Since my report of March 1, an order was issued requiring half the effective force of each regiment to work on the canal for twenty-four hours each day. The work was progressing very satisfactorily, when, on the morning of the 7th, the upper dam gave way. The opening in the canal levee which had been used to drain the water at this point, which it was found impossible to stop. This opening is now about 150 feet wide, double its original width. The condition of the canal is at present as follows: Between upper main levee and railroad, mostly dug out to required width, and about six or eight stumps in the canal; the canal levee is above water of river 18 inches. There was reason to fear a break in this levee, where it joins the main levee, but at present there need be no apprehension on that score. Between railroad and lower main levee all of the canal to full width; four to six trees and from twelve to FIFTEEN stumps in canal; levee for about half its length in good order, and grade 18 inches above level of water in the river; balance from 12 to 18 inches below grade, and levee not strong enough. Two dredges are at work in new entrance, making channel 11 feet deep.

By direction of the general commanding, endeavors are being made to cut off the influx of water on the upper side of the upper main levee, by using barges filled with dirt and by using the dredges.

A pile-driver and machine for cutting trees under water are expected daily from Memphis; also additional grain sacks. I am very doubtful of closing the upper entrance, but think that by driving piles across the break in the canal levee, using grain bags, and then the dredges, the opening in the canal levee can be closed. The dredges can then enlarge and raise the levee between railroad and lower levee, where there always has been difficulty in obtaining material for the levee. The battery has been completed with the exception of the magazines. No work is being done on it at present, owing to the difficulty of reaching it.

Two orders, sent herewith,* show the proposed organization of pioneer companies in this department. When carried into effect, it will enable me to dispense with the contrabands now under my immediate charge, and I shall only retain Company I, Thirty-FIFTH Missouri Volunteers, which has done all the special work on the batteries at Corinth and the new battery here. This company and the necessary working parties at Fort Pickering will be all that will remain under my immediate charge.

I am, general, very respectfully, your obedient servant,

FREDERICK E. PRIME,

Captain of Engineers.

Brigadier General JOSEPH G. TOTTEN, chief Engineer of the Army.

P. S. -The dredges work well, and will remove all obstructions in the canal; another is expected daily. The waters is still rising to-day, though slowly, notwithstanding the water drawn from the river at Yazoo Pass and also into Bayou Macon at the Arkansas line.

STEAMER MAGNOLIA,

Young's Point, La., March 19, 1863.

GENERAL: Since my report of the 11th instant concerning the canal, an attempt was made to stop the flow of water into the canal. This was done by making a dam where necessary, by means of the dredges,