On April 12, 1978, the Interstate Commerce Commission's suspension board issued a decision on docket No. 67940 - the Norfolk & Western railroad's announced reduction of "multiple-car flour tariffs" between Kansas City, Mo., and Barksdale, Md.

It was one of those dry, obscure actions, taken in the depths of the federal bureaucracy, and little noticed outside the industry affected, that can have a sweeping impact on prices, jobs and the economy.

In this case, it eventually could mean lower bread prices for millions of people living on the eastern seaboard.

It could slow the shift of the American milling industry away from its old roots in the Midwest to new eastern centers closer to consumers.

And it could signal the start of a battle between established milling companies and a newcomer, Cargill Inc., for the huge East Coast flour markets.

The suspension board, acting in the new spirit of deregulation, voted to let stand the Norfolk & Western's rate reduction.

Under the new tariff, flour shipped to Barksdale from Kansas City by the whole trainload will carry a charge of $1.06 per hundred pounds. That compares with the standard rate of $1.97 for single carloads of flour.

It is a rate specially tailored to Cargill Inc., the world's largest grain company. In 1974, Cargill jumped into the milling business by purchasing Ross Industries of Kansas City and devising a strategy to strengthen its position in the U.S. milling business.

Later this year, Ross plans to start sending 55-car trainloads full of flour to a new $2.1 million terminal being built at Barksdale. It is counting on the low rail rate to give it an edge over new East Coast mills that have begun to challenge companies based in the traditional milling centers of Minneapolis, Kansas City and Buffalo.

Barksdale is a hamlet northeast of Baltimore that is strategically situated close to major markets. About 8 million people, including much of the population of Philadelphia and Baltimore, live within 50 miles. And industry sources say that the Cargill plan eventually could force millers to lower flour prices along the whole eastern seaboard including Washington.

Cargill officials said ground was broken recently for the special Barksdale rail terminal which has been designed for rapid unloading of flour. The flour will be distributed to regional bakeries by truck.

Transportation rates have always played a crucial role in shaping the grain industry and determining food prices.

But Cargill's plans for capturing a share of eastern flour markets buck recent trends, which have seen major agribusiness companies invest in building East Coast mills that bring in their raw material - wheat - from halfway across the country.

The wheat for loaves of bread sold in eastern cities is grown in the midwest grain belt. But the location of the mills that turn this wheat into flour can depend on the differing rates for shipping wheat and flour.

Recently these have given some advantages to companies that ship wheat east and mill it close to the markets over those that mill the wheat in the midwest and ship the flour east.

In 1963, the Southern Railway established concessional rates for agricultural commodities transported in its 100-ton, aluminum hopper cars, called "Big John" cars. Later in the 1960s, northern railroads instituted concessional tariffs on wheat and corn shipped in "unit trains" - whole trainloads of grain that run from point to point on a regular schedule.

With the advent of the new rates for shipping grain, some companies invested in new modern mills that hauled their wheat from the midwest and sold flour products to big East Coast bakeries.

Seaboard Allied now has mills at Culpeper, Va., and Albany, N.Y. Conagra has a mill at Martin's Creek, Pa., and Archer-Daniels Midland is completing a large mill at Hudson, N.Y.

These developments have begun to reshape the U.S. milling industry.

Traditionally, eastern bakeries received flour from Kansas City or Minneapolis by truck or rail. Buffalo, whose mills obtained wheat via rail or the Great Lakes, also served this market. Companies such as Pillsbury, General Mills, Peavey and International Multifoods still serve their customers mainly from those three milling cities.

Midwest mills continue to supply about half the 3.4 million tons of flour needed in the East each year. But some said before Cargill's innovation that if present trends continue the new Mid-Atlantic mills could supplant them.

Milling and transportation interests in Buffalo - still the largest flour milling center in the country - also strongly opposed the advantageous new rates for Cargill's Kansas City flour. The International Association of Great Lakes Ports said the rate would be "catastrophic" for grain mills in Buffalo. Cargill itself operates three large grain elevators in Buffalo but does not mill flour there.

A number of factors have squeezed midwest millers. Export markets have been lost as foreign countries built their own facilities, milling equipment became outmoded and Americans switched from bread to meat. (Percapita flour consumption declined from 220 pounds in 1910 to 120 pounds in 1977.)

When the Bureau of Labor Statistics sampled bread prices in 24 cities in June 1978, it found the price was 32.8 cents a pound in Washington compared with 36.3 cents a pound in the flour milling center of Kansas City.

Regional factors such as labor costs, energy prices and the efficency of local bakeries account for bread price variations. By contrast, the price of flour, the raw material, tends to be established nationally - in long-term major bakeries, such as Safeway and A & P.

About a quarter of a baker's costs are for flour. And nationally determined flour prices are, in turn, strongly affected by transportation costs.

Rail rates for shipping flour have been rising in relation to shipping wheat, in part because of more stringent sanitary requirements.

Nevertheless, industry sources say, the new East Coast mills that get their wheat by rail from the midwest have tended to price their flour on a par with the midwest flour - even though midwest flour is made more expensive because of the stiff rail transportation costs.

Robert Wager, president of the American Bakers Association, which strongly supports Cargill's plans for flour trains, said: "If we can bring transportation costs down, then all things being equal, we'd have some chance of passing this on to [bread] consumers."

Announcement of the special Norfolk & Western rate last year resulted in a flurry of protests to the ICC from competing mills and railroads.

Archer-Daniels Midland, Seaboard Allied, and some smaller companies charged that the new tariff was "an illegal attempt to allocate an important market territory to a favored shipper" - Cargill's Ross Industries. Their petition asserted that Cargill could capture "substantially over 15 percent" of the mid-Atlantic market, and added that the share could go to 45 percent eventually.

Ross Industries countered that the Minneapolis milling giants, Pillsbury and Peavey, which also opposed the rate change, were following an "ostrich-like policy" that ignored the threat from the new East Coast mills. Ross labeled as "poppycock" the charge that the new rate allocated it a market.

Conrail, a major wheat handler that serves established East Coast mills, also lodged a protest. Sen. Daniel Patrick Moynihan (D-N.Y.) and 13 New York State congressmen warned that the new rate for Cargill "threatens, over time, to destroy the eastern milling business," and could jeopardize 1,500 jobs in Buffalo milling. CAPTION: Map, Flour Transit Route, By Lil Chores for The Washington Post