ic... base tah gre ort da. ore 12,870 17,568 36.50 Transportation service train miles Pete CMPLOY EC Gir cls Pete snes wae 737.21 (37.79 .08 d Decrease. The significant figures in the foregoing summary are: From 1911 to 1924 freight revenue per freight train mile increased 111.71 per cent; passenger train service revenue per passenger train mile increased 438.92 per cent; while per transportation service train mile, both freight and passenger, operating expenses increased 111.04 per cent; taxes increased 233.33 per cent, and all expenses increased 120.12 per cent, a much higher percentage of increase than occurred in revenues. The foregoing figures show a saving to the public in 1924, due to efficiencies in operation made since 1911, of more than half a billion dollars due to one item alone. Revenue tons per train were 553.54 in 1924, and 336.10 in 1911. If the Western railways had been loading their trains in 1924 only to the amount of the 1911 loading, it would have required 404,736,900 train’ miles to handle the. 1924 traffic, instead of the 245,744,898 train miles actually run in 1924. This means that increased train loading in 1924 resulted in a saving of 158,992,000 train miles, which at $3.83 per train mile, means a money sav- ing of $609,000,000. Discounting this total by as much as 25 per cent on account of possible fuel and main- tenance savings still leaves a saving in operating expenses of more than $450,000,000. Five per cent of the 1924 freight revenue of the Western railways amounts approxi- mately, to $82,000,000, so the annual savings to the pub- lic from the one item of heavier train loading alone are more than five times the amount of the rate increases now requested. Mr. Wettling next compared the operating revenues and expenses of the Western roads in 1924 and 1916. Com- paring 1924 with 1916, Western railway operating rev- enues have increased 53 per cent. Operating expenses have increased 81 per cent, and taxes have increased 102 per cent, both materially higher than the percentage of increase in revenues. As a result, the net railway oper- ating income decreased 19 per cent. Putting the foregoing figures on an average per mile of road the following situation appears: Increase, 1924 over 1916 . Account 1916 1924 Amount Per Cent Operating revenues ..$11,240.00 $16,700.00 $5,460.00 48.58 Operating expenses .. 7,082.00 12,490.00 5,408.00 76.36 PASES yee POR peor 556.00 1,093.00 537.00 96.58 Net railway operating INCOM. Gh Ade eee 3,530.00 2,795.00 Dec. 735.00 Dec. 20.82 8 Per thousand train miles the figures are as follows: Increase, 1924 over 1916 Account 1916 1924 Amount Per Cent Operating revenues .. $2,875.00 $4,595.00 $1,720.00 59.82 Operating expenses .. 1,811.00 3,436.00 1,625.00 89.73 OME Ears Sty sk cs 142.00 301.00 159.00 111.97 Net railway operating canis aie ys 903.00 769.00 Dec. 134.00 Dec. 14.84 The following figures present the financial situation in 1916 and in 1924 per thousand car miles: Increase, 1924 over 1916 Account 1916 1924 Amount Per Cent Operating revenues .. $141.50 $212.04 $70.54 49.85 Operating expenses .. 89.15 158.58 69.438 77.88 BACON Coord Sl ec kes w eee 7.00 13.88 6.85 97.86 Net railway operating BRIG Lie. os oo Ans cde 44,43 35.49 Dec. 8.94 Dec. 20.12 Property investment of the Western railways on De- ecember 31, 1924, was $9,900,773,458. In 1916, at the end of the calendar year, the investment was $8,159,292,775. There was thus an increase from 1916 to 1924 of $1,741, 480,683. The net railway operating income in 1924 was $371,504,260. In 1916 it was $456,049,664. 1924 thus shows a decrease below the 1916 net earnings amounting to $84,545,404. The rate of return on property invest- ment was only 3.75 per cent in 1924 as compared with a return of 5.59 per cent in 1916. The 1924 earnings amounted to a 53 per cent return on only $6,460,943,452 of property investment or on less than two-thirds of the money invested in the Western railways. Had the 1924 net been increased by 5 per cent of the total freight revenues in that year, the result- ing net railway operating income even then would have been short of the earnings in 1916, notwithstanding the very large increase in investment and would have amounted to a return of 5.56 per cent on the 1916 investment, con- trasted with the 5.59 per cent actually earned in 1916. Had the 1924 net railway operating income been increased by 5 per cent of the total freight revenues, this increased net would have produced a fair return on only $7,890,- 910,261 of property investment, leaving $2,009,863,000 of property investment receiving no return whatever. The losses in freight revenues’ which the Western rail- ways have suffered since 1920 were next discussed by Mr. Wettling. In August, 1920, freight rates in Western ter- 9 ritory were increased, on the average, approximately 32 per cent, this increase being necessary to establish a rate level calculated to yield the Western railways a fair re- turn. Immediately after this increase, however, down- ward readjustments were effected which have continued to the present time, augmented materially by the general freight rate reductions made by the Interstate Commerce Commission in 1922. On the basis of the increased rates established in August, 1920, it is estimated that the aver- age receipts per ton-mile of the Western railways under those rates were 1.449 cents. In 1921 this figure had been reduced to 1.422 cents; in 1922 to 1.292 cents; in 1923 to 1.228 cents and in 1924 to 1.209 cents. These downward readjustments and the general rate reductions have resulted in the following losses in freight revenues to the Western lines below the earnings which they would have had if the rates established in August, ’ 1920, had remained in effect: Losses in Revenue Due to Freight Rate Reductions Below Rate Level Fixed in August, 1920 Percentage Loss in of reduction in Year Freight Revenue’ gross freight revenues LOZ ica rs Tee nee $ 29,337,687 1.85 3 papa IMS AR IRAE, chy 186,061,493 ; 10.76 POR ar sata caar ns 302,845,567 15.12 AD 92 Sis ARR ae Ay oa a 326,598,358 16.48 Total 4 Years... .$844,843,105 It appears that in the last four years Western shippers have been saved an aggregate of approximately $845,000,000 due to reductions in freight rates below the level established by the Interstate Commerce Commission in August, 1920, as calculated to yield the railways a fair return. Further, it appears that present Western freight rates are more than 16 per cent below this fair return level. Mr. Wettling next presented statistics showing the rela- tionship of the freight revenues on agricultural products of Class I roads in the United States to the net value of those products at the farm, plus the freight to the point of consumption. The statement showed, contrasted with 1921, an increase of $956,000,000 (excluding crops fed to animals) in the net farm value of agricultural products in 1922, an increase of $2,128,000,000 in this value in 1923 10 and an increase of $2,188,000,000 in 1924. The percentages of increase in the net farm value of agricultural products over 1921 are 9.36 per cent in 1922; 20.83 per cent in 1923, and 21.42 per cent in 1924. The total freight revenues received by the railroads of the United States from the transportation of farm products were $887,701,000 in 1922; $832,604,000 in 1923, and $866,157,000 in 1924. The ratio of these freight charges to the net farm value of agricultural products, plus the freight to the point of consumption, was 7.386 per cent in 1922; 6.382 per cent in 1923 and’6.53 per cent in 1924. The ratio of the increased net farm value of agricul- tural products for 1922 over 1921 to the freight charges thereon in 1922 was 107.7 per cent. The ratio of the increased net farm value for 1923 over 1921 to the agri- cultural freight charges in 1923 was 255.6 per cent. The ratio of increased net value of farm products for 1924 over 1921 to the freight charges thereon in 1924 was 252.6 per cent. In other words, the increase in the net farm value of agricultural products in 1924 as compared with 1921 was more than two and one-half times as great as the total freight charges paid on these products in 1924. Mr. Wettling’s final table presented a comparison of certain financial and operating statistics for the Western railways, comparing the calendar year 1924 with the average results for the test period (the three years ended June 30, 1917). Comparing 1924 with the test period average the following facts appear: Gross Tevenues. inCreased....vecscccceeasiocecs 63.37 per cent Operating expenses, including rentals, increased. 91.83 per cent PL OSMLIMeE GR SEM May Use oie ab alhls cela e ate Sieve dae ae eee 104.23 per cent Net railway operating income decreased........ 7.23 per cent Transportation train miles decreased.......... 1.39 per cent Transportation car miles increased............. 17.69. per cent PROUEAL CA OANCT CA SEU Cd ag isha crecdicl bib viel see Gabe bl as 21.55 per cent Mr. Wettling next quoted the following statement made by the Interstate Commerce Commission’s Bureau of Sta- tistics: ‘“‘If the man-hour cost is assumed to have increased 119 per cent, the material prices 74.5 per cent and if de- preciation, retirements, insurance and pensions are assumed to have remained unaffected by these influences, the total operating expense of $4,994,000,000 (including equipment and joint facility rents) stated in terms of test period dollars is reduced to $2,641,000,000 and the weighted aver- age increase in the railroads’ cost of living would be 89 11 per cent for the calendar year 1923 as compared with the test period.”’ On the basis of this statement the unit cost per net ton-mile, excluding taxes, was calculated for the various districts for 1923, thus putting the 1923 figures on the basis of the test period unit prices and wages. These equated figures, eliminating increases due to higher price and wage levels, show that on the test period cost bases the unit cost per net ton-mile in 1923, as compared with the test period, had been reduced 1.15 per cent in the Eastern district, 8.88 per cent in the Southern district, and 11.16 per cent in the Western district. Statistics were also presented showing for the various districts the changes which have occurred in net railway operating income, comparing 1923 first with the test period average and then with 1916. 1923 compared with the aver- age for the test period shows the following changes in net railway operating income: Increase of $65,000,000 in the Eastern district. Increase of $39,000,000 in the Southern district. Decrease of $34,000,000 in the Western district. 1923 compared with 1916 shows the following changes in net railway operating income: Increase of $ 1,000,000 in the Eastern district. Increase of $10,000,000 in the Southern district. Decrease of $89,000,000 in the Western district. SITUATION OF THE CHICAGO & NORTHWESTERN Testimony of Fred W. Sargent The conditions confronting the Western railways as typified by the situation of the Chicago & North Western Railway Company were presented by Fred W. Sargent, president of that company. The Chicago and North West- ern Railway Company has in every year since the end of federal control furnished its service to the public at a return of less than 4 per cent upon its investment and the experience of the North Western is typical of the Western railways. This situation is caused by the ereat increases which have occurred in the cost of railway operation, in fuel, in wages, in taxes, and in practically every other item ; by the fact that western railway rates have been kept 12 far below the rising tide of their costs; and by the fact that constant new capital expenditures must be made to meet the growing demands of agriculture and industry and to furnish the people of the West with prompt, ade- quate and efficient transportation service. The inereased cost of railway operation is typified by the following figures showing for the years 1913 and 1924 various items of the North Western’s expenditures together with the percentage of increase which has occurred: Per Cent of increase Item 1913 1924 1924 over 1913 Hmployes’ compen- sation per hour..$ 0.2577 $ 0.6149 138.61 Employes’ compen- sation per annum 758.92 1,631.08 114.92 Operating expenses 58,252,780.00 120,536.645.00 106.92 Di) ee ee 3,597,160.00 9,348,842.00 159.90 Average cost oak Gross (lest oy 2 ik lo hos 89.04 Average cost per LODP EAE Se toe 30.13 44.32 47.10 Average cost per COUT eles we oes 2.03 2.70 33.00 The loss in freight revenues to the Chicago & North Western in 1923 and 1924 caused by the general freight rate reductions which have been made is shown below in detail : 1923 Loss Classified Total Revenue lLossin Revenue Commodity For 1923 For 1923 Grain and Grain Products......$ 138,994,718.87 ~ §$ 2,516,944.39 Other Products of Agriculture... 5LT251710 599,987.51 Total Products of Agriculture. 19,167,286.97 4,116,931.90 TES LOCI dcanteharcice Gv), We oee. dete i 9,437,013.42 1,226,811.75 Other Products of Animals..... 4,683,648.67 515,201.39 Total Products of Animals.... 14,120,662.09 4,748.018.14 Deen UME Wee Cee Ae eae fre ae ae UE er 6,827,103.19 1,550,783.25 Other Products of Mines..... . 18,866,152.88 2,075: 216318 Total Products of Mines...... 25,693,256.07 3,626,059.98 Total Products of Forests...... 8,503,058.87 935,336.49 Total Mfrs. & Miscellaneous..... 32,567 ,226.60 3,082,394.99 Total All Carload Freight.... 100,051,440.60 14,002,736.50 PRODALIME Glee erelont.s 555 dele ees 16,424,121.98 1,806,653.42 ‘Male We OAS yh als Ml 0a Oe) igang nem ges 116,475,562.58 15,809,389.92 Intrastate estimated ........... 250,000.00 Otel yearn O28 macys weal. $116,475,562.58 $ 16,059,389.92 13 1924 Loss Classified Total Revenue Commodity For 1924 Grain and Grain Products....... $ 12,649,720.46 Oiher Products of Agriculture... 4,787,130.33 Total Products of Agriculture. 17,436,850.79 TAVe GS GC Skee ore Laer oe 10,031,496.98 Other Products of Animals...... 4,837,308.43 Total Products of Animals.... 14,868,805.41 Trom Or eniah Gree ain: ceed te deus pate 5,008,076.71 Other Products of Mines........ 16,319,946.27 Total Products of Mines...... 21,328,022.98 Total Products of Forests...... 7,956,952.91 Total Mfrs. & Miscellaneous.... 29,512,507.68 Total All Carload Freight..... 91,103,139.77 TotaliGh CL vEreightain cos. 15,526,560.99 Total) Cand (Cie ticks 106,629, 700.76 Intrastate estimated ........... Total Very 1O24 oes, as cobs. $106,629,700.76 Loss in Revenue For 1924 $ 3,102,502.59 554,881.56 3,657,384.15 1,304,094.61 532,103.93 1,836,198.54 1,133,975.13 1,795,194.09 2,929,169.22 875,264.82 3,246,375.84 ~ 12.544,392.57 1,707,921.71 14,252,314.28 225,000.00 $ 14,477,314.28 The Western railways have been furnishing their patrons with the best transportation service they have ever known. The activities of the management of the Chicago & North Western Railway Company toward efficient and economi- cal operation are reflected in part in the Economies and Efficiency following data: Ratio Increased Efficiency 1913 1924 to 1913 Tractive Power of Locomo- tives (Aggregate) ...... 44,920,410 73,054,200 162.63% Tractive Power of Locomo- tives (Per Locomotive). . 26,086 Carrying Capacity Freight 34,557 182.47%, 41.2 117.71% 19.7 107.07% 28.5 121.138% _ 444 126.50% 1,295 181.87% Cars (Aggregate) Tons.. 2,114,945 2,838,879 134.23% Carrying Capacity Freight Oars) (Per: Car yoy, im aes 35.0 Revenue Tons per Loaded COAT fi varnvicee fait ar tlecw nei a. senate 18.4 Car Miles per Car per Day. 19.4 Tons per Train (Net), Rev- enne Bréight: 3) ees eas 351 Tons per Train (Gross).... 982 Locomotive Miles per En- Pine BLUES eit yc nee 2oi2t6 MonthiOt duly, O20 a ee Fuel Consumed per 1,000 69 967 300.58% 165,298 710.13% CE MEO ETD St Lae ie aaa 255 178 69.80% Tons Carried of Revenue D Tha 4 EP UMD aC Cle 44,839,071 52,158,316 116.32% Ton Miles of Revenue FOrOHRn Cite, Se sieed tos: ean ee 6,282,916,222 8,290,312,710 181.95% 14 Despite the records which the Western railways have made in the quality of their transportation service, the roads are not being permitted to earn a fair return from this service. This condition has compelled the postpone- ment of needed replacements to the railway property, has prevented the undertaking of additions and exten- sions to the railway plant, which would mean much to the people of the West, has necessitated reductions in the operating forces beyond the point of reasonable economy, and has deprived the railway stockholders of reasonable dividends upon their investments. All of these unfortunate conditions have a direct and depressing relation to the prosperity of the communities served by the Western railways and of the citizens of these communities, and, further, to the economic welfare of the countless persons, industries and mercantile activ- ities which depend upon the railways for part or all of their income or which receive the business of the rail- ways or of their employees. A reasonable increase in freight rates will act in a num- ber of ways to correct this situation. Such an increase will permit the railways to stabilize the employment of their men and to expand the forces employed in main- tenance work; it will allow the roads to purchase the materials and the equipment necessary to operate and maintain the properties if the present standard of service is to be continued; it will enable the carriers to partici- pate properly in community enterprises for improvement and expansion; and it will give fair and reasonable divi- dends to the investors in railway stocks, including the banks, the colleges, the insurance companies and the vari- ous other classes of railway stockholders whose welfare is the welfare of the people in general. All this will in- erease the buying power of the roads, of their employees, of their stockholders, and of all those dependent upon them, thereby producing greater prosperity in general, and enlarging the home market for American production, both agricultural and industrial. To cite a specific illustration, in the fiscal year ended June 30, 1925, 193,000,000 bushels of wheat were exported from this country, while in the same year the estimated American under-consumption of wheat was 206,000,000 bushels. This home under-consumption could be mate- rially reduced, with accompanying financial advantage to the American farmers, if the general purchasing power ef our working population was raised. The per capita 15 wheat consumption in this country in the fiscal year 1925 was but 4.15 bushels, while in fourteen of the fifteen years immediately preceding this country’s entrance into the World War, the average consumption per individual was well over five bushels a year, running, indeed, as high as 6.04 bushels in one year. Present wheat consump- tion per individual can be raised to the pre-war level, and above, by an increase in purchasing power. A reasonable increase in Western freight rates will immediately increase the purchasing power of the Western railways, of their employees, of their stockholders, and of all those depend- ent upon them, thereby producing greater prosperity in general, and enlarging the home market for American agri- cultural production. Finally, a reasonable increase in freight rates will guar- antee for the West the maintenance of an adequate system of transportation, a fundamental necessity for individual and national prosperity and welfare. As it is, the con- tinuation of the present adequate transportation service in the West is seriously threatened by the present low level of Western railway earnings, which, in turn, are the result of the depressed level of Western freight rates. It is evident, therefore, that every factor which may be considered shows at the same time the necessity of and the justification for an increase in the earnings of the Western railways. SITUATION OF THE NORTHERN PACIFIC Testimony of Charles Donnelly Charles Donnelly, president of the Northern Pacific Railway Company, testified as to the conditions confronting his line. In no year since the passage of the Transpor- tation Act has the Northern Pacific earned a fair return. At the end of the year 1924 the company’s investment in road and equipment, materials and supplies and work- ing capital amounted to $588,000,000. Upon this in- vestment it had a return for the year 1924 of 3.37%. Its return on investment for the four preceding years was 1.44% in 1920, 1.93% in 1921, 3.47% in 1922 and 2.93% in 1923. Argument is unnecessary to prove that this return is inadequate. The explanation of this inadequacy is not to be found in any shortcomings of the property consid- 16 ered as a transportation agency, or in any extravagance of outlay in connection with its operation. The physical condition of the property as regards both roadway and equipment is good. It has been well, though in no sense extravagantly maintained. It is capable of rendering, and is actually rendering, efficient service at unit operating costs which will bear comparison with those prevailing anywhere. The single explanation why the return is inade- quate is that freight rates are too low. In the year 1924 the freight rate level of the Northern Pacific as measured by the average receipts per ton mile, -had increased approximately 33 per cent over 1913. With this 33 per cent increase in freight rates, we have had to face increases in our expenses of a vastly greater amount. Our taxes which in 1913 were $4,000,000 were $8,500,000 in 1924. The wages which we paid to employees have increased from 26 per cent in some instances to 193 per cent in others. The cost of locomotives has increased 134 per cent; of coal, 46 per cent; of rails, 44 per cent; of locomotive tires from 75 to 99 per cent; of car axles, 100 per cent; and so on down the entire list. In connection with this increase in taxes and expenses I wish to draw attention to the very great decline in our passenger business, a situation which I do not think is going to improve. The short haul passenger business is more and more going to the bus and private automobile, and, sp far as I can see, there is little likelihood of its ever being recovered by the rail passenger carriers as such. In 1919 we had passenger revenues amounting to $20,000,000. In 1924 that had shrunk to $13,000,000. As far back as 1914 we carried 9,336,000 passengers. In 1924 ‘we carried 3,607,000 passengers. Our average haul per passenger (this being the best index of the extent to which we are losing the short haul business) has risen from 67 miles in 1914 to 114 miles in 1924. If we had been able in connection with the great loss of passenger business, to make a corresponding reduction in passenger train mileage, it would not have been so bad. However, the character of passenger service is not a func- tion of operation as to which the management has an ade- quately free hand. We cannot, for example, in the state of Minnesota, take off a passenger train without getting permission of the regulating authorities to do so. The 17 obligation to render the service is there. It cannot be escaped. In consequence, whereas in 1914 we made 11,230,000 pas- senger train miles, we were able in 1924 to reduce that only to 9,602,000 and that figure has remained practically constant ever since 1916. SITUATION OF THE MINNEAPOLIS & ST. LOUIS Testimony of W. H. Bremner The conditions confronting the Minneapolis & St. Louis Railroad were presented to the Interstate Commerce Commission by W. H. Bremner, receiver of that com- pany. Had it not been for the heavy reductions in freight rates made by the Interstate Commerce Commission since 1920, the Minneapolis & St. Louis Railroad would not now be in the hands of the Court, testified Mr. Bremner. Average freight charges on the Minneapolis & St. Louis Railroad in 1924 were only one-third greater than in 1915, an increase which is totally inadequate when com- pared with the increase in the prices of materials and sup- plies, in taxes, and in the cost of labor. White oak ties, which in 1915 cost 56 cents each, today command a price of $1.22 each, an increase of approxi- mately 116 per cent. Iowa coal, which in 1915 cost $1.89 per ton is today costing us $3.60 per ton, an increase of approximately 90 per cent. Bar iron, which in 1915 cost $1.15 per hundred pounds, cost $2.15 in July, 1925, an increase of 87 per cent. These illustrations might be continued almost indefi- nitely. Everything which a railroad buys has increased in cost in a much greater degree than the increase in the rates at which transportation is sold. Our total payroll in 1924 had increased 119 per cent over 1915, while taxes in 1924 showed an increase of 66 per cent. To offset all these huge increases in prices, wages and taxes, we have but a 33 per cent increase in freight rates. In the year 1915, the Minneapolis & St. Louis Rail- road earned a net railway operating income of $2,588,000, and in 1916, $2,912,000, or approximately 4.8 per cent on its investment. In 1923 it earned only $825,000, or 1.3 per cent on its investment, while in 1924 it incurred a 18 deficit of $960,000. Had freight rates in 1924 been the same as in 1921, earnings in 1924 would have been $1,297,000. The Minneapolis & St. Louis is now generally looked upon, financially, as one of the weaker roads of the North- west. However, only a comparatively short time ago, our stock was selling above par. It will be seen from the fore- going figures that prior to the great changes in the rela- tion between the rates which the railroads were permitted to charge for their services and the cost of the various units necessary to be used in the furnishing of trans- portation, the Minneapolis & St. Louis was in no imme- diate danger of being forced to the wall. Unless the Minneapolis & St. Louis is allowed sufficient income to permit it to be properly equipped and to oper- ate in an efficient manner, a large industrial population, as well as a large agricultural population, will be seri- ously inconvenienced. The only method by which there may be secured the additional revenue needed, not alone by the Minneapolis & St. Louis, but by all the roads of the Northwest, is by an increase in freight rates. I do not look for any sudden increase in the amount of traffic. The Northwest is improving in a business way, but de- velopment is gradual and will not be sufficient for many years, if ever, to permit the railroads to earn a fair return on the present level of freight rates. The stockholders, bondholders and creditors of the Minneapolis & St. Louis are entitled to consideration and should not be compelled longer to devote their money to the service of the public without any compensation whatsoever. INCREASING ADEQUACY OF TRANSPORTATION SERVICE AND IMPROVEMENTS IN_ EFFI- CIENCY AND ECONOMY OF OPERATION Testimony of R. H. Aishton The increasing adequacy of transportation and the re- markable improvement in the efficiency and economy of operation which have been made in recent years were presented in detail by R. H. Aishton, president of the American Railway Association. Mr. Aishton showed that in the past three years capital expenditures of the Class I railways of the United States had amounted to $1,420,- 19 841,252 for new equipment and $942,324,238 for improve- ments and additions to roadway and structures, a grand total of $2,363,165,490. These capital expenditures have probably been the principal factors in the increase in the adequacy of transportation during the past few years. The tangible results of these large expenditures of capi- tal are shown by the fact that in the past three years 2,760 miles of new track have been constructed in the United States, while from January 1, 1922, to August 1, 1925, 8,728 new locomotives and 534,508 new freight cars were put in service on the railroads of the country. During the first 33 weeks of this year the railways have handled the largest'number of cars loaded with freight ever handled in the same period of time. Despite these record-breaking carloadings, with the figures for several weeks past showing more than one million cars loaded each week, there has been at all times a surplus of cars in good order and ready for service in excess of 200,000, and a surplus of locomotives in good order in excess of 4,200. With reference to the increased efficiency and economy of operation which has been produced in recent years, Mr. Aishton presented a number of interesting statistical tables and charts. His first table dealt with the economies which have been made in road fuel consumption in both freight and passenger service. In 1920, for the United States as a whole, fuel consumption per one thousand gross ton miles in the freight service was 197 pounds. In 1924 this had been’ reduced to 170 pounds. This means that for the entire country there was a saving in the freight road fuel bill of $39,022,000 due solely to increased effi- ciency in the use of fuel. This figure is based both on the 1924 freight traffic and on the 1924 average fuel cost per ton. In the Western district alone, the fuel consumption per one thousand gross ton miles in the freight service has been reduced from 198 pounds in 1920 to 168 pounds in 1924, resulting in a saving in 1924 as compared with 1920 of $17,752,000 due to increased efficiency in freight fuel con- sumption. The passenger service presents the same situation. For the United States as a whole, the fuel consumption per passenger train car mile in 1920 was 18.8 pounds. In 1924 this figure had been reduced to 17.0 pounds. This reduc- tion resulted in a saving of $9,905,000, caused by increased efficiency in the use of fuel in the passenger service. 20 For the Western district alone the fuel consumption per passenger train car mile has been reduced from 17.4 pounds in 1920, to 15.8 pounds in 1924 with a consequent saving of $3,899,000 due to increased efficiency in fuel use in the passenger service. This increase in the efficiency of fuel utilization has largely been the result of capital expenditures for im- proved devices on locomotives, of a very active campaign on the part of the railroads and their committees in the American Railway Association, and of the active and in- telligent cooperation on the part of the officers and em- ployees engaged in the handling of fuel. Similar increases in the efficiency of operation are shown in the figures covering loss and damage payments and payments made on account of injuries to persons. For the United States as a whole the figures for 1920 and 1924, together with the amount and percentage of reduc- tion comparing 1924 with 1920, are shown below: Loss and Damage Payments and Payments for’ Injuries to Persons—Class I Railways United States Decrease, 1924 under 1920 Item 1920 1924 Amount Per cent LOSS & DAMAGE Damage to property .. $ 10,048,734 $ 5,351,536 $ 4,697,198 46.7 Damage to live stock..a 7,168,579 3,199,948 3,968,631 55.4 Loss and dam- age, freight. 0119,883,127 c41,251,243 78,581,884 65.6 Loss and dam- age, baggage 810,282 371,256 439,026 54.2 Total loss and damage .... 0$137,860,722 $50,173,988 $87,686,739 63.6 Injuries to persons $ 56,237,476 $39,533,860 $16,703,616 29.7 a@ On right of way. b Includes approximately $15,000,000 of Federal lap over items applicable to prior periods. ce Includes $6,905,901—the approximate amount of additional loss and damage freight expenditures charged to insurance ac- count. ot For the Western district alone the figures are as follows: Decrease, 1924 under 1920 Item 1920 1924 Amount Per cent LOSS & DAMAGE i, Damage to property ... $ 3,722,505 $ 1,711,803 $ 2,010,702 54.0 Damage to live stock ..a 3,887,892 1,786,256 2,101,636 54.1 Loss and dam- age, freight 47,106,714 15,228,196 31,878,518 67.7. Loss and dam- age, baggage 242,621 75,662 ~ 166,959 68.8 Total loss and damage .... $54,959,732 $18,801,917 $36,157,815 65.8 Injuries to persons $24,284,203 $15,782,260 $ 8,501,943 35.0 For the United States as a whole, the number of cars in the average freight train has been increased from 36.6 in 1920 to 41.7 in 1924. Net tons per train have been raised from 708 in 1920 to 715 in 1924, average freight train speed has been increased from 10.3 miles per hour to 11.5 miles per hour and the freight car miles per freight car day have been raised from 25.1 to 26.9. For the Western district alone, the number of freight ears per freight train has been increased from 34.8 in 1920 to 40.5 in 1924, net tons per train have been increased from 610 to 639, average freight train speed has been raised from 11.1 miles per hour to 12.1 miles per hour and freight car miles per freight car day have been in- creased from 28.1 to 28.9. THE RAILWAYS’ DETAILED PETITION Testimony of C. E. Spens Specific details of the carriers’ formal petition were pre- sented to the Interstate Commerce Commission by C. E. Spens, vice-president of the Chicago, Burlington & Quincy Railroad, and chairman of the traffic committee of the Western lines. The Transportation Act of 1920 recognizes and em- phasizes the constitutional guarantees of fair return on a On right of way. 22 property devoted to public uses, delegates authority to the Interstate Commerce Commission to determine the figures that in its judgment will constitute an annual fair return upon the value of railway property, and re- quires the Interstate Commerce Commission to so adjust the level of railway rates that the railways will earn as nearly as possible an annual fair return. For the two years ending March 1, 1922, the annual fair rate of return was determined by the Interstate Commerce Commission as 6 per cent. Subsequently this fair return has been fixed by the Commission at 5% per cent annually. In no year. however, since the passage of the Transporta- tion Act have the Western railways been permitted to earn upon their properties that percentage of annual re- turn specified by the Interstate Commerce Commission as a fair return. The carriers in the Western district, however, have been very reluctant to apply to the Interstate Commerce Com- mission and to the state commissions for relief, and have patiently awaited the fulfillment of the belief expressed by the Interstate Commerce Commission that under efficient and economical management and the anticipated growth of traffic, the shortage in earnings might be overcome. This result has failed to materialize and the carriers, therefore, have concluded that in the interest of the public at large, in the interest of continuous and adequate service and in the interest of the owners of the properties, this applica- tion for some relief has become obligatory. While under the law the carriers are justified in asking an increase that will yield them the fair return to which they are entitled, while the duty of the Commission is to adjust the rate level to produce this fair return as near as may be, and while the formal application of the West- ern railways now on file with the Commission contemplates a. readjustment that will produce the fair return, the car- riers have since decided to modify their original petition. Instead of asking an increase of approximately 11 per cent in their present freight revenues, they do hereby amend that petition by suggesting a very modest increase of approximately 5 per cent. The situation as to the Western railways as a whole has become so acute that in their judgment an emergency exists, and relief should be forthcoming with the least possible delay. Furthermore, the carriers do not suggest an advance that might pos- sibly in any instance affect the free movement of any traffic, although it is their judgment, based on experi- 23 ences connected with advances in the past, that even an 11 per cent increase would not have this result. The greater advance would, however, undoubtedly pro- voke greater opposition, with resultant ereater delay in the decision by the Interstate Commerce Commission, while the lesser advance, we believe, cannot invite legitimate criticism and should lead to a ‘speedy adjustment. It is the hope of the railways that an early grant of this mod- est request, together with favorable consideration in some individual readjustments now pending, coupled with the expectation that there may yet be some expansion of traf- fic, will obviate the necessity for any ftirther general in- creases at this time. Our specific proposal is that there shall be an increase of approximately 5 per cent in freight revenues to be accomplished in the following manner: A horizontal increase of 5 per cent in all existing freight rates except as follows: Rates on grain, grain products, flaxseed and other seeds taking flax or grain rates to the followimg markets: Kansas City, St. Joseph, Atchison, Leavenworth, Nebraska City, Omaha, South Omaha, Council Bluffs, Sioux City, St. Paul, Minneapolis, Duluth and West Superior to be advanced 1 cent per hundred pounds. Proportional rates in effect on these commodities be- tween these markets and from these markets to Chicago, Peoria, St. Louis, East St. Louis and points taking the same rates, also to Mississippi Valley and southwestern destinations and to Gulf Ports and Rio Grande crossings for export to be advanced 1 cent per hundred pounds. Intrastate rates and all other rates on these commodities to be advanced 1 cent per hundred pounds excepting that through rates based on a combination of local and propor- tional rates; also through rates from points west of the Missouri River and from Oklahoma to Mississippi Valley and southwestern destinations and to Gulf Ports and Rio Grande crossings for export to be advanced 2 cents per hundred pounds; also except rates between Pacific Coast and western trunk line and southwestern territories to be advanced 3 cents per hundred pounds. Should instances develop where this proposed adjustment might result in disruption of any established rate relationship as between markets, existing equalization to be continued by subse- quent necessary readjustments. Coal, lignite, bituminous, anthracite and semi- anthracite, also coke, 15 cents per ton. 24. Clay, gravel, sand and crushed stone, 714 cents per ton. Cement, brick and articles taking the same rates; stone — other than crushed — including artificial stone; also lime and plaster, 1 cent per hundred pounds. Lumber and articles taking the same rates, or arbi- traries over lumber rates, 2 cents per hundred pounds. Through rates to and from Eastern and Southeastern territory, excepting on lumber, to be advanced to the ex- tent Western line earnings are advanced, the entire ad- vance to accrue to Western carriers, excepting that no advance is proposed in class rates between Eastern terri- tory and Mississippi River — Dubuque and south — and Illinois and southern Wisconsin pro-rating territory. No change is proposed in current charges for switching, reconsigning or for other accessorial services. Some additional exceptions as to rates on transconti- nental traffic will be submitted by a succeeding witness. As to passenger fares, we did not in our original peti- tion nor do we now propose any change in the existing standard basis. Our judgment and experience dictate that any increase at this time would not substantially in- crease the revenues. Competition with other modes of travel is acute, and daily becoming more so, and any in- crease in the present rates would not invite an increase in rail travel, but, on the contrary, would undoubtedly pro- voke a decrease. ; On the other hand, while a reduction in the present passenger rates might stimulate slightly the present pas- senger traffic, our judgment is that this possible slight increase would not be sufficient even to offset the loss of revenue that would result from a general decrease in the current fare. We, therefore, believe that it would be un- wise and futile to suggest at this time any change in the present standard basis. The amount of increase we are asking for is nominal and to the individual who may pay it will be so negligible that it will cause no ripple in his daily life or pursuits. In the aggregate to the individual railroads, however, it will materially aid in maintaining that adequate service which is of far greater value to the producer than any fanciful damage he might think he would suffer by an advance of 1 cent or less per bushel for the transportation of his products. When daily fluctuations in grain prices are often several times greater than the meager advance we have proposed, it is indeed difficult to conceive how this slight advance could in actuality affect the situation. 25 The so-called Hoch-Smith resolution provides that the Interstate Commerce Commission shall investigate the general freight rate structure of the country, considering, as a factor in rate-making, economic conditions prevailing in the various industries, including agriculture. In the establishment of voluntary rates by the carriers this par- ticular feature, as well as the usual features governing rate-making, has been given due consideration. The railroads exist on the sale of transportation and unless sales can be made on a reasonable basis that will promote freedom of movement—assuming, of course, that. there is demand for transportation—the railroads cannot thrive nor can they provide the desired quantity and quality of product. Consequently, the rates that have been inaugurated by the railroads are those rates which we believe will yield some profit and at the same time will create free movement of tonnage. This method of rate- making appears to be the essence of the Hoch-Smith reso- lution. The Commission is further directed. by Congress, under the Hoch-Smith resolution, to effect such changes in the rate structure as will promote the free movement of prod- ucts of agriculture at the lowest possible lawful rates com- patible with the maintenance of adequate transportation service. Western railroads were built primarily to pro- mote and develop the production of the soil. There was little particular tonnage of other character to attract pioneer construction and as a matter of fact, there are today in Western territory great areas of land that pro- duce only a minimum amount of other tonnage. There- fore, the Western railways are very largely dependent for their livelihood upon the free movement of the products of the soil, and rates have been made so as to promote this free movement. Western freight rates on wheat and its products, as well as hay, are now only 1714 per cent higher than the rates in effect at the end of Federal control, rates on coarse grains are only 534. per cent higher, while the rates on all other commodities are 2114 per cent higher than the rates at the end of Federal control, except that on live stock the increase is less than the 2114 per cent on other commodities due to the 20 per cent reduction which has been made in the rates for the longer hauls. Further, in the general advance in rates made by the Director General of Railroads in 1918, the advance in rates on grain and its products and also on live stock 26 was less than on other commodities. From these figures it is evident that the principal items covered by the Hoch- Smith resolution have already received preferential treat- ment as compared with other commodities. So far as freedom of movement is concerned, we have yet to learn of a single instance where, under the rates fixed by the Director General of Railroads in 1918, the higher rates established by the Interstate Commerce Com- mission in 1920 or the reduced rates in effect today, any grain or live stock intended for shipment has failed to move on account of these freight rates. And if our peti- tion for advanced rates is granted, grain and live stock will still continue in their relative position as to other: commodities of having incurred a smaller advance since pre-war days than other items of commerce. While the Hoch-Smith resolution emphasizes the pro- priety of considering the economic condition of industry in the adjustment of rates in so far as it is legally possible to do so, we do not understand that the purpose of this resolution: is to eliminate all other customary factors that enter into the making of rates. If this were true, a most deplorably chaotic situation would ensue.