Price out of two defensive works, each about 1 3\4 miles in extent. The rebels gained no success until since we arrived here they captured a forage train. There seems to be no doubt that Banks has fallen back to Alexandria. If he gives up to expedition Smith will send a large force against me, and endeavor to recapture this place, which virtually gives us command of the Ouachita. Price is in front of us at present. He commanded in person at Prairie D'Ane. Kirby Smith has promised to send him re-enforcements, and it is reported that they will soon be here. Several of my regiments have enlisted as veterans, and must be furloughed or go out of service on account of breach of contract. To prevent this I have just ordered the veterans of the First Iowa Cavalry home. Two of my veteran regiments have been seized and ordered elsewhere. I hope that due consideration will be given to this department. It appears to me bad policy to give the rebels an opportunity of re-establishing themselves firmly in their Trans-Mississippi Department after they have been nearly beaten out of it. I cannot understand why Banks fell back, if he started from Alexandria prepared to go to Shreveport. If one of my emissaries had not returned I should have know nothing of his movements except to meet successfully the whole force which Kirby Smith could send against me, if Banks should let him go. This is a strong place. The rebels have fortified it for us, but until we can get the assistance of the gun-boats on the Ouachita the Arkansas must be our base of supplies. The rebels have a large cavalry force, and it is not safe to send a train without a large escort. One was captured the other day escorted by 1,300 men, two James guns, and two mountain howitzers. It is useless to talk of obtaining supplies in this country for my command. The country is well nigh exhausted, and the people are threatened with starvation. A bearer of dispatches from General Banks has just arrived. I suppose dispatches of a similar import have been sent you. It is reported that 8,000 infantry joined Price yesterday from Shreveport. Price was undoubtedly re-enforced, to what extent I do not know. They are just opening with artillery upon my outposts.

I will write you soon.

Very truly yours,

F. STEELE,

Major-General.

P. S.-Banks was at Grand Ecore when the bearer of dispatches left him, having fallen back 30 miles from Pleasant Hill, where the battle was fought.

F. S.

LITTLE ROCK, May 4, 1864.

P. S.-This letter was sent by a bearer of dispatches who did not get through. Another dispatch was sent to you, and one addressed to General Halleck, which failed also.

Very respectfully,

F. STEELE,

Major-General.

Major General W. T. SHERMAN,

Commanding Military Division of the Mississippi.